[Federal Register Volume 75, Number 228 (Monday, November 29, 2010)]
[Rules and Regulations]
[Pages 73169-73860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27969]



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Part II





Department of Health and Human Services





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Center for Medicare & Medicaid Services



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42 CFR Parts 405, 409, 410 et al.



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

Federal Register / Vol. 75, No. 228 / Monday, November 29, 2010 / 
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 409, 410, 411, 413, 414, 415, and 424

[CMS-1503-FC]
RIN 0938-AP79


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

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule with comment period 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. It finalizes the 
calendar year (CY) 2010 interim relative value units (RVUs) and issues 
interim RVUs for new and revised procedure codes for CY 2011. It also 
addresses, implements, or discusses certain provisions of both the 
Affordable Care Act (ACA) and the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA). In addition, this final rule with 
comment period discusses payments under the Ambulance Fee Schedule 
(AFS), the Ambulatory Surgical Center (ASC) payment system, and the 
Clinical Laboratory Fee Schedule (CLFS), payments to end-stage renal 
disease (ESRD) facilities, and payments for Part B drugs. Finally, this 
final rule with comment period also includes a discussion regarding the 
Chiropractic Services Demonstration program, the Competitive Bidding 
Program for durable medical equipment, prosthetics, orthotics, and 
supplies (CBP DMEPOS), and provider and supplier enrollment issues 
associated with air ambulances.

DATES: Effective date: These regulations are effective on January 1, 
2011. Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on January 3, 2011.

ADDRESSES: In commenting, please refer to file code CMS-1503-FC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions for 
``submitting a comment.''
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1503-FC, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1503-FC, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses: a. For delivery in Washington, 
DC--Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue, SW., Washington, DC 20201
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.

FOR FURTHER INFORMATION CONTACT:

Sara Vitolo, (410) 786-5714, for issues related to malpractice RVUs.
Erin Smith, (410) 786-0763, for issues related to end-stage renal 
disease-related services for home dialysis.
Michael Moore, (410) 786-6830, for issues related to geographic 
practice cost indices.
Ken Marsalek, (410) 786-4502, for issues related to the physician 
practice information survey, the multiple procedure payment reduction, 
and payment for the technical component of pathology services.
Regina Walker-Wren, (410) 786-9160, for issues related to outpatient 
mental health add-on provision and increased payment for certified 
nurse-midwife services.
Elizabeth Truong, (410) 786-6005, or Sara Vitolo, (410) 786-5714, for 
issues related to potentially misvalued services.
Elizabeth Truong, (410) 786-6005, for issues related to the sustainable 
growth rate or anesthesia or physician fee schedule conversion factors.
Dorothy Shannon, (410) 786-3396, for issues related to outpatient 
therapy services.
Pamela West, (410) 786-2302, for issues related to payment for diabetes 
self-management training programs and kidney disease education 
services.
Ryan Howe, (410) 786-3355, for issues related to direct practice 
expense inputs and telehealth services.
Sara Vitolo, (410) 786-5714, for issues related to pulmonary 
rehabilitation services, application of skin substitutes, canalith 
repositioning, intranasal/oral immunization, and the refinement panel.
Roberta Epps, (410) 786-4503, for issues related to portable x-ray and 
bone density tests.
Chava Sheffield, (410) 786-2298, for issues related to equipment 
utilization rate assumption for advanced imaging services.
Chava Sheffield, (410) 786-2298, or Larry Chan, (410) 786-6864, for 
issues related the physician fee schedule practice expense methodology.
Stephanie Frilling, (410) 786-4507, or Erin Smith, (410) 786-0763, for 
issues related to the incentive payment programs for primary care and 
general surgery services, and payment for the annual wellness visit and 
preventive services.
Cheryl Gilbreath, (410) 786-5919, for issues related to payment for 
covered outpatient drugs and biologicals.
Roechel Kujawa, (410) 786-9111, for issues related to ambulance 
services.
Glenn McGuirk, (410) 786-5723, for clinical laboratory issues.
Randall Ricktor, (410) 786-4632, for Federally Qualified Health Center 
Issues.
Pauline Lapin, (410) 786-6883, for issues related to the chiropractic 
services demonstration BN issue.
Troy Barsky, (410) 786-8873, or Kristin Bohl, (410) 786-8680, for 
issues related to physician self-referral.

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Troy Barsky, (410) 786-8873, or Fred Grabau (410) 786-0206, for issues 
related to timely filing rules.
Henry Richter, (410) 786-4562, or Lisa Hubbard, (410) 786-5472, for 
issues related to renal dialysis provisions and payments for end-stage 
renal disease facilities.
Diane Stern, (410) 786-1133, for issues related to the physician 
quality reporting initiative and incentives for e-prescribing.
Sheila Roman, (410) 786-6004, or Pamela Cheetham, 410-786-2259, for 
issues related to the Physician Resource Use Feedback Program and 
value-based purchasing.
Joel Kaiser, (410) 786-4499, for issues related to the DME provisions.
Sandra Bastinelli, (410) 786-3630, for issues related to provider and 
supplier enrollment issues.
Rebecca Cole, (410) 786-4497, for issues related to physician payment 
not identified above.

SUPPLEMENTARY INFORMATION: Comment Subject Areas: We will consider 
comments on the following subject areas discussed in this final rule 
with comment period that are received by the date and time indicated in 
the DATES section of this final rule with comment period:
    (1) The interim final work, practice expense, and malpractice RVUs 
(including the direct practice expense (PE) inputs and the equipment 
utilization rate assumption, and the applicability of a multiple 
procedure payment reduction (MPPR)), for new and revised CY 2011 HCPCS 
codes. These codes and their CY 2011 interim final RVUs are listed in 
Addendum C to this final rule with comment period.
    (2) The physician self-referral designated health services codes 
listed in Tables 98 and 99.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Table of Contents

    To assist readers in referencing sections contained in this 
preamble, we are providing a table of contents. Some of the issues 
discussed in this preamble affect the payment policies, but do not 
require changes to the regulations in the Code of Federal Regulations 
(CFR). Information on the regulations impact appears throughout the 
preamble and, therefore, is not discussed exclusively in section XI. of 
this final rule with comment period.
I. Background
    A. Development of the Relative Value System
    1. Work RVUs
    2. Practice Expense Relative Value Units (PE RVUs)
    3. Resource-Based Malpractice (MP) RVUs
    4. Refinements to the RVUs
    5. Adjustments to RVUs Are Budget Neutral
    B. Components of the Fee Schedule Payment Amounts
    C. Most Recent Changes to Fee Schedule
    D. Public Comments Received in Response to the CY 2011 PFS 
Proposed Rule
II. Provisions of the Final Rule for the Physician Fee Schedule
    A. Resource-Based Practice Expense (PE) Relative Value Units 
(RVUs)
    1. Overview
    2. Practice Expense Methodology
    a. Direct Practice Expense
    b. Indirect Practice Expense per Hour Data
    c. Allocation of PE to Services
    (i) Direct costs
    (ii) Indirect costs
    d. Facility and Nonfacility Costs
    e. Services with Technical Components (TCs) and Professional 
Components (PCs)
    f. Alternative Data Sources and Public Comments on Final Rule 
for 2010
    g. PE RVU Methodology
    (1) Setup File
    (2) Calculate the Direct Cost PE RVUs
    (3) Create the Indirect Cost PE RVUs
    (4) Calculate the Final PE RVUs
    (5) Setup File Information
    (6) Equipment Cost per Minute
    3. PE Revisions for CY 2011
    a. Equipment Utilization Rate
    b. HCPCS Code-Specific PE Issues
    (1) Biohazard Bags
    (2) PE Inputs for Professional Component (PC) Only and Technical 
Component (TC) Only Codes Summing to Global Only Codes
    (3) Equipment Time Inputs for Certain Diagnostic Tests
    (4) Cobalt-57 Flood Source
    (5) Venom Immunotherapy
    (6) Equipment Redundancy
    (7) Equipment Duplication
    (8) Establishing Overall Direct PE Supply Price Inputs Based on 
Unit Prices and Quantities
    c. AMA RUC Recommendations in CY 2010 for Changes to Direct PE 
Inputs
    (1) Electrogastrography and Esophageal Function Test
    (2) 64-Slice CT Scanner and Software
    (3) Breath Hydrogen Test
    (4) Radiographic Fluoroscopic Room
    (5) Cystometrogram
    d. Referral of Existing CPT Codes for AMA RUC Review
    e. Updating Equipment and Supply Price Inputs for Existing Codes
    f. Other Issues
    B. Malpractice Relative Value Units (RVUs)
    1. Background
    2. Malpractice RVUs for New and Revised Services Effective 
Before the Next 5-Year Review
    3. Revised Malpractice RVUs for Selected Disc Arthroplasty 
Services
    C. Potentially Misvalued Services Under the Physician Fee 
Schedule
    1. Valuing Services Under the PFS
    2. Identifying, Reviewing, and Validating the RVUs of 
Potentially Misvalued Services Under the PFS
    a. Background
    b. Progress in Identifying and Reviewing Potentially Misvalued 
Codes
    c. Validating RVUs of Potentially Misvalued Codes
    3. CY 2011 Identification and Review of Potentially Misvalued 
Services
    a. Codes on the Multispecialty Points of Comparison List
    b. Codes with Low Work RVUs Commonly Billed in Multiple Units 
Per Single Encounter
    c. Codes with High Volume and Low Work RVUs
    d. Codes with Site-of-Service-Anomalies
    e. Codes with ``23-hour'' Stays
    4. Expanding the Multiple Procedure Payment Reduction (MPPR) 
Policy to Additional Nonsurgical Services
    a. Background
    b. CY 2011 Expansion of the Imaging Technical Component MPPR 
Policy to Additional Combinations of Imaging Services
    c. CY 2011 Expansion of the MPPR Policy to Therapy Services
    5. High Cost Supplies
    a. Background
    b. Future Updates to the Prices of High-Cost Supplies
    D. Geographic Practice Cost Indices (GPCIs)
    1. Background
    2. GPCI Update
    a. Physician Work GPCIs
    b. Practice Expense GPCIs
    (1) The Affordable Care Act Requirements for PE GPCIs
    (A) General Methodology for the CY 2011 GPCIs
    (B) Phase-In of PE GPCIs
    (C) Data Analysis
    (D) Determining the PE GPCI Cost Share Weights
    (E) PE GPCI Floor for Frontier States
    (2) Summary of CY 2011 PE GPCIs
    c. Malpractice GPCIs
    d. Public Comments and CMS Responses on the Proposed 6th GPCI 
Update
    e. Summary of Final CY 2011 GPCIs

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    3. Payment Localities
    E. PFS Update for CY 2010: Rebasing and Revising of the Medicare 
Economic Index (MEI)
    1. Background
    2. Use of More Current Data
    3. Rebasing and Revising Expense Categories in the MEI
    a. Developing the Weights for Use in the MEI
    b. Physician's Own Time
    c. Physician's Practice Expenses
    (1) Nonphysician Employee Compensation
    (2) Office Expenses
    (3) Professional Liability Insurance (PLI) Expense
    (4) Medical Equipment Expenses
    (5) Medical Supplies Expenses
    (6) Other Professional Expenses
    4. Selection of Price Proxies for Use in the MEI
    a. Cost (Expense) Categories in the MEI
    (1) Physician's Own Time (Physician Compensation)
    (2) Nonphysician Employee Compensation
    (3) Utilities
    (4) Chemicals
    (5) Paper
    (6) Rubber and Plastics
    (7) Telephone
    (8) Postage
    (9) All Other Services
    (10) All Other Products
    (11) Fixed Capital
    (12) Moveable Capital
    (13) Professional Liability Insurance (PLI)
    (14) Medical Equipment
    (15) Medical Materials and Supplies
    (16) Other Professional Expenses
    (b) Productivity Adjustment to the MEI
    5. Results of Rebasing
    6. Medicare Economic Index Technical Advisory Panel
    7. Summaries of Comments and the Associated Responses
    a. Timing of Rebasing and Revising the MEI
    b. PPIS Data
    c. Office Expenses
    d. Purpose of the MEI
    e. Technical Panel
    f. Other
    8. Adjustments to the RVU Shares To Match the Proposed Rebased 
MEI Weights
    F. Allowed Expenditures for Physicians' Services and the 
Sustainable Growth Rate
    1. Medicare Sustainable Growth Rate
    2. Physicians' Services
    3. Preliminary Estimate of the SGR for 2011
    4. Revised Sustainable Growth Rate for 2010
    5. Final Sustainable Growth Rate for 2009
    6. Calculation of 2011, 2010, and 2009 Sustainable Growth Rates
    a. Detail on the CY 2011 SGR
    (1) Factor 1 Changes in Fees for Physicians' Services (Before 
Applying Legislative Adjustments) for CY 2011
    (2) Factor 2 The Percentage Change in the Average Number of Part 
B Enrollees From CY 2010 to CY 2011
    (3) Factor 3 Estimated Real Gross Domestic Product Per Capita 
Growth in 2011
    (4) Factor 4 Percentage Change in Expenditures for Physicians' 
Services Resulting From Changes in Statute or Regulations in CY 2011 
Compared With CY 2010
    b. Detail on the CY 2010 SGR
    (1) Factor 1 Changes in Fees for Physicians' Services (Before 
Applying Legislative Adjustments) for 2010
    (2) Factor 2 The Percentage Change in the Average Number of Part 
B Enrollees from CY 2009 to CY 2010
    (3) Factor 3 Estimated Real Gross Domestic Product Per Capita 
Growth in CY 2010
    (4) Factor 4 Percentage Change in Expenditures for Physicians' 
Services Resulting From Changes in Statute or Regulations in CY 2010 
Compared With CY 2009
    c. Detail on the CY 2009 SGR
    (1) Factor 1 Changes in Fees for Physicians' Services (Before 
Applying Legislative Adjustments) for 2009
    (2) Factor 2 The Percentage Change in the Average Number of Part 
B Enrollees from CY 2008 to CY 2009
    (3) Factor 3 Estimated Real Gross Domestic Product Per Capita 
Growth in CY 2009
    (4) Factor 4 Percentage Change in Expenditures for Physicians' 
Services Resulting From Changes in Statute or Regulations in CY 2009 
Compared With CY 2008
    G. The Update Adjustment Factor (UAF)
    1. Calculation under Current Law
    H. Physician and Anesthesia Fee Schedule Conversion Factors for 
CY 2011
    1. Physician Fee Schedule Update and Conversion Factor
    a. CY 2011 PFS Update
    b. CY 2011 PFS Conversion Factor
    2. Anesthesia Conversion Factor
III. Code-Specific Issues for the PFS
    A. Therapy Services
    1. Outpatient Therapy Caps for CY 2011
    2. Alternatives to Therapy Caps
    a. Background
    b. Current Activities
    c. Potential Short-Term Approaches to Therapy Caps
    B. Diabetes Self-Management Training (DSMT) Services (HCPCS 
Codes G0108 and G0109)
    1. Background
    2. Payment for DSMT Services
    C. End-Stage Renal Disease Related Services for Home Dialysis 
(CPT code 90963, 90964, 90965, and 90966)
    1. End-Stage Renal Disease Home Dialysis Monthly Capitation 
Payment Services (CPT codes 90963, 90964, 90965, and 90966)
    2. Daily and Monthly ESRD-Related Services (CPT Codes 90951 
through 90970)
    D. Portable X-Ray Set-Up (HCPCS code Q0092)
    E. Pulmonary Rehabilitation Services (HCPCS Code G0424)
    F. Application of Tissue Cultured Skin Substitutes to Lower 
Extremities (HCPCS Codes G0440 and G0441)
    G. Canalith Repositioning (CPT code 95992)
    H. Intranasal/Oral Immunization Codes (CPT codes 90467, 90468, 
90473, and 90474)
    I. Refinement Panel Process
    J. Remote Cardiac Monitoring Services (CPT codes 93012, 93229, 
93268, and 93271)
IV. Medicare Telehealth Services for the Physician Fee Schedule
    A. Billing and Payment for Telehealth Services
    1. History
    2. Current Telehealth Billing and Payment Policies
    B. Requests for Adding Services to the List of Medicare 
Telehealth Services
    C. Submitted Requests for Addition to the List of Telehealth 
Services for CY 2011
    1. Individual KDE Services
    2. Individual DSMT Services
    3. Group KDE, MNT, DSMT, and HBAI Services
    4. Initial, Subsequent, and Discharge Day Management Hospital 
Care Services
    5. Initial, Subsequent, Discharge Day Management, and Other 
Nursing Facility Care Services
    6. Neuropsychological Testing Services
    7. Speech-Language Pathology Services
    8. Home Wound Care Services
    9. Other Issues
    D. Summary of CY 2011 Telehealth Policies
    E. Telehealth Originating Site Facility Fee Payment Amount 
Update
V. Addressing Interim Final Relative Value Units from CY 2010 and 
Establishing Interim Relative Value Units for CY 2011
    A. Background
    B. Addressing Interim Final RVUs from CY 2010
    1. CY 2010 Interim Final Work RVUs Referred to the Refinement 
Panel
    2. CY 2010 Interim Final RVUs for which Public Comments Were 
Received
    a. Insertion of Breast Prosthesis (CPT code 19340)
    b. Computed Tomographic Colonography (CPT code 74261)
    c. Myocardial Perfusion Imaging (CPT codes 78451, 78452, 78453, 
and 78454)
    d. Nerve Conduction Test (CPT code 95905)
    e. Kidney Disease Education Services (HCPCS codes G0420 and 
G0421)
    f. Excision of Soft Tissue and Bone Tumors (CPT codes 21011 
through 21016, 21552, 21554 through 21558, 21930 through 21933, 
21395, 21936, 22900 through 22905, 23071, 23073, 23075 through 
23078, 23200, 23210, 23220, 24071, 24073, 24075 through 24077, 
24079, 24150 through 24153, 25071, 25073, 25075 through 25078, 
25170, 26111, 26113, 26115 through 26118, 26250, 26255, 26260, 
26262, 27043, 27045, 27047 through 27049, 27059, 27075 through 
27078, 27327 through 27329, 27337, 27339, 27364, 27365, 27615, 
27616, 27618, 27619, 27632, 27634, 27619, 27645 through 27647, 
28039, 28041, 28043, 28045 through 28047, 28171, 28173, and 28175)
    g. Cryoablation of Prostate (CPT code 55873)
    h. Urodynamics Studies (CPT Codes 51728 and 51729)
    i. Coronary Computed Tomographic Angiography (CPT codes 75571, 
75572, 75573, and 75574)

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    j. Adjacent Tissue Transfer or Rearrangement (CPT codes 14301 
and 14302)
    k. Insertion of a Temporary Prostatic Urethral Stent (CPT code 
53855)
    l. High Dose Rate Brachytherapy (CPT codes 77785, 77786, and 
77787)
    m. Injection of Facet Joint (CPT codes 64490, 64491, 64492, 
64493, 64494, and 64495)
    n. Knee Arthroscopy (CPT code 29870)
    3. Status of Interim Final Work RVUs for Potentially Misvalued 
Site-of-Service Anomaly Codes from CY 2009 and CY 2010
    4. Other New, Revised, or Potentially Misvalued Codes with CY 
2010 Interim Final RVUs Not Specifically Discussed in the CY 2011 
Final Rule with Comment Period
    C. Establishment of Interim Final RVUs for CY 2011
    1. Establishment of Interim Final Work RVUs for CY 2011
    a. Background
    b. CY 2011 Interim Final Work RVUs for New and Revised Codes
    (i) CY 2011 New and Revised Codes that Do Not Represent Major 
New Comprehensive Services
    (1) Excision and Debridement (CPT codes 11010, 11011, 11012, 
11042, 11043, 11044, 11045, 11046, 11047, and 97598)
    (2) Arthrodesis Including Discectomy (CPT code 22551)
    (3) Strapping Lower Extremity (CPT codes 29540 and 29550)
    (4) Paraesophageal Hernia Procedures (CPT codes 43333 and 43335)
    (5) Vaginal Radiation Afterloading Apparatus for Clinical 
Brachytherapy (CPT codes 57155 and 57156)
    (6) Vagus Nerve Stimulator (CPT codes 61885, 64568, 64569, and 
64570)
    (7) Ultrasound of Extremity (CPT codes 76881 and 76882)
    (8) Evaluation of Fine Needle Aspirate (CPT code 88172)
    (9) Immunization Administration (CPT code 90460 and 90461)
    (10) Diabetic Retinopathy Imaging (CPT code 92228)
    (11) Speech-Language Pathology Services (CPT codes 92508 and 
92606)
    (12) Sleep Testing (CPT codes 95806 and 95807)
    (13) Subsequent Hospital Observation Care
    (ii) Comprehensive Codes for a Bundle of Existing Component 
Services
    (iii) Work Budget Neutrality for Clinical Categories of CPT 
Codes
    c. CY 2011 Interim Final Work RVUs for Potentially Misvalued 
Codes
    (1) Excision and Debridement (CPT codes 11043 and 11044)
    (2) Strapping Lower Extremity (CPT code 29540)
    (3) Control Nasal Hemorrhage (CPT code 30901)
    (4) Cystourethroscopy (CPT codes 52281 and 52332)
    (5) Vaginal Radiation Afterloading Apparatus for Clinical 
Brachytherapy (CPT code 51755)
    (6) Obstetrical Care Codes (CPT codes 59440, 59410, 59510, 
59515, 59610, 59614, 59618, and 59622)
    (7) Vagus Nerve Stimulator (CPT code 61885)
    (8) Transforaminal Epidural Injection (CPT code 64483)
    (9) CT Thorax (CPT code 71250)
    (10) CT Spine (CPT code 72125)
    (11) CT Upper and CT Lower Extremity (CPT code 73200 and 73700)
    (12) Radiation Treatment Management (CPT code 77427)
    2. Establishment of Interim Final Direct PE Inputs for CY 2011
    a. Background
    b. CY 2011 Interim Final Direct PE Inputs for New, Revised, and 
Potentially Misvalued Codes
    (1) General Equipment Time
    (2) Equipment Time and Clinical Labor for Conscious Sedation
    (3) Equipment Time for Add-On Codes
    (4) Changes in Standard Uses of Certain Supplies
    (5) New Supply and Equipment Items
    (6) Endovascular Revascularization Stents
    (7) Nasal/Sinus Endoscopy Supply and Equipment Items
    3. Establishment of Interim Final Malpractice RVUs for CY 2011
VI. Provisions of the Affordable Care Act
    A. Section 3002: Improvements to the Physician Quality Reporting 
System
    B. Section 3003: Improvements to the Physician Feedback Program 
and Section 3007: Value-based payment modifier under the physician 
fee schedule
    1. Background
    2. Effect of the ACA of 2010 on the Program
    3. Phase II Proposed Changes
    4. Implementation of Sections 3003 and 3007 of ACA
    5. Comments Sought on Specific Statistical Issues Related to ACA 
Sections 3003 and 3007
    a. Risk Adjustment
    b. Attribution
    c. Benchmarking and Peer Groups
    d. Cost and Quality Measures and Compositing Methods
    C. Section 3102: Extension of the Work Geographic Index Floor 
and Revisions to the Practice Expense Geographic Adjustment under 
the Medicare Physician Fee Schedule, and Protections for Frontier 
States as amended by Section 10324
    D. Section 3103: Extension of Exceptions Process for Medicare 
Therapy Caps
    E. Section 3104: Extension of Payment for Technical Component of 
Certain Physician Pathology Services
    F. Section 3105 and 10311: Extension of Ambulance Add-Ons
    1. Amendment to Section 1834(l)(13) of the Act
    2. Amendment to Section 146(b)(1) of MIPAA
    3. Amendment to Section 1834(l)(12) of the Act
    G. Section 3107: Extension of Physician Fee Schedule Mental 
Health Add-On
    H. Section 3108: Permitting Physician Assistants to Order Post-
Hospital Extended Care Services
    I. Section 3111: Payment for Bone Density Tests
    J. Section 3114: Improved Access for Certified Nurse-Midwife 
Services
    K. Section 3122: Extension of Medicare Reasonable Costs Payments 
for Certain Clinical Diagnostic Laboratory Tests Furnished to 
Hospital Patients in Certain Rural Areas
    L. Section 3134: Misvalued Codes Under the Physician Fee 
Schedule
    M. Section 3135: Modification of Equipment Utilization Factor 
for Advanced Imaging Services
    1. Adjustment in Practice Expense to Reflect Higher Presumed 
Utilization
    2. Adjustment in Technical Component ``Discount'' on Single-
Session Imaging to Consecutive Body Parts
    N. Section 3136: Revision for Payment for Power-Driven 
Wheelchairs
    1. Payment Rules for Power Wheelchairs
    2. Revision of Payment Amounts for Power Wheelchairs
    3. Elimination of Lump Sum Payment for Standard Power 
Wheelchairs
    O. Section 3139: Payment for Biosimilar Biological Products
    P. Section 3401: Revision of Certain Market Basket Updates and 
Incorporation of Productivity Improvements into Market Basket 
Updates That Do Not Already Incorporate Such Improvements
    1. ESRD Market Basket Discussion
    2. Productivity Adjustment regarding Ambulatory Surgical Center, 
Ambulance, Clinical Laboratory and DMEPOS Fee Schedules
    a. Ambulatory Surgery Centers (ASCs)
    b. Ambulance Fee Schedule (AFS)
    c. Clinical Lab Fee Schedule
    d. DMEPOS Fee Schedule
    Q. Section 4103: Medicare Coverage of Annual Wellness Visit 
Providing a Personalized Prevention Plan
    1. Background and Statutory Authority
    a. Medicare Coverage of Preventive Physical Examinations and 
Routine Checkups
    b. Requirements for Coverage of an Annual Wellness Visit
    2. Regulatory Revisions--Summary of Proposed Rule and Comments
    a. Revisions to Sec.  411.15, Particular Services Excluded from 
Coverage
    b. Revisions to Part 410, Subpart B--Medical and Other Health 
Services
    (1) Definitions
    (2) Requirements of the First Annual Wellness Visit Providing 
Personalized Prevention Plan Services
    (3) Requirements of Subsequent Annual Wellness Visits Providing 
Personalized Prevention Plan Services
    3. Payment for the Annual Wellness Visit Providing Personalized 
Prevention Plan Services (PPPS)
    R. Section 4104: Removal of Barriers to Preventive Services in 
Medicare
    1. Definition of ``Preventive Services''
    2. Deductible and Coinsurance for Preventive Services
    3. Extension of Waiver of Deductible to Services Furnished in 
Connection With or in Relation to a Colorectal Cancer Screening Test 
that Becomes Diagnostic or Therapeutic

[[Page 73174]]

    S. Section 5501: Expanding Access to Primary Care Services and 
General Surgery Services
    1. Section 5501(a): Incentive Payment Program for Primary Care 
Services
    a. Background
    b. Primary Care Incentive Payment Program (PCIP)
    (1) Primary Specialty Designation
    (2) Primary Care Percentage Calculation
    (3) Period of Claims Data for Primary Care Percentage 
Calculation
    (4) PCIP Payment
    (5) Summary of Final PCIP Policies
    2. Section 5501(b): Incentive Payment Program for Major Surgical 
Procedures Furnished in Health Professional Shortage Areas
    a. Background
    b. HPSA Surgical Incentive Payment Program (HSIP)
    3. Sections 5501(a) and (b) of the Affordable Care Act and 
Payment for Critical Access Hospital Professional Services Under the 
Optional Method
    T. Section 6003: Disclosure Requirements for In-Office Ancillary 
Services Exception to the Prohibition on Physician Self-Referral for 
Certain Imaging Services
    1. Background
    2. Disclosure Requirement
    a. Services the Trigger the Disclosure Requirement
    b. General Disclosure Requirements
    c. List of Alternate Suppliers
    d. Documentation of Disclosure
    e. Effective Date
    f. Other comments
    U. Section 6404: Maximum Period for Submission of Medicare 
Claims Reduced to Not More than 12 Months
    1. Background
    2. Provisions of ACA
    V. Section 6410 of the Affordable Care Act and Section 154 of 
MIPPA: Adjustments to the Metropolitan Statistical Areas (MSA) for 
Medicare Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies Competitive Acquisition Program
    1. Background
    2. Subdividing Large MSAs under Round 2
    3. Exclusions of Certain Areas after Round 2 and Prior to 2015
    4. Expansion of Round 2
    W. Section 10501(i)(3): Collection of HCPCS data for Development 
and Implementation of a Prospective Payment System for the Medicare 
Federally Qualified Health Center Program
VII. Other Provisions of the Final Rule
    A. Part B Drug Payment: Average Sales Price (ASP) Issues
    1. ``Carry Over'' ASP
    2. Partial Quarter ASP Data
    3. Determining the Payment Amount for Drugs and Biologicals 
Which Include Intentional Overfill
    4. WAMP/AMP
    5. AMP Threshold and Price Substitutions
    6. Out of Scope Comments
    B. Ambulance Fee Schedule: Policy for Reporting Units when 
Billing for Ambulance Fractional Mileage
    1. History of Medicare Ambulance Services
    a. Statutory Coverage of Ambulance Services
    b. Medicare Regulations for Ambulance Services
    2. Mileage Reporting--Summary of the Provisions of the CY 2011 
Proposed Rule
    a. Background and Current Process for Reporting Ambulance 
Mileage
    b. Concerns Regarding the Potential for Inaccuracies in 
Reporting Units and Associated Considerations
    c. Billing of Fractional Units for Mileage
    3. Analysis of and Responses to Public Comments
    a. Basis for Reconsideration of the Ambulance Mileage Reporting 
Requirements
    b. Appropriateness of Fractional Mileage Reporting Policy
    (1) Financial Impact of Fractional Mileage Policy
    c. Administrative Impact
    (2) Technical and Other Considerations
    (A) Ability to Measure Fractional Miles
    (B) Ambulance Provider versus Supplier Billing
    (C) Billing Software
    (D) Enforcement and Compliance
    (E) Air Ambulance
    (F) Miscellaneous Comments
    4. Applicability of the Fractional Billing Policy to Other 
Services
    5. Final Fractional Mileage Billing Policy
    C. Clinical Laboratory Fee Schedule: Signature on Requisition
    D. Discussion of Budget Neutrality for the Chiropractic Services 
Demonstration
    E. Provisions Related to Payment for Renal Dialysis Services 
Furnished by End-Stage Renal Disease (ESRD) Facilities
    (1) Update to the Drug Add-on Adjustment to the Composite Rate
    (2) Estimating Per Patient Growth
    (3) Update to the Drug Add-on Adjustment
    (4) Update to the Geographic Adjustments to the Composite Rate
    (5) Updates to Core-Based Statistical Area (CBSA) Definitions
    (6) Updated Wage Index Values
    (7) Wage index Values for Areas With No Hospital Data
    (8) Reduction to the ESRD Wage Index Floor
    (9) Budget Neutrality Adjustment
    (10) ESRD Wage Index Tables
    F. Issues Related to the Medicare Improvements for Patients and 
Providers Act of 2008 (MIPPA)
    1. Section 131: Physician Payment, Efficiency, and Quality 
Improvements--Physician Quality Reporting System
    a. Program Background and Statutory Authority
    b. Incentive Payments for the 2011 Physician Quality Reporting 
System
    c. 2011 Reporting Periods for Individual Eligible Professionals
    d. 2011 Physician Quality Reporting System Reporting Mechanisms 
for Individual Eligible Professionals
    (1) Final Requirements for Individual Eligible Professionals Who 
Choose the Claims-based Reporting Mechanism
    (2) Final Requirements for Individual Eligible Professionals Who 
Choose the Registry-based Reporting Mechanism
    (3) Final Requirements for Individual Eligible Professionals Who 
Choose the EHR based Reporting Mechanism
    (4) Final Qualification Requirements for Registries
    (5) Final Qualification Requirements for EHR Vendors and Their 
Products
    e. Criteria for Satisfactory Reporting of Individual Quality 
Measures for Individual Eligible Professionals
    f. Criteria for Satisfactory Reporting Measures Groups for 
Individual Eligible Professionals
    g. Reporting Option for Satisfactory Reporting on Quality 
Measures by Group Practices
    (1) Background and Authority
    (2) Definition of ``Group Practice''
    (3) Process for Physician Group Practices to Participate as 
Group Practices and Criteria for Satisfactory Reporting
    A. Group Practice Reporting Option for Physician Group Practices 
with 200 or More NPIs GPRO I
    B. Group Practice Reporting Option for Group Practices of 2-199 
NPIs--GPRO-II
    h. Statutory Requirements and Other Considerations for 2011 
Physician Quality Reporting System Measures
    (1) Statutory Requirements for 2011 Physician Quality Reporting 
System Measures
    (2) Other Considerations for 2011 Physician Quality Reporting 
System Measures
    (3) Summary of Comments and Responses
    i. The Final 2011 Physician Quality Reporting System Quality 
Measures for Individual Eligible Professionals
    (1) 2011 Individual Quality Measures Selected From the 2010 
Physician Quality Reporting System Quality Measures Set Available 
for Claims based Reporting and Registry-based Reporting
    (2) 2011 Individual Quality Measures Selected From the 2010 
Physician Quality Reporting System Quality Measures Set Available 
for Registry-based Reporting Only
    (3) New Individual Quality Measures for 2011
    (4) 2011 Measures Available for EHR-based Reporting
    (5) Measures Proposed for Inclusion in 2011 Measures Groups
    j. 2011 Physician Quality Reporting System Quality Measures for 
Group Practices Selected to Participate in the Group Practice 
Reporting Option (GPRO I)
    k. Public Reporting of Physician Quality Reporting System Data
    l. Other Relevant ACA Provisions
    (1) Section 3002 (b)--Incentive Payment Adjustment for Quality 
Reporting
    (2) Section 3002(c)--Maintenance of Certification Programs and 
Section 10327 Improvements to the Physician Quality Reporting System
    (3) Section 3002(d)--Integration of Physician Quality Reporting 
and EHR Reporting
    (4) Section 3002(e)--Feedback
    (5) Section 3002(f)--Appeals
    2. Section 132: Incentives for Electronic Prescribing (eRx)- The 
Electronic Prescribing Incentive Program

[[Page 73175]]

    a. Program Background and Statutory Authority
    b. The 2011 eRx Incentive
    (1) The 2011 Reporting Period for the eRx Incentive Program
    (2) Criteria for Determination of Successful Electronic 
Prescriber for Eligible Professionals
    (A) Reporting the Electronic Prescribing Measure
    (B) The Reporting Denominator for the Electronic Prescribing 
Measure
    (C) Qualified Electronic Prescribing System--Required 
Functionalities and Part D eRx Standards
    (D) The Reporting Numerator for the Electronic Prescribing 
Measure
    (E) Criteria for Successful Reporting of the Electronic 
Prescribing Measure
    (3) Determination of the 2011 Incentive Payment Amount for 
Individual Eligible Professionals Who Are Successful Electronic 
Prescribers
    (4) Reporting Option for Satisfactory Reporting of the 
Electronic Prescribing Measure by Group Practices
    (A) Definition of ``Group Practice''
    (B) Process for Group Practices to Participate as Group 
Practices and Criteria for Successful Reporting of the Electronic 
Prescribing Measure by Group Practices
    c. The 2012 eRx Payment Adjustment
    (1) The eRx Payment Adjustment Reporting Period
    (2) Criteria for Determining Applicability of the 2012 eRx 
Payment Adjustment to Individual Eligible Professionals
    (3) Criteria for Determining Applicability of the 2012 eRx 
Payment Adjustment to Group Practices
    (4) Significant Hardship Exemption
    d. The 2013 eRx Payment Adjustment
    e. Public Reporting of Names of Successful Electronic 
Prescribers
    G. DMEPOS Provisions
    1. Medicare Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies (DMEPOS) Competitive Bidding Program (CBP)
    a. Legislative and Regulatory History of DMEPOS CBP
    b. Implementation of a National Mail Order DMEPOS Competitive 
Bidding Program (CBP) for Diabetic Testing Supplies
    (1) Future Competitions for Diabetic Testing Supplies
    (2) Definition of Mail Order Item
    (3) Special Rule in Case of Competition for Diabetic Testing 
Strips
    (4) Anti-switching Rule in Case of Competition for Diabetic Test 
Strips
    c. Off-the-Shelf (OTS) Orthotics Exemption
    d. Grandfathering Rules Resulting in Additional Payments to 
Contract Suppliers under the DMEPOS Competitive Bidding Program 
(CBP)
    e. Appeals Process
    (1) Purpose and Definitions: (Sec.  414.402)
    (2) Applicability
    (3) Contract Termination
    (4) Notice of Termination
    (5) Corrective Action Plan
    (6) Right to Request a Hearing by the CBIC Hearing Officer (HO)
    (7) Scheduling of the Hearing
    (8) Burden of Proof
    (9) Role of the Hearing Officer (HO)
    (10) CMS's Final Determination
    (11) Effective Date of the Contract Termination
    (12) Effect of Contract Termination
    2. Changes to Payment Rules for Oxygen and Oxygen Equipment
    a. Background
    b. Furnishing Oxygen Equipment after the 36-Month Rental Period 
(CAP)
    c. Furnishing Oxygen Equipment during the 36-Month Rental Period 
(CAP)
    H. Provider and Supplier Enrollment Issue: Air Ambulance 
Provision
    I. Technical Corrections
    1. Physical Therapy, Occupational Therapy and Speech-language 
Pathology
    2. Scope of Benefits
    J. Physician Self-Referral Prohibition: Annual Update to the 
List of CPT/HCPCS Codes
    1. General
    2. Annual Update to the Code List
    a. Background
    b. Response to Comments
    c. Revisions Effective for 2011
VIII. Waiver of Proposed Rulemaking and Delay in Effective Date
IX. Collection of Information Requirements
    A. ICRs Regarding Diagnostic X-ray Tests, Diagnostic Laboratory 
Tests, and Other Diagnostic Tests: Conditions (Sec.  410.32)
    B. ICRs Regarding General Exceptions to the Referral Prohibition 
Related to Both Ownership/Investment and Compensation (Sec.  
411.355)
    C. ICRs Regarding Appeals Process for Termination of Competitive 
Bidding Contract (Sec.  414.423)
    D. ICRs Regarding Additional Provider and Supplier Requirements 
for Enrolling and Maintaining Active Enrollment status in the 
Medicare Program (Sec.  424.516)
    E. Additional Information Collection Requirements
    1. Part B Drug Payment
    2. Physician Quality Reporting Initiative (PQRI)
    3. Electronic Prescribing (eRx) Incentive Program
X. Response to Comments
XI. Regulatory Impact Analysis
    A. RVU Impacts
    1. Resource Based Work, PE, and Malpractice RVUs
    2. CY 2011 PFS Impact Discussion
    a. Changes in RVUs
    b. Combined Impact
    B. Geographic Practice Cost Indices (GPCIs)
    C. Rebasing and Revising of the MEI
    D. The Affordable Care Act Provisions
    1. Section 3002: Improvements to the Physician Quality Reporting 
System
    2. Sections 3003 and 3007: Improvements to the Physician 
Feedback Program and Value-Based Payment Under the Physician Fee 
Schedule
    2. Section 3103: Extension of Exceptions Process for Medicare 
Therapy Caps
    3. Section 3102: Extension of the Work Geographic Index Floor 
and Revisions to the Practice Expense Geographic Adjustment under 
the Medicare Physician Fee Schedule, and Protections for Frontier 
States as amended by Section 10324
    4. Section 3103: Extension of Exceptions Process for Medicare 
Therapy Caps
    5. Section 3104: Extension of Payment for Technical Component of 
Certain Physician Pathology Services
    6. Sections 3105 and 10311: Extension of Ambulance Add-Ons
    7. Section 3107: Extension of Physician Fee Schedule Mental 
Health Add-On
    8. Section 3108: Permitting Physician Assistants to Order Post-
Hospital Extended Care Services
    9. Section 3111: Payment for Bone Density Tests
    10. Section 3114: Improved Access for Certified Nurse-Midwife 
Services
    11. Section 3122: Extension of Medicare Reasonable Costs 
Payments for Certain Clinical Diagnostic Laboratory Tests Furnished 
to Hospital Patients in Certain Rural Areas
    12. Section 3134: Misvalued Codes Under the PFS
    13. Section 3135: Modification of Equipment Utilization Factor 
For Advanced Imaging Services
    14. Section 3136: Revisions in Payments for Power Wheelchairs
    15. Section 3139: Payment for Biosimilar Biological Products
    16. Section 3401: Revisions of Certain Market Basket Updates and 
Incorporation of Productivity Adjustments
    17. Section 4103: Medicare Coverage of Annual Wellness Visit 
Providing a Personalized Prevention Plan
    18. Section 4104: Removal of Barriers to Preventive Services in 
Medicare
    19. Section 5501: Expanding Access to Primary Care Services and 
General Surgery Services
    20. Section 6003: Disclosure Requirements for In-office 
Ancillary Services Exception to the Prohibition of Physician Self-
referral for Certain Imaging Services
    21. Section 6404: Maximum Period for Submission of Medicare 
Claims Reduced to Not More Than 12 Months
    22. Section 6410 of Patient Accountability and Affordable Care 
Act and Section 154 of MIPPA: Adjustments to the Metropolitan 
Statistical Areas (MSA) for Medicare Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies Competitive Acquisition Program
    23. Section 10501(i)(3): Collection of HCPCS Data for the 
Development and Implementation of a Prospective Payment System for 
the Medicare FQHC Program
    E. Other Provisions of the Proposed Regulation
    1. Part B Drug Payment: ASP Issues
    2. Ambulance Fee Schedule: Proposed Policy for Reporting Units 
when Billing for Ambulance Fractional Mileage
    3. Chiropractic Services Demonstration
    4. Renal Dialysis Services Furnished by ESRD Facilities
    5. Section 131(b) of the MIPPA: Physician Payment, Efficiency, 
and Quality Improvements--Physician Quality Reporting System
    6. Section 132 of the MIPPA: Incentives for Electronic 
Prescribing (eRx)--The eRx Incentive Program

[[Page 73176]]

    7. Durable Medical Equipment-Related Issues
    a. Off-the-Shelf (OTS) Orthotics Exemption
    b. Changes to Payment for Oxygen Equipment
    c. Diabetic Testing Supplies
    d. Metropolitan Statistical Areas
    8. Air Ambulance
    F. Alternatives Considered
    G. Impact on Beneficiaries
    H. Accounting Statement

Regulations Text

Addendum A--Explanation and Use of Addendum B
Addendum B--Relative Value Units and Related Information Used In 
Determining Medicare Payments for CY 2011
Addendum C--Codes With Interim RVUS
Addendum D--Final 2011 Geographic Adjustment Factors (GAFS)
Addendum E--Final 2011****Geographic Practice Cost Indicies (GPCIS) 
By State and Medicare Locality
Addendum F--CY 2011 Diagnostic Imaging Services Subject To The 
Multiple Procedure Payment Reduction
Addendum G--CPT/HCPCS Imaging Codes Defined By Section 5102(B) of 
the DRA
Addendum H--CY 2011 ``Always Therapy'' Services* Subject to the 
Multiple Procedure Payment Reduction
Addendum I--[Reserved]
Addendum J--List of CPT1/HCPCS Codes Used to Define Certain 
Designated Health Service Categories \2\ Under Section 1877 of the 
Social Security Act Effective January 1, 2011
Addendum K--CY 2011 ESRD Wage Index For Urban Areas Based On CBSA 
Labor Market Areas
Addendum L-- CY 2011 Wage Index For Rural Areas Based On CBSA Labor 
Market Areas

Acronyms

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

AA Anesthesiologist assistant
AACVPR American Association of Cardiovascular and Pulmonary 
Rehabilitation
AANA American Association of Nurse Anesthetists
ABMS American Board of Medical Specialties
ABN Advanced Beneficiary Notice
ACA ``Affordable Care Act''
ACC American College of Cardiology
ACGME Accreditation Council on Graduate Medical Education
ACLS Advanced cardiac life support
ACP American College of Physicians
ACR American College of Radiology
ACS American Community Survey
AED Automated external defibrillator
AFROC Association of Freestanding Radiation Oncology Centers
AFS Ambulance Fee Schedule
AHA American Heart Association
AHFS-DI American Hospital Formulary Service-Drug Information
AHRQ [HHS] Agency for Healthcare Research and Quality
AMA American Medical Association
AMA-DE American Medical Association Drug Evaluations
AACE American Association of Clinical Endocrinologists
AADE American Association of Diabetes Educators
AMP Average manufacturer price
AO Accreditation organization
AOA American Osteopathic Association
APA American Psychological Association
APC Administrative Procedures Act
APTA American Physical Therapy Association
ARRA American Recovery and Reinvestment Act (Pub. L. 111-5)
ASC Ambulatory surgical center
ASP Average sales price
ASRT American Society of Radiologic Technologists
ASTRO American Society for Therapeutic Radiology and Oncology
ATA American Telemedicine Association
AWP Average wholesale price
AWV Annual Wellness Visit
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)
BPM Benefit Policy Manual
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection 
Act of 2000 (Pub. L. 106-554)
BLS Bureau of Labor Statistics
BN Budget neutrality
BPM Benefit Policy Manual
CABG Coronary artery bypass graft
CAD Coronary artery disease
CAH Critical access hospital
CAHEA Committee on Allied Health Education and Accreditation
CAP Competitive acquisition program
CARE Continuity Assessment Record and Evaluation
CBIC Competitive Bidding Implementation Contractor
CBP Competitive Bidding Program
CBSA Core-Based Statistical Area
CDC Centers for Disease Control and Prevention
CEM Cardiac Event Monitoring
CF Conversion factor
CFC Conditions for Coverage
CFR Code of Federal Regulations
CKD Chronic kidney disease
CLFS Clinical laboratory fee schedule
CMA California Medical Association
CMD Contractor Medical Director
CMHC Community mental health center
CMP Civil money penalty
CMS Centers for Medicare & Medicaid Services
CNS Clinical nurse specialist
CoP Condition of participation
COPD Chronic obstructive pulmonary disease
CORF Comprehensive Outpatient Rehabilitation Facility
COS Cost of service
CPEP Clinical Practice Expert Panel
CPI Consumer Price Index
CPI-U Consumer price index for urban consumers
CPR Cardiopulmonary resuscitation
CPT [Physicians] Current Procedural Terminology (4th Edition, 2002, 
copyrighted by the American Medical Association)
CR Cardiac rehabilitation
CRNA Certified registered nurse anesthetist
CRP Canalith repositioning
CRT Certified respiratory therapist
CSW Clinical social worker
CT Computed Tomography
CTA Computed Tomography Angography
CSC Computer Sciences Corporation
CWF Common Working File
CY Calendar year
DEA Drug Enforcement Agency
DOTPA Development of Outpatient Therapy Alternatives
DHS Designated health services
DHHS Department of Health and Human Services
DME Durable medical equipment
DMEPOS Durable medical equipment, prosthetics, orthotics, and 
supplies
DOQ Doctors Office Quality
DOS Date of service
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
DSMT Diabetes self-management training
EGC Electrocardiogram
E/M Evaluation and management
EDI Electronic data interchange
EEG Electroencephalogram
EHR Electronic health record
EKG Electrocardiogram
EMG Electromyogram
EMTALA Emergency Medical Treatment and Active Labor Act
EOG Electro-oculogram
EPO Erythopoeitin
eRx Electronic Prescribing
ESO Endoscopy Supplies
ESRD End-stage renal disease
FAA Federal Aviation Administration
FAX Facsimile
 FDA Food and Drug Administration (HHS)
 FFS Fee-for-service
 FOTO Focus On Therapeutic Outcomes
 FQHC Federally Qualified Health Center
 FR Federal Register
 GAF Geographic adjustment factor
 GAO General Accounting Office
 GEM Generating Medicare [Physician Quality Performance Measurement 
Results]
 GFR Glomerular filtration rate
 GPRO Group Practice Reporting Option
 GPO Group purchasing organization
 GPCI Geographic practice cost index
 GPS Geographic Positioning System
 GSA General Services Administration
 HAC Hospital-acquired conditions
 HBAI Health and behavior assessment and intervention
 HCC Hierarchal Condition Category
 HCPAC Health Care Professional Advisory Committee
 HCPCS Healthcare Common Procedure Coding System
 HCRIS Healthcare Cost Report Information System
 HEMS Helicopter Emergency Medical Services
 HDRT High dose radiation therapy

[[Page 73177]]

 HH PPS Home Health Prospective Payment System
 HHA Home health agency
 HHRG Home health resource group
 HHS [Department of] Health and Human Services
 HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191)
 HIT Health information technology
 HITECH Health Information Technology for Economic and Clinical 
Health Act (Title IV of Division B of the Recovery Act, together 
with Title XIII of Division A of the Recovery Act)
 HITSP Healthcare Information Technology Standards Panel
 HIV Human immunodeficiency virus
 HOPD Hospital outpatient department
 HPSA Health Professional Shortage Area
 HRA Health Risk Assessment
 HRSA Health Resources Services Administration (HHS)
 HSIP HPSA Surgical Incentive Program
 HUD Housing and Urban Development
 IACS Individuals Access to CMS Systems
 ICD International Classification of Diseases
 ICF Intermediate care facilities
 ICF International Classification of Functioning, Disability and 
Health
 ICR Intensive cardiac rehabilitation
 ICR Information collection requirement
 IDTF Independent diagnostic testing facility
 IGI IHS Global Insight, Inc.
 IFC Interim final rule with comment period
 IMRT Intensity-Modulated Radiation Therapy
 IOM Internet Only Manual
 IPCI indirect practice cost index
 IPPE Initial preventive physical examination
 IPPS Inpatient prospective payment system
 IRS Internal Revenue Service
 ISO Insurance services office
 IVD Ischemic Vascular Disease
 IVIG Intravenous immune globulin
 IWPUT Intra-service work per unit of time
 TJC Joint Commission
 JRCERT Joint Review Committee on Education in Radiologic Technology
 KDE Kidney disease education
 LCD Local coverage determination
 MA Medicare Advantage
 MA-PD Medicare Advantage-Prescription Drug Plans
 MAC Medicare Administrative Contractor
 MAV Measure Applicability Validation
 MCMP Medicare Care Management Performance
 MCP Monthly Capitation Payment
 MDRD Modification of Diet in Renal Disease
 MedCAC Medicare Evidence Development and Coverage Advisory 
Committee (formerly the Medicare Coverage Advisory Committee (MCAC))
 MedPAC Medicare Payment Advisory Commission
 MGMA Medical Group Management Association
 MEI Medicare Economic Index
 MIEA-TRHCA Medicare Improvements and Extension Act of 2006 (that 
is, Division B of the Tax Relief and Health Care Act of 2006 (TRHCA) 
(Pub. L. 109-432)
 MIPPA Medicare Improvements for Patients and Providers Act of 2008 
(Pub. L. 110-275)
 MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Pub. L. 108-173)
 MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 
110-173)
 MNT Medical nutrition therapy
 MOC Maintenance of certification
 MP Malpractice
 MPC Mulitspecialty Points of Comparison
 MPPR Multiple procedure payment reduction
 MQSA Mammography Quality Standards Act of 1992 (Pub. L. 102-539)
 MRA Magnetic Resonance Angiography
 MRI Magnetic Resonance Imaging
 MSA Metropolitan Statistical Area
 MSP Medicare Secondary Payer
 MUE Medically Unlikely Edit
 NCCI National Correct Coding Initiative
 NCD National Coverage Determination
 NCQA National Committee for Quality Assurance
 NCQDIS National Coalition of Quality Diagnostic Imaging Services
 NDC National drug code
 NF Nursing facility
 NISTA National Institute of Standards and Technology Act
 NP Nurse practitioner
 NPI National Provider Identifier
 NPP Nonphysician practitioner
 NQF National Quality Forum
 NBRC National Board for Respiratory Care
 NRC Nuclear Regulatory Commission
 NTSB National Transportation Safety Board
 NUBC National Uniform Billing Committee
 OACT [CMS] Office of the Actuary
 OBRA Omnibus Budget Reconciliation Act
 OCR Optical Character Recognition
 ODF Open door forum
 OES Occupational Employment Statistics
 OGPE Oxygen generating portable equipment
 OIG Office of Inspector General
 OMB Office of Management and Budget
 ONC [HHS] Office of the National Coordinator for Health IT
 OPPS Outpatient prospective payment system
 OSCAR Online Survey and Certification and Reporting
 PA Physician assistant
 PACE Program of All-inclusive Care for the Elderly
 PAT Performance assessment tool
 PC Professional component
 PCI Percutaneous coronary intervention
 PCIP Primary Care Incentive Payment Program
 PDP Prescription drug plan
 PE Practice expense
 PE/HR Practice expense per hour
 PEAC Practice Expense Advisory Committee
 PECOS Provider Enrollment Chain and Ownership System
 PERC Practice Expense Review Committee
 PFS Physician Fee Schedule
 PGP [Medicare] Physician Group Practice
 PHI Protected health information
 PHP Partial hospitalization program
 PIM [Medicare] Program Integrity Manual
PLI Professional liability insurance
POA Present on admission
POC Plan of care
PPI Producer price index
PPIS Physician Practice Information Survey
PPPS Personalized Prevention Plan Services
PPS Prospective payment system
PPTA Plasma Protein Therapeutics Association
PQRI Physician Quality Reporting Initiative
PR Pulmonary rehabilitation
PRA Paperwork Reduction Act
PSA Physician scarcity areas
PT Physical therapy
PTCA Percutaneous transluminal coronary angioplasty
PTA Physical therapy assistant
PVBP Physician and Other Health Professional Value-Based Purchasing 
Workgroup
QDCs (Physician Quality Reporting System) Quality Data Codes
RA Radiology assistant
RAC Medicare Recovery Audit Contractor
RBMA Radiology Business Management Association
RFA Regulatory Flexibility Act
RHC Rural health clinic
RHQDAPU Reporting Hospital Quality Data Annual Payment Update 
Program
RIA Regulatory impact analysis
RN Registered nurse
RNAC Reasonable net acquisition cost
RPA Radiology practitioner assistant
RRT Registered respiratory therapist
RUC [AMAs Specialty Society] Relative (Value) Update Committee
RVRBS Resource-Based Relative Value Scale
RVU Relative value unit
SBA Small Business Administration
SCHIP State Children's Health Insurance Programs
SDW Special Disability Workload
SGR Sustainable growth rate
STATS Short Term Alternatives for Therapy Services
SLP Speech-language pathology
SMS [AMAs] Socioeconomic Monitoring System
SNF Skilled nursing facility
SOR System of record
SRS Stereotactic radiosurgery
SSA Social Security Administration
SSI Social Security Income
STARS Services Tracking and Reporting System
STATS Short Term Alternative Therapy Services
TC Technical Component
TIN Tax identification number
TRHCA Tax Relief and Health Care Act of 2006 (Pub. L. 109-432)
TTO Transtracheal oxygen
UAF Update Adjustment Factor
UPMC University of Pittsburgh Medical Center
URAC Utilization Review Accreditation Committee
USDE United States Department of Education
USP-DI United States Pharmacopoeia-Drug Information
VA Veterans Administration
VBP Value-based purchasing
WAC Wholesale Acquisition Cost

[[Page 73178]]

WAMP Widely available market price
WHO World Health Organization

CPT (Current Procedural Terminology) Copyright Notice

    Throughout this final rule with comment period, we use CPT codes 
and descriptions to refer to a variety of services. We note that CPT 
codes and descriptions are copyright 2010 American Medical Association. 
All Rights Reserved. CPT is a registered trademark of the American 
Medical Association (AMA). Applicable FARS/DFARS apply.

I. Background

    Since January 1, 1992, Medicare has paid for physicians' services 
under section 1848 of the Social Security Act (the Act), ``Payment for 
Physicians' Services.'' The Act requires that payments under the 
physician fee schedule (PFS) are based on national uniform relative 
value units (RVUs) based on the relative resources used in furnishing a 
service. Section 1848(c) of the Act requires that national RVUs be 
established for physician work, practice expense (PE), and malpractice 
expense. Before the establishment of the resource-based relative value 
system, Medicare payment for physicians' services was based on 
reasonable charges. We note that throughout this final rule with 
comment period, unless otherwise noted, the term ``practitioner'' is 
used to describe both physicians and eligible nonphysician 
practitioners (such as physician assistants, nurse practitioners, 
clinical nurse specialists, certified nurse-midwives, psychologists, or 
social workers) that are permitted to furnish and bill Medicare under 
the PFS for the services under discussion.

A. Development of the Relative Value System

1. Work RVUs
    The concepts and methodology underlying the PFS were enacted as 
part of the Omnibus Budget Reconciliation Act (OBRA) of 1989 (Pub. L. 
101-239), and OBRA 1990, (Pub. L. 101-508). The final rule, published 
on November 25, 1991 (56 FR 59502), set forth the fee schedule for 
payment for physicians' services beginning January 1, 1992. Initially, 
only the physician work RVUs were resource-based, and the PE and 
malpractice RVUs were based on average allowable charges.
    The physician work RVUs established for the implementation of the 
fee schedule in January 1992 were developed with extensive input from 
the physician community. A research team at the Harvard School of 
Public Health developed the original physician work RVUs for most codes 
in a cooperative agreement with the Department of Health and Human 
Services (DHHS). In constructing the code-specific vignettes for the 
original physician work RVUs, Harvard worked with panels of experts, 
both inside and outside the Federal government, and obtained input from 
numerous physician specialty groups.
    Section 1848(b)(2)(B) of the Act specifies that the RVUs for 
anesthesia services are based on RVUs from a uniform relative value 
guide, with appropriate adjustment of the conversion factor (CF), in a 
manner to assure that fee schedule amounts for anesthesia services are 
consistent with those for other services of comparable value. We 
established a separate CF for anesthesia services, and we continue to 
utilize time units as a factor in determining payment for these 
services. As a result, there is a separate payment methodology for 
anesthesia services.
    We establish physician work RVUs for new and revised codes based on 
our review of recommendations received from the American Medical 
Association's (AMA) Specialty Society Relative Value Update Committee 
(RUC).
2. Practice Expense Relative Value Units (PE RVUs)
    Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 
103-432), enacted on October 31, 1994, amended section 
1848(c)(2)(C)(ii) of the Act and required us to develop resource-based 
PE RVUs for each physicians' service beginning in 1998. We were to 
consider general categories of expenses (such as office rent and wages 
of personnel, but excluding malpractice expenses) comprising PEs.
    Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 
105-33), amended section 1848(c)(2)(C)(ii) of the Act to delay 
implementation of the resource-based PE RVU system until January 1, 
1999. In addition, section 4505(b) of the BBA provided for a 4-year 
transition period from charge-based PE RVUs to resource-based RVUs.
    We established the resource-based PE RVUs for each physicians' 
service in a final rule, published November 2, 1998 (63 FR 58814), 
effective for services furnished in 1999. Based on the requirement to 
transition to a resource-based system for PE over a 4-year period, 
resource-based PE RVUs did not become fully effective until 2002.
    This resource-based system was based on two significant sources of 
actual PE data: the Clinical Practice Expert Panel (CPEP) data; and the 
AMA's Socioeconomic Monitoring System (SMS) data. The CPEP data were 
collected from panels of physicians, practice administrators, and 
nonphysicians (for example, registered nurses (RNs)) nominated by 
physician specialty societies and other groups. The CPEP panels 
identified the direct inputs required for each physicians' service in 
both the office setting and out-of-office setting. We have since 
refined and revised these inputs based on recommendations from the RUC. 
The AMA's SMS data provided aggregate specialty-specific information on 
hours worked and PEs.
    Separate PE RVUs are established for procedures that can be 
performed in both a nonfacility setting, such as a physician's office, 
and a facility setting, such as a hospital outpatient department 
(HOPD). The difference between the facility and nonfacility RVUs 
reflects the fact that a facility typically receives separate payment 
from Medicare for its costs of providing the service, apart from 
payment under the PFS. The nonfacility RVUs reflect all of the direct 
and indirect PEs of providing a particular service.
    Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113) directed the Secretary of Health and Human Services 
(the Secretary) to establish a process under which we accept and use, 
to the maximum extent practicable and consistent with sound data 
practices, data collected or developed by entities and organizations to 
supplement the data we normally collect in determining the PE 
component. On May 3, 2000, we published the interim final rule (65 FR 
25664) that set forth the criteria for the submission of these 
supplemental PE survey data. The criteria were modified in response to 
comments received, and published in the Federal Register (65 FR 65376) 
as part of a November 1, 2000 final rule. The PFS final rules published 
in 2001 and 2003, respectively, (66 FR 55246 and 68 FR 63196) extended 
the period during which we would accept these supplemental data through 
March 1, 2005.
    In the calendar year (CY) 2007 PFS final rule with comment period 
(71 FR 69624), we revised the methodology for calculating direct PE 
RVUs from the top-down to the bottom-up methodology beginning in CY 
2007 and provided for a 4-year transition for the new PE RVUs under 
this new methodology. This transition ended in CY 2010 and direct PE 
RVUs are calculated in CY 2011 using this methodology, unless otherwise 
noted.
    In the CY 2010 PFS final rule with comment period, we updated the 
PE/hour (HR) data that are used in the

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calculation of PE RVUs for most specialties (74 FR 61749). For this 
update, we used the Physician Practice Information Survey (PPIS) 
conducted by the AMA. The PPIS is a multispecialty, nationally 
representative, PE survey of both physicians and nonphysician 
practitioners (NPPs) using a survey instrument and methods highly 
consistent with those of the SMS and the supplemental surveys used 
prior to CY 2010. We note that in CY 2010, for oncology, clinical 
laboratories, and independent diagnostic testing facilities (IDTFs), we 
continued to use the supplemental survey data to determine PE/HR values 
(74 FR 61752).
3. Resource-Based Malpractice (MP) RVUs
    Section 4505(f) of the BBA amended section 1848(c) of the Act 
requiring us to implement resource-based malpractice (MP) RVUs for 
services furnished on or after CY 2000. The resource-based MP RVUs were 
implemented in the PFS final rule published November 2, 1999 (64 FR 
59380). The MP RVUs were based on malpractice insurance premium data 
collected from commercial and physician-owned insurers from all the 
States, the District of Columbia, and Puerto Rico.
4. Refinements to the RVUs
    Section 1848(c)(2)(B)(i) of the Act requires that we review all 
RVUs no less often than every 5 years. The first Five-Year Review of 
the physician work RVUs was published on November 22, 1996 (61 FR 
59489) and was effective in 1997. The second Five-Year Review was 
published in the CY 2002 PFS final rule with comment period (66 FR 
55246) and was effective in 2002. The third Five-Year Review of 
physician work RVUs was published in the CY 2007 PFS final rule with 
comment period (71 FR 69624) and was effective on January 1, 2007. 
(Note: Additional codes relating to the third Five-Year Review of 
physician work RVUs were addressed in the CY 2008 PFS final rule with 
comment period (72 FR 66360).) The fourth Five-Year Review of physician 
work RVUs was initiated in the CY 2010 PFS final rule with comment 
period where we solicited candidate codes from the public for this 
review (74 FR 61941). Changes due to the fourth Five-Year Review of 
physician work RVUs will be effective January 1, 2012.
    In 1999, the AMA RUC established the Practice Expense Advisory 
Committee (PEAC) for the purpose of refining the direct PE inputs. 
Through March 2004, the PEAC provided recommendations to CMS for over 
7,600 codes (all but a few hundred of the codes currently listed in the 
AMAs Current Procedural Terminology (CPT) codes). As part of the CY 
2007 PFS final rule with comment period (71 FR 69624), we implemented a 
new bottom-up methodology for determining resource-based PE RVUs and 
transitioned the new methodology over a 4-year period. A comprehensive 
review of PE was undertaken prior to the 4-year transition period for 
the new PE methodology from the top-down to the bottom-up methodology, 
and this transition was completed in CY 2010. In CY 2010, we also 
incorporated the new PPIS data to update the specialty-specific PE/HR 
data used to develop PE RVUs. Therefore, the next Five-Year Review of 
PE RVUs will be addressed in CY 2014.
    In the CY 2005 PFS final rule with comment period (69 FR 66236), we 
implemented the first Five-Year Review of the MP RVUs (69 FR 66263). 
Minor modifications to the methodology were addressed in the CY 2006 
PFS final rule with comment period (70 FR 70153). The second Five-Year 
Review and update of resource-based malpractice RVUs was published in 
the CY 2010 PFS final rule with comment period (74 FR 61758) and was 
effective in CY 2010.
5. Adjustments to RVUs Are Budget Neutral
    Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments 
in RVUs for a year may not cause total PFS payments to differ by more 
than $20 million from what they would have been if the adjustments were 
not made. In accordance with section 1848(c)(2)(B)(ii)(II) of the Act, 
if revisions to the RVUs cause expenditures to change by more than $20 
million, we make adjustments to ensure that expenditures do not 
increase or decrease by more than $20 million.
    For CY 2010, we adopted a number of new payment policies for which 
we estimated the potential for a redistributive effect under the PFS, 
including the use of the new PPIS data to develop the specialty-
specific PE/HR used for the PE RVUs (74 FR 61749 through 61752) and the 
elimination of the reporting of all CPT consultation codes in order to 
allow for correct and consistent coding and appropriate payment for 
evaluation and management services under the PFS (74 FR 61767 through 
61775). In the CY 2011 PFS proposed rule (75 FR 40047), we acknowledged 
that clinical experience with these new PFS policies has been growing 
over the first 6 months of CY 2010 and noted that as we seek to improve 
future PFS payment accuracy for services, we were interested in public 
comments on the perspectives of physicians and nonphysician 
practitioners caring for Medicare beneficiaries under the current PFS 
coding and payment methodologies for physicians' services.
    Comment: Many commenters expressed various concerns regarding new 
Medicare coding and payment methodologies adopted for CY 2010 and 
continuing in CY 2011. Some commenters indicated that the effects of 
using PPIS data to develop the specialty-specific practice expense per 
hour (PE/HR) significantly reduced the payment for certain services and 
procedures. Commenters were concerned that the reductions in practice 
costs reflected in the PPIS data were inaccurate and that CMS reliance 
on the PPIS data caused undue hardship to certain specialties. Some 
commenters requested that CMS utilize new PE survey data for specific 
specialties.
    A number of commenters were also particularly concerned with the 
decision by CMS to no longer recognize the CPT consultation codes for 
Part B payment of evaluation and management (E/M) services beginning in 
CY 2010. Many commenters recommended resuming payment for consultation 
codes under the PFS to recognize the unique physician work and practice 
expenses when consultation services are furnished at the request of 
other practitioners. Several commenters argued that consultation 
services were especially important to ensuring high-quality, 
coordinated care for complex patients and to prevent unnecessary, 
expensive tests. Based on findings from a survey of affected 
specialties, these commenters expressed concern that CMS policy 
decision to no longer recognize the CPT consultation codes for PFS 
payment purposes resulted in: (1) A reduction in the number of new 
Medicare patients seen by specialists; (2) a reduction in overall 
specialist time spent with individual Medicare patients; (3) a 
reduction in the number of consultations provided to hospital 
inpatients; (4) diminished continuity and coordination of care; and (5) 
the elimination of physicians' office staff and postponement of 
physicians purchasing new equipment because of practice cost concerns. 
Finally, other commenters requested that, in the absence of recognition 
of the CPT consultation codes for PFS payment, CMS should revise the 
current prolonged services and new patient definitions in order to 
allow for higher payments for services that, prior to CY 2010, would 
have been billed using the CPT consultation codes. Specifically,

[[Page 73180]]

the commenters believe that CMS should adopt the current CPT policy of 
identifying patients seen by physicians in a different subspecialty 
within a group practice as ``new'' patients, rather than continuing to 
use the same physician specialty as the decision point. In addition, 
some commenters encouraged CMS to adopt the CPT inpatient setting 
guidelines for determining whether a service meets the prolonged 
service criteria, which allow physicians to include time spent on a 
patients floor or unit performing tasked related to the patients care, 
rather than just face-to-face time as specified under current CMS 
policy.
    Response: We appreciate the concerns of the commenters regarding 
current PFS coding and payment methodologies. We welcome the 
perspective of physicians and nonphysician practitioners caring for 
Medicare beneficiaries. We understand that in some cases, recent policy 
changes under the PFS reduced payments for certain professional 
services, albeit with the goal of providing payment for services that 
appropriately reflects their relative value in the context of PFS 
payment for all other services. It is in the nature of any budget 
neutral payment system for changes, such as the use of PPIS data and 
the elimination of PFS payment for the CPT consultation codes, to have 
a somewhat differential impact on various groups of physicians and/or 
nonphysician practitioners. Furthermore, we note that all physicians 
benefited from the budget neutral increase in the payment levels for 
the other evaluation and management (E/M) CPT codes that resulted from 
the consultation code policy change.
    For CY 2010, we adopted the PPIS data for developing the PE RVUs as 
the most recent data on physicians office practice expenses that used a 
consistent survey instrument across all specialty and healthcare 
professional groups. The PPIS was a nationally representative survey 
providing the most up-to-date and comprehensive data available from 51 
specialties, using a survey instrument that was carefully designed, 
tested, and implemented. As discussed in the CY 2010 PFS final rule 
with comment period (75 FR 61751), because we recognized that some 
specialties would likely experience significant payment reductions with 
the use of the PPIS data, we adopted a 4-year transition from the 
previous PE RVUs to the PE RVUs developed using the new PPIS data in 
order to allow physicians and others time to adjust to the payment 
changes. We note that CY 2010 was the first year of the transition, 
with payment based upon 75 percent of the previous PE RVUs and 25 
percent of the PE RVUs using the new PPIS data. This blend will move to 
50/50 in CY 2011, and we intend to continue to closely monitor Medicare 
PFS utilization data to detect any emerging issues that may be of 
concern during this transition period, such as access problems for 
Medicare beneficiaries. To date, we have identified no specific 
problems that would warrant our proposal of a change with respect to 
the final CY 2010 policy regarding development of the PE RVUs based on 
the PPIS data. Going forward, as discussed further in section II.A.2.f. 
of this final rule with comment period, we remain interested in the 
thoughts of stakeholders regarding the MedPAC comment that ``CMS should 
consider alternatives to collecting specialty-specific cost data or 
options to decrease the reliance on such data.'' We encourage 
interested parties to contact us at any time if they have information 
to share or discuss in this regard.
    In response to extensive public comment on the CY 2010 PFS proposal 
to eliminate payment for the CPT consultation codes, we explained our 
rationale in detail in the CY 2010 PFS final rule with comment period 
(75 FR 61767 through 61775). Prior to the CY 2010 PFS rulemaking cycle, 
we had made numerous attempts to resolve issues related to the 
reporting of the CPT consultation codes, including developing and 
implementing relevant guidance and educating physicians regarding 
documentation, transfer of care, and consultation policy. Despite these 
efforts, there was still substantial disagreement and inconsistency 
within the physician community regarding these issues. In addition, we 
believe that in most cases there is no substantial difference in 
physician work between E/M visits and services that would otherwise be 
reported with CPT consultation codes. Therefore, we continue to believe 
that E/M services that could previously have been reported using the 
CPT consultation codes may now be appropriately reported and paid using 
other E/M codes, specifically office and other outpatient, initial 
hospital and nursing facility care, and subsequent hospital and nursing 
facility care E/M codes. This policy allows for correct and consistent 
coding for E/M services furnished by physicians and nonphysician 
practitioners, as well as provides for appropriate payment for the 
specific services that were previously billed using the CPT 
consultation codes.
    While we continue to believe that promoting effective coordination 
of care must be an essential goal of our payment systems, we are 
currently not aware of any evidence that the CY 2010 policy change to 
no longer recognize the CPT consultation codes is creating problems 
regarding care coordination and communication among physicians that 
negatively impact the health of Medicare beneficiaries. As we stated in 
the CY 2010 PFS final rule with comment period in response to similar 
hypothetical concerns expressed by some commenters (75 FR 61774), if we 
become aware of such evidence in the future, we would certainly 
consider whether there is an appropriate policy response to promote 
more effective coordination of care. However, we continue to believe it 
is premature to consider what the appropriate responses might be unless 
specific evidence of an issue affecting the health of Medicare 
beneficiaries comes to our attention. We will continue to be attentive 
to any concerns that develop about the effects of the policy on the 
goal of promoting effective coordination of care.
    In the CY 2010 PFS final rule with comment period (75 FR 61772), we 
explained that, although we estimated that there would be 
redistributional effects among specialties, we did not believe the 
estimated impacts of the change in consultation code policy were 
disproportionate to the goals we sought to achieve in finalizing the 
proposal. While we understand that commenters are concerned with the 
effects of this policy change and that these comments were submitted 
after only a half year's experience with the revised policy, the 
commenters on the CY 2011 proposed rule did not fundamentally address 
the underlying issues that led to our decision to no longer recognize 
the consultation codes for PFS payment purposes.
    We appreciate the suggestions of the commenters regarding policy 
changes to the definitions of new patients and prolonged services. 
Regarding the definition of ``new'' patient, we note that we continue 
to consider requests on an ongoing basis for new Medicare physician 
specialty codes and may establish new codes upon evaluating the 
submissions based on the criteria listed in the Medicare Claims 
Processing Manual, Pub. 100-04, chapter 26, section 10.8. In fact, we 
have approved four new Medicare physician specialty codes in the past 2 
years. These additions allow more patients of those subspecialties to 
be considered new based on the narrower range of services provided by 
the subspecialty within a broader specialty group practice. We 
encourage interested stakeholders to submit requests for new specialty 
codes

[[Page 73181]]

if they desire a specific code for a different medical specialty or 
subspecialty. We do not believe it is necessary to change our current 
policy to one that would routinely adopt the CPT policy of identifying 
patients seen by physicians in a different subspecialty as ``new'' 
patients because our current criteria for establishing new Medicare 
physician specialty codes already accounts for many of these scenarios. 
Medicare physician specialty codes describe the unique types of 
medicine that physicians practice. Therefore, we believe our current 
definition of ``new'' for reporting office visits to a group practice 
appropriately relies upon the Medicare definition of a different 
specialty so that that the differential physician resources required to 
care for a patient who is truly new to the physician's unique type of 
medical practice are appropriately recognized.
    Finally, we note that our prolonged service criterion that allows 
counting only of face-to-face time for inpatients, as it does for 
outpatients, is longstanding. Given that the highest level initial 
hospital care E/M visit by a physician typically extends for 70 
minutes, in order to report the prolonged physician service CPT code in 
the inpatient setting, a physician would need to spend at least an 
additional 30 minutes caring for the patient. We are uncertain whether 
many inpatient E/M services that would otherwise be reported as CPT 
consultation codes extend beyond 100 minutes, even if we were to 
consider adopting a policy change to allow counting of unit/floor time 
in addition to face-to-face time. If we were to consider such a policy 
change in the counting of physician time, we are also concerned that 
available documentation in the medical record could make evaluating the 
medical necessity of a prolonged service especially problematic. 
Therefore, we do not believe it would be appropriate to modify our 
interpretation of the counting of time for purposes of reporting the 
prolonged service inpatient codes. In most cases, we believe that the 
additional time that may be required for an E/M visit to a hospital 
inpatient that would otherwise be reported by a CPT consultation code 
may be appropriately paid through the Medicare payment for the level of 
initial or subsequent hospital care E/M code that is reported that 
takes into consideration the face-to-face time the consulting physician 
spends with the patient.
    We appreciate the commenters' varied perspectives on caring for 
Medicare beneficiaries under the recent PFS coding and payment changes 
adopted for CY 2010 and continuing in CY 2011. While we did not make CY 
2011 proposals to modify our established policies regarding the use of 
the PPIS data to calculate the PE RVUs or the reporting of E/M visits 
that would otherwise be reported under the CPT consultation codes, and 
we are not modifying them for CY 2011, we will continue to monitor the 
impact of these policies. We look forward to continuing our dialogue 
with stakeholders regarding these and future policy changes under the 
PFS.

B. Components of the Fee Schedule Payment Amounts

    To calculate the payment for every physician's service, the 
components of the fee schedule (physician work, PE, and MP RVUs) are 
adjusted by a geographic practice cost index (GPCI). The GPCIs reflect 
the relative costs of physician work, PE, and malpractice expense in an 
area compared to the national average costs for each component.
    RVUs are converted to dollar amounts through the application of a 
CF, which is calculated by CMS Office of the Actuary (OACT).
    The formula for calculating the Medicare fee schedule payment 
amount for a given service and fee schedule area can be expressed as:

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

C. Most Recent Changes to the Fee Schedule

    The CY 2010 PFS final rule with comment period (74 FR 61738) 
implemented changes to the PFS and other Medicare Part B payment 
policies. It also finalized some of the CY 2009 interim RVUs and 
implemented interim RVUs for new and revised codes for CY 2010 to 
ensure that our payment systems are updated to reflect changes in 
medical practice and the relative value of services. The CY 2010 PFS 
final rule with comment period also addressed other policies, as well 
as certain provisions of the MIPPA.
    As required by the statute at the time of its issuance on October 
30, 2009, the CY 2010 PFS final rule with comment period announced the 
following for CY 2010: The PFS update of -21.2 percent; the initial 
estimate for the sustainable growth rate of -8.8 percent; and the CF of 
$28.4061.
    On December 10, 2009, we published a correction notice (74 FR 
65449) to correct several technical and typographical errors that 
occurred in the CY 2010 PFS final rule with comment period. This 
correction notice announced a revised CF for CY 2010 of $28.3895.
    On December 19, 2009, the Department of Defense Appropriations Act, 
2010 (Pub. L. 111-118) was signed into law. Section 1011 of Public Law 
111-118 provided a 2-month zero percent update to the CY 2010 PFS 
effective only for dates of service from January 1, 2010 through 
February 28, 2010.
    On March 2, 2010, the Temporary Extension Act of 2010 (Pub. L. 111-
144) was signed into law. Section 2 of Public Law 111-144 extended 
through March 31, 2010 the zero percent update to the PFS that was in 
effect for claims with dates of service from January 1, 2010 through 
February 28, 2010.
    In addition, on April 15, 2010, the Continuing Extension Act of 
2010 (Pub. L. 111-157) was signed into law. Section 4 of Public Law 
111-157 extended through May 31, 2010 the zero percent update to the 
PFS that was in effect for claims with dates of services from January 
1, 2010 through March 31, 2010. The provision was retroactive to April 
1, 2010.
    In the May 11, 2010 Federal Register (75 FR 26350), we published a 
subsequent correction notice to correct several technical and 
typographical errors that occurred in the CY 2010 PFS final rule with 
comment period and the December 10, 2009 correction notice. The May 11, 
2010 correction notice announced a revised CF for CY 2010 of $28.3868.
    On June 25, 2010, the Preservation of Access to Care for Medicare 
Beneficiaries and Pension Relief Act of 2010 (Pub. L. 111-192) was 
signed into law. This law required application of a 2.2 percent update 
to the PFS for claims with dates of services from June 1, 2010 through 
November 30, 2010. As a result of this change, the PFS conversion 
factor was revised to $36.8729 for services furnished during this time 
period.
    On March 23, 2010 the Patient Protection and Affordable Care Act 
(Pub. L. 111-148) was signed into law. Shortly thereafter, on March 30, 
2010, the Health Care and Education Reconciliation Act of 2010 (Pub. L. 
111-152) was signed into law. These two laws are discussed in this 
final rule with comment period and are collectively referred to as the 
``Affordable Care Act'' (ACA) throughout this final rule with comment 
period.

[[Page 73182]]

D. Public Comments Received in Response to the CY 2011 PFS Proposed 
Rule

    We received approximately 8,500 timely pieces of correspondence 
containing multiple comments on the CY 2011 PFS proposed rule. We note 
that we received some comments that were outside the scope of the CY 
2011 PFS proposed rule, including public comments on new CY 2011 HCPCS 
codes that were not presented in the CY 2011 PFS proposed rule and 
existing CY 2010 HCPCS codes with final values for which we made no 
proposals for CY 2011. These comments are not addressed in this CY 2011 
PFS final rule with comment period. New and revised CY 2011 HCPCS codes 
and their CY 2011 interim PFS work, malpractice, and PE RVUs are 
displayed in Addendum C to this final rule with comment period, and 
these values are open to public comment on this final rule with comment 
period. Summaries of the public comments that are within the scope of 
the proposals and our responses to those comments are set for the in 
the various sections of this final rule with comment period under the 
appropriate headings.

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

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

1. Overview
    Practice expense (PE) is the portion of the resources used in 
furnishing the service that reflects the general categories of 
physician and practitioner expenses, such as office rent and personnel 
wages but excluding malpractice expenses, as specified in section 
1848(c)(1)(B) of the Act. Section 121 of the Social Security Amendments 
of 1994 (Pub. L. 103-432), enacted on October 31, 1994, required CMS to 
develop a methodology for a resource-based system for determining PE 
RVUs for each physician's service. We develop PE RVUs by looking at the 
direct and indirect physician practice resources involved in furnishing 
each service. Direct expense categories include clinical labor, medical 
supplies, and medical equipment. Indirect expenses include 
administrative labor, office expense, and all other expenses. The 
sections that follow provide more detailed information about the 
methodology for translating the resources involved in furnishing each 
service into service-specific PE RVUs. In addition, we note that 
section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments in 
RVUs for a year may not cause total PFS payments to differ by more than 
$20 million from what they would have been if the adjustments were not 
made. Therefore, if revisions to the RVUs cause expenditures to change 
by more than $20 million, we make adjustments to ensure that 
expenditures do not increase or decrease by more than $20 million. We 
refer readers to the CY 2010 PFS final rule with comment period (74 FR 
61743 through 61748) for a more detailed history of the PE methodology.
2. Practice Expense Methodology
a. Direct Practice Expense
    We use a bottom-up approach to determine the direct PE by adding 
the costs of the resources (that is, the clinical staff, equipment, and 
supplies) typically required to provide each service. The costs of the 
resources are calculated using the refined direct PE inputs assigned to 
each CPT code in our PE database, which are based on our review of 
recommendations received from the American Medical Association's 
(AMA's) Relative Value Update Committee (RUC). For a detailed 
explanation of the bottom-up direct PE methodology, including examples, 
we refer readers to the Five-Year Review of Work Relative Value Units 
Under the PFS and Proposed Changes to the Practice Expense Methodology 
proposed notice (71 FR 37242) and the CY 2007 PFS final rule with 
comment period (71 FR 69629).
b. Indirect Practice Expense per Hour Data
    We use survey data on indirect practice expenses incurred per hour 
worked (PE/HR) in developing the indirect portion of the PE RVUs. Prior 
to CY 2010, we primarily used the practice expense per hour (PE/HR) by 
specialty that was obtained from the AMA's Socioeconomic Monitoring 
Surveys (SMS). These surveys were conducted from 1995 through 1999. For 
several specialties that collected additional PE/HR data through 
supplemental surveys, we incorporated these data in developing the PE/
HR values used annually.
    While the SMS was not specifically designed for the purpose of 
establishing PE RVUs, we found these data to be the best available at 
the time. The SMS was a multispecialty survey effort conducted using a 
consistent survey instrument and method across specialties. The survey 
sample was randomly drawn from the AMA Physician Master file to ensure 
national representativeness. The AMA discontinued the SMS survey in 
1999.
    As required by the Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113), we also established a process by which specialty 
groups could submit supplemental PE data. In the May 3, 2000 Federal 
Register, we issued the Medicare Program; Criteria for Submitting 
Supplemental Practice Expense Survey Data interim final rule (65 FR 
25664) in which we established criteria for acceptance of supplemental 
data. The criteria were modified in the CY 2001 and CY 2003 PFS final 
rules with comment period (65 FR 65380 and 67 FR 79971, respectively). 
In addition to the SMS, we previously used supplemental survey data for 
the following specialties: Cardiology; dermatology; gastroenterology; 
radiology; cardiothoracic surgery; vascular surgery; physical and 
occupational therapy; independent laboratories; allergy/immunology; 
independent diagnostic testing facilities (IDTFs); radiation oncology; 
medical oncology; and urology.
    Because the SMS data and the supplemental survey data were from 
different time periods, we historically inflated them by the Medicare 
Economic Index (MEI) to put them on as comparable a time basis as we 
could when calculating the PE RVUs. This MEI proxy was necessary in the 
past due to the lack of contemporaneous, consistently collected, and 
comprehensive multispecialty survey data.
    The AMA administered a new survey in CY 2007 and CY 2008, the 
Physician Practice Expense Information Survey (PPIS), which was 
expanded (relative to the SMS) to include nonphysician practitioners 
(NPPs) paid under the PFS. The PPIS was designed to update the 
specialty-specific PE/HR data used to develop PE RVUs. The AMA and the 
CMS contractor, The Lewin Group (Lewin), analyzed the PPIS data and 
calculated the PE/HR for physician and nonphysician specialties, 
respectively. The AMA's summary worksheets and Lewin's final report are 
available on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=4&sortOrder=descending&itemID=CMS1223902&intNumPerPage=10. 
(See downloads labeled AMA PPIS Worksheets 1-3 and Physician Practice 
Expense non MDDO Final Report)
    The PPIS is a multispecialty, nationally representative, PE survey 
of both physicians and NPPs using a consistent survey instrument and 
methods highly consistent with those used for the SMS and the 
supplemental surveys. The PPIS gathered information

[[Page 73183]]

from 3,656 respondents across 51 physician specialty and healthcare 
professional groups.
    We believe the PPIS is the most comprehensive source of PE survey 
information available to date. Therefore, we used the PPIS data to 
update the PE/HR data for almost all of the Medicare-recognized 
specialties that participated in the survey for the CY 2010 PFS. When 
we changed over to the PPIS data beginning in CY 2010, we did not 
change the PE RVU methodology itself or the manner in which the PE/HR 
data are used in that methodology. We only updated the PE/HR data based 
on the new survey. Furthermore, as we explained in the CY 2010 PFS 
final rule with comment period (74 FR 61751), because of the magnitude 
of payment reductions for some specialties resulting from the use of 
the PPIS data, we finalized a 4-year transition (75/25 for CY 2010, 50/
50 for CY 2011, 25/75 for CY 2012, and 0/100 for CY 2013) from the 
previous PE RVUs to the PE RVUs developed using the new PPIS data.
    Section 303 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173) added section 
1848(c)(2)(H)(i) of the Act, which requires us to use the medical 
oncology supplemental survey data submitted in 2003 for oncology drug 
administration services. Therefore, the PE/HR for medical oncology, 
hematology, and hematology/oncology reflects the continued use of these 
supplemental survey data.
    We do not use the PPIS data for reproductive endocrinology, sleep 
medicine, and spine surgery since these specialties are not separately 
recognized by Medicare, and we do not know how to blend these data with 
Medicare-recognized specialty data.
    Supplemental survey data on independent labs, from the College of 
American Pathologists, were implemented for payments in CY 2005. 
Supplemental survey data from the National Coalition of Quality 
Diagnostic Imaging Services (NCQDIS), representing IDTFs, were blended 
with supplementary survey data from the American College of Radiology 
(ACR) and implemented for payments in CY 2007. Neither IDTFs nor 
independent labs participated in the PPIS. Therefore, we continue to 
use the PE/HR that was developed from their supplemental survey data.
    Finally, consistent with our past practice, the previous indirect 
PE/HR values from the supplemental surveys for medical oncology, 
independent laboratories, and IDTFs were updated to CY 2006 using the 
MEI to put them on a comparable basis with the PPIS data. In the CY 
2010 PFS final rule with comment period (74 FR 61753), we miscalculated 
the indirect PE/HR for IDTFs as part of this update process. Therefore, 
for CY 2011, we are using a revised indirect PE/HR of $479.81 for 
IDTFs, consistent with our final policy to update the indirect PE/HR 
values from prior supplemental survey data that we are continuing to 
use in order to put these data on a comparable basis with the PPIS 
data. This revision changes the IDTF indirect percentage from 51 
percent to 50 percent for CY 2011.
    Previously, we had established PE/HR values for various specialties 
without SMS or supplemental survey data by crosswalking them to other 
similar specialties to estimate a proxy PE/HR. For specialties that 
were part of the PPIS for which we previously used a crosswalked PE/HR, 
we instead use the PPIS-based PE/HR. We continue previous crosswalks 
for specialties that did not participate in the PPIS. However, 
beginning in CY 2010 we changed the PE/HR crosswalk for portable x-ray 
suppliers from radiology to IDTF, a more appropriate crosswalk because 
these specialties are more similar to each other with respect to 
physician time.
    In the CY 2010 PFS final rule with comment period (74 FR 61752), we 
agreed that, under the current PE methodology, the PPIS data for 
registered dieticians should not be used in the calculation of PE RVUs 
since these dieticians are paid 85 percent of what a physician would be 
paid for providing the service. To include their survey data in the PE 
calculation would influence the ratesetting by incorporating what the 
services would be paid if performed by registered dieticians and not 
strictly what the payment rates would be if provided by physicians. We 
further stated that we would utilize the ``All Physicians'' PE/HR, as 
derived from the PPIS, in the calculation of resource-based PE RVUs in 
lieu of the PE/HR associated with registered dieticians. In the 
resource-based PE methodology for CY 2010, while we removed the 
specialty of registered dieticians from the ratesetting step we did not 
assign the ``All Physicians'' PE/HR to services furnished by registered 
dieticians. Instead, we allowed the PE/HR for those services to be 
generated by a weighted average of all the physician specialties that 
also furnished the services. This method was consistent with our policy 
to not use the registered dietician PPIS PE/HR in calculating the PE 
RVUs for services furnished by registered dieticians but we did not 
actually crosswalk the specialty of registered dietician to the ``All 
Physicians'' PE/HR data as we had intended according to the final 
policy. Nevertheless, we are affirming for CY 2011 that the final 
resource-based PE RVUs have been calculated in accordance with the 
final policy adopted in the CY 2010 PFS final rule with comment period 
(74 FR 61752) for registered dietician services that crosswalks the 
specialty to the ``All Physicians'' PE/HR data.
    As provided in the CY 2010 PFS final rule with comment period (74 
FR 61751), CY 2011 is the second year of the 4-year transition to the 
PE RVUs calculated using the PPIS data. Therefore, in general, the CY 
2011 PE RVUs are a 50/50 blend of the previous PE RVUs based on the SMS 
and supplemental survey data and the new PE RVUS developed using the 
PPIS data as described above. Note that the reductions in the PE RVUs 
for expensive diagnostic imaging equipment attributable to the change 
to an equipment utilization rate assumption of 75 percent (see 74 FR 
61753 through 61755 and section II.A.3. of this final rule with comment 
period) are not subject to the transition.
    CMS' longstanding policy in a PFS transition payment year is that 
if the CPT Editorial Panel creates a new code for that year, the new 
code would be paid at its fully implemented PFS amount and not at a 
transition rate for that year. Consistent with this policy, all new CY 
2011 CPT codes will not be paid based on transitional PE RVUs in CY 
2011. Instead, we will pay these services based on the fully 
implemented PE RVUs in CY 2011. Additionally, existing CPT codes for 
which the global period has changed in CY 2011 will not be subject to 
the PPIS PE RVU transition. We believe that changing the global period 
of a code results in the CPT code describing a different service to 
which the previous PE RVUs would no longer be relevant when the code is 
reported for a service furnished in CY 2011. The five CY 2011 existing 
CPT codes with global period changes from CY 2010 to CY 2011 are: 11043 
(Debridement, muscle, and/or fascia (includes epidermis, dermis, and 
subcutaneous tissue, if performed); first 20 sq cm or less); 11044 
(Debridement, bone (includes epidermis, dermis, subcutaneous tissue, 
muscle and/or fascia, if performed); first 20 sq cm or less); 57155 
(Insertion of uterine tandems and/or vaginal ovoids for clinical 
brachytherapy); 97597 (Debridement (e.g., high pressure waterjet with/
without suction, sharp selective debridement with scissors,

[[Page 73184]]

scalpel and forceps), open wound, (e.g., fibrin, devitalized epidermis 
and/or dermis, exudate, debris, biofilm), including topical 
application(s), wound assessment, use of a whirlpool, when performed 
and instruction(s) for ongoing care, per session, total wound(s) 
surface area; first 20 square centimeters or less); and 97598 
(Debridement (e.g., high pressure waterjet with/without suction, sharp 
selective debridement with scissors, scalpel and forceps), open wound, 
(e.g., fibrin, devitalized epidermis and/or dermis, exudate, debris, 
biofilm), including topical application(s), wound assessment, use of a 
whirlpool, when performed and instructions(s) for ongoing care, per 
session, total wound(s) surface area; each additional 20 square 
centimeters, or part thereof (List separately in addition to code for 
primary procedure)).
c. Allocation of PE to Services
    To establish PE RVUs for specific services, it is necessary to 
establish the direct and indirect PE associated with each service.
    (i) Direct costs. The relative relationship between the direct cost 
portions of the PE RVUs for any two services is determined by the 
relative relationship between the sum of the direct cost resources 
(that is, the clinical staff, equipment, and supplies) typically 
required to provide the services. The costs of these resources are 
calculated from the refined direct PE inputs in our PE database. For 
example, if one service has a direct cost sum of $400 from our PE 
database and another service has a direct cost sum of $200, the direct 
portion of the PE RVUs of the first service would be twice as much as 
the direct portion of the PE RVUs for the second service.
    (ii) Indirect costs. Section II.A.2.b. of this final rule with 
comment period describes the current data sources for specialty-
specific indirect costs used in our PE calculations. We allocate the 
indirect costs to the code level on the basis of the direct costs 
specifically associated with a code and the greater of either the 
clinical labor costs or the physician work RVUs. We also incorporate 
the survey data described earlier in the PE/HR discussion. The general 
approach to developing the indirect portion of the PE RVUs is described 
below.
     For a given service, we use the direct portion of the PE 
RVUs calculated as described above and the average percentage that 
direct costs represent of total costs (based on survey data) across the 
specialties that perform the service to determine an initial indirect 
allocator. For example, if the direct portion of the PE RVUs for a 
given service were 2.00 and direct costs, on average, represented 25 
percent of total costs for the specialties that performed the service, 
the initial indirect allocator would be 6.00 since 2.00 is 25 percent 
of 8.00.
     We then add the greater of the work RVUs or clinical labor 
portion of the direct portion of the PE RVUs to this initial indirect 
allocator. In our example, if this service had work RVUs of 4.00 and 
the clinical labor portion of the direct PE RVUs was 1.50, we would add 
6.00 plus 4.00 (since the 4.00 work RVUs are greater than the 1.50 
clinical labor portion) to get an indirect allocator of 10.00. In the 
absence of any further use of the survey data, the relative 
relationship between the indirect cost portions of the PE RVUs for any 
two services would be determined by the relative relationship between 
these indirect cost allocators. For example, if one service had an 
indirect cost allocator of 10.00 and another service had an indirect 
cost allocator of 5.00, the indirect portion of the PE RVUs of the 
first service would be twice as great as the indirect portion of the PE 
RVUs for the second service.
     We next incorporate the specialty-specific indirect PE/HR 
data into the calculation. As a relatively extreme example for the sake 
of simplicity, assume in our example above that, based on the survey 
data, the average indirect cost of the specialties performing the first 
service with an allocator of 10.00 was half of the average indirect 
cost of the specialties performing the second service with an indirect 
allocator of 5.00. In this case, the indirect portion of the PE RVUs of 
the first service would be equal to that of the second service.
d. Facility and Nonfacility Costs
    For procedures that can be furnished in a physician's office, as 
well as in a hospital or facility setting, we establish two PE RVUs: 
Facility and nonfacility. The methodology for calculating PE RVUs is 
the same for both the facility and nonfacility RVUs, but is applied 
independently to yield two separate PE RVUs. Because Medicare makes a 
separate payment to the facility for its costs of furnishing a service, 
the facility PE RVUs are generally lower than the nonfacility PE RVUs.
e. Services With Technical Components (TCs) and Professional Components 
(PCs)
    Diagnostic services are generally comprised of two components: A 
professional component (PC) and a technical component (TC), each of 
which may be performed independently or by different providers, or they 
may be performed together as a ``global'' service. When services have 
PC and TC components that can be billed separately, the payment for the 
global component equals the sum of the payment for the TC and PC. This 
is a result of using a weighted average of the ratio of indirect to 
direct costs across all the specialties that furnish the global 
components, TCs, and PCs; that is, we apply the same weighted average 
indirect percentage factor to allocate indirect expenses to the global 
components, PCs, and TCs for a service. (The direct PE RVUs for the TC 
and PC sum to the global under the bottom-up methodology.)
f. Alternative Data Sources and Public Comments on Final Rule for 2010
    In the CY 2010 PFS final rule with comment period (74 FR 61749 
through 61750), we discussed the Medicare Payment Advisory Commission's 
(MedPAC's) comment that in the future, ``CMS should consider 
alternatives to collecting specialty-specific cost data or options to 
decrease the reliance on such data.'' We agreed with MedPAC that it 
would be appropriate to consider the future of the PE RVUs moving 
forward. We sought comments from other stakeholders on the issues 
raised by MedPAC for the future. In particular, we requested public 
comments regarding MedPAC's suggestion that we consider alternatives 
for collecting specialty-specific cost data or options to decrease the 
reliance on such data. We noted MedPAC's comment that, ``CMS should 
consider if Medicare or provider groups should sponsor future data 
collection efforts, if participation should be voluntary (such as 
surveys) or mandatory (such as cost reports), and whether a nationally 
representative sample of practitioners would be sufficient for either a 
survey or cost reports.'' MedPAC also stated that one option for 
decreasing the reliance on specialty-specific cost data would be the 
elimination of the use of indirect PE/HR data in the last step of 
establishing the indirect cost portion of the PE RVUs as described 
previously.
    Almost all of the commenters on the CY 2010 PFS final rule with 
comment period that addressed this issue expressed a general 
willingness to work with CMS on methodological improvements or future 
data collection efforts. Although no commenters detailed a 
comprehensive overall alternative methodology, several commenters did 
provide suggestions regarding future data collection efforts

[[Page 73185]]

and specific aspects of the current methodology.
    The commenters on the CY 2010 PFS final rule with comment period 
that addressed the issue of surveys supported the use of surveys if 
they yielded accurate PE information. The few commenters that addressed 
the issue of cost reports were opposed to physician cost reports. The 
commenters varied with respect to their opinions regarding whether data 
collection efforts should be led by organized medicine, individual 
specialty societies, or CMS. Several commenters that addressed the 
issue of voluntary versus mandatory data collection efforts supported 
voluntary data collection efforts and opposed mandatory data collection 
efforts.
    Some commenters recommended no changes to the methodology or PE 
data in the near future. Other commenters indicated that the 
methodology and data changes needed to be made for CY 2011. Although 
most commenters did not directly address the use of the indirect PE/HR 
data, those that did predominately opposed the elimination of the use 
of these data.
    Many commenters addressed specifics of the PE methodology (as 
further described in section II.A.2.c. of this final rule with comment 
period). Some were opposed to the scaling factor applied in the 
development of the direct PE portion of the PE RVUs so that in the 
aggregate the direct portion of the PE RVUs do not exceed the 
proportion indicated by the survey data (See Step 4 in g.(ii) below). 
Several of these commenters advocated the elimination of this direct 
scaling factor, while others indicated that the issue should be 
examined more closely.
    A few commenters recommended that physician work not be used as an 
allocator in the development of the indirect portion of the PE RVUs as 
described earlier in this section. A few indicated that physician time, 
but not physician work, should be used in the allocation. Other 
commenters suggested that indirect costs should be allocated solely on 
the basis of direct costs.
    We note that many of the issues raised by commenters on the CY 2010 
PFS final rule with comment period are similar to issues raised in the 
development of the original resource-based PE methodology and in 
subsequent revisions to the methodology, including the adoption of the 
bottom-up methodology. While we did not propose a broad methodological 
change or broad data collection effort in the CY 2011 PFS proposed 
rule, we invited comments on our summary of the issues raised by the 
commenters on the CY 2010 PFS final rule with comment period, as 
discussed in the CY 2011 PFS proposed rule (75 FR 40050). The complete 
public comments on the CY 2010 PFS final rule with comment period are 
available for public review at http://www.regulations.gov by entering 
``CMS-1413-FC'' in the search box on the main page.
    Comment: A number of commenters believe the PPIS data are flawed 
and, therefore, should not be used to set the PE RVUs for all or 
certain categories of PFS services. Other commenters supported the 
adoption of the PPIS data and, whether ultimately favoring the adoption 
of the PPIS data or not, many commenters stated that the 4-year 
transition adopted by CMS is important to physicians and Medicare 
beneficiaries to ensure access to care. The commenters explained that 
the transition gives physician specialty societies the opportunity to 
collect new and more detailed data where appropriate for refinement and 
CMS the opportunity to more carefully analyze the new data and its 
appropriateness. Although once again the commenters did not provide 
specific recommendations on alternatives to a comprehensive survey of 
practice expenses or options to decrease the PFS reliance on specialty-
specific cost data, the commenters offered the following suggestions 
regarding future practice expense data collection.
     Select a reputable company with experience in health care 
market research.
     Base changes on a comprehensive data source with adequate 
participation rates.
     Have data independently reviewed in order to ensure 
accuracy.
     Make data publicly available in time to allow for review 
and comment by stakeholders.
    Several commenters emphasized the administrative complexity and 
burden if CMS were to require all physicians to submit cost reports. 
One commenter supported a limited study of practice costs estimated by 
cost reports to determine if the current PE RVUs were appropriately 
paying physicians for the physician's office costs of services. The 
commenter believes that cost reports would be more accurate than the 
PPIS methodology. Finally, several commenters indicated a willingness 
to engage CMS in more detailed discussion about potential refinements 
to the current PE/HR data.
    Response: We appreciate the commenters' recommendations regarding 
factors we should consider in developing future practice expense data 
collection efforts in order to improve the accuracy of the information. 
While we are continuing the transition that was adopted in the CY 2010 
PFS final rule with comment period (74 FR 61751) under the CY 2011 PFS 
to full implementation of the PPIS data for the CY 2013 PFS PE RVUs, we 
continue to remain interested in the thoughts of stakeholders regarding 
the MedPAC comment that ``CMS should consider alternatives to 
collecting specialty-specific cost data or options to decrease the 
reliance on such data.'' More specifically, we encourage stakeholders 
to contact us at any time if they encounter additional information to 
share, develop further ideas or analyses that could inform our ongoing 
consideration of physicians' practice expenses, or otherwise would like 
to discuss this topic further as part of an open dialogue with us. 
While to date, no stakeholders have presented a comprehensive overall 
alternative methodology, we remain interested in potential novel or 
refined approaches. We also continue to welcome more limited 
suggestions for improvements to our current PE methodology or future 
practice expense information collection activities.
g. PE RVU Methodology
    For a more detailed description of the PE RVU methodology, we refer 
readers to the CY 2010 PFS final rule with comment period 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 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.
    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

[[Page 73186]]

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 components.
    Step 8: Calculate the service level allocators for the indirect PEs 
based on the percentages calculated in Step 7. The indirect PEs are 
allocated based on the three components: The direct PE RVUs, the 
clinical PE RVUs, and the work RVUs.
    For most services the indirect allocator is: Indirect percentage * 
(direct PE RVUs/direct percentage) + work RVUs.
    There are two situations where this formula is modified:
     If the service is a global service (that is, a service 
with global, professional, and technical components), then the indirect 
allocator is: Indirect percentage (direct PE RVUs/direct percentage) + 
clinical PE RVUs + work RVUs.
     If the clinical labor PE RVUs exceed the work RVUs (and 
the service is not a global service), then the indirect allocator is: 
Indirect percentage (direct PE RVUs/direct percentage) + clinical PE 
RVUs.

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

    For presentation purposes in the examples in Table 2, the formulas 
were divided into two parts for each service.
     The first part does not vary by service and is the 
indirect percentage (direct PE RVUs/direct percentage).
     The second part is either the work RVUs, clinical PE RVUs, 
or both depending on whether the service is a global service and 
whether the clinical PE RVUs exceed the work RVUs (as described earlier 
in this step).
    Apply a scaling adjustment to the indirect allocators.
    Step 9: Calculate the current aggregate pool of indirect PE RVUs by 
multiplying the current aggregate pool of PE RVUs by the average 
indirect PE percentage from the survey data.
    Step 10: Calculate an aggregate pool of indirect PE RVUs for all 
PFS services by adding the product of the indirect PE allocators for a 
service from Step 8 and the utilization data for that service.
    Step 11: Using the results of Step 9 and Step 10, calculate an 
indirect PE adjustment so that the aggregate indirect allocation does 
not exceed the available aggregate indirect PE RVUs and apply it to 
indirect allocators calculated in Step 8.
    Calculate the indirect practice cost index.
    Step 12: Using the results of Step 11, calculate aggregate pools of 
specialty-specific adjusted indirect PE allocators for all PFS services 
for a specialty by adding the product of the adjusted indirect PE 
allocator for each service and the utilization data for that service.
    Step 13: Using the specialty-specific indirect PE/HR data, 
calculate specialty-specific aggregate pools of indirect PE for all PFS 
services for that specialty by adding the product of the indirect PE/HR 
for the specialty, the physician time for the service, and the 
specialty's utilization for the service across all services performed 
by the specialty.
    Step 14: Using the results of Step 12 and Step 13, calculate the 
specialty-specific indirect PE scaling factors.
    Step 15: Using the results of Step 14, calculate an indirect 
practice cost index at the specialty level by dividing each specialty-
specific indirect scaling factor by the average indirect scaling factor 
for the entire PFS.
    Step 16: Calculate the indirect practice cost index at the service 
level to ensure the capture of all indirect costs. Calculate a weighted 
average of the practice cost index values for the specialties that 
furnish the service. (Note: For services with TCs and PCs, we calculate 
the indirect practice cost index across the global components, PCs, and 
TCs. Under this method, the indirect practice cost index for a given 
service (for example, echocardiogram) does not vary by the PC, TC, and 
global component.)
    Step 17: Apply the service level indirect practice cost index 
calculated in Step 16 to the service level adjusted indirect allocators 
calculated in Step 11 to get the indirect PE RVUs.
(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, 
MEI rebasing adjustment, and multiple procedure payment reduction 
(MPPR) adjustment.
    The final PE BN adjustment is calculated by comparing the results 
of Step 18 (prior to the MEI rebasing and MPPR adjustments) to the 
current pool of PE RVUs. This final BN adjustment is required primarily 
because certain specialties are excluded from the PE RVU calculation 
for ratesetting purposes, but all specialties are included for purposes 
of calculating the final BN adjustment. (See ``Specialties excluded 
from ratesetting calculation'' below in this section.)
    As discussed in section II.E.5. of this final rule with comment 
period, we are rebasing and revising the Medicare Economic Index (MEI) 
for CY 2011. As discussed in section II.C.4. of this final rule with 
comment period, section 1848(c)(2)(K) of the Act (as added by section 
3134 of the ACA) specifies that the Secretary shall identify 
potentially misvalued codes by examining multiple codes that are 
frequently billed in conjunction with furnishing a single service. 
There is inherent duplication in the PE associated with those services 
which are frequently furnished together, so reducing PFS payment for 
the second and subsequent services to account for the efficiencies in 
multiple service sessions may be appropriate. Consistent with this 
provision of the ACA, we are adopting a limited expansion of the 
current MPPR policy for imaging services for CY 2011 and a new MPPR 
policy for therapy 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 73187]]



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

     Crosswalk certain low volume physician specialties: 
Crosswalk the utilization of certain specialties with relatively low 
PFS utilization to the associated specialties.
     Physical therapy utilization: Crosswalk the utilization 
associated with all physical therapy services to the specialty of 
physical therapy.
     Identify professional and technical services not 
identified under the usual TC and 26 modifiers: Flag the services that 
are PC and TC services, but do not use TC and 26 modifiers (for 
example, electrocardiograms). This flag associates the PC and TC with 
the associated global code for use in creating the indirect PE RVUs. 
For example, the professional service, CPT code 93010 
(Electrocardiogram, routine ECG with at least 12 leads; interpretation 
and report only), is associated with the global service, CPT code 93000 
(Electrocardiogram, routine ECG with at least 12 leads; with 
interpretation and report).
     Payment modifiers: Payment modifiers are accounted for in 
the creation of the file. For example, services billed with the 
assistant at surgery modifier are paid 16 percent of the PFS amount for 
that service; therefore, the utilization file is modified to only 
account for 16 percent of any service that contains the assistant at 
surgery modifier.
     Work RVUs: The setup file contains the work RVUs from this 
final 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 = equipment utilization assumption; 0.75 for certain expensive 
diagnostic imaging equipment (see 74 FR 61753 through 61755 and 
section II.A.3. of this final rule with comment period) and 0.5 for 
others.
price = price of the particular piece of equipment.
interest rate = 0.11.
life of equipment = useful life of the particular piece of 
equipment.
maintenance = factor for maintenance; 0.05.

    Note: The use of any particular conversion factor (CF) in Table 
2 to illustrate the PE calculation has no effect on the resulting 
RVUs.


[[Page 73188]]



                                                              TABLE 2--Calculation of PE RVUs Under Methodology for Selected Codes
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             99213     33533 CABG,
                                                                                             Office     arterial,   71020 Chest    71020-TC     71020-26    93000 ECG,   93005 ECG,  93010  ECG,
                                      Step               Source              Formula       visit, est     single       x-ray     Chest x-ray  Chest x-ray    complete     tracing       report
                                                                                          Nonfacility    facility   Nonfacility  Nonfacility  Nonfacility  Nonfacility  Nonfacility  Nonfacility
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Labor cost (lab)..........  Step 1.........  AMA...................  ...............        13.32        77.52         5.74         5.74         0.00         6.12         6.12         0.00
(2) Supply cost (sup).........  Step 1.........  AMA...................  ...............         2.98         7.34         3.39         3.39         0.00         1.19         1.19         0.00
(3) Equipment cost (eqp)......  Step 1.........  AMA...................  ...............         0.19         0.65         8.17         8.17         0.00         0.12         0.12         0.00
(4) Direct cost (dir).........  Step 1.........  ......................  =(1) + (2) +           16.50        85.51        17.31        17.31         0.00         7.43         7.43         0.00
                                                                          (3).
(5) Direct adjustment (dir      Steps 2-4......  See footnote*.........  ...............         0.50         0.50         0.50         0.50         0.50         0.50         0.50         0.50
 adj).
(6) Adjusted labor............  Steps 2-4......  =Lab * Dir adj........  =(1)*(5).......         6.68        38.87         2.88         2.88         0.00         3.07         3.07         0.00
(7) Adjusted supplies.........  Steps 2-4......  =Sup * Dir adj........  =(2)*(5).......         1.50         3.68         1.70         1.70         0.00         0.60         0.60         0.00
(8) Adjusted equipment........  Steps 2-4......  =Eqp * Dir adj........  =(3)*(5).......         0.10         0.33         4.10         4.10         0.00         0.06         0.06         0.00
(9) Adjusted direct...........  Steps 2-4......  ......................  =(6) + (7) +            8.27        42.87         8.68         8.68         0.00         3.73         3.73         0.00
                                                                          (8).
(10) Conversion factor (CF)...  Step 5.........  PFS...................  ...............        36.87        36.87        36.87        36.87        36.87        36.87        36.87        36.87
(11) Adj labor cost converted.  Step 5.........  =(Lab * Dir adj)/CF...  =(6)/(10)......         0.18         1.05         0.08         0.08         0.00         0.08         0.08         0.00
(12) Adj supply cost converted  Step 5.........  =(Sup * Dir adj)/CF...  =(7)/(10)......         0.04         0.10         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         0.11         0.11         0.00         0.00         0.00         0.00
 converted.
(14) Adj. direct cost           Step 5.........  ......................  =(11) + (12) +          0.22         1.16         0.24         0.24         0.00         0.10         0.10         0.00
 converted.                                                               (13).
(15) Work RVUs................  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...............  ...............         0.26         0.18         0.29         0.29         0.29         0.29         0.29         0.29
(17) Ind pct..................  Steps 6,7......  Surveys...............  ...............         0.74         0.82         0.71         0.71         0.71         0.71         0.71         0.71
(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).......         0.65         5.29         0.58         0.58         0.00         0.25         0.25         0.00
(20) Ind alloc formulas (2nd    Step 8.........  See Step 8............  ...............         (15)         (15)  (15) + (11)         (11)         (15)  (15) + (11)         (11)         (15)
 part).
(21) Ind alloc (2nd part).....  Step 8.........  ......................  See (20).......         0.97        33.75         0.30         0.08         0.22         0.25         0.08         0.17
(22) Indirect allocator (1st +  Step 8.........  ......................  =(19) + (21)...         1.62        39.04         0.88         0.66         0.22         0.50         0.33         0.17
 2nd).
                               -----------------------------------------------------------------------------------------------------------------------------------------------------------------
(23) Indirect adjustment (ind   Steps 9-11.....  See footnote**                                  0.37         0.37         0.37         0.37         0.37         0.37         0.37         0.37
 adj).
(24) Adjusted indirect          Steps 9-11.....  =Ind alloc * ind adj                            0.60        14.47         0.33         0.24         0.08         0.19         0.12         0.06
 allocator.
(25) Ind. practice cost index   Steps 12-16....  See Steps 12-16                                 1.11         0.83         0.90         0.90         0.90         0.92         0.92         0.92
 (IPCI).
                               -----------------------------------------------------------------------------------------------------------------------------------------------------------------
(26) Adjusted indirect........  Step 17........  = Adj ind alloc * IPCI  =(24) * (25)...         0.67        12.04         0.29         0.22         0.07         0.17         0.11         0.06
(27) MEI rebasing adjustment..  Step 18........  PFS...................  ...............         1.18         1.18         1.18         1.18         1.18         1.18         1.18         1.18
(28) MPPR adjustments.........  Step 18........  PFS...................  ...............         1.01         1.01         1.01         1.01         1.01         1.01         1.01         1.01
(29) PE RVU...................  Step 18........  =(Adj dir + Adj ind) *  =((14) + (26))          1.06        15.68         0.63         0.54         0.09         0.32         0.25         0.07
                                                  budn * MEI adj * MPPR   * budn * (27)
                                                  adj.                    * (28).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note:
PE RVUs in Table 2, row 29, may not match the values in Addendum B due to rounding.
* The direct adj = [current pe rvus * CF * avg dir pct]/[sum direct inputs] = [Step 2]/[Step 3].
** The indirect adj = [current pe rvus * avg ind pct]/[sum of ind allocators] = [Step 9]/[Step 10].


[[Page 73189]]

3. PE Revisions for CY 2011
a. Equipment Utilization Rate
    As part of the PE methodology associated with the allocation of 
equipment costs for calculating PE RVUs, we currently use an equipment 
utilization rate assumption of 50 percent for most equipment, with the 
exception of expensive diagnostic imaging equipment (which is equipment 
priced at over $1 million, for example, computed tomography (CT) and 
magnetic resonance imaging (MRI) scanners), for which we adopted a 90 
percent utilization rate assumption and provided for a 4-year 
transition beginning in CY 2010 (74 FR 61755). Therefore, CY 2010 is 
the first transitional payment year. Payment is made in CY 2010 for the 
diagnostic services listed in Table 3 (those that include expensive 
diagnostic imaging equipment in their PE inputs) of the CY 2011 PFS 
proposed rule (75 FR 40054) based on 25 percent of the new PE RVUs and 
75 percent of the prior PE RVUs for those services.
    Section 1848(b)(4)(C) of the Act (as added by section 3135(a) of 
the ACA) requires that with respect to fee schedules established for CY 
2011 and subsequent years, in the methodology for determining PE RVUs 
for expensive diagnostic imaging equipment under the CY 2010 PFS final 
rule with comment period, the Secretary shall use a 75 percent 
assumption instead of the utilization rates otherwise established in 
that rule. The provision also requires that the reduced expenditures 
attributable to this change in the utilization rate for CY 2011 and 
subsequent years shall not be taken into account when applying the 
budget neutrality limitation on annual adjustments described in section 
1848(c)(2)(B)(ii)(II) of the Act.
    As a result, the 75 percent equipment utilization rate assumption 
will be applied to expensive diagnostic imaging equipment in a non-
budget neutral manner for CY 2011, and the resulting changes to PE RVUs 
will not be transitioned over a period of years. We will apply the 75 
percent utilization rate assumption in CY 2011 to all of the services 
to which we currently apply the transitional 90 percent equipment 
utilization rate assumption in CY 2010. These services are listed in a 
file on the CMS Web site that is posted under downloads for the CY 2010 
PFS final rule with comment period at http://www.cms.gov/physicianfeesched/downloads/CODES_SUBJECT_TO_90PCT_USAGE_RATE.zip. 
These codes are also displayed in Table 3 at the end of this section.
    Comment: Several commenters argued that the 75 percent utilization 
rate assumption should not be applied because of the imprecise data on 
which the policy was based. The commenters explained that based on an 
independent survey, actual equipment utilization rates are close to 50 
percent. In addition, the commenters postulated that rural imaging 
centers would be adversely affected by the change due to lower 
equipment utilization rates than non-rural centers. The commenters 
requested that CMS base equipment utilization rate assumptions on 
actual utilization data rather than assumptions.
    Several other commenters supported the implementation of the 75 
percent utilization rate assumption, and MedPAC recommended that CMS 
explore increasing the equipment utilization rate assumption for 
diagnostic imaging equipment that costs less than $1 million. Finally, 
several commenters clarified that certain procedures were not subject 
to the provision, including nuclear cardiology services and therapeutic 
interventional radiology.
    Response: Section 1848(b)(4)(C) of the Act (as added by section 
3135(a) of the ACA) requires that with respect to fee schedules 
established for CY 2011 and subsequent years, in the methodology for 
determining PE RVUs for expensive diagnostic imaging equipment under 
the CY 2010 PFS final rule with comment period, the Secretary shall use 
a 75 percent assumption instead of the utilization rates otherwise 
established in that rule. We acknowledge that further data regarding 
actual equipment utilization in the physician's office setting may be 
informative, but our use of such data to set the equipment utilization 
rate assumption for expensive diagnostic imaging equipment at a value 
other than 75 percent would require a statutory change.
    We did not propose to expand the 75 percent equipment utilization 
rate assumption for CY 2011 to other procedures beyond those that use 
CT and MRI scanners as listed in Table 4 of the CY 2011 PFS proposed 
rule (75 FR 40055) and Table 3 at the end of this section. Any future 
changes in equipment utilization rate assumptions, including any 
expansion of the 75 percent equipment utilization rate assumption to 
additional expensive diagnostic imaging equipment, would be made 
through the annual PFS notice and comment rulemaking cycle. 
Furthermore, any changes in equipment utilization rate assumptions for 
less costly diagnostic imaging equipment (less than $1 million) or for 
therapeutic imaging or other equipment would not be subject to the 
statutory provision that specifies a 75 percent assumption. We note 
that we are constantly reassessing our methodology for developing the 
PE RVUs and would propose any changes to the equipment utilization rate 
assumptions for these types of equipment through the annual PFS 
rulemaking cycle if we determine such changes could be appropriate.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal without modification. The 75 percent 
equipment utilization rate assumption will be applied to expensive 
diagnostic imaging equipment in a non-budget neutral manner for CY 
2011, and the changes to the PE RVUs will not be transitioned over a 
period of years. We will apply the 75 percent utilization rate 
assumption in CY 2011 to all of the services to which we currently 
apply the transitional 90 percent utilization rate assumption in CY 
2010. The CY 2011 codes are displayed in Table 3 at the end of this 
section that lists all the codes to which the 75 percent equipment 
utilization rate assumption applies for CY 2011. In addition, the codes 
subject to this policy are posted under the downloads for the CY 2011 
PFS final rule with comment period on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
    Additionally, for CY 2011, we proposed to expand the list of 
services to which the higher equipment utilization rate assumption 
applies to include all other diagnostic imaging services that utilize 
similar expensive CT and MRI scanners. The additional 24 CPT codes 
(listed in Table 4 of the CY 2011 PFS proposed rule (75 FR 40055)) to 
which we proposed to apply the 75 percent equipment utilization rate 
assumption also have expensive diagnostic imaging equipment (priced at 
over $1 million) included in their PE inputs. These services are 
predominantly diagnostic computed tomographic angiography (CTA) and 
magnetic resonance angiography (MRA) procedures that include similar 
expensive CT and MRI scanners in their direct PE inputs. We indicated 
in the CY 2010 PFS final rule with comment period (74 FR 61754) that we 
were persuaded by PPIS data on angiography that the extrapolation of 
MRI and CT data (and their higher equipment utilization rate) may be 
inappropriate. However, this reference was limited to those procedures 
that include an angiography room in the direct PE inputs, such as CPT 
code 93510 (Left heart catheterization, retrograde, from

[[Page 73190]]

the brachial artery, axillary artery or femoral artery; percutaneous). 
In contrast, CTA and MRA procedures include a CT room or MRI room, 
respectively, in the direct PE inputs, and the PPIS data confirm that a 
higher assumed utilization rate than 50 percent would be appropriate. 
The PPIS angiography room data that reflected a 56 percent equipment 
utilization rate would not specifically apply to CTA and MRA 
procedures. Thus, on further review, we believe it is appropriate to 
include CTA and MRA procedures in the list of procedures for which we 
assume a 75 percent equipment utilization rate, and we proposed to do 
so beginning in CY 2011.
    Consistent with section 1848(c)(2)(B)(v)(III) of the Act (as 
amended by section 3135 of the ACA), the reduced expenditures 
attributable to this change in the utilization rate assumption 
applicable to CY 2011 shall not be taken into account when applying the 
budget neutrality limitation on annual adjustments described in section 
1848(c)(2)(B)(ii)(II) of the Act.
    As provided in the CY 2010 PFS final rule with comment period (74 
FR 61751), CY 2011 is the second year of the 4-year transition to the 
PE RVUs calculated using the PPIS data. We note that the reductions in 
the PE RVUs for expensive diagnostic imaging equipment attributable to 
the change to an equipment utilization rate assumption of 75 percent 
for CY 2011 are not subject to the transition.
    Comment: Several commenters urged CMS not to finalize the proposed 
expansion of the list of procedures to which the 75 percent equipment 
utilization rate assumption would apply, pending further evaluation of 
equipment utilization data. While noting the statutory requirement of 
section 1848(b)(4)(C) of the Act (as added by section 3135(a) of the 
ACA), the commenters believe that CMS is not required to add additional 
services to the policy for CY 2011. Other commenters, including MedPAC, 
supported the proposed increase in the equipment utilization rate 
assumption from 50 percent to 75 percent for the 24 additional services 
that use diagnostic imaging equipment priced at over $1 million.
    Response: No commenters presented a rationale for not including the 
proposed 24 additional services to the 75 percent equipment utilization 
rate assumption, when the proposed additions use the same diagnostic CT 
or MRI imaging equipment as the current codes to which the policy 
applies. We note that the 90 percent equipment utilization rate 
assumption that we finalized in the CY 2010 PFS final rule with comment 
period (74 FR 61755) applies to CT and MRI scanners when used as 
diagnostic imaging equipment, one of these two pieces of equipment is 
listed as a direct PE input for the proposed MRA and CTA services, and 
no commenters recommended that we remove the CT or MRI equipment inputs 
from the additional codes. Therefore, we continue to believe that it is 
appropriate to apply the 75 percent equipment utilization rate 
assumption beginning in CY 2011 to MRA and CTA procedures, as we 
proposed.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to include CTA and MRA procedures in 
the 75 percent equipment utilization rate assumption policy because 
they include expensive CT and MRI scanners that cost more than $1 
million as direct PE inputs for these diagnostic imaging procedures. We 
are modifying our proposal, however, and will not include CPT code 
77079 (Computed tomography, bone mineral density study, 1 or more 
sites; appendicular skeleton (peripheral) (e.g., radius, wrist, heel)) 
because, upon further analysis for this final rule with comment period, 
we noted that the procedure does not include a CT room in its direct PE 
inputs.
    For CY 2011, we are also adding to the 75 percent equipment 
utilization rate assumption policy three new CY 2011 CPT codes for 
diagnostic imaging procedures that include a CT room in their direct PE 
inputs, specifically CPT codes 74176 (Computed tomography, abdomen and 
pelvis; without contrast material); 74177 (Computed tomography, abdomen 
and pelvis; with contrast material); and 74178 (Computed tomography, 
abdomen and pelvis; without contrast material in one or both body 
regions, followed by with contrast material(s) and further sections in 
one or both body regions). As new codes for CY 2011, the work, PE, and 
malpractice RVUs for these CPT codes that are displayed in Addendum C 
to this final rule with comment period are interim final values that 
are open to comment. Similarly, the assignment of the 75 percent 
equipment utilization rate assumption to these CPT codes, which 
contributes to the development of their PE RVUs, is being made on an 
interim final basis. We refer readers to section V.C. of this final 
rule with comment period for further discussion of the establishment of 
interim final RVUs for CY 2011 new and revised codes.
    As a result of the CY 2011 changes, the 75 percent equipment 
utilization rate assumption will be applied to all diagnostic imaging 
procedures with nationally established rates under the PFS in CY 2011 
and which include a CT or MRI scanner in their direct PE, consistent 
with the statutory requirement of section 1848(b)(4)(C) of the Act (as 
added by section 3135(a) of the ACA).
    Consistent with section 1848(c)(2)(B)(v)(III) of the Act (as 
amended by section 3135 of the ACA), the reduced expenditures 
attributable to the change in the utilization rate assumption 
applicable to CY 2011 (from the CY 2011 transitional rate for the 90 
percent equipment utilization rate assumption for expensive diagnostic 
imaging equipment costing over $1 million (CT and MRI scanners) that 
would have applied under the final policy established in the CY 2010 
PFS final rule with comment period to the 75 percent rate required 
under section 1848(b)(4)(C) of the Act) shall not be taken into account 
when applying the budget neutrality limitation on annual adjustments 
described in section 1848(c)(2)(B)(ii)(II) of the Act.
    Table 3 below lists the codes to which the 75 percent equipment 
utilization rate assumption applies for CY 2011. The codes subject to 
this policy are also posted under the downloads for the CY 2011 PFS 
final rule with comment period on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.

         Table 3--Final CPT Codes Subject to 75 Percent Equipment Utilization Rate Assumption in CY 2011
----------------------------------------------------------------------------------------------------------------
                    CPT code                                             Short descriptor
----------------------------------------------------------------------------------------------------------------
70336...........................................  Mri, temporomandibular joint(s).
70450...........................................  Ct head/brain w/o dye.
70460...........................................  Ct head/brain w/dye.
70470...........................................  Ct head/brain w/o & w/dye.
70480...........................................  Ct orbit/ear/fossa w/o dye.

[[Page 73191]]

 
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...........................................  Mri angiography head w/o dye.
70545...........................................  Mri angiography head w/dye.
70546...........................................  Mri angiography head w/o & w/dye.
70547...........................................  Mri angiography neck w/o dye.
70548...........................................  Mri angiography neck w/dye.
70549...........................................  Mri 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...........................................  Mri angio spine 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...........................................  Mri angio upr extr w/o & w/dye.
73700...........................................  Ct lower extremity w/o dye.
73701...........................................  Ct lower extremity w/dye.

[[Page 73192]]

 
73702...........................................  Ct lower extremity w/o & w/dye.
73706...........................................  Ct angio lower extr w/o & w/dye.
73718...........................................  Mri lower extremity w/o dye.
73719...........................................  Mri lower extremity w/dye.
73720...........................................  Mri lower extr 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...........................................  Mri angio lower extr w or w/o dye.
74150...........................................  Ct abdomen w/o dye.
74160...........................................  Ct abdomen w/dye.
74170...........................................  Ct abdomen w/o & w/dye.
74175...........................................  Ct angio abdom w/o & w/dye.
74176...........................................  Ct abd & pelvis w/o contrast.
74177...........................................  Ct abdomen & pelvis w/contrast.
74178...........................................  Ct abd & pelv 1+ section/regns.
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, both breasts.
77078...........................................  Ct bone density, axial.
77084...........................................  Magnetic image, bone marrow.
----------------------------------------------------------------------------------------------------------------

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

[[Page 73193]]

corrections to the 14 CPT codes listed in Table 4.

     Table 4--Groups of Related CPT Codes with Proposed Changes to PE Inputs so that Inputs for Professional
              Component (PC) Only and Technical Component (TC) Only Codes Sum to Global Only Codes
----------------------------------------------------------------------------------------------------------------
                CPT Code                                             Long descriptor
----------------------------------------------------------------------------------------------------------------
93224..................................  Wearable electrocardiographic rhythm derived monitoring for 24 hours by
                                          continuous original waveform recording and storage, with visual
                                          superimposition scanning; includes recording, scanning analysis with
                                          report, physician review and interpretation.
93225..................................  Wearable electrocardiographic rhythm derived monitoring for 24 hours by
                                          continuous original waveform recording and storage, with visual
                                          superimposition scanning; recording (includes connection, recording,
                                          disconnection).
93226..................................  Wearable electrocardiographic rhythm derived monitoring for 24 hours by
                                          continuous original waveform recording and storage, with visual
                                          superimposition scanning; scanning analysis with report.
93230..................................  Wearable electrocardiographic rhythm derived monitoring for 24 hours by
                                          continuous original waveform recording and storage without
                                          superimposition scanning utilizing a device capable of producing a
                                          full miniaturized printout; including recording, microprocessor-based
                                          analysis with report, physician review and interpretation.
93231..................................  Wearable electrocardiographic rhythm derived monitoring for 24 hours by
                                          continuous original waveform recording and storage without
                                          superimposition scanning utilizing a device capable of producing a
                                          full miniaturized printout; recording (includes connection, recording,
                                          and disconnection).
93232..................................  Wearable electrocardiographic rhythm derived monitoring for 24 hours by
                                          continuous original waveform recording and storage without
                                          superimposition scanning utilizing a device capable of producing a
                                          full miniaturized printout; microprocessor-based analysis with report.
93268..................................  Wearable patient activated electrocardiographic rhythm derived event
                                          recording with presymptom memory loop, 24-hour attended monitoring,
                                          per 30 day period of time; includes transmission, physician review and
                                          interpretation.
93270..................................  Wearable patient activated electrocardiographic rhythm derived event
                                          recording with presymptom memory loop, 24-hour attended monitoring,
                                          per 30 day period of time; recording (includes connection, recording,
                                          and disconnection).
93271..................................  Wearable patient activated electrocardiographic rhythm derived event
                                          recording with presymptom memory loop, 24-hour attended monitoring,
                                          per 30 day period of time; monitoring, receipt of transmissions, and
                                          analysis.
93720..................................  Plethysmography, total body; with interpretation and report.
93721..................................  Plethysmography, total body; tracing only, without interpretation and
                                          report.
93784..................................  Ambulatory blood pressure monitoring, utilizing a system such as
                                          magnetic tape and/or computer disk, for 24 hours or longer; including
                                          recording, scanning analysis, interpretation and report.
93786..................................  Ambulatory blood pressure monitoring, utilizing a system such as
                                          magnetic tape and/or computer disk, for 24 hours or longer; recording
                                          only.
93788..................................  Ambulatory blood pressure monitoring, utilizing a system such as
                                          magnetic tape and/or computer disk, for 24 hours or longer; scanning
                                          analysis with report.
----------------------------------------------------------------------------------------------------------------

    Comment: A number of commenters expressed support for CMS' proposal 
to ensure that the direct PE inputs for certain global only codes 
reflect the appropriate summation of their related TC only and PC only 
component code PE inputs as they appear in the direct PE database. One 
commenter questioned why the prior clinical labor time for the global 
only codes in the PE database did not match the direct PE inputs that 
must have been used in CY 2010 to generate the PE RVUs, given that the 
PE RVUs for the global only codes were the sum of the PE RVUs for the 
component codes.
    Response: We appreciate the commenters' support for the proposal, 
and we are finalizing our correction of the direct PE inputs for the 
global only codes so that the inputs reflect the appropriate summing of 
the PE inputs for the associated PC only and TC only codes. In response 
to the commenter who questioned why prior clinical labor time for the 
global only codes in the PE database did not match the direct PE inputs 
that must have been used to generate the PE RVUs for payment, we note 
that Medicare payment systems are programmed to ensure that the PE RVUs 
for global only codes equal the sum of the PE RVUs for the PC and TC 
only codes. Therefore, rather than relying upon the direct PE inputs 
for the global only codes to determine the PE RVUs, which would have 
not resulted in values that equaled the summation of the component code 
PE RUVs, our PFS system was programmed so that the PE RVUs for the 
global only codes were set as the sum of the PE RVUS for the component 
codes. We expect the corrections to the inputs as incorporated in the 
direct PE database to alleviate any confusion caused by the prior 
inclusion of inputs associated with the global only codes that were not 
actually used to generate the PE RVUs.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to correct the direct PE inputs for the 
global only codes so that the inputs reflect the appropriate summing of 
the PE inputs for the associated PC only and TC only codes. The final 
CY 2011 direct PE database includes PE corrections to the 14 CPT codes 
listed in Table 4.
(3) Equipment Time Inputs for Certain Diagnostic Tests
    In the CY 2011 PFS proposed rule (75 FR 40056), we stated that we 
had recently identified equipment time PE inputs that we believed were 
incorrect for four CPT codes associated with certain diagnostic tests 
(each is displayed in Table 4):
     CPT code 93225 is the TC only code that includes the 
connection, recording, and disconnection of the holter monitor (CMS 
Equipment Code EQ127) used in 24-hour continuous electrocardiographic 
rhythm derived monitoring. The CY 2010 equipment time input for the 
holter monitor is 42 minutes, which parallels the intra-service 
clinical labor input time for the CPT code. However, we believed that 
the equipment time should reflect the 24 hours of continuous monitoring 
in which the device is used exclusively by the patient. Therefore, we 
proposed to change the monitor equipment time for CPT code 93225 to 
1440 minutes, the number of minutes in 24 hours.
     CPT code 93226 is the TC only code that includes the 
scanning analysis with report. We believed that the number of minutes 
the monitor (CMS Equipment

[[Page 73194]]

Code EQ127) is used in this service should parallel the intra-service 
clinical labor input time of 52 minutes during which the monitor is in 
use, instead of the CY 2010 equipment time of 1440 minutes, because 
this code does not represent 24 hours of device use. Therefore, we 
proposed to change the monitor equipment time for CPT code 93226 to 52 
minutes.
     CPT 93224 is the global only code that includes the 
connection, recording, and disconnection of the monitor (CMS Equipment 
Code EQ127) and the scanning analysis with report, as well as the 
physician review and interpretation. We proposed direct PE inputs for 
CPT code 93224 to include 1492 total minutes of monitor time (which 
represents the total monitor time we proposed for CPT codes 93225 and 
93226).
     CPT code 93788 is the TC only code that describes the 
scanning analysis with report for ambulatory blood pressure monitoring. 
We believed that the equipment time input for the blood pressure 
monitor should parallel the 10 minutes of clinical labor input for the 
CPT code since that is the time during which the monitor is in use. In 
CY 2010, the equipment time input for the monitor is 1440 minutes, 
which is appropriate only for CPT code 93786, the code that describes 
the 24 hours of ambulatory blood pressure monitoring recording. 
Therefore, we proposed to correct the equipment time input for the 
ambulatory blood pressure monitor in CPT code 93788 to 10 minutes.
     CPT code 93784 is the global only code that includes the 
recording, the scanning analysis with report, and the physician 
interpretation and report for ambulatory blood pressure monitoring. We 
proposed to establish the direct PE inputs for CPT code 93784 to 
include 1450 total minutes of time for the ambulatory blood pressure 
monitor (which represents the proposed total amount of monitor time 
included in CPT codes 93786 and 93788).
    The proposed CY 2011 direct PE database reflected these changes.
    Comment: Several commenters pointed out that the prior assignment 
of the 1440 minutes of holter monitor equipment time to CPT code 93226 
stemmed from discussions between CMS and provider groups that resulted 
in PE policies initially implemented in CY 2007 (72 FR 18910). The 
commenters recommended that CMS retain the 1440 minutes of holter 
monitor equipment for CPT code 93326, consistent with current policy, 
rather than reassign the 1440 minutes of holter monitor equipment time 
as proposed to CPT code 93226.
    Response: We agree with the commenters that it would be most 
appropriate to maintain our established policy for the equipment times 
associated with CPT codes 93225 and 93226, based upon further 
description of the direct practice expenses experienced by the current 
providers that typically furnish these services to Medicare 
beneficiaries. Therefore, we are not adopting the equipment time 
changes that we proposed for CPT codes 93225 and 93226. However, we are 
revising the direct PE inputs for CPT code 93224, a global only code, 
to include the total equipment time for the holter monitor that is 
incorporated in component codes CPT codes 93225 and 93226, as discussed 
in section II.A.3.b.(2). of this final rule with comment period. The PE 
inputs for CPT code 93224 did not previously correctly reflect the 
summation of the direct PE inputs for the component codes.
    Comment: One commenter supported the proposed changes to the direct 
PE inputs for CPT codes 93784 through 93788. However, the commenter was 
confused about why 1440 minutes of equipment time were assigned to CPT 
code 93786, which the commenter stated is used only for the technical 
component of scanning the data rather than recording the data.
    Response: As we stated in our proposal, we believe that the direct 
PE inputs for CPT code 93786 are currently correct because the code 
describes the recording of the data. We believe that the commenter may 
have inadvertently referred to CPT code 93786 instead of CPT code 
93788, which is the technical component code that describes the 
scanning rather than the recording of the data. We proposed to remove 
the 1440 minutes associated with the scanning analysis from the inputs 
for CPT code 93788, not CPT code 93786.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposals to change the ambulatory blood 
pressure monitor equipment times included as direct PE inputs for CPT 
codes 938784 and 93788, while maintaining the current equipment time 
direct PE input for CPT code 93786. However, we are not finalizing our 
proposals to change the holter monitor equipment times included as 
direct PE inputs for CPT codes 93225 and 93226, but instead will 
maintain the inputs for CPT codes 93225 and 93226 as they were for CY 
2010. We are also revising the direct PE inputs for CPT code 93224 to 
include the total equipment time for the holter monitor that is 
incorporated in CPT codes 93225 and 93226. The equipment times in the 
final CY 2011 direct PE database reflect these decisions.
(4) Cobalt-57 Flood Source
    Stakeholders requested that CMS reevaluate the useful life of the 
Cobalt-57 flood source (CMS Equipment Code ER001), given their estimate 
of approximately 271 days for the source's half-life. The CY 2010 
useful life input in the CY 2010 direct PE database for the Cobalt-57 
flood source is 5 years. Using publicly available catalogs, we found 
that the Cobalt-57 flood source is marketed with a useful life of 2 
years. Therefore, we proposed to change the useful life input from the 
current 5 years to 2 years. The Cobalt-57 flood source was included 
with the revised useful life input for 96 HCPCS codes in the proposed 
CY 2011 direct PE database.
    Comment: One commenter supported the proposal to change the useful 
life input from 5 years to 2 years for the Cobalt-57 flood source.
    Response: We appreciate the commenter's support for our proposal.
    After consideration of the public comment we received, we are 
finalizing our CY 2011 proposal to change the useful life input in the 
direct PE database for the Cobalt-57 flood source from 5 years to 2 
years. This change is included in the final CY 2011 direct PE database.
(5) Venom Immunotherapy
    One stakeholder provided updated price information for the venoms 
used for the five venom immunology CPT codes, specifically 95145 
(Professional services for the supervision of preparation and provision 
of antigens for allergen immunotherapy (specify number of doses); 
single stinging insect venom); 95146 (Professional services for the 
supervision of preparation and provision of antigens for allergen 
immunotherapy (specify number of doses); 2 single stinging insect 
venoms); 95147 (Professional services for the supervision of 
preparation and provision of antigens for allergen immunotherapy 
(specify number of doses); 3 single stinging insect venoms); 95148 
(Professional services for the supervision of preparation and provision 
of antigens for allergen immunotherapy (specify number of doses); 4 
single stinging insect venoms); 95149 (Professional services for the 
supervision of preparation and provision of antigens for allergen 
immunotherapy (specify number of doses); 5 single stinging insect 
venoms).
    In the CY 2004 PFS final rule with comment period (68 FR 63206), we 
adopted a pricing methodology that utilizes the average price of a 1 
milliliter

[[Page 73195]]

dose of venom and adds that price per dose as direct PE inputs for CPT 
codes 95145 and 95146. When a patient requires three stinging insect 
venoms, as for CPT code 95147, the price input for a 3-vespid mix is 
used. This 3-vespid mix price is also used to value CPT codes 95148 
(four venoms) and 96149 (five venoms), with the single venom price 
added once to CPT code 97148 and twice to CPT code 97149.
    As requested by the stakeholder, we updated the price inputs for 
the 1-milliliter dose of venom to $16.67 and for the 3-vespid mix to 
$30.22 in the proposed CY 2011 direct PE database.
    Comment: One commenter supported the proposal to update the price 
inputs for the venoms used for venom immunotherapy.
    Response: We appreciate the information provided by stakeholders 
regarding the price inputs for venom immunotherapy supplies, consistent 
with our interest in utilizing accurate market prices as the direct PE 
inputs for these items.
    After consideration of the public comment we received, we are 
finalizing our CY 2011 proposals to update the price inputs for the 1-
milliliter dose of venom to $16.67 and for the 3-vespid mix to $30.22 
in the CY 2011 direct PE database. These changes are included in the 
final CY 2011 direct PE database.
(6) Equipment Redundancy
    Stakeholders recently brought to our attention that the ECG, 3-
channel (with SpO2, NIBP, temp, resp) (CMS Equipment Code EQ011) 
incorporates all of the functionality of the pulse oximeter with 
printer (CMS Equipment Code EQ211). Therefore, in HCPCS codes where CMS 
Equipment Code EQ011 is present, CMS Equipment Code EQ211 is redundant. 
On this basis, we proposed to remove the pulse oximeter with printer 
(CMS Equipment Code EQ211) as an input for the 118 codes that also 
contain the ECG, 3-channel (with SpO2, NIBP, temp, resp) (CMS Equipment 
Code EQ011). We made these adjustments in the proposed CY 2011 direct 
PE database.
    We received no public comments regarding this proposal to address 
the pulse oximeter equipment redundancy. Therefore we are finalizing 
our CY 2011 proposal without modification. We have made these 
adjustments in the final CY 2011 direct PE database.
(7) Equipment Duplication
    We recently identified a number of CPT codes with duplicate 
equipment inputs in the PE database. We proposed to remove the 
duplicate equipment items and modified the proposed CY 2011 direct PE 
database accordingly as detailed in Table 5.

                             TABLE 5--CPT Codes With Proposed Removal of Duplicate Equipment Items in the Direct PE Database
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  CMS equipment code
              CPT Code                                              for duplicate                          Description of equipment
                                                                      equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
19302..............................  P-mastectomy w/1n removal.  EF014                light, surgical.
                                                                 ED005                camera, digital system, 12 megapixel (medical grade).
19361..............................  Breast reconstr w/lat flap  EF031                table, power.
                                                                 EQ168                light, exam.
44157..............................  Colectomy w/ileoanal anast  EF031                table, power.
                                                                 EQ168                light, exam.
44158..............................  Colectomy w/neo-rectum      EF031                table, power.
                                      pouch.                     EQ168                light, exam.
56440..............................  Surgery for vulva lesion..  EF031                table, power.
                                                                 EQ170                light, fiberoptic headlight w-source.
57296..............................  Revise vag graft, open abd  EF031                table, power.
                                                                 EQ170                light, fiberoptic headlight w-source.
58263..............................  Vag hyst w/t/o & vag        EF031                table, power.
                                      repair.
59610..............................  Vbac delivery.............  EF031                table, power.
67228..............................  Treatment of retinal        EL005                lane, exam (oph).
                                      lesion.                    EQ230                slit lamp (Haag-Streit), dedicated to laser use.
76813..............................  Ob us nuchal meas, 1 gest.  ED024                film processor, dry, laser.
77371..............................  Srs, multisource..........  EQ211                pulse oximeter w-printer.
                                                                 ED018                computer workstation, cardiac cath monitoring.
                                                                 EL011                room, angiography.
93540..............................  Injection, cardiac cath...  EQ011                ECG, 3-channel (with SpO2, NIBP, temp, resp).
                                                                 EQ032                IV infusion pump.
                                                                 EQ088                contrast media warmer.
                                                                 EQ211                pulse oximeter w-printer.
93542..............................  Injection for heart x-rays  ED018                computer workstation, cardiac cath monitoring.
                                                                 EL011                room, angiography.
                                                                 EQ011                ECG, 3-channel (with SpO2, NIBP, temp, resp).
                                                                 EQ032                IV infusion pump.
                                                                 EQ088                contrast media warmer.
                                                                 EQ211                pulse oximeter w-printer.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comment: One commenter pointed out that the equipment duplication 
issue for CPT codes 93540 and 93542 is irrelevant because these codes 
would no longer be reported for Medicare in CY 2011. The commenter 
stated that the codes are being replaced by a new set of diagnostic 
cardiac catheterization CPT codes.
    Response: We agree with the commenter's assessment that our 
proposal for these codes is not relevant for CY 2011 because these 
codes are being deleted.
    Comment: One commenter reviewed the duplicate inputs and offered a 
correction regarding CPT code 19302 (Mastectomy, partial (eg, 
lumpectomy,

[[Page 73196]]

tylectomy, quadrantectomy, segmentectomy); with axillary 
lymphadenectomy). The commenter pointed out that one of the line-items 
erroneously duplicated (light, surgical, EF014) for that code should 
have originally been applied to CPT code 19304 (Mastectomy, 
subcutaneous).
    Response: We appreciate the commenter bringing this error to our 
attention and we agree with the commenter's assessment.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to remove the duplicate equipment items 
from the CY 2011 direct PE database as detailed in Table 5, with 
modification to transfer the duplicate surgical light input from CPT 
code 19302 to CPT code 19304. These changes are reflected in the final 
CY 2011 direct PE database.
(8) Establishing Overall Direct PE Supply Price Inputs Based on Unit 
Prices and Quantities
    In the CY 2011 PFS proposed rule (75 FR 40057), we stated that we 
had identified minor errors in total price inputs for a number of 
supply items due to mathematical mistakes in multiplying the item unit 
price and the quantity used in particular CPT codes for the associated 
services. We proposed to modify the direct PE database to appropriately 
include the overall supply price input for a supply item as the product 
of the unit price and the quantity of the supply item used in the CPT 
code. Most of the overall supply price input changes were small, and we 
adjusted the proposed CY 2011 direct PE database accordingly. The CPT 
and Level II HCPCS codes and associated supplies for nonfacility and 
facility settings that were subject to these corrections are displayed 
in Tables 6 and 7, respectively.
BILLING CODE 4120-01-P

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[[Page 73200]]


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[[Page 73201]]


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[GRAPHIC] [TIFF OMITTED] TR29NO10.239

BILLING CODE 4120-01-C
    Comment: Several commenters agreed that the overall supply price 
inputs should be equal to the product of the supply price and the 
quantity associated with each code. Some commenters pointed out that 
for many of the supply items displayed in Tables 6 and 7, the overall 
supply prices remained incorrect in the proposed CY 2011 direct PE 
database. The commenters speculated that an underlying programming 
error may have led to incorrect calculations.
    Response: In constructing the proposed CY 2011 direct PE database 
posted on the CMS web site, we inadvertently retained a display column 
of data that reflected our previous calculation error, despite our 
correct calculation of the values for PFS ratesetting purposes. We have 
corrected the underlying process error that led to the incorrect 
display. We have modified the direct PE database for the CY 2011 PFS 
final rule with comment period to appropriately display the overall 
supply price input for a supply item as the product of the unit price 
and the quantity of the supply item used in the CPT code.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to modify the direct PE database to 
include the overall supply price input for a supply item as the product 
of the unit price and the quantity of the supply item used in the CPT 
code. We have modified the display column within the publicly available 
database to reflect the proper calculation. These changes are reflected 
in the final CY 2011 direct PE database.
c. AMA RUC Recommendations in CY 2010 for Changes to Direct PE Inputs
    In a March 2010 letter, the AMA RUC made specific PE 
recommendations that we considered in the CY 2011 PFS proposed rule (75 
FR 40062 through 40063). The proposed changes that follow were included 
in the proposed CY 2011 direct PE database, which is available on the 
CMS Web site under the downloads for the CY 2011 PFS proposed rule at 
http://www.cms.gov/PhysicianFeeSched/. The final direct PE database for 
CY 2011 is available under the downloads for the CY 2011 PFS final rule 
with comment period at the same location.
(1) Electrogastrography and Esophageal Function Test
    We proposed to accept the AMA RUC recommendations for the CY 2011 
PE inputs for the following CPT codes: 91132 (Electrogastrography, 
diagnostic, transcutaneous); 91133 (Electrogastrography, diagnostic, 
transcutaneous; with provocative testing); 91038 (Esophageal function 
test, gastroesophageal reflux test with nasal catheter intraluminal 
impedance electrode(s) placement, recording, analysis and 
interpretation; prolonged (greater than 1 hour, up to 24 hours)). For 
CPT code 91038, we assumed a useful life of 5 years for the equipment 
item ``ZEPHR impedance/pH reflux monitoring system with data recorder, 
software, monitor, workstation and cart,'' based on its entry in the 
AHA's publication, ``Estimated Useful Lives of Depreciable Hospital 
Assets,'' which we use as a standard reference. The proposed CY 2011 
direct PE database was changed accordingly.
(2) 64-Slice CT Scanner and Software
    The AMA RUC submitted an updated recommendation regarding the 
correct pricing of the 64-slice CT scanner and its accompanying 
software. Based on the documentation accompanying the recommendation, 
we accepted this recommendation and proposed to update the price input 
for the 64-slice scanner and software. This affected the following four 
CPT codes that use either the scanner, the software, or both: 75571 
(computed tomography, heart, without contrast material, with 
quantitative evaluation of coronary calcium); 75572 (Computed 
tomography, heart, with contrast material, for evaluation of cardiac 
structure and morphology (including 3D image postprocessing, assessment 
of cardiac function, and evaluation of venous structures, if 
performed)); 75573 (Computed tomography, heart, with contrast material, 
for evaluation of cardiac structure and morphology in the setting of 
congenital heart disease (including 3D image postprocessing, assessment 
of LV cardiac function, RV structure and function and evaluation of 
venous structures, if performed)); and 75574 (Computed tomographic 
angiography, heart, coronary arteries and bypass grafts (when present), 
with contrast material, including 3D image post processing (including 
evaluation of cardiac structure and morphology, assessment of cardiac 
function, and evaluation of venous structure, if performed)). The 
proposed CY 2011 direct PE database was modified accordingly.
(3) Breath Hydrogen Test
    The AMA RUC provided recommendations regarding the PE inputs for 
CPT code 91065 (breath

[[Page 73204]]

hydrogen test (e.g., for detection of lactase deficiency, fructose 
intolerance, bacterial overgrowth, or oro-cecal gastrointestinal 
transit). We accepted the recommendations with two modifications. We 
folded the two pieces of equipment listed as ``quinGas Table-Top 
Support Stand, 3 Tank'' and ``Drying Tube, Patient Sample'' into the 
``BreathTrackerDigital SC Instrument'' and summed their inputs into one 
equipment line-item, since these equipment items are used together 
specifically for the service in question. We increased the useful life 
input of the ``BreathTrackerDigital SC Instrument'' from 7 to 8 years 
based on our use of the American Hospital Association (AHA)'s 
publication entitled, ``Estimated Useful Lives of Depreciable Hospital 
Assets'' as a standard reference. Additionally, because the AMA RUC did 
not include equipment times in their recommendations for this CPT code, 
we used 53 minutes as the total time for all equipment items based on 
the total intra-service period for the clinical labor, consistent with 
our general policy for establishing equipment times. These 
modifications were reflected in the proposed CY 2011 direct PE 
database.
(4) Radiographic Fluoroscopic Room
    A recent AMA RUC review of services that include the radiographic 
fluoroscopic room (CMS Equipment Code EL014) as a direct PE input 
revealed that the use of the item is no longer typical for certain 
services in which it is specified within the current direct cost 
inputs. The AMA RUC recommended to CMS that the radiographic 
fluoroscopic room be deleted from CPT codes 64420 (Injection, 
anesthetic agent; intercostal nerve, single); 64421 (Injection, 
anesthetic agent; intercostal nerves, multiple, regional block); and 
64620 (Destruction by neurolytic agent, intercostal nerve). We accepted 
these recommendations and, therefore, these changes were included in 
the proposed CY 2011 direct PE database.
    Comment: Several commenters generally expressed support for our 
acceptance of these AMA RUC-recommended direct PE inputs with the 
stated refinements. The AMA RUC expressed appreciation for CMS' 
acceptance of the committee's recommendations.
    Response: We appreciate the assistance of stakeholders in our 
efforts to utilize the most accurate direct PE inputs for PFS services. 
We also appreciate the judicious work of the AMA RUC in providing these 
recommendations in time for us to respond to them and include our 
proposals in the CY 2011 proposed rule.
    Comment: One commenter expressed concern about these 
recommendations on the basis of the flawed professional composition of 
the AMA RUC. The commenter stated that without fair representation by 
all specialties, including nonphysician practitioners who may bill Part 
B directly under the PFS, CMS' reliance on the AMA RUC as representing 
the professional views and knowledge of all healthcare specialties for 
purposes of establishing the direct PE inputs for services paid under 
the PFS is deeply flawed.
    Response: As we have stated previously (69 FR 66243), because the 
AMA RUC is an independent committee, we are not in a position to set 
the requirements for AMA RUC membership. Concerned stakeholders should 
communicate directly with the AMA RUC regarding its professional 
composition. We note that we alone are responsible for all decisions 
about the direct PE inputs for purposes of PFS payment so, while the 
AMA RUC provides us with recommendations for new and revised CPT codes 
in the context of what we believe is its broad expertise, we ultimately 
remain responsible for determining the direct PE inputs for all new or 
revised services.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposals to accept the AMA RUC recommendations, 
with certain changes described above, regarding the direct PE inputs 
for electrogastrography and esophageal function tests, the 64-slice CT 
scanner and software, the breath hydrogen test, and certain procedures 
that no longer require a radiographic fluoroscopic room. These 
decisions are reflected in the final CY 2011 direct PE database.
(5) Cystometrogram
    The AMA RUC recently identified a rank order anomaly regarding CPT 
code 51726 (Complex cystometrogram (i.e., calibrated electronic 
equipment)). Currently, this procedure has higher PE RVUs, despite 
being less resource-intensive than the three CPT codes for which it 
serves as the base: 51727 (Complex cystometrogram (i.e., calibrated 
electronic equipment); with urethral pressure profile studies (i.e., 
urethral closure pressure profile), any technique); 51728 (Complex 
cystometrogram (i.e., calibrated electronic equipment); with voiding 
pressure studies (that is, bladder voiding pressure), any technique); 
and 51729 (Complex cystometrogram (i.e., calibrated electronic 
equipment); with voiding pressure studies (that is, bladder voiding 
pressure) and urethral pressure profile studies (that is, urethral 
closure pressure profile), any technique).
    Since the AMA RUC's general view is that CPT codes with a 0-day 
global period do not have pre-service time associated with the code, 
the AMA RUC recommended removing the nonfacility pre-service clinical 
labor time from the PE inputs for 51726. Additionally, the AMA RUC 
recommended that the nonfacility clinical intra-service staff time for 
CPT code 51276 be reduced from the 118 minutes of intra-service 
clinical labor time currently assigned to the code to 85 minutes of 
intra-service clinical labor time. These changes would resolve the rank 
order anomaly and bring the PE inputs for CPT code 51726 into alignment 
with the other three codes. Finally, and for the reasons stated above, 
the AMA RUC recommended that CMS remove the 23 minutes of pre-service 
nonfacility clinical labor time from CPT code 51725 (Simple 
cystometrogram (CMG) (for example, spinal manometer)). We agreed with 
the AMA RUC recommendations, proposed to accept these recommendations 
for CY 2011 and, therefore, changed the direct PE inputs for CPT codes 
51725 and 51726 in the nonfacility setting in the proposed CY 2011 
direct PE database.
    Comment: Some commenters argued that the rank order anomaly 
resulted from clinical labor inputs that were too low in the more 
complex codes, rather than too high in the base codes. These commenters 
stated that the AMA RUC and CMS had addressed the wrong ``end'' of the 
rank order anomaly in making the changes to the clinical labor minutes 
assigned to CPT codes 51725 and 51726. Several commenters on the CY 
2010 PFS final rule with comment period, where new CY 2011 CPT code 
51727, 51728, and 51729 were assigned interim direct PE inputs, also 
argued that CPT codes 51727, 51728, and 51729 should have additional 
clinical labor inputs, including a greater number of minutes during the 
intra-service period and minutes during the pre-service period.
    Response: We have reviewed the direct PE inputs for all five CPT 
codes in this series and continue to agree with the AMA RUC's 
recommendations regarding changes for CY 2011. Specifically, we believe 
the pre-service nonfacility clinical labor time for the 0-day global 
period CPT codes 51725 and 51726 should be removed and the intra-
service clinical labor time for CPT code 51726 should also be reduced, 
consistent with the usual treatment of

[[Page 73205]]

other 0-day global codes. We believe the AMA RUC provided 
recommendations to us regarding the direct PE inputs for these four 
cystometrogram services that accurately reflect the costs of the 
resources (that is, the clinical labor, equipment, and supplies) 
typically required to furnish these services to Medicare beneficiaries.
    Comment: Several commenters requested that CMS change the supply 
inputs included in the direct PE database for the complex 
cystometrogram services. For example, the commenters requested that 
single dual sensor catheters replace the single sensor catheters 
currently included as direct PE inputs for these codes. The commenters 
stated that both the catheters and their price inputs are outdated. In 
other cases, the commenters explained that certain supplies in the 
database were not those typically used by certain physician specialties 
in performing the services.
    Response: We rely on our review of recommendations received from 
the AMA RUC in order to make changes to the clinical labor, supply, and 
equipment inputs for CPT codes within the direct PE database. We have 
no reason to believe that the supplies used in the complex 
cystometrogram procedures described by CPT codes 51727, 51728, and 
51729 are outdated because these were new codes for CY 2010 and the AMA 
RUC recently addressed their direct PE inputs when initially 
recommending values for the services. We believe the AMA RUC's 
extensive expertise and broad perspective generally allows it to 
accurately identify the direct PE inputs for new and revised CPT codes. 
We encourage stakeholders who believe that enhancements in technology 
or changes in medical practice have resulted in changes in the supplies 
or equipment typically used in furnishing a particular service to 
address these concerns with the AMA RUC.
    As we discuss further in section II.A.3.e. of this final rule with 
comment period with respect to our proposal regarding updating supply 
and equipment price inputs, we welcome public requests for updates to 
supply price and equipment price and useful life inputs associated with 
existing codes through the process we are adopting beginning in CY 
2011.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to accept the recommendations of the 
AMA RUC regarding the revised direct PE inputs for CPT codes 51725 and 
52726. The final direct PE inputs are included in the final CY 2011 
direct PE database.
d. Referral of Existing CPT Codes for AMA RUC Review
    As part of our review of high cost supplies, we conducted a 
clinical review of the procedures associated with high cost supplies to 
confirm that those supplies currently are used in the typical case 
described by the CPT codes. While we confirmed that most high cost 
supplies could be used in the procedures for which they are currently 
direct PE inputs, we noted that one of the high cost supplies, fiducial 
screws (CMS Supply Code SD073) with a current price of $558, is 
included as a direct PE input for two CPT codes, specifically 77301 
(Intensity modulated radiotherapy plan, including dose-volume 
histograms for target and critical structure partial tolerance 
specifications) and 77011 (Computed tomography guidance for 
stereotactic localization). The documentation used in the current 
pricing of the supply item describes a kit that includes instructions, 
skull screws, a drill bit, and a collar for the TALON[reg] System 
manufactured by Best nomos. Best nomos' literature describes the 
insertion of the screws into the patient's skull to ensure accurate 
set-up. When CPT codes 77301 and 77011 were established in CY 2002 and 
CY 2003, respectively, we accepted the AMA RUC recommendations to 
include fiducial screws in the PE for these services. Upon further 
review, while we understand why this supply may still be considered a 
typical PE input for CPT code 77011, we do not now believe that 
fiducial screws, as described in the Best nomos literature, would 
typically be used in CPT code 77301, where the most common clinical 
scenario would be treatment of prostate cancer.
    Therefore, in order to ensure that CPT codes 77301 and 77011 are 
appropriately valued for CY 2011 through the inclusion or exclusion of 
fiducial screws in their PE, in the CY 2011 PFS proposed rule (75 FR 
40063), we asked the AMA RUC to review these CPT codes with respect to 
the inclusion of fiducial screws in their PE. We requested that the AMA 
RUC make recommendations to us regarding whether this supply should be 
included in the PE or removed from the PE for CPT codes 77301 and 77011 
in a timeframe that would allow us to adopt interim values for these 
codes for CY 2011, should the AMA RUC recommend a change. Were the AMA 
RUC to continue to recommend the inclusion of fiducial screws in the PE 
for CPT code 77301 and/or 77011 for CY 2011, we requested that the AMA 
RUC provide us with a detailed rationale for the inclusion of this 
specialized supply in the PE for the typical case reported under the 
relevant CPT code. We also requested that the AMA RUC furnish updated 
pricing information for the screws if they were to continue to 
recommend the screws as a PE input for one or both of these CPT codes 
in CY 2011.
    Comment: The AMA RUC recommended that CMS remove the fiducial 
screws as a direct PE input from both CPT codes 77011 and 77301. 
Several commenters also agreed that the fiducial screws would not 
typically be used with CPT code 77301. Additionally, multiple 
commenters pointed out that the fiducial screws may now be reported 
using HCPCS supply code A4648 (Tissue marker, implantable, any type, 
each) when the markers are implanted.
    Response: We appreciate the responsiveness of the AMA RUC to our 
request and the interest of the other commenters in this issue.
    After consideration of the public comments we received and the AMA 
RUC recommendation following publication of the CY 2011 PFS proposed 
rule, for CY 2011, we are accepting the AMA RUC's recommendation and 
removing fiducial screws from the direct PE database as inputs for CPT 
codes 77011 and 77301. Because the direct PE inputs for these codes are 
being revised on an interim final basis for CY 2011, the changes are 
subject to public comment on this final rule with comment period.
e. Updating Equipment and Supply Price Inputs for Existing Codes
    Historically, we have periodically received requests to change the 
PE price inputs for supplies and equipment in the PE database. In the 
past, we have considered these requests on an ad hoc basis and updated 
the price inputs as part of quarterly or annual updates if we believed 
them to be appropriate. In the CY 2011 PFS proposed rule (75 FR 49963), 
we proposed to establish a regular and more transparent process for 
considering public requests for changes to PE database price inputs for 
supplies and equipment used in existing codes.
    We proposed to act on public requests to update equipment and 
supply price inputs annually through rulemaking by following a regular 
and consistent process as discussed in the following paragraphs. We 
proposed to use the annual PFS proposed rule released in the summer and 
the final rule with comment period released on or about

[[Page 73206]]

November 1 each year as the vehicle for making these changes.
    We would accept requests for updating the price inputs for supplies 
and equipment on an ongoing basis; requests must be received no later 
than December 31 of each calendar year to be considered for inclusion 
in the next proposed rule. In that next proposed rule, we would present 
our review of submitted requests to update price inputs for specific 
equipment or supplies and our proposals for the subsequent calendar 
year. We would then finalize changes in the final rule with comment 
period for the upcoming calendar year. Our review of the issues and 
consideration of public comments may result in the following outcomes 
that would be presented in the final rule with comment period:
     Updating the equipment or supply price inputs, as 
requested.
     Updating the equipment or supply price inputs, with 
modifications.
     Rejecting the new price inputs.
     Declining to act on the request pending a recommendation 
from the AMA RUC.
    To facilitate our review and preparation of issues for the proposed 
rule, at a minimum, we would expect that requesters would provide the 
following information:
     Name and contact information for the requestor.
     The name of the item exactly as it appears in the direct 
PE database under downloads for the most recent PFS final rule with 
comment period, available on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
    In order to best evaluate the requests in the context of our goal 
of utilizing accurate market prices for these items as direct PE 
inputs, we also would expect requestors to provide multiple invoices 
from different suppliers/manufacturers. In some cases, multiple sources 
may not be available, whereupon a detailed explanation should be 
provided to support the request. When furnishing invoices, requestors 
should take into consideration the following parameters:
    ++ May be either print or electronic but should be on supplier and/
or manufacturer stationery (for example, letterhead, billing statement, 
etc.)
    ++ Should be for the typical, common, and customary version of the 
supply or equipment that is used to furnish the services.
    ++ Price should be net of typical rebates and/or any discounts 
available, including information regarding the magnitude and rationale 
for such rebates or discounts.
    ++ If multiple items are presented on the same invoice, relevant 
item(s) should be clearly identified.
    We solicited public comments on this process, including the 
information that requestors should furnish to facilitate our full 
analysis in preparation for the next calendar year's rulemaking cycle.
    Comment: Several commenters supported establishing a regular and 
more transparent process for considering public requests for changes to 
the direct PE price inputs for supplies and equipment used in existing 
codes. However, other commenters were concerned that the process might 
prevent CMS from making timely corrections to the database that are 
brought to the attention of the agency by specialty societies or other 
stakeholders. These commenters suggested creating an expedited process 
whereby mistakes could be corrected.
    Response: We appreciate the broad support for the proposal. We 
believe that this process, though regular, would not limit our ability 
to correct technical errors that are discovered by the agency or 
brought to our attention by stakeholders. On these occasions, we would 
continue to correct errors and issue correction notices to final rules 
when appropriate. The regular process for updating supply and equipment 
prices is intended to reflect significant changes in the market prices 
of supplies and equipment that are used in the direct PE database. It 
would not substitute for the timely correction of technical errors.
    Comment: Some commenters were concerned that the proposed process 
would necessitate a 12- to 24-month delay between CMS' acknowledgement 
of a price update and the resulting change in PE RVU calculations. The 
commenters pointed out that the current ad hoc process has historically 
resulted in a fairly timely response from the agency in most 
circumstances and were concerned that the formalization of the process 
might result in unnecessary delays. One commenter suggested creating a 
process for quarterly updates to the supply and equipment price inputs.
    Response: We understand that some commenters are concerned about 
the timelines for price updates. However, we believe that the value of 
the transparency of the proposed process outweighs its potential for 
slowing the previous ad hoc process. Additionally, it is important to 
acknowledge that in most previous cases, price input updates would not 
have been immediately effective since such updates have always required 
CMS' review, concurrence, and processing through the rate setting 
methodology prior to any change in Medicare payment rates. 
Additionally, many stakeholders already provide public comments to CMS 
regarding specific issues addressed in our annual rate setting for the 
PFS through the notice and comment rulemaking process. Therefore, we 
believe that the annual process offers both an economic use of 
stakeholders' resources, as well as the best opportunity for broad 
public input into proposed price changes. These are qualities any 
accelerated alternative, such as quarterly updates, would lack.
    We believe that an annual update process most effectively promotes 
both timeliness and transparency, while also allowing for public 
comment and input regarding our proposals before the adoption of 
pricing changes that could have a significant effect on payment for 
services under the PFS.
    Comment: Some commenters asserted that it may be more difficult to 
obtain invoices for some supplies that are not frequently used and 
there should be acceptable alternative sources of information, 
including price lists or other information from the manufacturer. One 
commenter suggested that in the case of items that are not used in high 
volumes in physicians' office, volume or other discounts are unlikely 
for physicians' practices.
    Response: Even though the direct PE inputs should reflect the 
resource costs required for typical cases, we understand that there may 
be circumstances in which updated invoices or invoices that reflect 
volume or other discounts may be difficult to obtain. As stated in our 
proposal, we will consider a detailed written explanation in support of 
requests submitted without the documentation usually required.
    Comment: One commenter urged that the updating of supply and 
equipment prices be only for ``like'' items and not for ``newer 
technology'' items. The commenter requested that CMS refer the initial 
review of new supply and equipment inputs to the AMA RUC Practice 
Expense Subcommittee for review and recommendation back to CMS. Other 
commenters made specific requests for additions, deletions, or 
substitutions of supply and equipment items associated with particular 
codes.
    Response: We appreciate the opportunity to clarify that this 
regular and consistent process would only apply to the price inputs for 
supply and equipment items. As part of our review of equipment price 
inputs, we will also consider updates to the useful life of equipment 
insofar as that information is

[[Page 73207]]

supported by similar documentation. However, we will continue to 
encourage stakeholders who believe that there should be additions, 
deletions, or substitutions of direct PE inputs associated with 
particular codes to address these concerns through the AMA RUC, 
including when a stakeholder believes that enhanced technology has 
replaced older technology in the typical case of a particular service. 
We believe the AMA RUC recommendations are an efficient and effective 
mechanism to inform our review of changes to the clinical labor, 
supply, and equipment inputs within the direct PE database.
    Comment: One commenter was concerned about the potential for CMS to 
reject the requested price input outright and suggested that CMS be 
required to explain its rejection of the request for an updated price 
input.
    Response: We appreciate the concerns of the commenter and consider 
this perspective as providing additional support for instituting such a 
regular and transparent process. As we stated in the CY 2011 proposed 
rule (75 FR 40063), we would present our review of submitted requests 
to update price inputs for specific equipment or supplies and our 
proposals for the subsequent calendar year in the annual proposed rule. 
This process would provide CMS an annual opportunity to explain our 
review and decisions regarding public requests for changes in direct PE 
price inputs.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to act on public requests to update 
equipment and supply price inputs annually through rulemaking by 
following a regular and consistent process as discussed in the 
preceding paragraphs. We will use the annual PFS proposed rule released 
in the summer and the final rule with comment period released on or 
about November 1 each year as the vehicle for making these changes. In 
order to make the most effective use of the rulemaking process and be 
responsive to the concerns of stakeholders that we consider the most 
recent evidence available, we ask that requests for updates to supply 
price inputs or equipment price or useful life inputs be submitted as 
comments to the PFS final rule with comment period each year, subject 
to the deadline for public comments applicable to that rule. 
Alternatively, stakeholders may submit requests to CMS on an ongoing 
basis throughout a given calendar year to CMS PE_Price_Input_Update@cms.hhs.gov. Requests received by the end of a calendar year 
will be considered in rulemaking during the following year. For 
example, requests received by December 31, 2010 will be considered in 
conjunction with the CY 2012 PFS rulemaking cycle. We refer readers to 
the description earlier in this section of the minimum information we 
are requesting that stakeholders provide in order to facilitate our 
review and preparation of issues for the proposed rule.
    In the CY 2012 PFS proposed rule, scheduled to be released in the 
summer of CY 2011, we will present a review of any timely requests we 
receive to update supply price inputs or equipment price or useful life 
inputs. After reviewing the issues and responding to the public 
comments, we will finalize our decision as one of the outcomes listed 
below for each request in the final rule with comment period for CY 
2012.
     Updating the equipment or supply price inputs, as 
requested.
     Updating the equipment or supply price inputs, with 
modifications.
     Rejecting the new price inputs.
     Declining to act on the request pending a recommendation 
from the AMA RUC.
f. Other Issues
    We received other public comments on matters related to direct PE 
inputs that were not the subject of proposals in the CY 2011 PFS 
proposed rule. We thank the commenters for sharing their views and 
suggestions. Because we did not make any proposals regarding these 
matters, we do not generally summarize or respond to such comments in 
this final rule with comment period. However, we are summarizing and 
responding to several of the public comments in order to reiterate or 
clarify certain information.
    Comment: Several commenters stated that the clinical labor minutes 
for CPT code 37210 (Uterine fibroid embolization (UFE, embolization of 
the uterine arteries to treat uterine fibroids, leiomyomata), 
percutaneous approach inclusive of vascular access, vessel selection, 
embolization, and all radiological supervision and interpretation, 
intraprocedural roadmapping, and imaging guidance necessary to complete 
the procedure) are inconsistent with recommendations forwarded to CMS 
by the AMA RUC for CY 2007 and accepted by CMS in the CY 2007 PFS final 
rule with comment period (71 FR 69643). The commenters indicated that 
10 minutes of clinical labor time were erroneously not attributed to 
this CPT code in the proposed CY 2011 direct PE database.
    Response: We agree with the commenters' assessment and appreciate 
being informed of the error. The 10 minutes of clinical labor time 
missing from the direct PE inputs for CPT code 37210 have been 
incorporated and this change is reflected in the final CY 2011 direct 
PE database.
    Comment: Several commenters expressed concerns regarding the 
current direct PE inputs for various services. One commenter submitted 
extensive information regarding a perceived disparity between the 
equipment inputs for echocardiography services and those for other 
ultrasound services. Another commenter requested that CMS ask the AMA 
RUC to establish nonfacility RVUs for the placement or insertion of 
high dose rate brachytherapy catheters/applicators because it is common 
practice, especially in gynecology, for physicians to perform such 
procedures in their offices or in freestanding clinics. One commenter 
stated that the proposed PE RVUs do not provide sufficient payment to 
cover the cost of prothrombin time (PT)/international normalized ratio 
(INR) home monitoring services and recommended that CMS alter the 
direct PE inputs for those services. Another commenter requested that 
CMS alter direct PE inputs for holter monitoring based on changes to 
the language in CPT code descriptors from the current ``24 hours'' to 
``up to 48 hours,'' even when the AMA RUC did not recommend such 
changes.
    Response: We did not propose CY 2011 changes to the direct PE 
inputs for any of those services referenced by the commenters and, 
therefore, their direct PE inputs have already been finalized in a 
prior year's PFS rulemaking. As we have previously stated in this 
section, we encourage stakeholders who believe a change is required in 
the direct PE inputs associated with a particular service in the 
typical case that is furnished in the facility or nonfacility setting 
to address these concerns with the AMA RUC with respect to codes that 
have been reviewed by the AMA RUC. The direct PE inputs for existing 
services paid under the PFS have all been adopted through rulemaking 
that has allowed for public notice and comment, so their current direct 
PE inputs are final unless we would make a proposal to change them in a 
future year. In most cases, we like to receive and review 
recommendations from the AMA RUC for new and revised codes or other 
codes for which another review has been conducted in order to assist us 
in determining whether we should make changes to the clinical labor, 
supply, and equipment inputs within the direct

[[Page 73208]]

PE database and, if so, what revisions should be made.
    Additionally, throughout the year we meet with parties who want to 
share their views on topics of interest to them. These discussions may 
provide us with information regarding changes in medical practice and 
afford opportunities for the public to bring to our attention issues 
they believe we should consider for future rulemaking. Thus, we 
encourage stakeholders to contact us at any time if there are topics 
related to the direct PE inputs for physicians' services that they 
would like to discuss.

B. Malpractice Relative Value Units (RVUs)

1. Background
    Section 1848(c) of the Act requires that each service paid under 
the PFS be comprised of three components: Work, PE, and malpractice. 
From 1992 to 1999, malpractice RVUs were charge-based, using weighted 
specialty-specific malpractice expense percentages and 1991 average 
allowed charges. Malpractice RVUs for new codes after 1991 were 
extrapolated from similar existing codes or as a percentage of the 
corresponding work RVU. Section 4505(f) of the BBA required us to 
implement resource-based malpractice RVUs for services furnished 
beginning in 2000. Therefore, initial implementation of resource-based 
malpractice RVUs occurred in 2000.
    The statute also requires that we review, and if necessary adjust, 
RVUs no less often than every 5 years. The first review and update of 
resource-based malpractice RVUs was addressed in the CY 2005 PFS final 
rule with comment period (69 FR 66263). Minor modifications to the 
methodology were addressed in the CY 2006 PFS final rule with comment 
period (70 FR 70153). In the CY 2010 PFS final rule with comment 
period, we implemented the second review and update of malpractice 
RVUs. For a discussion of the second review and update of malpractice 
RVUs see the CY 2010 PFS proposed rule (74 FR 33537) and final rule 
with comment period (74 FR 61758).
2. Malpractice RVUs for New and Revised Services Effective Before the 
Next 5-Year Review
    Currently, malpractice RVUs for new and revised codes effective 
before the next 5-Year Review (for example, effective CY 2011 through 
CY 2014) are determined by a direct crosswalk to a similar ``source'' 
code or a modified crosswalk to account for differences in work RVUs 
between the new/revised code and the source code. For the modified 
crosswalk approach, we adjust the malpractice RVUs for the new/revised 
code to reflect the difference in work RVUs between the source code and 
the AMA RUC's recommended work value (or the work value we are applying 
as an interim final value under the PFS) for the new code. For example, 
if the interim final work RVUs for the new/revised code are 10 percent 
higher than the work RVUs for the source code, the malpractice RVUs for 
the new/revised code would be increased by 10 percent over the source 
code RVUs. This approach presumes the same risk factor for the new/
revised code and source code but uses the work RVUs for the new/revised 
code to adjust for risk-of-service. The assigned malpractice RVUs for 
new/revised codes effective between updates remain in place until the 
next 5-Year Review.
    For CY 2011, we explained that we will continue our current 
approach for determining malpractice RVUs for new/revised codes that 
become effective before the next 5-Year Review and update. Under this 
approach we crosswalk the new/revised code to the RVUs of a similar 
source code and adjust for differences in work (or, if greater, the 
clinical labor portion of the fully implemented PE RVUs) between the 
source code and the new/revised code. Additionally, we stated that we 
would publish a list of new/revised codes and the analytic crosswalk(s) 
used for determining their malpractice RVUs in the CY 2011 final rule 
with comment period, which we have not previously done. We also 
explained that the CY 2011 malpractice RVUs for new/revised codes would 
be implemented as interim final values in the CY 2011 PFS final rule 
with comment period, where they would be subject to public comment, and 
finalized in the CY 2012 PFS final rule with comment period.
    Comment: Several commenters supported the continuation of our 
current approach to determining malpractice RVUs for new/revised codes 
that become effective before the next 5-Year Review and update. The 
commenters stated that publication of the new/revised codes and the 
analytic crosswalk(s) used for determining their malpractice RVUs in 
the final rule is a move toward greater transparency. A few commenters 
requested that CMS provide the rationale used for selecting crosswalks 
for new/revised codes and subject the rationale to public comment.
    Response: For purposes of determining malpractice RVUs for the CY 
2011 new/revised codes, we accepted all source code recommendations 
submitted by the AMA RUC. We understand that the AMA RUC-recommended 
source codes for new/revised codes were based on the expected similar 
specialty mix of practitioners furnishing the source code and the new/
revised code. In other words, the medical specialties furnishing a 
source code were expected to be similar to the specialty mix furnishing 
the new/revised code. In adopting all of the AMA RUC's source code 
recommendations for CY 2011, we agree with its assessment of these 
similarities in each new/revised code case. If we were to disagree with 
the AMA RUC's malpractice source code recommendations in a future year 
for any new/revised codes, we would provide the rationale for both our 
difference of opinion and the alternative source code we select for 
purposes of establishing the interim final malpractice RVUs.
    After consideration of the public comments we received, we are 
continuing our current approach of assigning the interim final 
malpractice RVUs for new/revised codes based on the methodology 
described earlier in this section. We adjusted the malpractice RVUs of 
the CY 2011 new/revised codes for differences in work RVUs (or, if 
greater, the clinical labor portion of the fully implemented PE RVUs) 
between the source code and the new/revised code to reflect the 
specific risk-of-service for the new/revised code. The source code 
crosswalks for the CY 2011 new/revised codes are being adopted on an 
interim final basis and are subject to public comment on this CY 2011 
final rule with comment period, as are the CY 2011 malpractice RVUs of 
the new/revised codes that are listed in Addendum C to this final rule 
with comment period. The malpractice RVUs for the CY 2011 new/revised 
codes will be finalized in the CY 2012 PFS final rule with comment 
period, where we will also respond to the public comments received on 
the values that are included in this CY 2011 final rule with comment 
period.
    Table 8 lists the CY 2011 new/revised codes and their respective 
source codes for determining the interim final CY 2011 malpractice 
RVUs. We are also posting this crosswalk on the CMS Web site under the 
downloads for the CY 2011 PFS final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
BILLING CODE 4120-01-P

[[Page 73209]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.240


[[Page 73210]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.241


[[Page 73211]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.242


[[Page 73212]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.243


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[GRAPHIC] [TIFF OMITTED] TR29NO10.244

BILLING CODE 4120-01-C
3. Revised Malpractice RVUs for Selected Disc Arthroplasty Services
    As discussed in the CY 2010 PFS proposed rule (74 FR 33539), we 
assign malpractice RVUs to each service based upon a weighted average 
of the risk factors of all specialties that furnish the service. For 
the CY 2010 review of malpractice RVUs, we used CY 2008 Medicare 
payment data on allowed services to establish the frequency of a 
service by specialty. CPT code 22856 (Total disc arthroplasty 
(artificial disc), anterior approach, including discectomy with end 
plate preparation (includes osteophytectomy for nerve root or spinal 
cord decompression and microdissection), single interspace, cervical) 
had zero allowed services for CY 2008. Therefore, our contractor 
initially set the level of services to 1, and assigned a risk factor 
according to the average risk factor for all services that do not 
explicitly have a separate technical or professional component. We 
proposed to adopt our contractor's initial malpractice RVUs for CPT 
code 22856 in the CY 2010 proposed rule. Application of the average 
physician risk factor would have resulted in a significant decrease in 
malpractice RVUs for CPT code 22856 in CY 2010.
    Several commenters on the CY 2010 PFS proposed rule expressed 
concern regarding the proposed malpractice RVUs for CPT code 22856, 
which represented a proposed reduction of more than 77 percent. The 
commenters stated that this service is predominantly furnished by 
neurosurgeons and orthopedic surgeons. Given the high risk factors 
associated with these specialty types and the changes in malpractice 
RVUs for comparable services, the commenters stated that a reduction in 
the malpractice RVUs of this magnitude for CPT code 22856 could not be 
correct.
    After consideration of the public comments, for CY 2010, we set the 
risk factor for CPT code 22856 as the weighted average risk factor of 
six comparable procedures mentioned by the commenters: CPT code 22554 
(Arthrodesis, anterior interbody technique, including minimal 
discectomy to prepare interspace (other than for decompression); 
cervical below C2); CPT code 22558 (Arthrodesis, anterior interbody 
technique, including minimal discectomy to prepare interspace (other 
than for decompression); lumbar); CPT code 22857 (Total disc 
arthroplasty (artificial disc), anterior approach, including discectomy 
to prepare interspace (other than for decompression), single 
interspace, lumbar); CPT code 22845 (Anterior instrumentation; 2 to 3 
vertebral segments (list separately in addition to code for primary 
procedure)); CPT code 63075 (Discectomy, anterior, with decompression 
of spinal cord and/or nerve root(s), including osteophytectomy; 
cervical, single interspace); and CPT code 20931 (Allograft for spine 
surgery only; structural (list separately in addition to code for 
primary procedure)). The weighted average risk factor for these 
services is 8.4.
    Since publication of the CY 2010 PFS final rule with comment 
period, stakeholders have mentioned that we made significant changes to 
the malpractice RVUs for CPT code 22856 in CY 2010. The commenters also 
brought to our attention that other services are clinically similar to 
CPT code 22856 and have similar work RVUs and, therefore, some 
stakeholders believe these services should all have similar malpractice 
RVUs. Services mentioned by the stakeholders that are clinically 
similar to CPT code 22856 include CPT code 22857; CPT code 22861 
(Revision including replacement of total disc arthroplasty (artificial 
disc), anterior approach, single interspace;

[[Page 73214]]

cervical); CPT code 22862 (Revision including replacement of total disc 
arthroplasty (artificial disc) anterior approach, lumbar); CPT code 
22864 (Removal of total disc arthroplasty (artificial disc), anterior 
approach, single interspace; cervical); and CPT code 22865 (Removal of 
total disc arthroplasty (artificial disc), anterior approach, single 
interspace; lumbar).
    After further review of this issue, for CY 2011 we proposed to 
apply the same risk factor used for CPT code 22856 to certain other 
services within this family of services (CPT codes 22857 through 22865) 
for which there were no allowed services in CY 2008. CPT codes 22861 
and 22864 had zero allowed services in CY 2008 and our contractor 
initially set their malpractice RVUs in the same way as it did for CPT 
code 22856. Therefore, for CY 2011 we proposed to assign the weighted 
average risk factor used for CPT code 22856 (that is, the weighted 
average of the risk factors for CPT codes 20931, 22554, 22558, 22845, 
22857, and 63075) to CPT codes 22861 and 22864. However, CPT codes 
22857, 22862, and 22865 are low volume services (allowed services under 
100). Our policy for low volume services is to apply the risk factor of 
the dominant specialty as indicated by our claims data. Thus, for CY 
2011 we proposed to continue to apply our policy for low volume 
services to CPT codes 22857, 22862, and 22865.
    Comment: A few commenters expressed support for the proposed 
changes in malpractice RVUs for disc arthroplasty services that are 
similar to CPT code 22856. One commenter urged CMS to finalize the 
proposal in the CY 2011 PFS final rule.
    Response: We appreciate the commenters' support for our proposal.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to apply the same risk factor used for 
CPT code 22856 to CPT codes 22861 and 22864 for purposes of setting the 
malpractice RVUs for these codes prior to the next 5-Year Review of 
malpractice RVUs.

C. Potentially Misvalued Services Under the Physician Fee Schedule

1. Valuing Services Under the PFS
    As discussed in section I. of this final rule with comment period, 
in order to value services under the PFS, section 1848(c) of the Act 
requires the Secretary to determine relative values for physicians' 
services based on three components: The work, practice expense (PE), 
and malpractice components. Section 1848(c)(1)(A) of the Act defines 
the work component to include ``the portion of the resources used in 
furnishing the service that reflects physician time and intensity in 
furnishing the service.'' Additionally, the statute provides that the 
work component shall include activities that occur before and after 
direct patient contact. Furthermore, the statute specifies that with 
respect to surgical procedures, the valuation of the work component for 
the code would reflect a ``global'' concept in which pre-operative and 
post-operative physicians' services related to the procedure would also 
be included.
    In addition, section 1848(c)(2)(C)(i) of the Act specifies that 
``the Secretary shall determine a number of work relative value units 
(RVUs) for the service based on the relative resources incorporating 
physician time and intensity required in furnishing the service.'' As 
discussed in detail in sections I.A.2. and I.A.3. of this final rule 
with comment period, the statute also defines the PE and malpractice 
components and provides specific guidance in the calculation of the 
RVUs for each of these components. Section 1848(c)(1)(B) of the Act 
defines the PE component as ``the portion of the resources used in 
furnishing the service that reflects the general categories of expenses 
(such as office rent and wages of personnel, but excluding malpractice 
expenses) comprising practice expenses.''
    Section 1848(c)(2)(C)(ii) of the Act specifies that the ``Secretary 
shall determine a number of practice expense relative value units for 
the services for years beginning with 1999 based on the relative 
practice expense resources involved in furnishing the service.'' 
Furthermore, section 1848(c)(2)(B) of the Act directs the Secretary to 
conduct a periodic review, not less often than every 5 years, of the 
RVUs established under the PFS. Finally, on March 23, 2010, the ACA was 
enacted, further requiring the Secretary to periodically review and 
identify potentially misvalued codes and make appropriate adjustments 
to the relative values of those services identified as being 
potentially misvalued. Section 3134(a) of the ACA added a new section 
1848(c)(2)(K) of the Act which requires the Secretary to periodically 
identify potentially misvalued services using certain criteria, and to 
review and make appropriate adjustments to the relative values for 
those services. Section 3134(a) of the ACA also added a new section 
1848(c)(2)(L) of the Act which requires the Secretary to develop a 
validation process to validate the RVUs of potentially misvalued codes 
under the PFS and make appropriate adjustments.
    As discussed in section I.A.1. of this final rule with comment 
period, we establish physician work RVUs for new and revised codes 
based on our review of recommendations received from the AMA RUC. The 
AMA RUC also provides recommendations to CMS on the values for codes 
that have been identified as potentially misvalued. To respond to 
concerns expressed by MedPAC, the Congress, and other stakeholders 
regarding accurate valuation of services under the PFS, the AMA RUC 
created the Five-Year Review Identification Workgroup in 2006. In 
addition to providing recommendations to CMS for work RVUs, the AMA 
RUC's Practice Expense Subcommittee reviews direct PE (clinical labor, 
medical supplies, and medical equipment) for individual services and 
examines the many broad methodological issues relating to the 
development of PE RVUs.
    In accordance with section 1848(c) of the Act, we determine 
appropriate adjustments to the RVUs, taking into account the 
recommendations provided by the AMA RUC and MedPAC, and publish the 
explanation for the basis of these adjustments in the PFS proposed and 
final rules. We note that section 1848(c)(2)(A)(ii) of the Act 
authorizes the use of extrapolation and other techniques to determine 
the RVUs for physicians' services for which specific data are not 
available, in addition to taking into account the results of 
consultations with organizations representing physicians.
2. Identifying, Reviewing, and Validating the RVUs of Potentially 
Misvalued Services Under the PFS
a. Background
    In its March 2006 Report to Congress, MedPAC noted that ``misvalued 
services can distort the price signals for physicians' services as well 
as for other health care services that physicians order, such as 
hospital services.'' In that same report MedPAC postulated that 
physicians' services under the PFS can become misvalued over time for a 
number of reasons: ``For example, when a new service is added to the 
physician fee schedule, it may be assigned a relatively high value 
because of the time, technical skill, and psychological stress that are 
required to perform it. Over time, skill, and stress involved may 
decline as physicians become more familiar with the service and more 
efficient at providing it. The amount of physician work needed to 
furnish an existing service may decrease when new technologies are 
incorporated. Services

[[Page 73215]]

can also become overvalued when practice expenses decline. This can 
happen when the costs of equipment and supplies fall, or when equipment 
is used more frequently, reducing its cost per use. Likewise, services 
can become undervalued when physician work increases or practice 
expenses rise.'' In the ensuing years since MedPAC's 2006 report, 
additional groups of potentially misvalued services have been 
identified by Congress, CMS, MedPAC, the AMA RUC, and other 
stakeholders.
    In recent years CMS and the AMA RUC have taken increasingly 
significant steps to address potentially misvalued codes. As MedPAC 
noted in its March 2009 Report to Congress, in the intervening years 
since MedPAC made the initial recommendations, ``CMS and the AMA RUC 
have taken several steps to improve the review process.'' Most 
recently, section 1848(c)(2)(K)(ii) of the Act (as added by section 
3134 of the ACA) directed the Secretary to specifically examine 
potentially misvalued services in seven categories as follows:
    (1) Codes and families of codes for which there has been the 
fastest growth.
    (2) Codes or families of codes that have experienced substantial 
changes in practice expenses.
    (3) Codes that are recently established for new technologies or 
services.
    (4) Multiple codes that are frequently billed in conjunction with 
furnishing a single service.
    (5) Codes with low relative values, particularly those that are 
often billed multiple times for a single treatment.
    (6) Codes which have not been subject to review since the 
implementation of the RBRVS (the so-called ``Harvard-valued codes'').
    (7) Other codes determined to be appropriate by the Secretary.
    Section 1848(c)(2)(K)(iii) of the Act (as added by section 3134 of 
the ACA) also specifies that the Secretary may use existing processes 
to receive recommendations on the review and appropriate adjustment of 
potentially misvalued services. In addition, the Secretary may conduct 
surveys, other data collection activities, studies, or other analyses 
as the Secretary determines to be appropriate to facilitate the review 
and appropriate adjustment of potentially misvalued services. This 
section authorizes the use of analytic contractors to identify and 
analyze potentially misvalued codes, conduct surveys or collect data, 
and make recommendations on the review and appropriate adjustment of 
potentially misvalued services. Finally, section 1848(c)(2)(K)(iii)(V) 
of the Act (as added by section 3134 of the ACA) specifies that the 
Secretary may make appropriate coding revisions (including using 
existing processes for consideration of coding changes) which may 
include consolidation of individual services into bundled codes for 
payment under the physician fee schedule.
b. Progress in Identifying and Reviewing Potentially Misvalued Codes
    Over the last several years, CMS, in conjunction with the AMA RUC, 
has identified and reviewed numerous potentially misvalued codes in all 
seven of the categories specified in section 1848(c)(2)(K)(ii) (as 
added by section 3134 of the ACA), and we plan to continue our work 
examining potentially misvalued codes in these areas over the upcoming 
years, consistent with the new legislative mandate on this issue. In 
the current process, the AMA RUC reviews potentially misvalued codes 
that are identified either by CMS or through its own processes and 
recommends revised work RVUs and/or direct PE inputs for those codes to 
CMS. CMS then assesses the recommended revised work RVUs and/or direct 
PE inputs and, in accordance with section 1848(c) of the Act, we 
determine if the recommendations constitute appropriate adjustments to 
the RVUs under the PFS. Since CY 2009, CMS and the AMA RUC have 
identified over 700 potentially misvalued codes.
    For example, in regard to the first category (codes and families of 
codes for which there has been the fastest growth), for CY 2009 CMS 
identified over 100 potentially misvalued codes for which an analysis 
of the utilization data showed an annual growth in allowed services of 
10 percent (or more) for 3 consecutive years (73 FR 38586). Each of 
these codes had allowed charges of $1 million or more in CY 2007. We 
published this list in the CY 2009 PFS proposed rule (73 FR 38586 
through 38589) and requested that the AMA RUC immediately begin a 
review of the codes on this list. Meanwhile, in parallel with CMS' 
efforts, the AMA RUC also initiated processes to identify and review 
potentially misvalued codes on an ongoing basis using certain screens, 
including screens for ``CMS fastest growing procedures'' and ``high 
volume growth.'' Both of these AMA RUC screens are applicable to the 
first category of potentially misvalued codes specified in the ACA. We 
plan to continue to analyze Medicare claims data over future years to 
identify additional services that exhibit rapid growth and high 
Medicare expenditures for referral to the AMA RUC for review as 
potentially misvalued codes.
    Pertaining to the second category specified in section 
1848(c)(2)(K)(ii) of the Act (as added by section 3134 of the ACA) 
(codes or families of codes that have experienced substantial changes 
in practice expenses), in CY 2009 we requested that the AMA RUC 
continue its review of direct PE inputs, focusing particularly on high-
volume codes where the PE payments are increasing significantly under 
the transition to the new PE methodology (73 FR 38589). The AMA RUC has 
responded by sending CMS recommendations for revised direct PE inputs 
for codes identified for PE review on an ongoing basis.
    Additionally in CY 2009, we began an initiative to review and 
update the prices for high-cost supplies in order to ensure the 
accuracy and completeness of the direct PE inputs. We discuss our most 
recent efforts in refining the process to update the prices of high-
cost supplies in section II.C.5. of this final rule with comment 
period.
    For the third category of potentially misvalued codes identified in 
section 1848(c)(2)(K)(ii) (as added by section 3134 of the ACA) (codes 
that are recently established for new technologies or services), the 
AMA RUC routinely identifies such codes through a screen based on 3 
years of Medicare claims data, and sends CMS recommendations for 
revised work RVUs and/or direct PE inputs for these codes on an ongoing 
basis. The AMA RUC may determine that a code for a new service requires 
reevaluation or does not require reevaluation, or it may conclude, on a 
case-by-case basis, that more than 3 years of claims data are necessary 
before the code can be reviewed. In that case, it would determine the 
appropriate future timeframe for review.
    We also note that in its June 2008 Report to Congress entitled 
``Reforming the Health Care System'' and in the context of a discussion 
about primary care, MedPAC acknowledges, ``* * * Efficiency can improve 
more easily for other types of services, such as procedures, with 
advances in technology, technique, and other factors. Ideally, when 
such efficiency gains are achieved, the fee schedule's relative value 
units (RVUs) for the affected services should decline accordingly, 
while budget neutrality would raise the RVUs for the fee schedule's 
primary care services.'' (page 27). Section II.C.5. of this final rule 
with comment period includes a discussion regarding periodic updates to 
the costs of high-cost supplies. This discussion is highly relevant to 
new technology services, where growth in volume of a

[[Page 73216]]

service as it diffuses into clinical practice may lead to a decrease in 
the cost of expensive supplies. We also expect that other efficiencies 
in physician work and PE may be achieved after an initial period of 
relative inefficiency that reflects the ``learning curve.'' We plan to 
pay particular attention to the work values and direct PE inputs for 
these new services and the AMA RUC's periodic review process to ensure 
that any efficiencies are captured under the PFS over time, recognizing 
that the appropriate timing for revaluing these services needs to be 
considered on a case-by-case basis depending on the growth rate in 
service volume.
    We have also addressed the fourth category (multiple codes that are 
frequently billed in conjunction with furnishing a single service) in 
rulemaking prior to the enactment of the ACA. As discussed in the CY 
2009 PFS proposed rule (73 FR 38586), we have a longstanding policy of 
reducing payment for multiple surgical procedures performed on the same 
patient, by the same physician, on the same day. Over the ensuing 
years, the multiple procedure payment reduction (MPPR) policy has been 
extended to a number of nuclear diagnostic and diagnostic imaging 
procedures. We continue our work to recognize efficiencies in this area 
with a new CY 2011 policy to expand the MPPR policy to additional 
combinations of imaging services and to therapy services for CY 2011 as 
described in section II.C.4. of this final rule with comment period.
    We note the AMA RUC has also established a screen to identify 
services performed by the same physician on the same date of service 95 
percent of the time or more. Over the past 2 years, the CPT Editorial 
Panel has established new bundled codes to describe a comprehensive 
service for certain combinations of these existing services that are 
commonly furnished together, and the AMA RUC has recommended work 
values and direct PE inputs to CMS for these comprehensive service 
codes that recognize the associated efficiencies. We look forward to 
working with the AMA RUC in this joint effort to examine codes commonly 
reported together and more appropriately value common combinations 
services.
    We address the fifth category of potentially misvalued codes (codes 
with low relative values, particularly those that are often billed 
multiple times for a single treatment) in section II.C.3.b. of this 
final rule with comment period. That is, we have provided a list of 
services with low work RVUs that are commonly reported with multiple 
units in a single encounter and requested that the AMA RUC review these 
codes that we have identified as potentially misvalued.
    The sixth category (codes which have not been subject to review 
since the implementation of the RBRVS (the so-called ``Harvard-valued 
codes'')) also continues to be addressed by CMS and the AMA RUC on an 
ongoing basis. As we noted in the CY 2009 PFS proposed rule (73 FR 
38589), there were at that time approximately 2,900 codes, representing 
$5 billion in annual spending, that were originally valued using 
Harvard data and had not subsequently been evaluated by the AMA RUC. 
Consequently, in CY 2009, we requested that the AMA RUC engage in an 
ongoing effort to review the remaining Harvard-valued codes, focusing 
first on the high-volume, low-intensity codes (73 FR 38589). In 
response to our request, the AMA RUC initially conducted an analysis of 
Harvard-valued services with utilization above 10,000 services per 
year, which resulted in a list of 296 distinct services (73 FR 69883). 
The AMA RUC, in its public comment on the CY 2009 proposed rule, stated 
that it believes it would be effective to limit any review to these 296 
services and also noted that of the 296 services identified, 23 had 
already been identified by another screen and were in the process of 
being reviewed (73 FR 69883). To date, the AMA RUC has reviewed and 
submitted to CMS recommendations for revised work RVUs and/or direct PE 
inputs for a number of Harvard-valued codes, prioritizing those codes 
with utilization of over 1 million services. The AMA RUC and CMS intend 
to continue our ongoing assessment of Harvard-valued codes, next 
targeting codes with utilization of over 100,000 services.
    Finally, the seventh category of potentially misvalued codes in 
section 1848(c)(2)(K)(ii) (as added by section 3134 of the ACA) is all 
other codes determined to be appropriate by the Secretary. In this 
category, CMS has previously proposed policies and requested that the 
AMA RUC review codes for which there have been shifts in the site-of-
service (site-of-service anomalies), as well as codes that qualify as 
``23-hour stay'' outpatient services. The policies for valuation of 
both the site-of-service anomaly codes and the ``23-hour stay'' codes 
are developed further in sections II.C.3.d. and e., respectively, of 
this final rule with comment period. For CY 2011, we have also 
identified codes with low work RVUs but that are high volume based on 
claims data as another category of potentially misvalued codes and 
referred these codes to the AMA RUC for review, as discussed in section 
II.C.3.b. of this final rule with comment period. In addition, for CY 
2011 we have newly targeted key codes that the AMA RUC uses as 
reference services for valuing other services, termed ``multispecialty 
points of comparison'' services, and referred these to the AMA RUC for 
review as potentially misvalued codes as described in section II.C.3.a. 
of this final rule with comment period. Finally, we note the AMA RUC 
has also established screens to identify potentially misvalued codes in 
additional categories, including codes with a high intra-service work 
per unit of time (IWPUT) and codes representing services that had been 
surveyed by one specialty, but are now performed by a different 
specialty. We will continue to review AMA RUC recommendations for 
revised work RVUs and/or direct PE inputs for codes that fall into 
these categories.
    As a result of the combined efforts of CMS and the AMA RUC to 
address potentially misvalued codes, for CY 2009 the AMA RUC 
recommended revised work values and/or PE inputs for 204 misvalued 
services (73 FR 69883). For CY 2010, an additional 113 codes were 
identified as misvalued and the AMA RUC provided new recommendations 
for revised work RVUs and/or PE inputs to CMS as discussed in the CY 
2010 PFS final rule with comment period (74 FR 61778). Upon review of 
the AMA RUC-recommended work RVUs, CMS accepted the majority of the 
values as appropriate adjustments to the RVUs under the PFS, in 
accordance with section 1848(c) of the Act. However, for a number of 
codes, mainly the site-of-service anomaly codes, we indicated that 
although we would accept the AMA RUC valuations for these codes on an 
interim basis through CY 2010, we had ongoing concerns about the 
methodology used by the AMA RUC to review these services (73 FR 69883 
and 74 FR 61776 through 61778, respectively). In the CY 2010 PFS final 
rule with comment period, we requested that the AMA RUC reexamine the 
site-of-service anomaly codes and use the building block methodology to 
revalue the services (74 FR 61777). In that same rule, we also stated 
that we would continue to examine these codes and consider whether it 
would be appropriate to propose additional changes in future 
rulemaking. We discuss our CY 2011 proposals with respect to these 
codes in section II.C.3.d. of this final rule with comment period.

[[Page 73217]]

c. Validating RVUs of Potentially Misvalued Codes
    In addition to identifying and reviewing potentially misvalued 
codes, section 1848(c)(2)(L) (as added by section 3134 of the ACA) 
specifies that the Secretary shall establish a formal process to 
validate relative value units under the PFS. The validation process may 
include validation of work elements (such as time, mental effort and 
professional judgment, technical skill and physical effort, and stress 
due to risk) involved with furnishing a service and may include 
validation of the pre-, post-, and intra-service components of work. 
The Secretary is directed to validate a sampling of the work RVUs of 
codes identified through any of the seven categories of potentially 
misvalued codes specified by section 1848(c)(2)(K)(ii) of the Act (as 
added by section 3134 of the ACA). Furthermore, the Secretary may 
conduct the validation using methods similar to those used to review 
potentially misvalued codes, including conducting surveys, other data 
collection activities, studies, or other analyses as the Secretary 
determines to be appropriate to facilitate the validation of RVUs of 
services. Currently, while CMS does assess the AMA RUC-recommended work 
RVUs to determine if the recommendations constitute appropriate 
adjustments to the RVUs under the PFS, we intend to establish a more 
extensive validation process of RVUs in the future in accordance with 
the requirements of section 1848(c)(2)(L) of the Act (as added by 
section 3134 of the ACA). Therefore, in the CY 2011 PFS proposed rule 
(75 FR 40068), we solicited public comments on possible approaches and 
methodologies that we should consider for a validation process. We were 
interested in public comments regarding approaches, including the use 
of time and motion studies, to validate estimates of physician time and 
intensity that are factored into the work RVUs for services with rapid 
growth in Medicare expenditures, one of the categories that the statute 
specifically directs CMS to examine. We indicated that we plan to 
discuss the validation process in a future PFS rule once we have 
considered the matter further in conjunction with any public comments 
and other input from stakeholders that we receive.
    Comment: Some commenters were skeptical that there could be viable 
alternative methods to the existing AMA RUC code review process for 
validating physician time and intensity that would preserve the 
appropriate relativity of specific physician's services under the 
current payment system. These commenters generally urged CMS to rely 
solely on the AMA RUC to provide valuations for services under the PFS. 
A number of commenters expressed the belief that since CMS has reviewed 
the AMA RUC recommendations for codes and generally accepted these 
valuations in the past, these actions constitute a ``CMS validation 
process.'' The commenters asserted that this current ``CMS validation 
process'' more than meets the requirement of section 1848(c)(2)(L) of 
the Act (as added by section 3134 of the ACA).
    In addition, a number of commenters opposed the approach of using 
time and motion studies to validate estimates of physician time and 
intensity, stating that properly conducted time and motion studies are 
extraordinarily expensive and, given the thousands of codes paid under 
the PFS, it would be unlikely that all codes could be studied. The 
commenters generally opposed applying different methodologies to 
valuing different services under the PFS and supported using a 
consistent methodology for all codes. Some commenters observed that it 
would be extremely difficult for CMS to establish a process by which to 
validate a sample of work RVUs under the PFS because of the relative 
nature of the system. Specifically, one commenter noted that the 
``advantages of a relative system are considerable--they allow scaling 
based on available funds and make it far easier for a payer such as 
Medicare to set rates for multiple services with a single adjustment to 
the conversion factor. However, one disadvantage of a relative system 
is that it cannot be externally validated unless all components are 
included in the validation. Services cannot be examined for absolute 
accuracy, only for relative precision. If we identify some component of 
the calculation used to generate the RVU that is incorrect, it is 
impossible to know whether this is a systemic error or an issue with an 
individual code. If it is a systemic error, then it does not invalidate 
the relative value system, which merely must operate on an even playing 
field.'' That is, many commenters believe that as long as appropriate 
relativity is maintained in the work RVUs for services valued under the 
PFS, the specific methodology for valuing services is less important. 
Accordingly, many commenters expressed support for the AMA RUC's use of 
``magnitude estimation'' to develop the recommended value for a service 
and urged CMS to accept the AMA RUC's recommendations as the most 
informed and best estimation of the true value of physician work for a 
service.
    In contrast, some commenters declared that ``the flaws inherent in 
the RUC system are the lack of accountability and transparency.'' These 
commenters believe that the AMA RUC's composition as a professional 
panel puts cognitive services at a disadvantage and suggested that 
``the composition of the RUC needs to be modified to more accurately 
reflect the desired workforce composition. At present primary care 
specialties are under-represented which we [the commenters] believe 
contributes to the overvaluation of procedural codes and undervaluation 
of cognitive codes.'' Similarly, other commenters noted that while 
certified registered nurse anesthetists (CRNAs) furnished approximately 
32 million anesthesia services in the United States annually and can 
bill Medicare directly for their services, ``the AMA RUC excludes CRNAs 
from directly participating in its deliberations because CRNAs are not 
physicians.'' These commenters noted that ``without fair representation 
by all specialties that bill Part B directly, CMS' reliance on the AMA-
RUC as representing the professional views and knowledge of all 
healthcare specialties is deeply flawed.'' The commenters also advised 
that ``while the RUC relies on persuasion and brokering deals, RVUs 
need to be validated empirically.'' In general, these commenters 
believe that since section 1848(c)(2)(L) of the Act (as added by 
section 3134 of the ACA) expressly specifies that CMS has the authority 
to conduct surveys and studies and collect data, CMS should develop a 
process that uses empirical evidence as the basis for validation of 
work RVUs.
    Response: We agree with the commenters that the work before us to 
develop a formal validation process as specified by section 
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA) will be 
a challenging but worthwhile effort to ensure accurate valuation of 
physician work under the PFS. While we have reviewed AMA RUC 
recommendations for codes and frequently accepted these valuations in 
the past, we disagree with the commenters' assertion that these actions 
constitute a formal CMS validation process as envisioned by section 
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA). Section 
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA) clearly 
specifies a new requirement that ``the Secretary shall establish a 
process to validate relative value units under the fee schedule.'' 
While we solicited

[[Page 73218]]

comments on the possibility of using time and motion studies to support 
a future validation process, we understand that these studies would 
require significant resources and we remain open to suggestions for 
other approaches to developing a validation process.
    In response to the commenters who raised the issue of the AMA RUC's 
most commonly used approach for valuing codes, referred to as 
``magnitude estimation,'' we note that the AMA RUC does not rely on a 
single consistent methodology to value codes. Based on our historical 
and current review of the AMA RUC recommendation summaries which 
accompany the work RVU recommendations for each code newly valued or 
revalued by the AMA RUC each year, we have noticed that the AMA RUC 
appears to use a variety of methodologies in its valuation process. For 
some codes, the AMA RUC uses magnitude estimation in conjunction with 
survey data from surveys conducted by the specialty societies to 
support the values. For other codes, the AMA RUC uses magnitude 
estimation to override the results of the survey data, recommending to 
CMS a value that is not based on survey data, but rather, justified in 
terms of its appropriate relativity within the system to other similar 
services. The AMA RUC may also elect to use a crosswalk approach in 
valuing a code by applying a work value from a currently valued code to 
the code under review based on the clinical similarity of the 
procedures or explicit considerations of pre-, intra-, and post-service 
time. In some instances, we note that the AMA RUC has asserted that it 
uses the building block methodology to value the code, a methodology we 
have historically supported (74 FR 61777). Since the AMA RUC uses a 
variety of methodologies for valuing codes, not just magnitude 
estimation supported by survey data, or our recommended methodology of 
valuation based on building blocks, we foresee that validation of the 
work RVUs will be complex, perhaps requiring an initial study of the 
all the possible valuation methodologies currently being employed by 
the AMA RUC so that we can better understand how relativity between 
services under the PFS has developed and been maintained over the 
years.
    As we have stated previously (69 FR 66243), because the AMA RUC is 
an independent committee, we are not in a position to set the 
requirements for AMA RUC membership regarding primary care specialties 
or other types of practitioners. Concerned stakeholders should 
communicate directly with the AMA RUC regarding its professional 
composition. We note that we alone are responsible for all decisions 
about establishing the RVUs for purposes of PFS payment so, while the 
AMA RUC provides us with recommendations regarding the work and direct 
PE inputs for new and revised CPT codes in the context of its broad 
expertise, we determine the interim final RVUs for all new or revised 
services. Additionally, the interim RVUs are subject to public comment 
and we respond to those comments in a final rule when we adopt the 
final RVUs for the new and revised CPT codes. We believe that the 
formal validation process will further complement the ongoing work of 
the AMA RUC to provide recommendations to us regarding the valuation of 
PFS services.
    Comment: While a number of commenters strongly opposed CMS' plans 
to develop a formal validation process, many other commenters expressed 
support for the development and establishment of a system-wide 
validation process of the work RVUs under the PFS. The commenters 
commended CMS for seeking new approaches to validation, as well as 
being open to suggestions from the public on this process. A number of 
commenters submitted technical advice and offered their time and 
expertise as resources for CMS to draw upon in any examination of 
possible approaches to developing a formal validation process.
    Furthermore, MedPAC advised that a formal validation process should 
include validating the fee schedule's estimates of physician time. 
MedPAC noted that ``Contract research for CMS and the Assistant 
Secretary for Planning and Evaluation has shown that some of the time 
estimates are likely too high. In addition, the Government 
Accountability Office has found that the fee schedule does not 
adequately account for efficiencies occurring when a physician 
furnishes multiple services for the same patient on the same day.'' 
Finally, MedPAC suggested that CMS should consider alternative 
approaches, ``such as collecting data on a recurring basis from a 
cohort of practices and other facilities where physicians and 
nonphysician clinical practitioners work.''
    Some commenters noted that ``involving RUC experts, those who are 
most intimately acquainted with and possess the deepest level of 
expertise and experience makes the most sense'' and stated that these 
individuals ``are also those best equipped to provide insights and 
guidance to help shape an independent validation system.'' A number of 
commenters asked CMS to confirm that stakeholders would be given the 
opportunity to comment on any specific proposals for a validation 
process that CMS plans to implement.
    Response: We thank the many commenters who generously offered to 
help and provided technical suggestions, including the use of 
statistical modeling and possible sources of data that we should 
consider in developing a validation process. We will review MedPAC's 
suggestions to examine physician time in the formal validation process. 
We will also consider the commenters' recommendation that we include 
the AMA RUC and other professional groups who also have a stake in 
ensuring appropriate payment for practitioners' services. As we stated 
previously, we intend to establish a more extensive validation process 
of RVUs in the future in accordance with the requirements of section 
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA). We note 
that MedPAC, in providing comments to the CY 2011 PFS proposed rule, 
``strongly supports efforts to improve the accuracy of the fee 
schedule's RVUs.'' We plan to discuss the validation process in more 
detail in a future PFS rule once we have considered the matter further 
in conjunction with the public comments that we have received in 
response to our solicitation in the CY 2011 proposed rule as well as 
other input from stakeholders. Moreover, we note that any proposals we 
would make on the formal validation process would be subject to public 
comment, and we would consider those comments before finalizing any 
policies.
3. CY 2011 Identification and Review of Potentially Misvalued Services
    In this section, we discuss codes that may be potentially misvalued 
according to five different criteria:
     Codes on the multi-specialty points of comparison list;
     Codes with low work RVUs commonly billed in multiple units 
per single encounter;
     Codes with high volume and low work RVUs;
     Codes with site-of-service anomalies; and
     Codes that qualify as ``23-hour stay'' outpatient 
services.
a. Codes on the Multispecialty Points of Comparison List
    The AMA RUC uses a scale referred to as the multispecialty points 
of comparison (MPC) to evaluate the reasonableness of a specialty 
society's recommended RVU value for a service.

[[Page 73219]]

The MPC list contains reference codes of established comparison 
services that are used in the valuation of new codes. The current MPC 
list consists of 316 codes which the AMA RUC may use to compare and 
contrast the relativity of codes under review to existing relative 
values. Since the AMA RUC may use the values on the MPC list as a basis 
for relativity when determining the values for new, revised, and newly 
reviewed codes (including potentially misvalued codes), it is essential 
that the services on the MPC list be appropriately valued since any 
codes misvalued on the MPC list could contribute to the misvaluing of 
other codes under review. While we believe that the entire MPC list 
should be assessed to ensure that services are paid appropriately under 
the PFS, we prioritized the review of the MPC list, ranking the codes 
by allowed service units and charges based on CY 2009 claims data. We 
proposed to refer the codes in Table 9 to the AMA RUC for review in CY 
2011.

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

    Comment: While some commenters agreed with CMS that the entire MPC 
list should be assessed to ensure that services are paid appropriately 
under the PFS, and supported the proposal that the AMA RUC review the 
services listed in Table 9, a number of other commenters expressed 
surprise that CMS seemed to be suggesting that any code on the MPC list 
could be classified as potentially misvalued. Many commenters noted 
that the MPC list of codes is considered the ``gold standard'' within 
the PFS and it is used to help judge the appropriate relativity of 
procedures across specialties. A number of commenters assured CMS that 
the codes on the MPC list have been thoroughly vetted and, therefore, 
these commenters took issue with CMS for implying that the codes could 
somehow be considered potentially misvalued. Specifically, one 
commenter noted, ``[t]he assumption of the specialties, the RUC and CMS 
has been that these services are appropriately valued and well 
established.'' Another commenter expressed the concern as follows: 
``[c]hallenging the rank order of the MPC list essentially negates 20 
years of RUC work. Obtaining new data to validate the old data 
inevitably leads to the problem of what should be done if the data 
yield different results. Is there any reason to believe that a newer 
survey is a more accurate survey, or that the data analysis and 
subsequent opinion of the current or future RUCs will be more valid 
than that of previous RUCs? Admittedly data collection methods have 
become more refined in the past 20 years, but that neither means nor 
implies that relativity amongst physician services has changed.'' Some 
commenters reminded CMS that the AMA RUC is already planning to review 
some codes on the MPC list in the coming year, while other commenters 
noted that some of the codes on the MPC list have been reviewed by the 
AMA RUC within the past 6 years. Some commenters did not believe that 
some of the well-established services on the MPC list would need 
another review and that the resources required to re-review such 
services could be better used elsewhere. Furthermore, some commenters 
believe that if a code has been surveyed as part of the potentially 
misvalued services initiative during the last 5 years and it is 
identified again using a different screen, that it need not be 
resurveyed again.
    Finally, several commenters noted that while reviewing all the 
codes on the MPC list would ``be a substantial undertaking for the RUC, 
properly valuing these services will help restore equity in the 
physician payment system.'' The commenters further suggested that CMS 
should specify to the AMA RUC what it considers good survey 
methodology, including the use of peer review and time studies.
    Response: We note that the vast majority of commenters, whether 
they supported or opposed our proposal, acknowledged the significant 
and central role that the MPC list plays in the valuation of services 
under the PFS. Because it is currently the ``gold standard'' to which 
other codes, across specialties, are compared, we agree with the 
commenters who suggested that codes on this list should be vetted, 
though we disagree that we should assume this has been done or occurs 
automatically and systematically. We also acknowledge that the AMA RUC 
recently has reviewed some of the codes and is planning to review more 
codes on the MPC list. Our proposal suggested prioritizing the review 
of the codes by ranking them according to utilization which, in our 
view, would potentially provide the most immediate benefit to the 
system.
    If a code on the MPC list has not been reviewed recently--certainly 
more recently than 6 years ago--we believe that the code is vulnerable 
to being potentially misvalued and that the misvaluation of an MPC code 
could disproportionately affect the correct valuation of other related 
services under the PFS. Given the rapid changes in medical practice, we 
have no reason to believe that the relativity of the MPC codes would 
not have changed over the past 20 years and we would expect that more 
recent survey data would more accurately reflect the physician work in 
current medical practice. If the codes are resurveyed and newer more 
accurate data are available, we would support using the most recent 
available data to value physician work under the PFS, which is 
consistent with our general policy to use the most current data 
whenever possible and practicable to update the PFS.
    Given the evolving review process of the AMA RUC over the past 
several years, CMS' strong interest in ensuring current and appropriate 
physician work values for PFS services, and the increased emphasis on 
revaluing established services that are potentially misvalued, we are 
requesting that the AMA RUC provide a current and comprehensive 
recommendation on the appropriate physician work value, including 
describing and affirming the methodology for the recommended work 
value, for all of the codes listed in Table 9. To the extent the AMA 
RUC chooses to limit its work in reexamining MPC codes that have 
recently been evaluated, consistent with our usual practice, we will 
consider the context when we evaluate the AMA RUC's recommendation for 
the value of the code.

[[Page 73220]]

    Although valuation is ultimately our responsibility, the AMA RUC 
and CMS remain partners in ensuring the appropriate valuation of 
physician work for services under the PFS and we believe our proposal 
serves to enhance this process. Accordingly, after consideration of the 
public comments we received, we are finalizing our CY 2011 proposal and 
we look forward to receiving the AMA RUC's recommendations for the 
codes listed in Table 9.
b. Codes With Low Work RVUs Commonly Billed in Multiple Units Per 
Single Encounter
    Consistent with section 1848(c)(2)(K)(ii) of the Act (as added by 
section 3134 of the ACA) which identifies categories of potentially 
misvalued codes for our review, we believe services with low work RVUs 
that are commonly billed with multiple units in a single encounter are 
an additional appropriate category for identifying potentially 
misvalued codes. An example of a high multiple/low work RVU service is 
CPT code 95004 (Percutaneous tests (scratch, puncture, prick) with 
allergenic extracts, immediate type reaction, including test 
interpretation and report by a physician, specify number of tests). For 
purposes of compiling a list of the high multiple/low work RVU 
services, we defined a high multiple service as one that is commonly 
performed in multiples of 5 or more per day. Then, we selected from 
high multiple services with work RVUs of less than or equal to 0.5 
RVUs. We note that in selecting 5 per day as the minimum threshold for 
the number of common services performed in a multiple service 
encounter, we intended to establish a meaningful threshold which, in 
conjunction with the threshold for work RVUs of 0.5 RVUs or less, would 
produce a reasonable number of services for the RUC to review that have 
substantial total work RVUs for the comprehensive service furnished 
during a single treatment. That is, as a general example, with a work 
RVU threshold of 0.5 RVUs and a multiple threshold of 5 per day, the 
total work RVUs for a typical treatment would equate to 2.5 RVUs, which 
is approximately comparable to a high level office visit, an 
interpretation of a complex imaging procedure, or a minor surgical 
procedure.
    In the CY 2011 PFS proposed rule (75 FR 40069), we requested that 
the AMA RUC review the codes in Table 10.

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

c. Codes With High Volume and Low Work RVUs
    We believe that codes that have low work RVUs but are high volume 
based on claims data are another category of potentially misvalued 
codes. Although these codes have low work RVUs (less than or equal to 
0.25 RVUs), the high utilization of these codes represents significant 
expenditures under the PFS such that their appropriate valuation is 
especially important. Table 11 contains a list of such codes and we 
requested that the AMA RUC review these codes in the CY 2011 PFS 
proposed rule (75 FR 40069).

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

    Comment: A number of commenters agreed with CMS' proposal for the 
AMA RUC to review codes with low work RVUs that are commonly billed 
with multiple units, and codes with high volume and low work RVUs. 
Other commenters did not support these proposals based on a belief that 
just because a code has low work RVUs, the conclusion should not 
necessarily be drawn that the code is potentially misvalued.
    Response: While we do not believe that low work RVUs automatically 
indicate that the code is misvalued, we believe that some codes in this 
category may be vulnerable to being potentially misvalued because they 
have not been subject to review recently, there are particular 
challenges associated with establishing appropriate low work RVUs for 
services, and these services would not likely be subject to AMA RUC 
revaluation without CMS' recommendation. Accordingly, after 
consideration of the public comments we received, we are finalizing our 
CY 2011 proposal and we look forward to receiving the AMA RUC's 
recommendation for the codes listed in Tables 10 and 11.
d. Codes With Site-of-Service-Anomalies
    In previous years, we requested that the AMA RUC review codes that, 
according to the Medicare claims database, have experienced a change in 
the typical site of service since the original valuation of the code. 
For example, we have found services that originally were furnished in 
the inpatient setting but for which current claims data show the 
typical case has shifted to being furnished outside the inpatient 
setting. Since the procedures were typically performed in the inpatient 
setting when the codes were originally valued, the work RVUs for these 
codes would have been valued to include the inpatient physician work 
furnished, as well as to reflect the intensive care and follow-up 
normally associated with an inpatient procedure. If the typical case 
for the procedure has shifted from the inpatient setting to an 
outpatient or physician's office setting, it is reasonable to expect 
that there have been changes in medical practice, and that such changes 
would represent a decrease in physician time or intensity or both. The 
AMA RUC reviewed and recommended to CMS revised work RVUs for 29 codes 
for CY 2009 and 11 codes for CY 2010 that were identified as having 
site-of-service anomalies.
    In the CY 2010 PFS proposed and final rules with comment period (74 
FR 33556 and 74 FR 61777, respectively), we encouraged the AMA RUC to 
utilize the building block methodology when revaluing services with 
site-of-service

[[Page 73221]]

anomalies. Specifically, where the AMA RUC has determined in its review 
that changes in the inclusion of inpatient hospital days, office 
visits, and hospital discharge day management services (that is, the 
``building blocks'' of the code) are warranted in the revaluation of 
the code, we asked the AMA RUC to adjust the site-of-service anomaly 
code for the work RVUs associated with those changes.
    Additionally, we suggested that in cases where the AMA RUC has 
adjusted the pre-service, intra-service and post-service times of the 
code under review, the AMA RUC should also make associated work RVU 
adjustments to account for those changes. However, we remained 
concerned that in the AMA RUC's recommendations of the work RVUs for 
the CYs 2009 and 2010 site-of-service anomaly codes, the AMA RUC may 
have determined that eliminating or reallocating pre-service and post-
service times, hospital days, office visits, and hospital discharge day 
management services was appropriate to reflect the typical case that is 
now occurring in a different setting, but the work RVUs associated with 
those changes may not have been systematically extracted or reallocated 
from the total work RVU value for the service.
    In the CYs 2009 and 2010 PFS final rules with comment period (73 FR 
69883 and 74 FR 61776 through 61778, respectively), we indicated that 
although we would accept the AMA RUC valuations for these site-of-
service anomaly codes on an interim basis through CY 2010, we had 
ongoing concerns about the methodology used by the AMA RUC to review 
these services. We requested that the AMA RUC reexamine the site-of-
service anomaly codes and use the building block methodology to revalue 
the services (74 FR 61777). We also stated that we would continue to 
examine these codes and consider whether it would be appropriate to 
propose additional changes in future rulemaking.
    Accordingly, in preparation for CY 2011 rulemaking, we conducted a 
comprehensive analysis of the codes that the AMA RUC reviewed for CYs 
2009 and 2010 due to site-of-service anomaly concerns. We 
systematically applied the reverse building block methodology to the 29 
codes from CY 2009 and 11 codes from CY 2010 as follows:
     First, we obtained the original work RVU value assigned to 
the code (this is the ``starting value'') and made a list of the 
building block services with RVUs that were originally associated with 
the code (that is, before the AMA RUC reviewed the code for site-of-
service anomalies).
     Next, we examined the AMA RUC-recommended changes to the 
building blocks of the code.
     We then deducted the RVUs associated with the AMA RUC's 
recommended eliminations from the code's starting RVU value.
    Generally, the AMA RUC eliminated inpatient hospital visit building 
blocks from the value of the code since the site-of-service for the 
code has shifted from the inpatient setting to another setting. We 
noted in some cases, the AMA RUC left an inpatient hospital visit in 
the valuation of the code. We believe this is inconsistent with the 
change in the site-of-service to non-inpatient settings. Accordingly, 
we adhered to the methodology and deducted the RVUs associated with all 
inpatient hospital visits from the starting value. In cases where the 
AMA RUC recommended adding or substituting outpatient visits, we also 
added or substituted the RVUs associated with those changes to the 
starting value. If the AMA RUC recommended changes to the pre-, intra-, 
or post-service times, we calculated the incremental change in RVUs 
associated with that time and either added or deducted that RVU amount 
from the starting value. We noted that the RVU values associated with 
the incremental time change were calculated using the intensity 
associated with the particular pre-, intra-, or post-period. For the 
intensity of the intra-service period, we utilized the original IWPUT 
associated with the code. The AMA RUC generally recommended allowing 
only half of a hospital discharge day management service for the site-
of-service anomaly codes. That is, CPT code 99238 (Hospital discharge 
day management; 30 minutes or less) has a work RVU value of 1.28; 
therefore, half the value associated with CPT code 99238 is 0.64. 
Accordingly, if a code had one CPT code 99238 listed as part of the 
original valuation, we deducted 0.64 RVUs from the starting value.
    We standardized the methodology so that each of the site-of-service 
anomaly codes had half of a hospital discharge day management service 
value accounted in the valuation. Finally, we noted that while we 
eliminated the RVUs associated with all inpatient hospital visits built 
into the code's starting value, because the typical case no longer 
occurs in the inpatient setting, we allowed for the possibility that in 
some cases, some part of the work which had been furnished in the 
inpatient setting may continue to be furnished even in the outpatient 
setting. Therefore, to be conservative in our deductions of work RVUs 
associated with the inpatient hospital codes from the starting values, 
we allowed the intra-time of any inpatient hospital visits included in 
the original valuation to migrate to the post-service period of the 
code. Accordingly, while we deducted the full RVUs of an inpatient 
hospital visit from the starting value, we added the intra-service time 
of the inpatient hospital visit to the post-service time of the code 
and accounted for the incremental change in RVUs. The following 
description provides an example of our methodology.
    CPT code 21025 (Excision of bone (e.g., for osteomyelitis or bone 
abscess); mandible) has a starting value of 11.07 RVUs. Table 12 shows 
the building blocks that are included in the original valuation of the 
code.

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

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

[[Page 73222]]



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

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

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

    In the final step, the RVUs associated with the changes to the 
building blocks recommended by the AMA RUC (Table 14) were deducted 
from or added to the starting value of 11.07 RVUs, which resulted in 
the CY 2011 reverse building block value of 8.08 RVUs (11.07 + 0.22-
0.44 + 0.38 - 0.76 - 1.39 - 0.64 - 0.36 = 8.08).
    The methodology discussed above was applied to each of the site-of-
service anomaly codes from CYs 2009 and 2010 and the results are 
summarized in Tables 15 and 16.
BILLING CODE 4120-01-P

[[Page 73223]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.245


[[Page 73224]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.246

BILLING CODE 4120-01-C
    For most codes in Tables 15 and 16, the CY 2011 reverse building 
block methodology produced a value that was somewhat lower than the AMA 
RUC-recommended value. While our results suggested that the majority of 
the codes with site-of-service anomalies continue to be overvalued 
under the AMA RUC's most recent recommendations, we also found that the 
methodology may produce a result that is considerably reduced or, in 
several cases, a negative value. We understand that in previous years, 
stakeholders have expressed confusion as to why the application of a 
building block methodology would produce negative values. We believe in 
some cases, the starting value, that is, the original work RVU, may 
have been misvalued using building block inputs that were not 
consistent with the service, although the overall work value of the 
code may have been consistent with the values for other similar 
services. Moreover, a number of these services are the Harvard-valued 
codes, for which the RVUs were established many years ago based on 
historical inputs that may no longer be appropriate for the code. An 
attempt to extract the RVUs associated with these inappropriate inputs 
through the reverse building block methodology could produce aberrant 
results. Furthermore, in some cases, we noticed that the original IWPUT 
of the code was negative even before the code was reviewed by the AMA 
RUC for a site-of-service anomaly. A negative value for the IWPUT is 
counterintuitive to the IWPUT concept, indicating that the code was 
originally misvalued at the building block level. At a minimum, we 
believe that in cases where the reverse building block methodology 
produced aberrant results, and where clinical review indicated a need 
for further analysis, the codes should be referred back to the AMA RUC 
for review and new valuation should be performed based on the building 
block methodology.
    We noted the application of the reverse building block methodology 
is an objective way to account for changes in the resources resulting 
from the change in the site-of-service in which the typical service is 
furnished. However, because relative values under the PFS are 
``relative,'' that is, where work relative value units for a code are 
established relative to work relative value units for other codes, the 
recommended methodology of valuing services based on input building 
blocks is best applied within the context of the AMA RUC discussion. 
For example, we recognize that the AMA RUC looks at families of codes 
and may assign RVUs based on a particular code ranking within the 
family. This method of valuing services preserves relativity within the 
relative value scale for that code family. However, we have stated that 
we believe the relative value scale requires each service to be valued 
based on the resources used in furnishing the service as specified in 
section 1848(c)(1)(A) of the Act, which defines the physician work 
component to include ``the portion of the resources used in furnishing 
the service that reflects physician time and intensity in furnishing 
the service.'' Furthermore, section 1848(c)(2)(C)(i) of the Act 
specifies that ``the Secretary shall determine a number of work 
relative value units (RVUs) for the service based on the relative 
resources incorporating physician time and intensity required in 
furnishing the service.'' Read together, these two sections of the 
statute support our intention to rely on the building block methodology 
to determine appropriate work RVUs for codes.
    We noted that we continue to rely on the extensive expertise 
provided by the AMA RUC to recommend appropriate input building blocks 
for codes. Additionally, the AMA RUC's unique infrastructure and broad 
perspective permits the valuation of a code within the context of 
relativity to the entire relative value system. Therefore, we believe 
that the recommended methodology of valuing services based on input 
building blocks is best applied within the context of the AMA RUC 
discussion.
    Accordingly, in the CY 2011 PFS proposed rule (75 FR 40072), we 
requested that the AMA RUC review the CPT codes displayed in Tables 15 
and 16. In addition, where the application of the CY 2011 reverse 
building block methodology produced an aberrant result that is clearly 
not a reflection of physician work for the service, we requested that 
the AMA RUC review the

[[Page 73225]]

input building blocks and recommend an appropriate RVU value that is 
both consistent with the building blocks of the code and appropriate 
relative to the values for other codes in the family. For other codes 
where the application of the CY 2011 reverse building block methodology 
produced a result that is consistent with the physician work for the 
service, we encouraged the AMA RUC to confirm the values and recommend 
these work values for CY 2011. In this way, we hoped to receive new AMA 
RUC recommendations for all of the codes in Tables 15 and 16 for CY 
2011. Furthermore, we indicated that if the recommendations that we 
received from the AMA RUC were not consistent with the building block 
methodology and not appropriate relative to the values of other 
services, and the application of the CY 2011 reverse building block 
methodology produced a result that CMS medical advisors believe is 
consistent with the work for the service, we proposed to adopt the CY 
2011 reverse building block methodology values that are listed in 
Tables 15 and 16 for CY 2011. In cases where the reverse building block 
methodology produced a negative work value, we suggested that the AMA 
RUC review and revise the building blocks of the code so that a new 
valuation could be determined based on the building block methodology. 
For such codes, if the revised recommendations that we hoped to receive 
from the AMA RUC were still not consistent with the building block 
methodology upon revision, because we could not pay for these services 
based on negative work RVUs, we proposed to modify the AMA RUC-
recommended values for these codes as CMS determined to be clinically 
appropriate and adopt the CMS-modified RVUs on a interim final basis 
for CY 2011.
    In their future work, we urged the AMA RUC to use the building 
block methodology when valuing services or provide CMS with extensive 
rationale for cases where the AMA RUC believes the building block 
methodology is inappropriate for a specific code. Since section 
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA) 
specifies that the Secretary shall establish a process to validate work 
RVUs of potentially misvalued codes under the PFS, as we have discussed 
earlier in this section, we believe codes that are valued using the 
building block methodology would be more likely to meet the standards 
of a systematic RVU validation process that could be developed in 
accordance with the requirements of the statute.
    Comment: While several commenters supported CMS' recommendation to 
use the reverse building block methodology to value physician work for 
codes identified as having site-of-service anomalies, the majority of 
commenters strongly opposed the reverse building block methodology, 
expressing concern that the methodology produced very low or negative 
work RVUs for a number of the codes listed in Tables 14 and 15. Several 
letter writing campaigns by groups of providers and beneficiaries 
affected by some of the codes listed in Tables 14 and 15 produced 
scores of comments expressing confusion and alarm that CMS appeared to 
be on the verge of finalizing negative work RVUs. Some commenters noted 
that the values calculated by the application of the reverse building 
block methodology would result in rank order anomalies across the PFS.
    Many commenters reiterated CMS' observation that some of the codes 
were originally Harvard-valued, for which the RVUs were established 
many years ago based on historical inputs that may no longer be 
appropriate for the code, and an attempt to extract the RVUs associated 
with these inappropriate inputs through the reverse building block 
methodology would produce aberrant (that is, very low or negative) 
results. Some commenters disagreed with CMS' statement that if the 
typical case for the procedure has shifted from the inpatient setting 
to an outpatient or physician's office setting, it would be reasonable 
to expect that there have been changes in medical practice, and that 
such changes would represent a decrease in physician time, or 
intensity, or both. These commenters believe that that this assumption 
is fundamentally wrong and that the reverse actually may be true. One 
commenter noted, ``When a procedure migrates from the inpatient to the 
outpatient setting, the physician work and practice expense actually 
increase. The result is more office visits, more utilization of office 
staff, more consumption of office supplies, and no decrease in legal 
liability to the physician (and in some instances increased legal 
liability as functions formerly performed by hospital staff are now 
done by physician office staff).''
    A number of commenters asserted that any mathematical or 
computational methodology used to value physician work is simply 
absurd. Many commenters stated their preference for the AMA RUC's 
established valuation process which the commenters believe is based on 
specialty society survey data. Other commenters asserted that the AMA 
RUC's use of magnitude estimation is the only methodology that makes 
sense in assigning physician work values to individual services because 
the PFS is a relative system and maintaining appropriate relativity 
between the services is paramount in valuing physician work.
    Response: We acknowledge that commenters overwhelmingly objected to 
the proposed reverse building block methodology because, in some cases, 
it produced very low or negative physician work values. While we 
explained in the proposed rule (75 FR 40071 through 40072) the possible 
reasons why negative values could be generated in the application of 
the reverse building block methodology, the commenters generally 
disregarded this explanation and summarily dismissed the methodology as 
invalid based on the reasoning that negative work values are absurd. 
Responding to the commenters who were concerned that CMS was preparing 
to implement negative work RVUs imminently, we assure the commenters 
that at no time was this a possibility, as we made clear in the CY 2011 
PFS proposed rule (75 FR 40072) where we acknowledge that we could not 
pay for services based on negative work RUVs. As we stated in the 
proposed rule, in cases where the reverse building block methodology 
produced a negative work value, we suggested that the AMA RUC review 
and revise the building blocks of the code so that a new valuation 
could be determined based on the building block methodology. We further 
proposed that if we did not believe the AMA RUC recommended values were 
consistent with the building block methodology, we would modify the 
recommended values as we determined to be clinically appropriate and 
adopt the modified RVUs on an interim final basis for CY 2011.
    The AMA RUC has not provided revised work recommendations to us for 
these codes for CY 2011. Therefore, in light of the strong public 
opposition to the reverse building block methodology and since we 
remain convinced that the values for the codes with site-of-service 
anomalies listed in Tables 14 and 15 continue to be misvalued based on 
our clinical review of the building blocks for those services as 
recommended previously by the AMA RUC, we believe that the most 
appropriate action is to continue to await the further AMA RUC review 
of these codes that we requested in the CY 2011 PFS proposed rule (75 
FR 40072). However, after consideration of the public comments we 
received, we are modifying our CY 2011 proposal and we will not apply 
the reverse building block methodology to value any of these codes for 
CY 2011 as we proposed. We

[[Page 73226]]

are requesting that the AMA RUC reconsider its previously recommended 
values that have been applied on an interim basis in CYs 2009 and 2010, 
as applicable, and revise the work RVUs to better reflect the intensity 
of the services and the revised physician times and post-procedure 
visits included in the valuation of these codes. As we stated in the CY 
2011 PFS proposed rule (75 FR 40072), we suggest that the AMA RUC 
review and revise the building blocks of the codes so that a new 
valuation can be determined based on the building block methodology. 
Until we receive the revised values from the AMA RUC for CY 2012 and 
can make a determination regarding them, we will continue to accept the 
existing AMA RUC-recommended work RVUs listed in Tables 14 and 15 on an 
interim basis for CY 2011. We would follow our usual method of 
reviewing the AMA RUC recommendations in the context of the associated 
valuation methodologies it used for CY 2012 and would either accept the 
recommendations for these codes or provide alternative work values that 
would be adopted on an interim final basis for CY 2012 and open to 
public comment on the CY 2012 PFS final rule with comment period.
e. Codes With ``23-hour'' Stays
    In the CY 2010 PFS proposed rule (74 FR 33557), we requested that 
the AMA RUC review services that are typically performed in the 
outpatient setting and require a hospital stay of less than 24 hours. 
We stated in the proposed rule that we believed these to be primarily 
outpatient services and expressed concern that the value of evaluation 
and management (E/M) visits for inpatients was inappropriately included 
in the valuation of codes that qualify as ``23-hour stay'' outpatient 
services.
    We received a number of comments in response to the discussion in 
the CY 2010 proposed rule. The AMA RUC stated that it already values 
stays of less than 23 hours appropriately by reducing the hospital 
discharge day management service (that is, CPT code 99238), from 1 day 
to a half day. The AMA RUC also explained that when the AMA RUC refers 
to 23-hour stay services in discussions at AMA RUC meetings, it is 
referring primarily to services that are reported in the Medicare 
claims database as typically outpatient services, but where the patient 
is kept overnight and, on occasion, even longer in the hospital. 
Because the AMA RUC believes the patient stays overnight in the 
hospital, it believes the inclusion of inpatient E/M visits to be 
appropriate in the valuation of this category of codes.
    We believe that the 23-hour stay issue encompasses several 
scenarios. The typical patient is commonly in the hospital for less 
than 24 hours, which often means the patient may indeed stay overnight 
in the hospital. On occasion, the patient may stay longer than a single 
night in the hospital; however, in both cases, the patient is 
considered for Medicare purposes to be a hospital outpatient, not an 
inpatient, and our claims data support that the typical 23-hour stay 
service is billed as an outpatient service. Accordingly, we believe 
that the valuation of the codes that fall into the 23-hour stay 
category should not reflect work that is typically associated with an 
inpatient service. For example, inpatient E/M visit codes such as CPT 
codes 99231 (Level 1 subsequent hospital care, per day); 99232 (Level 2 
subsequent hospital care, per day); and 99233 (Level 3 subsequent 
hospital care, per day), should not be included at the full value in 
the valuation of 23-hour stay services.
    Currently, the valuation of 23-hour stay services is conducted in a 
nonuniform manner by the AMA RUC. The AMA RUC has indicated that it 
currently includes a half hospital discharge day management service and 
no hospital inpatient visits for outpatient services with expected 
hospital stays of 23 hours or less. In contrast, for those outpatient 
services where the AMA RUC believes that the recovery period could be 
longer than 23 hours, the AMA RUC stated in its comment on the CY 2010 
PFS proposed rule that it currently includes a full hospital discharge 
day management service and one or more inpatient E/M visits in the 
code's value. However, we note the typical 23-hour stay service is 
billed as an outpatient service and so long as the typical case 
continues to be billed as an outpatient service, we believe the code 
should not incorporate physician work values for services that are 
typically associated with an inpatient service. In the CY 2010 PFS 
proposed rule and final rule with comment period (74 FR 33556 and 74 FR 
61777, respectively), we stated that we believed the use of inpatient 
E/M visit codes for services rendered in the post-service period for 
outpatient 23-hour stay procedures would result in overpayment for pre- 
and post-service work that would not be furnished. Accordingly, we 
proposed in the CY 2010 proposed rule (74 FR 33556 through 33557) not 
to allow any additional inpatient E/M service to be billed for care 
furnished during the post-procedure period when care is furnished for 
an outpatient service requiring less than a 24-hour hospital stay.
    However, we find it is plausible that while the patient receiving 
the 23-hour stay service remains a hospital outpatient, the patient 
would typically be cared for by the physician furnishing the procedure 
during that post-procedure period. While we do not believe that post-
procedure hospital ``visits'' would be at the inpatient level since the 
typical case is an outpatient who would be ready to be discharged from 
the hospital in 23 hours or less, we agree that the intra-service time 
of the inpatient hospital visit may be included in the valuation for 
the 23-hour stay code.
    Accordingly, for CY 2011 we modified our proposed CY 2010 approach 
and suggested that in the future, when the AMA RUC reviews new and 
potentially misvalued codes that are identified as 23-hour stay 
services, the AMA RUC would apply the following methodology:
     Begin with the starting RVU value of the 23-hour stay code 
under review and decrease the hospital discharge day management service 
from one day to a half day.
     Deduct the RVUs of inpatient hospital visits from the 
starting RVU value.
     Reallocate the time associated with the intra-service 
portion of the inpatient hospital visits to the immediate post-service 
time of the 23-hour stay code under review.
    Example: A 23-hour stay code is currently valued at 15 RVUs and has 
1 hospital discharge day management service and 1 level 3 subsequent 
hospital care visit incorporated in this value.
     Applying step (1): 15-0.64* = 14.36
     Applying step (2): 14.36-2** = 12.36
     Applying step (3): 12.36 + (30 minutes x 0.0224)*** = 
13.032 RVUs

* Value associated with \1/2\ hospital discharge day management 
service.
** Value associated with an inpatient hospital visit, CPT code 
99233.
*** Value associated with the reallocated intra-service time 
multiplied by the post-service intensity of the 23-hour stay code.

    Finally, we note that since work relative value units are 
established by the Secretary in the context of relativity to other 
codes in the system, the recommended methodology for the evaluation of 
23-hour stay codes is best applied within the context of relativity. We 
appreciate that the AMA RUC has the ability to assess the 23-hour stay 
code after application of the recommended methodology to ensure

[[Page 73227]]

appropriate relativity of this code and other codes within the system. 
We strongly encourage the AMA RUC to apply the recommended methodology 
to ensure the consistent and appropriate valuation of the physician 
work for these services.
    Comment: A number of commenters asserted that if a service is 
performed in the hospital and the patient stays overnight, the work of 
the physician is typically the same regardless of whether the hospital 
designates the patient receiving the services as an inpatient or 
outpatient. Other commenters supported CMS' position in that it is 
appropriate for physicians' services related to the post-procedure care 
of the patient to be recognized and the intra-service time of the 
inpatient hospital visit should be included in the valuation for the 
23-hour stay code. Some commenters noted that recent issues associated 
with hospital observation care may also be impacting CPT observation 
care codes, and these commenters ``request that any changes in the 23+ 
hour stay policy be deferred until after the RUC conducts its 
consideration of hospital observation services in February 2011.''
    Response: While some commenters advocated for a deferral on the 
issue of valuing 23-hour stay services, we note that a number of 
commenters supported CMS' proposed approach. As we stated in the CY 
2010 PFS proposed rule (74 FR 33557) and affirmed in the CY 2011 PFS 
proposed rule (75 FR 40072), we believe these services, for a typical 
patient, would be considered for Medicare purposes to be hospital 
outpatient services, not inpatient services, and our claims data 
support that the typical 23-hour stay service is billed as an 
outpatient service. Furthermore, since the typical patient commonly 
remains in the hospital for less than 24 hours, even if the stay 
extends overnight, and discharge from the hospital is therefore 
imminent, we believe the acuity of the typical patient is less than 
that of a typical inpatient who is admitted to the hospital, resulting 
in less intensity for the physician work to care for the hospital 
outpatient immediately following a 23-hour stay procedure. Accordingly, 
we believe that the valuation of the codes that fall into the 23-hour 
stay category should not reflect physician work that is typically 
associated with an inpatient service. Furthermore, we do not believe 
that it would be more beneficial to suspend valuing 23-hour services in 
the manner we discussed in the proposed rule until after the AMA RUC's 
review of hospital observation care services. Even if the AMA RUC were 
to provide future recommendations to us for valuing surgical procedures 
in which hospital observation care services were substituted for 
hospital inpatient care visits, we believe that we should treat the 
valuation of the physician time in the same manner as discussed 
previously, that is, by valuing the intra-service time of the hospital 
observation care service in the immediate post-service time of the 23-
hour stay code being valued.
    Accordingly, in light of the support from the commenters, we are 
finalizing our proposed approach to valuing 23-hour stay services by 
allowing the intra-service portion of the subsequent hospital care 
visits (or observation care visits in the future if the AMA RUC were to 
recommend them instead as building blocks for outpatient surgical 
services) furnished to outpatients in the hospital post-procedure to be 
allocated to the immediate post-service time of the procedure to 
account for the physician work in these cases. We encourage the AMA RUC 
to apply this methodology itself in the recommendations it provides to 
us for valuing 23-hour stay codes, in order to ensure the consistent 
and appropriate valuation of the physician work for these services.
4. Expanding the Multiple Procedure Payment Reduction (MPPR) Policy to 
Additional Nonsurgical Services
a. Background
    Medicare has a longstanding policy to reduce payment by 50 percent 
for the second and subsequent surgical procedures furnished to the same 
patient by the same physician on the same day, largely based on the 
presence of efficiencies in the practice expense (PE) and pre- and 
post-surgical physician work. Effective January 1, 1995, the MPPR 
policy, with the same percentage reduction, was extended to nuclear 
medicine diagnostic procedures (CPT codes 78306, 78320, 78802, 78803, 
78806, and 78807). In the CY 1995 PFS final rule with comment period 
(59 FR 63410), we indicated that we would consider applying the policy 
to other diagnostic tests in the future.
    Consistent with recommendations of MedPAC in its March 2005 Report 
to Congress on Medicare Payment Policy, under the CY 2006 PFS, the MPPR 
policy was extended to the technical component (TC) of certain 
diagnostic imaging procedures performed on contiguous areas of the body 
in a single session (70 FR 70261). The reduction recognizes that, for 
the second and subsequent imaging procedures, there are some 
efficiencies in clinical labor, supplies, and equipment time. In 
particular, certain clinical labor activities and supplies are not 
duplicated for subsequent procedures and, because equipment time and 
indirect costs are allocated based on clinical labor time; those would 
also be reduced accordingly.
    The imaging MPPR policy currently applies to computed tomography 
(CT) and computed tomographic angiography (CTA), magnetic resonance 
imaging (MRI) and magnetic resonance angiography (MRA), and ultrasound 
services within 11 families of codes based on imaging modality and body 
region. When we adopted the policy in CY 2007, we stated that we 
believed efficiencies were most likely to occur when contiguous body 
areas are the focus of the imaging because the patient and equipment 
have already been prepared for the second and subsequent procedures, 
potentially yielding resource savings in areas such as clerical time, 
technical preparation, and supplies (70 FR 45850). Therefore, the MPPR 
policy currently applies only to procedures involving contiguous body 
areas within a family of codes, not across families, and to those 
procedures that are furnished in a single session. Additionally, while 
the MPPR policy applies to TC-only services and to the TC of global 
services, it does not apply to professional component (PC) services.
    Under the current imaging MPPR policy, full payment is made for the 
TC of the highest-paid procedure, and payment is reduced by 25 percent 
of the TC for each additional procedure when an MPPR scenario applies. 
We had originally planned to phase in the MPPR policy over a 2-year 
period, with a 25 percent reduction in CY 2006 and a 50 percent 
reduction in CY 2007 (70 FR 70263). However, the Deficit Reduction Act 
of 2005 (DRA) (Pub. L. 109-171) capped the PFS payment amount for most 
imaging procedures at the amount paid under the hospital outpatient 
prospective payment system (OPPS). In view of the DRA, we determined 
that it would be prudent to retain the MPPR at 25 percent while we 
continued to examine the appropriate payment levels (71 FR 69659). The 
DRA also exempted reduced expenditures attributable to the MPPR policy 
from the PFS budget neutrality provision. Most recently, effective July 
1, 2010, section 3135(b) of the ACA increased the MPPR on the TC of 
imaging services under the policy established in the CY 2006 PFS final 
rule with comment period from 25 to 50 percent and exempted the reduced 
expenditures attributable to this further change from the PFS budget 
neutrality provision.

[[Page 73228]]

    In the July 2009 GAO report entitled, ``Medicare Physician 
Payments: Fees Could Better Reflect Efficiencies Achieved when Services 
are Provided Together,'' the GAO recommended that we take further steps 
to ensure that fees for services paid under the PFS reflect 
efficiencies that occur when services are furnished by the same 
physician on the same beneficiary on the same day. The GAO recommended 
the following: (1) Expanding the existing MPPR policy to the PC to 
reflect efficiencies in physician work for certain imaging services; 
and (2) expanding the MPPR to reflect PE efficiencies that occur when 
certain nonsurgical, nonimaging services are furnished together. The 
GAO also encouraged us to focus on service pairs that have the most 
impact on Medicare spending.
    In the March 2010 report, MedPAC noted its concerns about 
mispricing of services under the PFS. MedPAC indicated that it would 
explore whether expanding the unit of payment through packaging or 
bundling would improve payment accuracy and encourage more efficient 
use of services.
    In the CYs 2009 and 2010 PFS proposed rules (73 FR 38586 and 74 FR 
33554, respectively), we stated that we planned to analyze nonsurgical 
services commonly furnished together (for example, 60 to 75 percent of 
the time) to assess whether an expansion of the MPPR policy could be 
warranted. MedPAC encouraged us to consider duplicative physician work, 
as well as PE, in any expansion of the MPPR policy.
b. CY 2011 Expansion of the Imaging Technical Component MPPR Policy to 
Additional Combinations of Imaging Services
    Over the past 2 years, the AMA RUC has examined several services 
billed 90 percent or more of the time together as part of the 
potentially misvalued service initiative and, in several cases, created 
one code to describe the complete service, with a value that reflects 
the expected efficiencies. Notwithstanding the bundling work of the 
RUC, there may be additional imaging and other diagnostic services that 
are furnished together less than 90 percent of the time where we could 
still expect efficiencies in the TC, and in some cases in the PC, 
resulting in potential overpayment for these services under current 
policy when furnished together.
    Section 1848(c)(2)(K) of the Act (as added by section 3134 of the 
ACA) specifies that the Secretary shall identify potentially misvalued 
codes by examining multiple codes that are frequently billed in 
conjunction with furnishing a single service, and review and make 
appropriate adjustments to their relative values. As a first step in 
applying this provision, we proposed a limited expansion of the current 
imaging MPPR policy for CY 2011. We will continue to review other 
possible expansions of the MPPR policy to the TC and/or PC of imaging 
procedures or other diagnostic tests for the future. Any further 
changes will be addressed in future rulemaking.
    In a related policy for hospital outpatient payment of imaging 
services, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68559 through 68569), the OPPS adopted a policy to pay for two or more 
CT and CTA, MRI and MRA, or ultrasound procedures furnished in the same 
session through a single composite ambulatory payment classification 
(APC) group. These composite APC payments were based on the 11 families 
of codes subject to the MPPR under the PFS that were collapsed into 3 
imaging families for the OPPS according to their modality--1 for 
ultrasound, 1 for CT and CTA, and 1 for MRI and MRA services.
    At that time, we stated our belief that the contiguous body area 
concept that was incorporated in the PFS imaging families was not 
necessary for potential efficiencies to be achieved in an imaging 
session. We provided examples to illustrate that we would not expect 
second and subsequent imaging services of the same modality involving 
noncontiguous body areas to require duplicate facility resources 
(comparable to the TC under the PFS) for clinical labor activities such 
as greeting the patient, providing education and obtaining consent, 
retrieving prior exams, setting up an intravenous infusion, and 
preparing and cleaning the room, any more than second and subsequent 
imaging procedures of the same modality involving contiguous body 
areas. While we noted that multiple imaging claims under the OPPS are 
generally within the same imaging modality and involve contiguous body 
areas the vast majority of the time, we estimated that the collapsed 3 
families, as opposed to the 11 PFS families, would add 12 percent 
additional claims to those eligible for a single composite APC payment 
under the OPPS based on the provision of 2 or more imaging services in 
a single session, allowing us to capture additional claims with 
efficiencies.
    Taking into consideration the OPPS policy that was adopted in the 
CY 2009 OPPS/ASC final rule with comment period, for CY 2011 under the 
PFS, we proposed to apply the MPPR regardless of family, that is, the 
policy would apply to multiple imaging services furnished within the 
same family of codes or across families. This proposal would simplify 
the current imaging MPPR policy in a way that is consistent with the 
standard PFS MPPR policy for surgical procedures that does not group 
procedures by body region. Therefore, the MPPR would apply to CT and 
CTA, MRI and MRA, and ultrasound procedures services furnished to the 
same patient in the same session, regardless of the imaging modality, 
and not limited to contiguous body areas.
    Because of the different pieces of equipment used for CT/CTA, MRI/
MRA, and ultrasound procedures, it would be unlikely that a single 
practitioner would furnish more than one imaging procedure involving 2 
different modalities to one patient in a single session where the 
proposed MPPR policy would apply. On the other hand, while most 
multiple procedures furnished with a single modality in one session 
would involve procedures currently assigned to one of the 11 imaging 
families, it would not be uncommon for more than one imaging procedure 
of the same modality to be furnished across families and, like the 
scenario for hospital outpatient imaging services, we would expect 
efficiencies to occur in these cases. Therefore, we believe that an 
expansion of the current imaging MPPR policy to account for 
efficiencies in such situations would allow us to pay more 
appropriately for these multiple imaging procedure sessions, consistent 
with our ongoing efforts to address misvalued services.
    The expansion of the imaging MPPR policy to include all of the 
current codes in a single family to which the standard 50 percent 
reduction for second and subsequent procedures would apply would reduce 
payment for 20 percent more services than the current MPPR policy under 
the PFS. Thus, in CY 2011, we would capture additional efficiencies and 
pay more appropriately in these cases. We note that section 
1848(c)(2)B)(v)(VI) (as added by section 3135(b) of the ACA)) specifies 
that reduced expenditures attributable to the increase in the imaging 
MPPR from 25 to 50 percent in CY 2011 are excluded from the PFS budget 
neutrality adjustment. However, the reduced payment for code 
combinations that would newly be subject to the imaging MPPR policy 
under this proposal would be made in a budget neutral manner under the 
PFS, as these new combinations are not included under section 
1848(b)(4)(D) (as added by section 3135(b) of the ACA), which addresses 
``single-session imaging to

[[Page 73229]]

consecutive body parts'' under the established imaging MPPR policy.
    We also proposed to add the CY 2010 codes displayed in Table 17 of 
the CY 2011 PFS proposed rule (75 FR 40075) to the list of imaging 
services subject to the MPPR policy in CY 2011. These four codes (CPT 
codes 75771 through 75774) were newly created for CY 2010 and are 
similar to codes currently in imaging family 2, titled CT and CTA 
(Chest/Thorax/Abdomen/Pelvis).
    We further note that new CY 2010 CPT codes 74261 (Computed 
tomography (CT) colonography, diagnostic, including image 
postprocessing; without contrast material) and 74262 (Computed 
tomography (CT) colonography, diagnostic, including image 
postprocessing; with contrast material(s) including non-contrast 
images, if performed) were added to the CY 2010 MPPR policy through the 
July 2010 PFS quarterly update, with a retroactive effective date of 
January 1, 2010. These codes replaced CPT code 0067T (Computed 
tomographic (CT) colonography (that is, virtual colonoscopy); 
diagnostic) in CY 2010, which was on the list of procedures subject to 
the imaging MPPR policy prior to CY 2010.
    As discussed earlier in this section, reduced expenditures 
attributable to the increase in the MPPR for multiple imaging 
procedures to consecutive body parts (that is, those previously 
designated in the same family of codes) are exempt from the budget 
neutrality provision of the PFS. However, the reduced expenditures 
attributable to the MPPR for combinations of multiple imaging 
procedures that we proposed for CY 2011 (the MPPR for multiple imaging 
procedures not involving consecutive body parts) would be subject to 
budget neutrality adjustment under the PFS. We note that this 
formulation for whether reduced expenditures are exempt from budget 
neutrality applies both to procedures currently subject to the imaging 
MPPR and to new codes that would be subject to the policy in CY 2011 
and in future years. To the extent that imaging procedures described by 
the new codes are furnished in combination with other procedures that 
are subject to the imaging MPPR on consecutive body areas, the reduced 
expenditures attributable to the MPPR for these combinations would be 
exempt from the PFS budget neutrality adjustment.
    Comment: With one exception, the commenters uniformly opposed the 
proposal to consolidate the imaging families for application of the 
imaging MPPR and urged CMS not to finalize the proposal. The exception 
was MedPAC, which supported the policy as reasonable and consistent 
with the hospital OPPS policy on multiple imaging and the PFS MPPR 
policy for multiple surgical procedures, neither of which are limited 
to procedures involving contiguous body areas.
    Many commenters pointed out that the AMA RUC has worked to resolve 
any duplication in the direct PE inputs for services commonly furnished 
together over the past few years. The commenters stated that new 
bundled services were implemented in CY 2010 and speculated that 
additional ones would be implemented in the future and, therefore, 
concluded that a general MPPR to adjust PFS payment when imaging 
services are commonly furnished together is not necessary. The 
commenters argued that any duplication in the PE should be resolved at 
the code pair level. The AMA RUC urged CMS to continue to work within 
the established processes and offered for its Practice Expense 
Subcommittee to review specific code pairs about which CMS was 
concerned regarding potential PE duplication and recommend a course of 
action that would be fair and consistent.
    Response: The imaging MPPR is not intended to supersede the AMA RUC 
process that values services described by CPT codes. We encourage the 
AMA RUC to continue examining code pairs for PE duplication based upon 
the typical case and appropriately valuing new comprehensive codes for 
bundled services that are established by the CPT Editorial Panel. 
However, we believe that it is necessary to address the PE duplication 
immediately for imaging code pairs that have not been recently reviewed 
or bundled into single comprehensive codes. We note that as more code 
combinations are bundled into a single complete service reported by one 
CPT code, they would no longer be subject to the MPPR. For example, 
there are new CY 2011 codes to describe abdominal and pelvic CT scans 
furnished together, specifically CPT codes 74176 (Computed tomography, 
abdomen and pelvis; without contrast material); 74177 (Computed 
tomography, abdomen and pelvis; with contrast material); and 74178 
(Computed tomography, abdomen and pelvis; without contrast material in 
one or both body regions, followed by with contrast material(s) and 
further sections in one or both body regions). We are accepting the AMA 
RUC recommendations for the direct PE inputs for these codes for CY 
2011 and, therefore, their TCs are valued accordingly. Whereas prior to 
CY 2011, the 50 percent imaging MPPR would have applied to the TC of 
the second service when an abdominal and pelvic CT were furnished in 
the same imaging session, this will no longer be the case in CY 2011. 
Instead, the TC payment for the comprehensive code will reflect the 
valuing of the specific services furnished in combination with one 
another. Thus, we believe our current and proposed MPPR formulations 
are consistent with the AMA RUC's work to review code pairs for 
potential PE duplication and to appropriately value comprehensive codes 
for a bundle of component services.
    Comment: Numerous commenters opposed applying the MPPR to 
noncontiguous body area imaging services using the same modality and to 
combinations of imaging services involving different modalities. Many 
commenters indicated that there is no major duplication in clinical 
labor activities when two studies of noncontiguous body areas using a 
single imaging modality are furnished in the same session and even less 
duplication when imaging services are furnished in a separate session 
on the same day using different modalities. The commenters argued that 
the duplication in clinical labor activities that occurs in the pre- 
and post-operative periods for multiple surgical procedures does not 
apply to imaging services.
    More specifically, several commenters observed that the minimal 
duplicate costs of a few minutes of technician time do not justify a 50 
percent payment reduction in the TC for the second service. Some 
commenters also believe that the imaging MPPR creates an incentive for 
physicians to order separate procedures on different days, thereby 
discouraging efficiencies. In addition, the commenters contended that 
the imaging MPPR is detrimental to patient care, access, and 
convenience.
    One commenter asserted that it is not appropriate to compare the 
OPPS composite ambulatory payment classification (APC) groups to 
office-based imaging as a justification for expanding the imaging MPPR 
under the PFS. The commenter cited an analysis of OPPS payment 
demonstrating that CMS pays hospitals for the second imaging study at 
nearly 100 percent of the amount paid for a single study, concluding 
that not until the third study would the payment be reduced from the 
sum of what would otherwise be paid under the OPPS if the studies were 
performed alone.
    Another commenter agreed that the current PFS imaging families 
could be further collapsed to eliminate the contiguous body area 
concept but opposed applying the MPPR across

[[Page 73230]]

modalities. The commenter suggested establishing three families to 
parallel the modality-based APC groups used under the OPPS, that is, 
CT/CTA, MRI/MRA, and ultrasound. Another commenter noted that highly 
specialized clinics often treat complex conditions and perform multiple 
imaging services on noncontiguous body areas primarily for good patient 
care. As an example of a situation when complex imaging services are 
used to diagnose and treat significant medical conditions, the 
commenter indicated that a CT of the chest may be furnished, resulting 
in a diagnosis of lung cancer. In addition, the same commenter noted 
that appropriate treatment of the patient's neurological signs and 
symptoms also requires a CT of the head, because primary lung tumors 
account for 50 percent of all metastatic brain tumors. The commenter 
explained that these medically necessary combinations of imaging 
services are often performed in a single imaging session. Results of 
the initial imaging service, contended the commenter, could change the 
course of treatment for the patient and it would be prudent not to 
delay or complicate a patient's treatment plan. The commenter also 
pointed out that it is a convenience to the patient to have same day 
access for all imaging services.
    Another commenter acknowledged that while some efficiencies are 
gained in certain situations and settings when multiple imaging 
services are furnished together, the expanded MPPR policy would not 
appropriately pay for the additional studies required for the majority 
of patients with significant medical conditions. The commenter 
explained that highly organized clinics treating these complex patients 
often structure patient encounters so that there are intervening 
consultations with multiple providers and additional tests in between 
imaging services.
    Response: While most multiple procedures furnished with a single 
modality in 1 session would involve procedures currently assigned to 1 
of the 11 imaging families, it would not be uncommon for more than 1 
imaging procedure of the same modality to be furnished across families, 
and we would expect efficiencies to occur in these cases. As noted by 
MedPAC, the proposed PFS MPPR expansion to eliminate the concept of 
contiguous body areas as the basis for a payment reduction due to 
efficiencies is consistent with the established hospital OPPS policy on 
multiple imaging and the PFS MPPR policy for multiple surgical 
procedures, neither of which is limited to procedures involving 
contiguous body areas. While we acknowledge that the OPPS composite 
imaging APCs utilize a different payment methodology than an MPPR to 
reflect the level of efficiencies when multiple imaging services are 
furnished together, consideration of the specific body areas imaged is 
not an aspect of the OPPS policy. The OPPS methodology continues to 
distinguish among services using different imaging modalities in part 
because of the statutory requirement that APCs be clinically 
homogenous. This same limitation would not apply to an MPPR. Despite 
the differences in their payment methodologies, both the OPPS and the 
PFS strive to recognize the efficiencies in the TCs when multiple 
imaging services are furnished together. We continue to believe that 
there are significant efficiencies in the TCs when multiple imaging 
procedures of the same modality are furnished on noncontiguous body 
areas in the same imaging a session, and believe that an expanded 
imaging MPPR under the PFS is an important policy refinement to pay 
more appropriately for the comprehensive imaging service under such 
circumstances.
    Because most of the combinations of imaging services furnished in 
one session that are not now subject to the imaging MPPR occur within 
one modality, we believe it would be unnecessarily complex to continue 
separate families (even if fewer than 11) for different imaging 
modalities to address the limited circumstances when imaging services 
furnished with more than one modality are performed in a single imaging 
session. Even in these unusual cases, we would expect certain 
efficiencies in the TCs, such as the establishment of venous access 
only one time. Finally, the more general proposed policy would provide 
a streamlined basis for our further consideration of other possible 
expansions of an MPPR policy to the TC and/or PC of imaging procedures 
or other diagnostic tests in the future.
    Consistent with our current expectations for provider ordering 
practices under the established imaging MPPR policy for single 
modality, contiguous body area imaging studies, under an expanded MPPR 
we would not expect providers to order multiple imaging procedures of 
different modalities or for noncontiguous body areas on different days 
or order different imaging sessions on the same day simply to garner 
increased payment unless it were medically reasonable and necessary 
that the studies be furnished on different days or in different 
sessions on the same day. However, where it is medically necessary to 
have intervening consultations among multiple providers or other 
diagnostic tests furnished to a patient between imaging services on the 
same day to which the MPPR would otherwise apply, such cases would 
constitute separate imaging sessions and the MPPR would not apply.
    Comment: Many commenters addressed CMS' assertion that because of 
the different pieces of equipment used for CT/CTA, MRI/MRA, and 
ultrasound procedures it would be unlikely that a single practitioner 
would furnish more than one imaging procedure involving two different 
modalities to one patient in a single session where the proposed MPPR 
policy would apply. While most commenters agreed with this statement, 
the commenters questioned why CMS would implement the proposal if this 
were the case. When procedures are furnished across modalities, the 
commenters believe them to be separate and distinct procedures with 
little or no overlap and argue that efficiencies cannot be achieved. 
The commenters asserted that CMS offered no data to support its 
expectation that efficiencies would occur when different imaging 
modalities are furnished at the same time. Many commenters requested a 
more rigorous analysis, validated evidence to support the proposed 
expansion, and an opportunity for stakeholders to comment on the 
analysis.
    A number of the commenters agreed that specialized staff with 
different expertise and certification is often needed to furnish 
services within the different imaging modalities. When multiple imaging 
is necessary, the commenters explained that two appointments are 
created, and the patient is checked in twice, prepared and instructed 
twice, educated on each study independently, transported from one room 
to another, and furnished separate supplies such as contrast and IV 
tubing, following which the two rooms are cleaned.
    Response: We agree with the majority of commenters that in most 
cases a practitioner would not furnish more than one imaging procedure 
involving two different modalities to one patient in a single session. 
While there may be some instances where the MPPR applies to two 
different modalities used in a single session, the MPPR would not apply 
in most cases because this clinical scenario is uncommon. In response 
to the commenters who questioned why we proposed to apply an MPPR 
across modalities, we believe that if, in the unusual case, more than 
one imaging service of different modalities were

[[Page 73231]]

furnished to a patient in a single session, there would be some 
efficiencies in the TC, such as greeting the patient only one time and 
setting up one intravenous line. We acknowledge that the application of 
a general MPPR policy to numerous imaging service combinations may 
result in an overestimate of the efficiencies in some cases and an 
underestimate in others, but this can be true for any service paid 
under the PFS, and we believe it is important to establish a general 
policy to pay appropriately for the TCs of combinations of imaging 
services upon which we may consider building in the future. We do not 
believe that it is administratively efficient or necessary for 
appropriate payment to maintain modality-specific imaging families 
given the uncommon occurrences of pairs of imaging services involving 
different modalities furnished by one practitioner on the same day to a 
single patient that we observe in our claims data.
    Comment: Several commenters generally opposed the inclusion of 
nondiagnostic radiation oncology imaging procedures in any future 
expansion of the MPPR policy, given the clinical differences between 
radiation oncology and diagnostic imaging. In addition, one commenter 
noted that cardiologists commonly provide echocardiography services and 
peripheral vascular ultrasound tests. While both types of services use 
ultrasound technology that resembles the technology used in the 
ultrasound procedures currently subject to the imaging MPPR, the 
commenter reported that these services are furnished using a different 
machine and different staff who have different expertise so the imaging 
MPPR policy.
    Response: We did not propose to expand the existing contiguous body 
area MPPR policy, which currently includes only nonobstetrical chest, 
abdominal, and pelvic ultrasound services, to include peripheral 
vascular ultrasound services or echocardiography services in CY 2011. 
While we explained in the CY 2011 PFS proposed rule (75 FR 40074) that 
we would continue to review other possible expansions of the MPPR 
policy to the TC and/or PC of imaging procedures or other diagnostic 
tests for the future, we have not proposed to do so at this time. 
Further changes to include services such as nondiagnostic radiation 
oncology imaging services or echocardiography or peripheral vascular 
ultrasound services would be addressed in future rulemaking.
    Comment: A few commenters reported that it is often difficult for 
imaging providers to understand when an encounter begins and ends and, 
therefore, urged CMS to better define a single session. They explained 
that it is not always easy to identify when the use of the -59 modifier 
(Distinct procedural services), denoting a separate session under the 
current imaging MPPR policy, is appropriate. This ambiguity leaves the 
responsibility for determining whether imaging services are furnished 
in a separate session to the judgment of the imaging technologist, 
leading to inconsistent determinations and, therefore, variable payment 
for the same services furnished in similar clinical scenarios. One 
commenter specifically requested further parameters of a separate 
encounter be defined to include the same exam room, a specific 
timeframe, or a specific action. Another commenter noted that 
distinguishing separate sessions is a particular challenge for 
ultrasound imaging.
    Response: In the CY 2006 PFS final rule with comment period (70 FR 
70262), we indicated that a single imaging session is one encounter 
where a patient could receive one or more radiological studies. If a 
patient has a separate encounter on the same day for a medically 
necessary reason and receives a second imaging service, this would 
represent a separate session. Physicians would report the -59 modifier 
to indicate multiple sessions and the MPPR would not apply. This same 
policy would continue in CY 2011 under the consolidation of the imaging 
families to expand the imaging MPPR under the PFS. We believe that 
providers' 5 years of previous experience with this policy should allow 
them to continue to appropriately distinguish separate imaging sessions 
by reporting the -59 modifier, even under the expanded MPPR policy. We 
may provide further subregulatory guidance to providers on this issue 
in the future in view of our CY 2011 expanded imaging MPPR policy if 
specific issues arise that we believe warrant further clarification 
regarding the characteristics of separate imaging sessions.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to apply the 50 percent 
imaging MPPR to all of the ultrasound, CT, CTA, MRI, and MRA services 
to which the current contiguous body area and modality-specific policy 
applies, regardless of the specific combinations of imaging services 
furnished to the patient in a single session. We believe this proposal 
is consistent with our overall strategy to pay more appropriately for 
services that are commonly furnished together, consistent with section 
1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) that 
instructs the Secretary to identify multiple codes that are frequently 
billed in conjunction with furnishing a single service, and review and 
make appropriate adjustments to their relative values.
    As stated earlier in this section, expenditures attributable to the 
increase in the MPPR for multiple imaging procedures to consecutive 
body parts (that is, those previously designated in the same family of 
codes) are exempt from the budget neutrality provision of the PFS. 
However, the reduced expenditures attributable to the MPPR for new 
combinations of multiple imaging procedures that we are finalizing for 
CY 2011 (the MPPR for multiple imaging procedures not involving 
consecutive body parts) would be subject to budget neutrality 
adjustment under the PFS. We note that this formulation for whether 
reduced expenditures are exempt from budget neutrality applies both to 
procedures currently subject to the imaging MPPR and to new codes that 
are subject to the policy in CY 2011 and in future years. To the extent 
that imaging procedures described by the new codes are furnished in 
combination with other procedures that are subject to the imaging MPPR 
on consecutive body areas, the reduced expenditures attributable to the 
MPPR for these combinations would be exempt from the PFS budget 
neutrality adjustment.
    The complete list of codes subject to the CY 2011 MPPR policy for 
diagnostic imaging services is included in Addendum F to this final 
rule with comment period and the CY 2011 code additions to the MPPR 
policy are listed in Table 17. The codes being added to the policy are 
those we proposed, as well as new CY 2011 codes or newly covered codes 
that are clinically similar to the imaging codes subject to the MPPR in 
CY 2010. The new codes include CPT codes 74176 (Computed tomography, 
abdomen and pelvis; without contrast material); 74177 (Computed 
tomography, abdomen and pelvis; with contrast material(s)); and 74178 
(Computed tomography, abdomen and pelvis; without contrast material in 
one or both body regions, followed by contrast material(s) and further 
sections in one or both body regions). The newly covered codes are CPT 
codes 72159 (Magnetic resonance angiography, spinal canal and contents, 
with or without contrast material) and 73225 (Magnetic resonance 
angiography, upper extremity, with or without contrast material). These 
codes are being added on an interim final

[[Page 73232]]

basis and are open to public comment on this final rule with comment 
period. The complete list of CPT codes newly added to the diagnostic 
imaging MPPR for CY 2011 is displayed in Table 17 below.

 TABLE 17--CPT Code Additions to the Diagnostic Imaging MPPR Policy for
                                 CY 2011
------------------------------------------------------------------------
                                                           Subject to
                                                          comment in CY
           CPT code                Short descriptor      2011 PFS final
                                                              rule
------------------------------------------------------------------------
72159.........................  Mr angio spine w/o & w/ Yes.
                                 dye.
73225.........................  Mr angio upr extr w/o   Yes.
                                 & w/dye.
74176.........................  Ct abd & pelvis w/o     Yes.
                                 contrast.
74177.........................  Ct abdomen & pelvis w/  Yes.
                                 contrast.
74178.........................  Ct abd & pelv 1+        Yes.
                                 section/regns.
75571.........................  Ct hrt w/o dye w/ca     No.
                                 test.
75572.........................  Ct hrt w/3d image.....  No.
75573.........................  Ct hrt w/3d image,      No.
                                 congen.
75574.........................  Ct angio hrt w/3d       No.
                                 image.
------------------------------------------------------------------------

c. CY 2011 Expansion of the MPPR Policy to Therapy Services
    In the July 2009 GAO report entitled, ``Medicare Physician 
Payments: Fees Could Better Reflect Efficiencies Achieved when Services 
are Provided Together,'' the GAO found efficiencies when multiple 
physical therapy services were furnished in one session and concluded 
that an MPPR policy could be appropriate for these services. In the 
report, the GAO noted that officials from the AMA RUC explained that 
time spent on pre-service and post-service therapy activities is spread 
across the number of services in a typical session in order to avoid 
duplication of the PE for the services. Nevertheless, the GAO found 
that there was duplication of certain activities in the intra-service 
period, and provided the example of time spent testing range of motion 
or muscle flexibility that was duplicated in commonly observed code 
pairs.
    In the typical clinical scenario for therapy services, we believe 
that therapy services are misvalued for PFS payment when multiple 
services are furnished to a patient in a single session because 
duplicate clinical labor and supplies are included in the PE of the 
services furnished. We believe this duplication should be accounted for 
under the PFS, as we currently account for efficiencies in multiple 
surgical and multiple diagnostic imaging procedures furnished in a 
single session. Over the past 2 years, the AMA RUC has examined several 
services billed 90 percent or more of the time together as part of its 
potentially misvalued service initiative and, in several cases, created 
one code to describe the complete service, with a value that reflects 
the expected efficiencies. Notwithstanding the AMA RUC's analyses, in 
most cases it has not created one code to describe a complete therapy 
service, in part because many of the core therapy CPT codes are timed 
codes based on increments of treatment time.
    Therefore, in the CY 2011 PFS proposed rule (75 FR 40075), we 
proposed a further step to implement section 1848(c)(2)(K) of the Act 
(as added by section 3134 of the ACA) that specifies that the Secretary 
shall identify potentially misvalued codes by examining multiple codes 
that are frequently billed in conjunction with furnishing a single 
service. For CY 2011 we proposed an MPPR policy for the HCPCS codes 
listed in Table 18, specifically the separately payable ``always 
therapy'' services that are only paid by Medicare when furnished under 
a therapy plan of care. These services are designated ``always 
therapy'' services regardless of who furnishes them and always require 
therapy modifiers to be reported, specifically -GP (Services rendered 
under outpatient physical therapy plan of care); -GO (Services rendered 
under outpatient occupational therapy plan of care); or -GN (Services 
rendered under outpatient speech-language pathology plan of care). The 
therapy codes are available in a file on the CMS Web site at: http://www.cms.gov/TherapyServices/. We excluded both contractor-priced and 
bundled codes from Table 18 because, under our proposal, an MPPR would 
not be applicable for ``always therapy'' services furnished in 
combination with these codes. In the case of bundled codes that are not 
separately paid, there are no explicit efficiencies in the direct PE to 
be reflected in payment for the second and subsequent therapy services 
furnished to the patient on the same day. In the case of contractor-
priced codes, there is no nationally established pricing that could be 
uniformly adjusted to reflect the expected efficiencies when multiple 
therapy services are furnished.

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

[[Page 73233]]

 
G0283.........................  Elec stim other than wound.
G0329.........................  Electromagnetic tx for ulcers.
------------------------------------------------------------------------
*Excludes contractor-priced and bundled codes.

    We did not propose an MPPR policy for ``sometimes therapy'' 
services, specifically those services that may be furnished under a 
therapy plan of care or otherwise by physicians or NPPs as medical 
services. We believe that the care patterns are different for the 
latter group of services that may sometimes be furnished as therapy 
services, and we noted that they are less commonly furnished with 
multiple services in a single session than the ``always therapy'' 
services. In the discussion that follows, our reference to therapy 
services means those HCPCS codes designated annually as ``always 
therapy'' services by CMS.
    Based on CY 2009 PFS claims data, we identified over 500 therapy 
service code pairs billed for the same patient in a single session. We 
then reviewed a sample of the most common therapy code pairs, 
specifically those high volume code pairs with more than 250,000 
combined services per year, to examine the potential for duplication in 
the PE. These code pairs represented more than half of the occurrences 
of therapy services billed together. While we acknowledged that the PE 
inputs per service for some therapy services were included in the 
direct PE database based on one-half of the total PE inputs required 
for two services furnished in a single session, which would account for 
some duplication, this was not the case for all combinations of therapy 
services. Of the high volume therapy services examined, approximately 
one-fourth of the code pairs were not valued based on two services. In 
addition, we noted that the CY 2009 PFS claims data for services paid 
under the PFS (excluding services furnished in facility settings that 
were paid at PFS rates) show that when multiple therapy services are 
billed on a claim for the same date of service, the median number is 
four services per day. Therefore, even for those clinical labor times 
that may reflect the allocation of total time across two units of 
therapy services, we believe that some elements of the current PE 
inputs are duplicated based on current patterns of therapy service 
delivery where most multiple service claims involve delivery of more 
than two services in a session.
    In the CY 2011 proposed rule (75 FR 40076), we stated that 
duplicate labor activities currently included in the PE for the service 
period for these high volume pairs of therapy services are as follows: 
clean room/equipment; education/instruction/counseling/coordinating 
home care; greet patient/provide gowning; obtain measurements, for 
example, ROM/strength/edema; and post-treatment patient assistance. The 
most common duplicate supply item included in the PE was the 
multispecialty visit pack. Examples of duplicated and unduplicated 
labor activities and supplies for two sample therapy code pairs and our 
estimates of potential clinically appropriate time and quantity 
reductions for multiple service sessions (which were also included in 
our proposed rule) are displayed in Table 19. We note that CY 2009 PFS 
claims data for these sample code pairs include over 3.4 million pairs 
of CPT codes 97112 (Therapeutic procedure, 1 or more areas, each 15 
minutes; neuromuscular reeducation of movement, balance, coordination, 
kinesthetic sense, posture, and/or proprioception for sitting and/or 
standing activities) and 97110 (Therapeutic procedure, 1 or more areas, 
each 15 minutes; therapeutic exercises to develop strength and 
endurance, range of motion and flexibility) furnished by the same 
practitioner on the same day and over 500,000 pairs of CPT codes 97001 
(Physical therapy evaluation) and 97140 (Manual therapy techniques (eg, 
mobilization/manipulation, manual lymphatic drainage, manual traction), 
1 or more regions, each 15 minutes).
BILLING CODE 4120-01-P

[[Page 73234]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.247


[[Page 73235]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.248

BILLING CODE 4120-01-C
    In the CY 2011 PFS proposed rule (75 FR 40078), we did not remove 
minutes for clinical labor tasks that were not duplicated. For example, 
for CPT code pair 97001 and 97140 the following tasks were not 
duplicated: post treatment patient assistance; prep and position 
patient; and prepare room, equipment, and supplies. In addition, we did 
not remove any supply items that would be required for only one of the 
separate services because these would not be duplicated in the PE 
applicable to the combination of services. We estimated no reduction 
for equipment time, even though efficiencies would be expected for 
equipment that is used in both services when they are furnished 
together. Finally, a corresponding reduction to the indirect expenses 
would be appropriate since indirect costs are allocated partially based 
on direct costs. For five high volume therapy code pairs that each 
occur over 2 million times in PFS claims for multiple therapy services 
and account for almost half of such claims, we estimated that the 
resulting reduction in the PE for the lower paying code would range 
from 28 to 56 percent.
    As we summarized in the CY 2011 PFS proposed rule (75 FR 40078), 
given the duplicative clinical labor activities and supplies as shown 
in the code combination examples, we believe it would be appropriate to 
extend the MPPR policy that is currently applied to surgical services 
and the TC of imaging services, to the PE component of certain therapy 
services. Specifically, we proposed to apply a 50 percent payment

[[Page 73236]]

reduction to the PE component of the second and subsequent therapy 
services for multiple ``always therapy'' services furnished to a single 
patient in a single day. Because we believed it would be difficult to 
determine the precise beginning and end of therapy sessions and we did 
not believe that beneficiaries would typically have more than one 
therapy session furnished in a single day, we proposed to apply the 50 
percent MPPR policy to the PE component of subsequent therapy services 
furnished to the same patient on the same day, rather than limiting the 
proposed policy to services furnished in the same session.
    We noted that many therapy services are time-based CPT codes, so 
multiple units of a single code may be billed for a single session that 
lasts for a longer period of time than one unit of the code. The 
proposed MPPR policy would apply to multiple units of the same therapy 
service, as well as to multiple different services, when furnished to 
the same patient on the same day. Therefore, we proposed that full 
payment would be made for the service or unit with the highest PE and 
payment would be made at 50 percent of the PE component for the second 
and subsequent procedures or units of the same service.
    We proposed that the work and malpractice components of the therapy 
service payment would not be reduced. For therapy services furnished by 
an individual or group practice or ``incident to'' a physician's 
service, the MPPR would apply to all ``always therapy'' services 
furnished to a patient on the same day, regardless of whether the 
services are furnished in one therapy discipline or multiple 
disciplines, for example, physical therapy, occupational therapy, or 
speech-language pathology. The MPPR policy would apply to both those 
services paid under the PFS that are furnished in the office setting 
and those services paid at the PFS rates that are furnished by 
outpatient hospitals, home health agencies, comprehensive outpatient 
rehabilitation facilities (CORFs), and other entities that are paid by 
Medicare for outpatient therapy services. Table 20 provides a sample 
calculation of the current and proposed CY 2011 payment for multiple 
therapy services furnished in on the same day. For those services paid 
under the PFS, the PFS budget neutrality provision would apply so that 
the estimated reduced expenditures for therapy services would be 
redistributed to increase payment for other PFS services.

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

    In the CY 2011 PFS proposed rule (75 FR 40078), we stated that we 
believe the proposed therapy MPPR policy would provide more appropriate 
payment for therapy services that are commonly furnished together by 
taking into account the duplicative clinical labor activities and 
supplies in the PE that are not furnished more than once in the single 
therapy session. This approach is consistent with the statutory 
requirement for the Secretary to identify, review and adjust the 
relative values of potentially misvalued services under the PFS as 
specified by section 1848(c)(2)(K) of the Act (as added by section 3134 
of the ACA). We also believe this proposed policy is responsive to 
continued concerns about significant growth in therapy spending and to 
MedPAC and GAO recommendations regarding the expansion of MPPR policies 
under the PFS to account for additional efficiencies. We observed that 
paying more appropriately for therapy services based on PE relative 
values that are adjusted for the clinical scenario under which the 
services are furnished would result in reduced therapy expenditures, 
and beneficiaries would be able to receive more medically necessary 
outpatient therapy services before reaching the therapy cap. For a 
further discussion of potential alternatives to the therapy caps, we 
refer readers to section III.A.2. of this final rule with comment 
period.
    Comment: Many commenters opposed application of the proposed MPPR 
policy to therapy services. The commenters characterized the proposal 
as drastic, arbitrary, and unfair, resulting in across-the-board cuts 
based on flawed assumptions that would lead to therapy underpayments 
that would jeopardize access to necessary care and harm patients. The 
commenters requested that CMS withdraw the proposal, study the issue 
further, and share the analyses with the public.
    In contrast, MedPAC supported the general direction of the proposed 
policy, but suggested that CMS better justify how a 50 percent 
reduction would capture the duplicate inputs related to multiple 
therapy services performed in a single session. MedPAC also recommended 
that CMS request that the AMA RUC review the values of all outpatient 
therapy codes to ensure that the practice expenses are not duplicated, 
regardless of whether or not the current values of those codes assume 
that two services are furnished during a single visit.
    Numerous commenters requested a detailed justification for the 
proposed policy's 50 percent reduction, including an explanation of the 
methodology used to calculate the new payments that would result. These 
commenters asked CMS to work with stakeholders to finalize a policy 
that would not adversely impact access to care, particularly in rural 
and other underserved areas. The commenters further urged consideration 
of other payment methods and alternatives to the therapy caps that 
would preserve and improve access to therapy services. The commenters 
stated that between 80 to 90 percent of physical therapy services 
furnished in private practices would potentially be subject to the 
MPPR, concluding that the policy would result in payment decreases of 
19.2 percent and 17.8 percent for physical therapy services in 
facilities

[[Page 73237]]

and offices, respectively, notably more than the CMS' impact estimate 
of 11 percent for the proposed rule.
    The commenters provided analyses to show that the duplication of 
supplies is very limited and argued that a more thorough analysis of 
duplication based on expert clinical review would result in 
considerably lower estimates of duplication. For example, the AMA RUC 
explained that for a typical single session combination of 2 units of 
CPT code 97110 (Therapeutic procedure, 1 or more areas, each 15 
minutes; therapeutic exercises to develop strength and endurance, range 
of motion and flexibility) and one unit of 97140 (Manual therapy 
techniques (e.g., mobilization/manipulation, manual lymphatic drainage, 
manual traction), 1 or more regions, each 15 minutes), a $12 PE payment 
reduction from the MPPR would be applied to adjust for $3.60 in 
potentially duplicated costs.
    Before implementing an MPPR, the commenters urged CMS to take time 
to ensure that individual services were valued correctly based upon the 
resources needed to deliver them. The commenters advised CMS to conduct 
a more thorough analysis, taking into consideration the fact that the 
direct PE inputs for therapy services were already reduced to avoid 
duplication. The commenters alleged that CMS provided incorrect 
examples of duplication in the proposed rule examples by overestimating 
the duplication compared to the standard time allocated by the AMA RUC 
for certain activities. The commenters explained that PE for therapy 
services was valued by the AMA RUC based upon three units of service, 
not two units of service as stated by CMS in the proposed rule. Three 
units of service are typical, and the commenters contended that no 
duplication of PE exists when the typical three units of service are 
delivered using typical time allotments for clinical labor activities. 
The commenters submitted multiple examples of combinations of therapy 
services, using the most frequently billed therapy codes and providing 
valuations for each of the components of PE, such as pre-service and 
post-service physical therapy assistant activities. The commenters 
pointed out that in the case of single unit therapy claims, or claims 
with one therapeutic procedure and one modality, there would currently 
be underpayment based on how therapy services are valued. The 
commenters further argued that it would not be fair to apply the MPPR 
to all subsequent services when some of the code combinations are 
already undervalued.
    Many commenters observed that the AMA RUC has worked in good faith 
to resolve any duplication in the PE inputs over the past few years and 
pointed out that CMS has historically accepted over 90 percent of the 
AMA RUC's recommendations. In April 2010, some commenters reported that 
the AMA RUC reviewed high volume therapy code pairs that included the 
most frequently billed therapy CPT code 97110, and the commenters 
conveyed the AMA RUC's conclusion that there is no duplication in the 
work or PE inputs for the most frequently reported therapy codes.
    The commenters pointed out that single comprehensive codes for 
certain bundles of component services were implemented in CY 2010, and 
that additional ones would be created in the future. Therefore, the 
commenters disagreed with CMS' reasoning for proposing a general MPPR 
that is not code pair-specific in the context of these ongoing efforts 
of the CPT Editorial Panel and the AMA RUC to revise the coding and 
values for services that are commonly furnished together. Instead, the 
commenters urged CMS to continue to work within the established 
processes and resolve duplication, where it exists, at the code pair 
level rather than with payment.
    Response: We appreciate the detailed information provided by the 
commenters regarding the historical AMA RUC process to value the 
therapy codes and the additional examples of the practice expenses as 
they apply to the many combinations of therapy services that may be 
reported. We understand that the AMA RUC valued many of the therapy 
services based on certain assumptions about the typical combinations of 
services furnished in a therapy session. However, as the commenters 
pointed out, there are numerous combinations of therapy services 
observed in the PFS claims data that we posted on the CMS Web site 
under supporting files for the CY 2011 PFS proposed rule that are 
commonly furnished in the physician's office setting. In the context of 
this large number of commonly observed combinations, we do not believe 
that our usual PFS methodology of valuing the typical service 
adequately accounts for the duplication in PE that occurs in the many 
possible therapy service combinations. Although they are frequent, they 
do not represent the typical case used by the AMA RUC in valuing the 
individual component services and, thus, do not fully account for 
duplications in PE. We proposed the therapy MPPR in order to pay more 
appropriately for therapy services in general by adjusting for the 
duplicate payment for the PE that may occur when combinations of 
therapy services are furnished together.
    We agree with the commenters that, when considering all claims for 
therapy services paid under the PFS, the median number of services is 
three. Thus, that number may have been appropriate for the AMA RUC to 
use in valuing therapy services. However, the median number of four 
services that we presented in the CY 2011 PFS proposed rule was based 
upon all claims for multiple therapy services, and did not include 
claims for a single therapy service. It was the multiple service claims 
that we examined for purposes of the MPPR analysis, and it is these 
claims to which the MPPR would apply. Therefore, we continue to believe 
that the median number of four is the appropriate reference point when 
evaluating an MPPR. We note further that when the AMA RUC valued 
certain therapy services based on the assumption that a combination of 
three types of therapy services would be furnished to the patient, then 
in the case of multiple service claims where the median number of 
services is four, some PE duplication would clearly occur for the 
typical multiple service case with more than three services.
    Although we continue to believe that 50 percent would generally be 
an appropriate level for an MPPR for the PE component of payment for 
therapy services, consistent with the current PFS MPPR policies for 
imaging and surgical services and our PE overlap analysis of certain 
therapy code combinations for the CY 2011 PFS proposed rule, we 
acknowledge there are particular challenges associated with 
establishing an MPPR for therapy services to account for the 
duplication in PE. For example, the current coding structure for 
therapy services relies upon timed units in many cases, and as a 
result, the number of commonly observed combinations is very large. The 
PE overlaps vary depending upon the specific combinations of services 
furnished to the patient, which may include evaluation services, 
therapeutic procedures, and therapeutic modalities. The common 
occurrence of such a great variety of multiple therapy code 
combinations contrasts with the relatively lesser number of 
combinations and/or frequency of combinations of surgical procedures or 
diagnostic imaging procedures to which the established PFS MPPR 
policies apply.
    As the commenters pointed out, the direct PE inputs for certain 
therapy services were systematically established

[[Page 73238]]

based upon a standard AMA RUC methodology of three therapy services 
furnished in a session that included two therapeutic procedures and one 
therapeutic modality and that assigned certain PE inputs solely to the 
two therapeutic procedures. However, the scenarios utilized by the AMA 
RUC in this process are an incomplete representation of the usual 
combinations of services reported when therapy services are furnished 
in a practitioner's office. For example, the most common combination of 
CPT codes for therapy services in CY 2009 PFS claims data consisted of 
an average of 3.5 services which were comprised of some combination of 
one or more units of a single therapeutic procedure CPT code and one or 
more units of a single modality CPT code, rather than 3 total units of 
the services. The second most common combination was a therapeutic 
procedure CPT code alone, with an average of 2.8 units, while the AMA 
RUC relied upon 2 therapeutic procedures in a session for its 
assignment of certain PE inputs. Other commonly observed combinations 
of codes included 3.4 to 4.6 therapy services, with different numbers 
of therapeutic procedures and therapeutic modalities furnished to the 
patient than were assumed by the AMA RUC under the scenarios that were 
the basis for establishing the PE inputs for certain therapy CPT codes. 
Therefore, despite the AMA RUC's consideration of multiple services for 
valuation, the therapy code combinations as actually reported by 
practitioners would typically have some additional duplication in their 
PE. Thus, while the current PFS values for therapy services may reflect 
some efficiencies in the PE for certain code combinations based on the 
AMA RUC approach to valuation (to the extent we accepted the AMA RUC 
recommendations), the actual efficiencies are not fully recognized in 
the PE inputs for the most commonly reported therapy code combinations, 
nor are they necessarily recognized in the many other common code 
combinations that were not considered by the AMA RUC as the typical 
case.
    Based on our review of the scenarios submitted by the commenters, 
we continue to believe that there is significant overlap in the PE when 
many combinations of therapy services are furnished together and that 
this overlap has not been adequately accounted for in the direct PE 
inputs that the AMA RUC has recommended to us for the component 
services. We believe the overlaps remain substantial and they can be 
potentially higher than 50 percent for some combinations while lower 
for others. Our analysis of five high volume therapy code pairs as 
noted in the CY 2011 PFS proposed rule (75 FR 40078) suggested a 
reduction in the PE for the lower paying code of 28 to 56 percent to 
account for PE duplication.
    In response to the commenters who projected that the impact on 
physician's office payment for physical therapy services would be 
greater than the 11 percent reduction we modeled for the proposed rule 
(75 FR 40232), we note that an additional element of our analysis was 
the continued transition to setting the PE RVUs based on the PPIS data. 
The PPIS transition is expected to significantly increase payment for 
the PE component of therapy services in CY 2011. While we acknowledge 
that the estimated change in PE RVUs due to the proposed therapy MPPR 
alone would result in a payment decrease for the specialty of physical 
and occupational therapy of somewhat more than 11 percent, it is the 
combined consideration of all factors affecting the CY 2011 PE RVUs 
that resulted in the 11 percent decrease for physical and occupational 
therapists in the proposed rule specialty impact table (75 FR 40232). 
We note further that the estimated impact of all the PE RVU changes for 
physical and occupational therapy based upon our proposals for CY 2011 
if there were no remaining transition to the new PE RVUs using the PPIS 
data would be -7 percent.
    Any MPPR policy, such as the MPPR that currently applies to 
surgical services and imaging procedures, is a relatively blunt payment 
policy tool that improves the overall accuracy of payment when 
combinations of services are furnished together but is not, by its 
nature, a specific policy that precisely values each code combination. 
A general MPPR is not unlike the well-established PFS pricing 
methodology that relies on the typical case, where we readily 
acknowledge that the clinician's resources used to furnish a specific 
service to a specific patient on a specific day may be more or less 
than those used in the typical case. Similarly, while we believe that 
an MPPR would generally improve the accuracy of PFS payment when 
multiple therapy services are furnished to a single patient in a single 
session, we understand that for a specific combination of services for 
a given patient, the resources required may be more or less than those 
recognized for payment under the MPPR policy. In view of the 
requirements of section 1848(c)(2)(K) of the Act (as added by section 
3134 of the ACA) which specify that the Secretary shall identify 
potentially misvalued codes by examining multiple codes that are 
frequently billed in conjunction with furnishing a single service and 
make RVU adjustments, we continue to believe it would be appropriate to 
expand the current PFS MPPR policies to address those scenarios where 
we conclude that combinations of services commonly furnished together 
are systematically overvalued.
    We believe the more specific valuation of common code combinations 
is best conducted with input from the AMA RUC as it evaluates single 
new comprehensive codes for a bundle of component services when those 
new codes are established by the CPT Editorial Panel. In such cases 
where a single code is used to report a comprehensive service, an MPPR 
would no longer apply, which would be appropriate because the potential 
for PE duplication would have been explicitly considered in determining 
the PE inputs for the comprehensive service. As we stated earlier in 
this section concerning the MPPR for imaging services, the MPPR is not 
intended to supersede the AMA RUC process. We encourage the AMA RUC to 
reexamine the values and direct PE inputs for therapy services, 
including code pairs, for duplication in the PE, and to recommend 
therapy services to the CPT Editorial Panel for consideration of 
bundling into comprehensive codes. However, we believe it is 
appropriate to use an MPPR to address the PE duplication that is 
currently present within the PFS RVUs for the therapy codes when more 
than one service is furnished to a patient.
    After consideration of the public comments we received, we are 
adopting, with modifications, our proposal to establish a MPPR policy 
for ``always therapy'' services for CY 2011. However, given the 
complexities involved in establishing an MPPR for the very large number 
of therapy codes and combinations, rather than the proposed 50 percent 
payment reduction to the PE component of the second and subsequent 
``always therapy'' services billed by the same practitioner or facility 
on the same date of service for the same patient, we are adopting a 25 
percent MPPR for ``always therapy'' services furnished in CY 2011. We 
continue to believe that a 50 percent MPPR for therapy services may be 
appropriate in light of our analysis of five high volume therapy code 
pairs that each occur over 2 million times in PFS claims for multiple 
therapy services and account for almost half of such claims, and for 
which we estimated that the resulting reduction in the PE for the lower 
paying code would range from 28 to 56 percent. However, we believe a 25

[[Page 73239]]

percent MPPR represents an appropriate and conservative first step 
toward eliminating payment for duplicative PE when multiple ``always 
therapy'' services are furnished to the same patient by the same 
therapy provider on the same date of service. We note that a 25 percent 
MPPR represents half the proposed reduction, and is slightly less than 
the lower range of the reduction suggested by our analysis of high 
volume code pairs. During CY 2011 and future years, we will continue to 
refine our analyses and consider whether further modifications to the 
policy would be appropriate, including the possible adoption of a 50 
percent MPPR or a different payment percentage reduction. Any further 
changes to the MPPR for therapy services will be addressed in future 
rulemaking, including the possible adoption of any alternative 
percentage payment reduction to the 25 percent MPPR that will be in 
place for CY 2011. We will also closely follow the work of the CPT 
Editorial Panel and the AMA RUC with respect to the coding and 
valuation for therapy services over the next few years as we assess the 
potential merits of further changes to the MPPR policy. We note that 
the typical reductions in total PFS payment for high utilization 
therapy code combinations due to the MPPR alone would fall within the 
range of 7 to 9 percent under our final policy, but this decrease will 
be mitigated by the continued transition to use of the PPIS data. As 
displayed in Table 101 of this final rule with comment period, we 
estimate that the CY 2011 impact on the PE RVUs of the new therapy MPPR 
and continued PPIS transition is a reduction in PFS payment to physical 
and occupational therapists of approximately -3 percent.
    The final list of CY 2011 CPT codes for ``always therapy'' services 
that are subject to the therapy MPPR is displayed in Table 21 at the 
end of this section.
    Comment: Some commenters pointed out that CMS' analysis was based 
only on data from physicians and private practice therapists, which the 
commenters opposed as unrepresentative of the typical therapy session 
because the data represent only 35 percent of outpatient therapy 
services paid under Medicare. The commenters objected that no data from 
skilled nursing facilities (SNFs), rehabilitation agencies, CORFs, and 
hospital outpatient departments were considered in the analysis. The 
commenters reported that application of the MPPR policy on a per-day 
basis would be inconsistent with the delivery of therapy services in 
provider settings where multiple sessions of the same or different 
disciplines of therapy on the same day are commonly furnished to 
``captive'' patients and would unfairly reduce payment for the 
resources used to provide these services. The commenters believe there 
is no duplication in the PE in such circumstances. Some commenters 
suggested that reductions should not be applied when there is a break 
in services into more than one session in the same day.
    Response: With respect to payment under the PFS, according to 
section 1848(c)(1)(B) of the Act, the term ``practice expense 
component'' means 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. Under section 1848(c)(2)(C)(ii) of the 
Act, we are required to determine PE RVUs based on the relative 
practice expense resources involved in furnishing services. We develop 
these resource-based PE RVUs by looking at the direct and indirect 
physician practice resources involved in furnishing each service. To 
establish the direct PE inputs for services paid under the PFS, we 
consider the typical clinical scenario in which those services are 
delivered and paid by Medicare. In the case of therapy services that 
are paid under the PFS, the scenarios we consider are office-based (not 
institutional) because these therapy services are the only ones that 
are actually paid under the PFS (section 1848 of the Act) and subject 
to all of the provisions of the PFS, including budget neutrality under 
section 1848(c)(2)(B)(ii)(II) of the Act. Section 1834(k)(3) of the Act 
then requires that we pay for all outpatient therapy services at the 
applicable PFS amount. Therefore, our analyses and policy development 
regarding the therapy MPPR were based solely on claims for office-based 
therapy services and, given the applicable statutory payment 
provisions; we do not believe it would have been appropriate for us to 
consider institutional patterns of care in setting PFS rates for 
therapy services.
    We are required to establish the values for services paid under the 
PFS (office-based services) so that therapy services are valued 
appropriately in the context of all other services paid under the PFS, 
and that means ensuring that therapy services are appropriately valued 
for the office setting. In the case of other services paid under the 
PFS that may be furnished in both facility and nonfacility settings, we 
generally establish separate but related facility and nonfacility 
values to differentially value the services when furnished in each of 
the two types of settings. However, therapy services are only paid 
under the PFS when furnished in the office setting, so we establish the 
PFS values for therapy services based on patterns of care in the office 
setting. This approach ensures equitable and relative treatment of all 
services paid under the PFS with respect to the statutory provisions 
that apply to the PFS, including year-to-year budget neutrality. In 
contrast to other services paid under the PFS, the statute then 
specifies that we pay for therapy services furnished in facility 
settings at the applicable PFS amount (which, as discussed above, is 
established based upon our resource-based methodology for services 
furnished in nonfacility settings). Although the statutory payment 
scheme for therapy services differs from most other services, we note 
that this treatment ensures that Medicare payment is the same across 
all settings for outpatient Part B therapy services.
    We acknowledge the commenters' point that multiple therapy sessions 
furnished to one patient by one provider (one National Provider 
Identifier (NPI)) in a single day are more common in facility settings 
than in the office setting. However, we continue to believe that in 
these situations there would be some overlaps in the PE, including 
patient education and obtaining measurements, that would be 
appropriately accounted for through the therapy MPPR. Furthermore, 
given the nature of therapy services and the associated coding, we 
believe it would be very challenging to determine the medical necessity 
of multiple therapy sessions on one date of service or the precise 
beginning and ending of therapy sessions if we were to exclude from the 
MPPR those therapy services furnished by the same provider to a single 
patient on the same day but in different sessions, although we 
acknowledge that this modification would be consistent with our 
established policy for the imaging MPPR.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to apply the therapy MPPR when multiple 
therapy services are billed on the same date of service for the same 
patient by the same practitioner or facility under the same NPI, 
regardless of whether those therapy services are furnished in separate 
sessions.
    Comment: Many commenters objected to applying the MPPR across 
therapy disciplines because the commenters argued that physical 
therapy,

[[Page 73240]]

occupational therapy, and speech-language pathology (SLP) are separate 
and distinct interventions furnished independently by individually 
licensed professionals, each of which is certified to provide unique 
and specialized services that do not cross discipline or service lines. 
Several commenters explained that each discipline involves entirely 
different skills, equipment, supplies, and treatment goals, and 
separate disciplines are often located in different treatment settings. 
Individual plans of care, explained the commenters, are separately 
maintained for each therapy discipline and contain specific goals and 
treatments. Some commenters compared the proposal to claiming that 
services furnished to a single patient on the same day by a 
cardiologist and internal medicine specialist contain duplicative PE 
inputs. The same commenters described administrative contact with the 
patient in this scenario as distinct and separate, observing that 
greeting and gowning the patient, cleaning, and assistant activities 
are furnished independently by the second or subsequent discipline, and 
cannot be shared.
    The large majority of commenters argued that the proposal did not 
make logical distinctions between therapy treatments or specialties or 
even properly distinguish between the skills of rehabilitation 
practitioners. While physical therapists and occupational therapists 
report the same CPT codes, the commenters noted that the codes do not 
represent the same service and the plan and approach to treatments 
differ depending on the discipline.
    Response: We recognize that the therapy disciplines are separately 
qualified professionals who address specific impairments using separate 
and unique skills. However, in the office setting which is the basis 
for our valuing therapy services for payment under the PFS as discussed 
previously, although we believe it would be uncommon for services to be 
furnished to a single patient by different therapy disciplines and 
billed by a single provider (one NPI) on the same date of service, we 
continue to believe that there would be some overlap in the PE in this 
circumstance. The PE overlaps that we would anticipate include greeting 
the patient, obtaining vital signs, and post-visit phone calls. We do 
not agree with the commenters that we should accept such multiple 
discipline cases from the therapy MPPR that would otherwise apply.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to apply the therapy MPPR to all 
therapy services across the disciplines billed on the same date of 
service for the same patient by the same practitioner or facility under 
the same NPI.
    Comment: Several commenters pointed out that, unlike other therapy 
services, many SLP services contain therapist work in their PE because 
SLPs have no assistants. These commenters requested that the therapy 
MPPR not be implemented, or at least be delayed, until the AMA RUC 
completes its plan to recommend moving SLP work from PE to work. In 
addition to bundled codes, the commenters also requested that add-on 
codes, such as CPT code 92608 (Evaluation for prescription for speech-
generating augmentative and alternative communication device, face-to-
face with the patient; each additional 30 minutes (List separately in 
addition to code for primary procedure)), be exempted from the therapy 
MPPR, since the PE inputs for add-on codes explicitly take into 
consideration the PE inputs for a base code that is always reported. 
The commenters reported that the major SLP codes include a wide variety 
of service types and are essentially bundled already, meaning that SLP 
practitioners rarely bill two different services on the same day for 
the same patient. The commenters expressed concern because SLP services 
are furnished and valued differently than physical and occupational 
therapy, yet the proposed rule contained no SLP examples to justify 
including SLP codes in the MPPR or to estimate the impact on SLP 
services.
    Response: We note that most of the SLP codes will have been valued 
with therapist work in the work component of the SLP service RVUs by CY 
2011, although we do not see the continued valuation of therapist work 
in the PE as an impediment to application of the MPPR to SLP services. 
Since many single SLP codes represent multiple component services that 
are reported using a single comprehensive code, the impact of the 
therapy MPPR on PFS payment for SLP services would be minimal. For 
those services that may occasionally be billed with more than one SLP 
code for a session, we see no basis for treating SLP services 
differently than other therapy services because we believe there would 
also be PE duplication in these cases.
    However, we agree with the commenters that add-on codes should not 
be subject to the MPPR for therapy services because their PE inputs 
already consider that the add-on code is always furnished along with a 
primary service.
    Therefore, after consideration of the public comments we received, 
we are removing add-on therapy CPT code 92608 from the list of ``always 
therapy'' services that we proposed for application of the therapy MPPR 
policy. In addition, we are removing CPT code 97010 (Application of a 
modality to 1 or more areas; hot or cold pack) which is a bundled code 
that was inadvertently included on the proposed list. These changes are 
reflected in the final list of codes subject to the therapy MPPR policy 
that is displayed in Table 21 at the end of this section. This policy 
parallels our treatment of the MPPR for surgical services, where 
surgical add-on codes are not subject to the surgical MPPR.
    Comment: Some commenters characterized the proposed therapy MPPR as 
contrary to the objectives of the ACA, which the commenters believe was 
designed to shift care to the most effective and efficient delivery 
setting to ensure beneficiary access to cost-effective, high quality 
and coordinated care. Because therapy services do not involve expensive 
drugs or testing, yet they assist patients in avoiding or reducing 
other medical costs, many commenters believe that physical therapy is 
the most efficient and cost-effective treatment to return patients to 
independent function. The commenters contended that growing Medicare 
expenditures for the treatment of common musculoskeletal problems could 
easily be controlled by earlier access of patients to physical therapy 
services.
    The commenters were concerned that lower therapy payments would 
exacerbate the shortage of therapists, lead to restricted access to 
therapy services, especially in rural areas, and result in patients who 
are more prone to injuries and functioning at a lower level. 
Undertreated functional impairments, argued the commenters, would lead 
to increased spending for medication and medical costs associated with 
decreased mobility, pain and falls, increased emergency room services, 
longer inpatient stays, quicker returns to the hospital setting, and 
earlier placement in nursing homes.
    In addition, some commenters were concerned that the MPPR would 
provide an incentive to schedule patients in a manner that would be 
inefficient, inappropriate, and inconvenient for patients. The 
commenters noted that research proves therapy is more effective for 
many elderly patients with several visits on the same day, separated by 
rest. The commenters indicated that patients in rural communities 
prefer multiple therapy service visits to minimize lengthy commutes.

[[Page 73241]]

    Response: Through the CY 2011 proposed rule and its associated 
public comment period, we have invited public involvement in the 
process of policy development regarding an MPPR for therapy services. 
We believe the therapy MPPR policy is fully consistent with section 
1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) which 
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. Therefore, we do not agree with 
the commenters that the MPPR policy undermines the goals of the ACA 
but, instead, we believe the policy fulfills one of our statutory 
obligations by valuing more appropriately combinations of therapy 
services furnished to patients and paid under the PFS. We have no 
reason to believe that appropriately valuing services for payment under 
the PFS by reducing payment for duplication in the resource-based PE 
payment for the component services would contribute to therapist 
workforce shortages or limit patients' access to medically reasonable 
and necessary therapy services.
    With respect to the ordering and scheduling of therapy services for 
Medicare beneficiaries, we require that Medicare-covered services be 
appropriate to patient needs and that a physician certifies each 
patient's plan of care. We would not expect the adoption of an MPPR for 
therapy services to result in therapy services being furnished on 
separate days by one provider so that the provider may garner increased 
therapy payment unless this pattern of care is the most clinically 
appropriate for the patient. We agree with the commenters that this 
unprofessional behavioral response on the part of practitioners would 
be inefficient and inappropriate and could result in patient compliance 
problems with the plan of care. We will continue to monitor access to 
care and patterns of delivery for therapy services, with particular 
attention focused on identifying any changes in the delivery of same 
day therapy services that may be inappropriate.
    Comment: Several commenters noted that CMS has contracted with 
Computer Sciences Corporation (CSC) and RTI International to develop 
outpatient therapy payment alternatives and urged CMS to place a high 
priority on the development of an alternative payment approach for 
therapy services rather than applying the proposed MPPR. Many 
commenters supported bundled per-session codes that would vary based on 
the severity of the patient and the complexity of evaluation and 
treatment services, and some commenters believe this payment approach 
would be more equitable than the proposed MPPR. The commenters argued 
for a scientific approach to the development of alternatives to the 
current payment system, which the commenters believe contrasts with the 
analysis presented by CMS to support the MPPR. However, most commenters 
encouraged further study and development before implementation of any 
alternatives. Many commenters pledged to work with CMS in the future to 
further develop a bundled service approach based on episodes of care.
    Response: We appreciate the effort and useful information 
contributed by stakeholders to the discussion and development of 
alternatives to the therapy caps and we refer readers to section 
III.A.2. of this final rule with comment period for a further 
discussion of the public comments and our responses on this issue. We 
look forward to the continued cooperation of stakeholders as we 
continue our work in this area over the coming years. However, we do 
not believe short-term alternative payment options for therapy services 
are sufficiently developed to warrant immediate implementation, and the 
commenters on the CY 2011 PFS proposed rule generally shared that view. 
In contrast, we believe that we can implement an appropriate MPPR for 
therapy services beginning in CY 2011 that would immediately provide 
more appropriate payment for the PE component of therapy services when 
multiple therapy services are furnished to one patient on one date of 
service by one provider. Paying more appropriately for therapy services 
in CY 2011 will allow patients to receive more medically necessary 
therapy services before reaching the therapy cap. To the extent that 
the therapy MPPR encourages the future bundling of therapy codes into a 
single comprehensive service that would be specifically valued, we 
support the exploration of that concept to capture the specific 
efficiencies associated with certain combinations of therapy services.
    Comment: Several commenters asserted that the therapy MPPR proposal 
violated the Administrative Procedure Act (APA), alleging the proposal 
was arbitrary and capricious. In addition, some commenters argued that 
CMS did not provide sufficient information regarding the data and 
analysis used to develop the policy to allow the informed public input 
from qualified providers of therapy services.
    Response: Consistent with the requirements of the APA, a full 
description of our analysis and the rationale we used as the basis for 
the proposed therapy MPPR policy was presented in the proposed rule, 
the public comments on our proposal have been reviewed, and our 
responses are provided in this final rule with comment period. Although 
many commenters requested that we share more data to support the 
proposed policy, several commenters demonstrated that they have their 
own access to Medicare data by submitting reports to us along with 
their comments in order to support their views or to refute the 
examples we presented in the proposed rule. We note further that we 
posted therapy utilization data on the CMS web site after publication 
of the proposed rule to provide additional information regarding the 
specific combinations and utilization of therapy services on PFS 
claims. The information was posted under downloads for the CY 2011 PFS 
proposed rule at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage. Therefore, we believe the final MPPR for therapy 
services is being adopted in compliance with the notice and comment 
rulemaking process under the APA.
    In summary, after consideration of the public comments we received, 
we are adopting our CY 2011 proposal to apply an MPPR to the PE 
component of Medicare payment for the second and subsequent outpatient 
``always therapy'' services, with a modification to apply a 25 percent 
reduction for CY 2011 rather than the 50 percent reduction we had 
proposed. Specifically, beginning in CY 2011 we are adopting an MPPR 
for ``always therapy'' services under which a 25 percent reduction will 
be applied to the PE component of payment for the second and subsequent 
``always therapy'' service(s) (those displayed in Table 21) that are 
furnished to a single patient by a single provider on one date of 
service in all settings where outpatient therapy services are paid 
under Part B. This policy applies to office-based therapy services paid 
under the PFS as well as to institutional therapy services paid under 
Part B at the PFS rates. We note that the MPPR would apply only when 
multiple therapy services are billed on the same date of service for 
one patient by the same practitioner or facility under the same NPI. 
This policy does not apply to add-on, bundled, or contractor-priced 
``always therapy'' codes. It does, however, apply to all ``always 
therapy'' services furnished on a single date of service by the same 
provider to a single

[[Page 73242]]

patient, including ``always therapy'' services furnished in different 
sessions or in different therapy disciplines.
    For those therapy services paid under the PFS, we are required to 
make a budget neutrality adjustment under section 1848(c)(2)(B)(ii)(II) 
of the Act. As a result, the estimated reduced expenditures for therapy 
services due to the 25 percent MPPR will be redistributed to increased 
CY 2011 payments for other PFS services. We refer readers to XI.A.2. of 
this final rule with comment period for further discussion of the 
impact of this policy. The final list of CY 2011 ``always therapy'' CPT 
codes subject to the MPPR policy for therapy services is displayed in 
Table 21.

    Table 21--``Always Therapy'' Services Subject To The CY 2011 MPPR
                                 Policy*
------------------------------------------------------------------------
           CPT code                         Short descriptor
------------------------------------------------------------------------
92506.........................  Speech/hearing evaluation.
92507.........................  Speech/hearing therapy.
92508.........................  Speech/hearing therapy.
92526.........................  Oral function therapy.
92597.........................  Oral speech device eval.
92607.........................  Ex for speech device rx, 1 hr.
92609.........................  Use of speech device service.
96125.........................  Cognitive test by hc pro.
97001.........................  Pt evaluation.
97002.........................  Pt re-evaluation.
97003.........................  Ot evaluation.
97004.........................  Ot re-evaluation.
97012.........................  Mechanical traction therapy.
97016.........................  Vasopneumatic device therapy.
97018.........................  Paraffin bath therapy.
97022.........................  Whirlpool therapy.
97024.........................  Diathermy eg, microwave.
97026.........................  Infrared therapy.
97028.........................  Ultraviolet therapy.
97032.........................  Electrical stimulation.
97033.........................  Electric current therapy.
97034.........................  Contrast bath therapy.
97035.........................  Ultrasound therapy.
97036.........................  Hydrotherapy.
97110.........................  Therapeutic exercises.
97112.........................  Neuromuscular reeducation.
97113.........................  Aquatic therapy/exercises.
97116.........................  Gait training therapy.
97124.........................  Massage therapy.
97140.........................  Manual therapy.
97150.........................  Group therapeutic procedures.
97530.........................  Therapeutic activities.
97533.........................  Sensory integration.
97535.........................  Self care mngment training.
97537.........................  Community/work reintegration.
97542.........................  Wheelchair mngment training.
97750.........................  Physical performance test.
97755.........................  Assistive technology assess.
97760.........................  Orthotic mgmt and training.
97761.........................  Prosthetic training.
97762.........................  C/o for orthotic/prosth use.
G0281.........................  Elec stim unattend for press.
G0283.........................  Elec stim other than wound.
G0329.........................  Electromagntic tx for ulcers.
------------------------------------------------------------------------
 *Excludes contractor-priced, bundled, and add-on ``always therapy''
  codes.

5. High Cost Supplies
a. Background
    MedPAC and the AMA RUC have long recommended that CMS establish a 
frequent price update process for high-cost supplies that are direct PE 
inputs in the PE database for services paid under the PFS because of 
their speculation that prices for these items may decrease over time as 
competition increases and new technologies disseminate into medical 
practice. MedPAC in particular has perennially noted that it is 
important for CMS to update the prices of high-priced supplies on a 
regular basis as inaccurate prices can distort PE RVUs over time, 
contributing to the misvaluation of established services under the PFS.
    Most of the current prices for high-cost supplies included in the 
direct PE database are from 2004 or earlier. There are currently 62 
unique supplies with prices of $150 or more in the proposed CY 2011 PE 
database, which is available on the CMS Web site under the supporting 
data files for the CY 2011 PFS proposed rule at http://www.cms.gov/PhysicianFeeSched/. Finally, we note that we do not actually pay the 
supply prices included in the PE database but, instead, use them to 
develop the PE RVUs according to our standard PE methodology as 
described in section II.A.2. of this final rule with comment period. 
Payment for a procedure that uses a supply is based upon the PE RVUs 
that result from the PE methodology, and supplies are among the direct 
PE inputs for procedures. Therefore, it is the relativity of high-cost 
supply prices to prices for other PE items (equipment, low-cost 
supplies, and clinical labor) that is important.
    Accordingly, in the CY 2009 PFS proposed rule (73 FR 38582), we 
proposed a process to update the prices for high-cost supplies priced 
at $150 or more that are included in the PE inputs for procedures paid 
under the PFS PE methodology. The CY 2009 proposed rule described a 
publicly transparent process in which CMS would publish a list of the 
high-cost supplies in the PFS proposed rule (65 supplies were included 
in the CY 2009 PFS proposed rule), and specialty societies or other 
relevant organizations would provide acceptable documentation 
supporting the pricing for the supplies during the 60-day public 
comment period. Furthermore, in that same proposed rule (73 FR 38582), 
we provided guidance on what constitutes valid, reliable documentation 
that reflects the typical price of the high-cost item in the 
marketplace. We outlined examples of acceptable documentation, such as 
a detailed description (including system components), sources, and 
current pricing information, confirmed by copies of catalog pages, 
invoices, and quotes from manufacturers, vendors, or distributors. We 
indicated that documentation that does not include specific pricing 
information such as phone numbers and addresses of manufacturers, 
vendors, or distributors or Web site links without pricing information 
would not be acceptable. We also noted that if acceptable documentation 
was not received within the proposed rule's 60-day public comment 
period, we would use prices from the Internet, retail vendors, and 
supply catalogs to determine the appropriate cost, and that we would 
use the lowest price identified by these sources (73 FR 38582). 
Finally, we solicited public comments on alternatives that could be 
used to update pricing information in the absence of acceptable 
documentation provided by specialty societies or other interested 
organizations.
    In the CY 2009 PFS final rule with comment period (73 FR 69882), we 
indicated that we received many comments on the proposed process and, 
while some commenters expressed support, others believed the proposed 
process was flawed and burdensome. Moreover, although we received some 
data in response to our request for information on the 65 high-cost 
supplies with prices of $150 or more, much of what we received was not 
complete or did not represent typical market prices. In particular, we 
expressed concern that the submitted data often represented 
manufacturer list prices for the premier models of many supplies, while 
we believed there were less expensive alternatives. Therefore, we were 
unable to determine the most appropriate, typical supply prices for our 
PFS payment methodology that prices the typical service described by a 
HCPCS code. Rather than finalizing the proposed process for updating 
high-cost supplies and revising the prices for the 65 supplies based on 
inadequate pricing information, we stated in the CY 2009 PFS final rule 
with comment period (73 FR 69882) that we would research the 
possibility of using an independent contractor to assist us in 
obtaining accurate pricing information. Furthermore, we informed the 
public that we planned to study the limitations of available pricing 
data and determine how to revise our proposed process to elicit better 
data.
    In the CY 2010 PFS proposed rule and final rule with comment period 
(74 FR 33554 and 61776, respectively), we

[[Page 73243]]

stated that we were continuing to examine ways to obtain accurate 
pricing information for high-cost supplies. We noted again in the CY 
2010 PFS proposed rule that we would depend upon the cooperation of the 
medical community to obtain typical prices in the marketplace, and we 
provided stakeholders with another opportunity to submit public 
comments on the process. In the CY 2010 PFS final rule with comment 
period, we acknowledged commenters' general support for an initiative 
to ensure accurate pricing of high-cost supplies. In general, the 
commenters strongly preferred a transparent and public process, and we 
stated that we would consider this perspective as we explore the best 
way to ensure that accurate supply pricing information is used in the 
PFS payment methodology.
b. Future Updates to the Prices of High-Cost Supplies
    In working towards refining a process to update the prices of high-
cost supplies and consistent with our intention expressed in the CY 
2009 PFS final rule with comment period (73 FR 69882), we contracted 
with an independent contractor during CY 2009 to help us study the 
availability of accurate pricing information. We requested that the 
independent contractor, L&M Policy Research, research pricing 
information for the 65 high-cost supplies listed in the CY 2009 
proposed rule (73 FR 38583 through 38585) and determine what, if any, 
pricing information reflecting typical market prices could be obtained 
for these high-cost supplies.
    We first requested that the contractor explore publicly available 
sources to obtain typical market prices for these supplies. The 
contractor utilized supply vendor catalogs and web sites and directly 
contacted vendors, manufacturers, group purchasing organizations 
(GPOs), and any other suppliers that the contractor identified in their 
research in order to identify prices for each of the supplies. Where 
more than one version of a supply item appeared to match a description 
of a high-cost supply and/or more than one possible vendor or 
manufacturer was identified, the contractor attempted to obtain prices 
from the multiple sources.
    Upon review of the high-cost supply list, the contractor refined 
the list to 62 unique high-cost items with prices of $150 or more for 
the study. The original list only consisted of 64 items but included 
one item inadvertently listed twice (CMS Supply Code SD207 (suture 
device for vessel closure (Perclose A-T))) and one item (CMS Supply 
Code SH079 (collagen implant)) that was deleted from the PE database 
after CY 2007 because it was no longer used as an input for any codes. 
While the contractor was able to obtain prices for 37 of the 62 unique 
supplies, the contractor was unable to obtain pricing information for 
the remaining 25 supplies. Documentation of these prices, a requirement 
we discussed in the CY 2009 PFS proposed rule (73 FR 38582), was only 
obtained for 25 of the 36 supplies with new pricing information. For 
the remainder, while the contractor was given price quotes over the 
phone, the sales agents or customer service representatives declined to 
provide any form of written documentation, in some cases because 
company policies restricted providing pricing documentation to 
prospective customers without an account. Moreover, information on 
typical discounts was obtained for only seven products, and only one 
discount was documented. In the case of these products, companies 
disclosed the maximum available discounts, ranging from 18 percent to 
45 percent. Relative to prices currently included in the PE database, 
the contractor found higher prices for the majority of the medical 
supplies that were researched, specifically 23 supplies with higher 
prices, 8 with lower prices, and 3 with the same price. The high-cost 
supplies studied by the contractor and their current database prices 
are displayed in Table 22.

[[Page 73244]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.249

BILLING CODE 4120-01-P

[[Page 73245]]

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[[Page 73246]]


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[[Page 73247]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.252

    Next, we directed the contractor to access the United States 
General Services Administration (GSA) medical supply schedule to 
augment the results obtained through review of vendor materials and 
direct contact with vendors, manufacturers, and GPOs. We note that the 
GSA establishes long-term government-wide contracts with commercial 
firms for many products, negotiating contracts and determining prices 
to be fair and reasonable prior to placing them on schedule. Included 
on the schedule are thousands of medical supplies at prices that, in 
most cases, are established through competition. The GSA schedule is an 
open solicitation and a business of any size, if it is stable and 
financially sound, can request to be included on the schedule. GSA's 
vendors usually are nationwide

[[Page 73248]]

vendors with substantial non-government sales, and products on the 
schedule must be manufactured in the U.S. or in a nation with a trade 
agreement with the United States. Submissions for the schedule are 
received 365 days per year, vendor contracts can be of varying lengths, 
and vendors can add or delete products from the schedule. Depending on 
the aggregate cost estimate associated with the vendor's supply items, 
the time to achieve inclusion on the schedule can vary from as short as 
several months to as long as 2 years. The GSA has delegated authority 
to the Department of Veterans Affairs (VA) to procure medical supplies 
under the VA Federal Supply Schedules Program.
    Using the GSA general search engine under the category 
``Laboratory, Scientific, & Medical'' available at https://www.gsaadvantage.gov/advgsa/advantage/main/start_page.do, the 
contractor obtained nine prices for items similar to the high-cost 
supplies in the PE database and that are displayed in Table 20 from the 
publicly available information on the Internet, including pricing for 
one product for which its prior work did not yield an updated price. We 
believe that additional items that are similar to the high-cost 
supplies in the PE database and that may be used with the same 
procedures may be on the GSA schedule but we are still working through 
the crosswalk between our supplies and the way the supplies are 
presented on the GSA schedule. In the proposed rule (75 FR 40081), we 
stated that examples of high-cost supplies in the PE database that the 
contractor located on the GSA schedule include: (1) Kit, capsule, ESO, 
endoscopy w-application supplies (ESO), priced at $450 in the PE 
database and $444 on the GSA schedule; and (2) tube, jejunostomy, 
priced at $195 the PE database and $60 to $83 on the GSA schedule, 
depending on the characteristics of the tube. We note that the price of 
the ``jejunostomy'' tube that we included in the proposed rule was 
incorrect. The actual price of that supply item in the PE database is 
$97.50, a lower value that is still substantially higher than the price 
range on the GSA schedule.
    Since the GSA medical supply schedule is a source for pricing 
information that is public and transparent and reflects the best 
government contract price for a product, we believe it is a desirable 
resource for us to use in a refined process for updating the prices of 
high-cost supplies. For historical context, CMS has previously proposed 
to use VA prices that result from the competitive marketplace as 
comparison points to limit the Medicare prices for oxygen and certain 
items of durable medical equipment and prosthetic devices (62 FR 38100 
through 38107, and 64 FR 44227 through 44231) in 1997 and 1999, 
respectively. These prior proposals were based on our determination 
that the Medicare payment amounts for these items as durable medical 
equipment or prosthetics (not as physicians' services) were not 
inherently reasonable. We noted, however, that our current interest in 
the GSA schedule for pricing high-cost supplies for payment of 
physicians' services is not based on considerations of inherent 
reasonableness, and we do not actually pay the prices in the PE 
database for supplies under the PFS.
    We further noted that public commenters on pricing high-cost 
supplies have consistently requested that we ensure that the pricing 
information used to update the prices is provided publicly. The 
commenters have observed that this transparency would enable 
stakeholders to evaluate and provide feedback to the agency on pricing 
accuracy (74 FR 61776). We also acknowledged that our past attempts 
over several years to identify typical market prices for the high-cost 
supplies have been inhibited by the limited availability of public data 
that meet the documentation requirements we have previously 
established. Individual vendors do not always publish their product 
prices or provide typical discounts. Moreover, discounts may vary 
depending on suppliers and the volume of supplies purchased. In the CY 
2011 PFS proposed rule (75 FR 40082), we explained that our 
understanding of the GSA medical supply schedule is that the publicly 
listed fair and reasonable prices on the schedule generally do not 
include volume and or certain other discounts that may be subsequently 
negotiated by the buyer. Consequently, we would consider the prices 
available on the GSA schedule to represent the ``individual item 
ceiling'' price for a single item purchase, which we believe would be 
appropriate to estimate the high-cost supply prices for physicians' 
office purchases. We solicited public comments regarding the high-cost 
supplies in the direct PE database for the CY 2011 PFS proposed rule, 
available on the CMS Web site as noted earlier in this section, and the 
corresponding supplies or alternative items that could be used for the 
same function that are currently on the GSA supply schedule. We 
encouraged commenters to provide a detailed analysis of the current 
relationships between the items in the PE database and those on the GSA 
schedule.
    In the CY 2011 PFS proposed rule (75 FR 40082), we described a 
refined process for regularly updating prices for high-cost supplies 
under the PFS and solicit comments on how we could improve on this 
process. The process could occur every 2 years beginning as soon as CY 
2013, although we noted that we would propose the refined process 
through rulemaking before revising the prices for any high-cost supply 
item based on the GSA schedule. We could also consider establishing a 
different price update period depending on whether a high-cost supply 
was a new supply in the PE database or had been in use for some time, 
in which case we might expect that the price would have stabilized and, 
therefore, could be updated less frequently. In general, we would 
expect that the periodicity of updating prices for high-cost supplies 
that we eventually adopted would balance the associated administrative 
burden with the rate of price changes, to ensure that the associated 
procedures remain appropriately valued, rather than increasingly 
misvalued, over time.
    We envisioned that we would base high-cost supply price inputs on 
the publicly available price listed on the GSA medical supply schedule. 
Since the medical community would have several years to examine the GSA 
medical supply schedule before the refined process would be adopted, 
and we had found no apparent limitations on vendors placing products on 
the GSA schedule, beyond the schedule's interest in competitive, best 
value procurements, stakeholders would have the opportunity to ensure 
that any high-cost direct PE input for a PFS service that may currently 
be missing from the GSA medical supply schedule would be included 
before CMS needs to access the publicly available price for the item. 
If a supply price were not publicly available on the GSA medical supply 
schedule by the time CMS needs to access the price, we would propose to 
reduce the current price input for the supply by a percentage that 
would be based on the relationship between GSA prices at that time and 
the existing PE database prices for similar supplies (currently an 
average 23 percent reduction). We believe that this refined process 
would be desirable because it is consistent with commenters' repeated 
requests for the updating methodology to be transparent and 
predictable.
    Moreover, the VA (with responsibility delegated by the GSA) 
determines whether prices are fair and reasonable by comparing the 
prices and discounts that a company offers the government

[[Page 73249]]

with the prices and discounts that the company offers to commercial 
customers. Therefore, using the GSA medical supply schedule as a source 
for publicly available prices would also better account for product-
specific market dynamics than the alternative of an across-the-board 
percentage reduction for supplies not on the GSA schedule based on 
general price trends for the high-cost supplies on the schedule. That 
is, if the market price of a particular supply were not to drop 
according to broad trends for other high-cost supplies, suppliers would 
have the opportunity to provide their price to the public on the GSA 
schedule in order to preclude any reduction in Medicare payment for 
procedures associated with that supply.
    Finally, we reiterated our interest in receiving detailed public 
comments on the refined process discussed above, including all aspects 
of the price update methodology that we have presented. Moreover, we 
believe a similar approach could potentially be appropriate to update 
the prices for other supplies in the PE database that would not fall 
under our definition of high-cost supplies, and we welcomed further 
public comments on that possible extension. We also invited further 
suggestions for alternative approaches to updating high-cost supply 
prices, specifically those that would result in a predictable, public, 
and transparent methodology that would ensure that the prices in the PE 
database reflect typical market prices. These principles are 
particularly important in order to ensure that the services that 
utilize the high-cost supplies when provided in the physician's office 
are appropriately valued under the PFS and continue to be appropriately 
valued over time.
    Comment: Many commenters agreed with the need for a frequent, 
transparent price update process for high-cost supplies based on 
publicly available sources of pricing information. MedPAC supported 
CMS' description of the process update the prices of high-cost supplies 
presented in the CY 2011 PFS proposed rule: ``As an initial step, it is 
reasonable to use the GSA schedule as a source for the prices of high-
cost supply items and to reduce the prices of items not on the GSA 
schedule by the average difference between the GSA prices and the 
prices in CMS' PE database for similar supplies.''
    Response: We appreciate the general affirmation by many 
stakeholders of the significance of accurate pricing of high-cost 
supplies relative to other PE items (equipment, low-cost supplies, and 
clinical labor). We also value MedPAC's support for the update process 
that we described for the prices of high-cost supplies.
    Comment: Many commenters asserted that because the medical supply 
prices on the GSA schedule reflect the best price for government 
entities, these prices are not representative of typical prices 
available to practitioners caring for Medicare beneficiaries. The 
commenters suggested that physicians in private practices do not have 
the requisite purchasing power to negotiate such large discounts on 
their own and that the sales environments for the government and 
private markets are vastly different. Therefore, the commenters argued, 
because the GSA schedule is a streamlined buying process that the 
government uses to buy products and services through registered vendors 
at pre-negotiated prices, the schedule does not provide an accurate 
reflection of prices faced by any physician practice. Some commenters 
also observed that the prices on this schedule have historically been 
used only by manufacturers and suppliers in the context of providing 
these high-cost supplies to the VA alone, and do not reflect prices to 
other non-governmental entities.
    Response: We appreciate the differences in the purchasing power of 
the federal government and individual practitioners. However, we have 
reason to believe that prices on the GSA schedule do not reflect the 
full volume discounts available to large purchasers like the Federal 
government. In fact, while the GSA has delegated the authority to the 
VA to procure medical supplies under the VA Federal Supply Schedules 
Program, we understand that the prices that appear on the schedule do 
not reflect the prices the VA itself would usually pay for a medical 
supply. Instead, the VA determines the schedule prices to be fair and 
reasonable prior to placing them on the schedule, and uses that 
schedule price as a starting point for its own negotiations with supply 
vendors for specific purchases.
    While several commenters explained how vendors provide the VA 
itself with discounts that are greater than those offered to other 
buyers, and a few additional commenters made uncorroborated claims that 
prices on the GSA supply schedule reflect discounts unavailable to 
other providers, we received no evidence that the prices contained on 
the schedule are atypical of medical supply prices in the private 
marketplace. We agree that the prices on the GSA schedule may reflect 
some discounting, but we do not believe that the prices reflect the 
full discounting available to the VA itself for many purchases. 
Instead, we believe that the discounting on the GSA schedule reflects 
what the VA has deemed reasonable for other government buyers in the 
context of prices and discounts that a vendor offers to commercial 
customers.
    We also believe that typical practitioners receive discounts from 
vendors' listed prices for supply items for a variety of reasons, 
although we acknowledge that the basis for the discounts reflected on 
the GSA schedule may differ from the basis for the discounts that are 
available to typical practitioners. Therefore, we do not necessarily 
agree with the premise underlying many commenters' concerns that the 
usefulness of the GSA schedule as a source for PFS high-cost supply 
prices is necessarily undermined solely because large government buyers 
benefit from some exclusive discounts.
    We believe that in a relative payment system, maintaining the 
relativity of discounting among the prices for supply items may be more 
significant than any concern associated with the reasons different 
buyers receive particular discounts. At the moment, we have no reason 
to believe that the prices on the GSA schedule are atypical of the non-
government market, despite broad assertions by the commenters that the 
government may receive discounts for different reasons than those 
available to private purchasers. As we consider this high-cost supply 
update process for the future, we would be interested in receiving 
further public comments that substantiate the claims that medical 
supply prices on the GSA schedule are not representative of actual 
prices paid by typical practitioners caring for Medicare patients.
    Comment: Some commenters expressed concern that pricing high-cost 
supplies based on the GSA supply schedule could result in loss of 
appropriate relativity in PE RVUs because pricing for other supplies 
would be determined using other methodologies.
    Response: As stated earlier in this section, we do not actually pay 
the supply prices included in the PE database but instead use them to 
develop the PE RVUs according to our standard PE methodology as 
described in section II.A.2. of this final rule with comment period. 
However, we believe that inaccuracies in the prices for high-cost 
supplies that are specific to a very few PFS services may 
disproportionately distort physician payment by leading to inaccurate 
PE RVUs for services using those high-cost supplies. We believe that 
neglecting to incorporate any discounts or typical reductions in the 
market price for a

[[Page 73250]]

high-cost supply that is sold to a practitioner for use in a specific 
service would result in a greater likelihood that the service would be 
misvalued under a relative payment system than would similar 
imprecision in the prices for lower-cost supplies that are commonly 
used in many services and where price changes are typically less 
extreme. Finally, we note that we also remain interested in the 
possibility of using the GSA supply schedule for all PFS supply and 
equipment price inputs, as we stated in the CY 2011 PFS proposed rule 
(75 FR 40082).
    Comment: One commenter suggested that using the GSA schedule for 
supply price inputs might allow a single supplier furnishing a small 
volume of a product at a divergent price to distort the PE RVU 
calculations. On the other hand, MedPAC stated that the current CMS' 
process of ``using price information voluntarily submitted by specialty 
societies, individual practitioners, suppliers, and product developers 
might not result in objective and accurate prices because each group 
has a financial stake in the process.''
    Another commenter recommended that if CMS were to use the GSA 
schedule prices as high-cost inputs, then CMS should guarantee that 
physicians may purchase supplies at the GSA schedule prices. The 
commenter claimed that failure to do so would result in inherently 
unfair, lower PE RVUs for certain procedures, which could ultimately 
create an access to care problem for Medicare beneficiaries.
    Response: We believe that our current system of accepting 
voluntarily submitted invoices for supply and equipment price direct PE 
inputs may be problematic for high-cost supplies because the prices for 
such supplies may be particularly susceptible to distortions that 
significantly influence the PE RVUs that we use for payment of the 
associated services. We also believe that any attempt to account for 
these distortions and more appropriately value the services must be 
transparent to the stakeholders. Because the prices on the GSA supply 
schedule are developed based on the interaction between parties that 
have competing financial interests (the VA and supply vendors), we 
believe that these prices are more likely to be representative of 
competitive market prices than are prices that are voluntarily 
submitted by individuals with financial stakes in the PFS payment 
process. We agree that distortions--whether price overstatements or 
understatements--in the values of the direct PE inputs, resulting in 
misvalued services, have the potential to create financial incentives 
for practitioners that are detrimental to ensuring access to medically 
necessary and reasonable care for Medicare beneficiaries. Based in part 
on prior analysis by MedPAC, we believe that the greater risk of 
misvalued PE RVUs results from overvaluing high-cost supplies since we 
believe that prices for these items may generally decrease over time as 
competition increases.
    As we discussed in our response to a previous comment, we do not 
actually use the prices in the PE database for supplies but instead 
those prices are the basis for the PE RVUs for the associated services 
developed under the budget neutral PFS. Therefore, we do not agree with 
the commenter that we should guarantee that physicians may purchase 
supplies at the GSA schedule prices. Where our goal is for the high-
cost supply prices we use for PFS ratesetting to reflect typical market 
prices for these items, especially in a relative sense, for many 
reasons different supplies may not be available to individual 
practitioners purchasing them at the prices in the PE database. The PFS 
is not a payment system that reimburses health care practitioners based 
on their individual costs, and the price available to an individual 
practitioner for a supply item may be high or lower than the price in 
the PE database that is used for setting the PFS PE RVUs for the 
associated procedure.
    Comment: One commenter claimed that no U.S. manufacturer sells 
cryoablation probes through the GSA supply schedule and, therefore, 
asserted that the pricing process for high-cost supplies described in 
the CY 2011 PFS proposed rule would be inappropriate for that 
particular supply. Other commenters reported difficulty locating 
particular medical supplies on the GSA supply schedule.
    Response: While we recognize that not all high-cost supplies are 
currently on the GSA supply schedule, as we stated in the CY 2011 PFS 
proposed rule (75 FR 40082), we believe that since we have provided the 
medical community several years to examine the GSA medical supply 
schedule before its use could be adopted under the PFS, stakeholders 
would have the opportunity to ensure that any high-cost direct PE input 
for a PFS service that may currently be missing from the GSA medical 
supply schedule would be included before CMS needs to access the 
publicly available price for the item. Furthermore, we have found that 
the use of multiple clinically related search terms under the GSA 
schedule search engine improves our ability to locate supply items that 
are related to those that we currently include in the direct PE 
database for the PFS. We believe that the mistaken assumption that 
certain supplies are unavailable on the GSA supply schedule, resulting 
from some commenters' inconclusive searches, may have influenced many 
commenters' responses to the process we discussed in the CY 2011 PFS 
proposed rule.
    Prior to adopting use of the GSA supply schedule to update the 
prices for high-cost supplies under the PFS, we believe it would be 
appropriate to work with interested stakeholders to consider developing 
a crosswalk between supply items included the direct PE database and 
the GSA supply schedule.
    Comment: One commenter contended that implementation of a process 
to update high-cost supply prices based on the GSA schedule would 
disadvantage all medical device companies that have chosen to provide 
devices directly to the armed services or facilities for the treatment 
of veterans. A few commenters speculated that many supply vendors would 
resist placing their products on the GSA schedule for a variety of 
reasons, including avoiding any unnecessary regulatory burden or the 
scrutiny of GSA audits.
    Response: We have no reason to believe that vendors who sell 
directly to the VA at discounts must incorporate negotiated discounted 
prices on the GSA schedule, so we do not believe that utilizing 
publicly available prices as direct PE inputs would have a 
disproportionately unfair impact on suppliers who sell directly to the 
VA. At the same time, we also understand that not every medical supply 
vendor would choose to place their products on the GSA schedule. That 
is why we stated in the proposed rule (75 FR 40082) that if a supply 
price were not publicly available on the GSA medical supply schedule by 
the time CMS needs to access the price, we would consider proposing to 
reduce the current price input in the PE database for the supply by a 
percentage that would be based on the relationship between GSA prices 
at that time and the existing PE database prices for similar supplies. 
Vendors would need to balance their concerns about placing their 
products on the GSA supply schedule with the alternative pricing policy 
that would apply.
    Comment: Several commenters objected to a reduction of supply price 
inputs based on the relationship between GSA prices at the time the 
prices are being updated and the existing PE database prices for 
similar supplies. Many of the commenters stated that the 23 percent 
reduction presented as an example in the CY 2011 PFS proposed rule (75 
FR 40082) was

[[Page 73251]]

based on a very small sample of items and appeared arbitrary. One 
commenter contended that the percentage reduction would need to be 
validated for application to current pricing and argued that it would 
be inappropriate for use on an item-specific basis.
    Additional commenters, including the AMA RUC, pointed out the 
discrepancy between the price of the ``jejunostomy tube'' supply item 
listed in the chart of high-cost supplies and in the direct PE 
database. These commenters were concerned that this discrepancy may 
have led CMS to incorrectly calculate the average difference between 
GSA prices and current prices in the direct PE database. One commenter 
reasoned that it would be unfair for CMS to change the price inputs for 
innovative medical devices by relying on ``speculation that prices for 
these items may decrease over time as competition increases and new 
technologies disseminate into medical practice.''
    Response: We appreciate the commenters' concerns regarding the 
example of the 23 percent reduction mentioned in the CY 2011 PFS 
proposed rule. We provided that sample percentage as an example based 
on a current analysis of a small sample of supplies. We appreciate 
commenters correctly pointing out that we displayed an outdated price 
input for the supply item ``jejunostomy tube'' in the CY 2011 PFS 
proposed rule (75 FR 40080 through 40081). As we explained in the 
proposed rule, we are still working through the crosswalk between our 
supplies and the way the supplies are presented on the GSA schedule. We 
included the 23 percent figure as a rough guide based on a comparison 
of current GSA schedule and PE database prices for a small sample of 
high-cost supply items.
    Prior to implementing any price update based on GSA supply schedule 
prices, we would conduct a thorough analysis of the validity of the GSA 
pricing data in question. We believe that using such data for price 
comparisons, validated, and expanded to include all applicable supply 
items, may be more likely to approximate typical prices for these 
supplies than any available alternative--especially failing to update 
the high-cost supply price inputs with the necessary frequency. In 
cases where the prices for certain high-cost supplies do not follow the 
broad trends for other high-cost supplies, suppliers would have the 
opportunity to provide their price to the public on the GSA schedule in 
order to preclude any reduction in Medicare payment for procedures 
associated with that supply.
    Comment: Some commenters asserted that CMS should conduct 
independent market research similar in kind to the research CMS claims 
that the VA conducts in placing supply items and their associated 
prices on the GSA schedule. Another commenter recommended that CMS use 
a particular market research contractor to price these supplies.
    Response: As we stated in the CY 2011 PFS proposed rule (75 FR 
40079), we contracted with an independent contractor during CY 2009 to 
help us study the availability of accurate pricing information for 
high-cost supplies. We believe such research needs to be conducted with 
transparency, including using publicly available sources and contacting 
supply vendors directly. The contractor reported tremendous difficulty 
in identifying typical market prices using these methods. We have no 
reason to believe that a different contractor using similar methods 
would have greater success in acquiring market pricing information 
without utilizing a methodology that would be burdensome to 
practitioners or supply vendors or other stakeholders. Because the 
supply vendors in contact with the VA generally have a financial 
incentive to cooperate with their market research directly, we believe 
that the VA's methodology in this case would yield more accurate 
information than information derived from market researchers who do not 
have such cooperation, like the contractor working previously on behalf 
of CMS.
    Comment: Several commenters, including the AMA RUC, recommended 
that CMS consider creating HCPCS codes to be reported by rendering 
physicians for high-cost supplies when used for the care of a patient 
during procedure. The supplies could then be removed from the direct PE 
database and appropriate pricing for these supply HCPCS codes could be 
determined by CMS on an annual basis. One commenter requested that CMS 
explore whether such a methodology would be budget neutral under the 
PFS, since the commenter did not support an approach that would reduce 
PFS payments for cognitive services.
    Response: We appreciate the commenters' suggestions, but we believe 
creating separately reportable HCPCS codes for high-cost supplies and 
paying separately for these items would merely shift the pricing 
challenge rather than resolve it, and could compound the problem of 
misvaluing services by explicitly paying for high-cost supplies at the 
expense of other low-cost supplies, equipment, and clinical labor 
included in the PE component of PFS payment. We do not understand how 
this suggestion would help CMS price the supply items accurately, nor 
how it would lead to more appropriate payment for high-cost supplies 
under the relativity of the budget neutral PFS. This approach would be 
required to be budget neutral under the PFS and, to the extent that our 
current PE methodology pays less than the direct PE database cost for a 
supply item, payment for individual high-cost supplies at prices we 
establish could redistribute dollars from other PFS services to payment 
for these supply items if we were to pay more for them separately. 
Finally, unbundling payment for high-cost supplies from the associated 
procedures would be contrary to the current public policy interest in 
increasing the size of the payment bundles used for Medicare payment to 
encourage efficiencies in the delivery of services.
    Comment: Several commenters expressed a readiness to provide any 
additional information that may help CMS in pricing high-cost supplies, 
in lieu of using the GSA schedule prices for that purpose.
    Response: We appreciate commenters' offers of assistance regarding 
the pricing of direct PE inputs. However, based on the public comments 
from stakeholders that we received on the process we proposed in the CY 
2009 PFS proposed rule and the experience of the CMS' contractor who 
attempted to acquire market pricing for supply items directly from 
supply vendors, we believe that use of the GSA schedule would have 
greater potential to provide us systematically and transparently with 
typical market prices for high-cost supply items that could be updated 
with an appropriate periodicity.
    Comment: Some commenters expressed concern that CMS had not 
presented any information about how prices for Medicare PE purposes 
would actually be developed from the GSA supply schedule and had not 
specified how the Agency would do so nor whether (or when) CMS intended 
to make the approach available for public comment.
    Response: We appreciate the commenters' concerns regarding the 
practical implementation of a high-cost supply price update process 
based on prices on the GSA supply schedule. In the CY 2011 PFS proposed 
rule (75 FR 40082), our discussion was intended to encourage broad 
stakeholder comment, including consideration of potential alternatives 
to the process presented. Prior to implementing a high-cost supply 
update methodology, such as the use of prices on the GSA schedule that 
was the focus of our proposed rule

[[Page 73252]]

discussion, we would expect to use annual rulemaking in order to 
propose a more detailed process that would be subject to modification 
based upon our consideration of the public comments.
    In summary, we appreciate the many public comments we received on 
our discussion of a process that would use GSA schedule prices to 
update the prices for high-cost supplies utilized for developing PE 
RVUs under the PFS. In the context of our explicit responsibility to 
review and adjust the PFS values for potentially misvalued services 
under section 1848(c)(2)(K) of the Act (as added by section 3134 of the 
ACA), we believe it is especially important to soon establish a 
periodic and transparent process to update the cost of high-cost 
supplies to reflect typical market prices so that these supply items 
are appropriately considered in our ratesetting methodology. While 
public commenters expressed some concerns regarding our discussion of 
use of the GSA supply schedule prices in such a process, at this point 
we remain optimistic that this approach has significant potential to be 
used under the PFS and, based on our several year history of work in 
this area, we do not see other viable alternatives at this point. We 
will continue to study the issue of how to update the prices for high-
cost supplies over the upcoming months, and we encourage stakeholders 
to also further consider the process we discussed in CY 2011 rulemaking 
and provide their additional thoughts and perspectives to us on an 
ongoing basis.

D. Geographic Practice Cost Indices (GPCIs)

1. Background
    Section 1848(e)(1)(A) of the Act requires us to develop separate 
Geographic Practice Cost Indices (GPCIs) to measure resource cost 
differences among localities compared to the national average for each 
of the three fee schedule components (that is, work, PE, and 
malpractice). While requiring that the PE and malpractice GPCIs reflect 
the full relative cost differences, section 1848(e)(1)(A)(iii) of the 
Act requires that the physician work GPCIs reflect only one-quarter of 
the relative cost differences compared to the national average. In 
addition, section 1848(e)(1)(G) of the Act sets a permanent 1.5 work 
GPCI floor in Alaska for services furnished beginning January 1, 2009. 
Section 1848(e)(1)(C) of the Act requires us to review and, if 
necessary, adjust the GPCIs not less often than every 3 years. This 
section also specifies that if more than 1 year has elapsed since the 
last GPCI revision, we must phase in the adjustment over 2 years, 
applying only one-half of any adjustment in each year. As discussed in 
the CY 2009 PFS final rule with comment period (73 FR 69740), the CY 
2009 adjustment to the GPCIs reflected the fully implemented fifth 
comprehensive GPCI update. CY 2010 would have typically included no 
adjustments to the GPCIs. However, section 3102(a) of the ACA amended 
section 1848(e)(1)(E) of the Act to extend the 1.0 work GPCI floor for 
services furnished through December 31, 2010. Additionally, section 
3102(b) of the ACA added a new subparagraph (H) to section 1848(e)(1) 
of the Act, which specifies that for CY 2010 and CY 2011, the employee 
compensation and rent portions of the PE GPCI must reflect only one-
half of the relative cost differences for each locality compared to the 
national average. The new subparagraph also includes a ``hold 
harmless'' provision for CY 2010 and CY 2011 for any PFS locality that 
would otherwise receive a reduction to its PE GPCI resulting from the 
limited recognition of cost differences. Additionally, section 
1848(e)(1)(I) of the Act (as added by section 10324(c) of the ACA) 
established a 1.0 PE GPCI floor for services furnished in frontier 
States effective January 1, 2011. In May 2010, we provided our Medicare 
contractors with an updated CY 2010 payment file that included the 1.0 
work GPCI floor and the PE GPCIs calculated according to the 
methodology required by section 1848(e)(1)(H) of the Act (as added by 
section 3102(b) of the ACA) for CY 2010, to be used for payment of 
services furnished on or after January 1, 2010.
    For the CY 2011 PFS proposed rule, we completed the sixth review of 
the GPCIs and proposed new GPCIs. We noted that section 1848(e)(1)(E) 
of the Act (as amended by section 3102(a) of the ACA) extends the 1.0 
work GPCI floor only through December 31, 2010. Under current statute, 
the 1.0 work GPCI floor will expire on January 1, 2011. Therefore, the 
CY 2011 physician work GPCIs, and summarized geographic adjustment 
factors (GAFs), do not reflect the 1.0 work floor. However, section 
1848(e)(1)(G) of the Act (as amended by section 134(b) of the MIPPA) 
set a permanent 1.5 work GPCI floor in Alaska for services furnished 
beginning January 1, 2009 and, as noted above, section 1848(e)(1)(I) of 
the Act (as added by section 10324(c) of the ACA) provides for a 
permanent 1.0 PE GPCI floor for frontier States effective January 1, 
2011. Therefore, as required by the statute, the 1.5 work GPCI floor 
for Alaska and the 1.0 PE GPCI floor for frontier States will be in 
effect for CY 2011. In addition to the limited recognition of certain 
cost differences for the PE GPCIs, section 1848(e)(1)(H) of the Act (as 
added by section 3102 (b) of the ACA) also requires us to complete an 
analysis of the data sources used and cost share weights assigned to 
the PE GPCIs. Implementation of the ACA provisions related to the CY 
2011 PE GPCIs is discussed in more detail in the GPCI update section 
below.
2. GPCI Update
    As discussed in the CY 2011 PFS proposed rule (75 FR 40083), the 
updated GPCI values were developed by Acumen, LLC (Acumen) under 
contract to CMS. As mentioned above, there are three GPCI components 
(physician work, PE, and malpractice), and all GPCIs are developed 
through comparison to a national average for each component. 
Additionally, each of the three GPCIs relies on its own data source(s) 
and methodology for calculating its value as described below.
a. Physician Work GPCIs
    The physician work GPCIs are designed to capture the relative cost 
of physician labor by Medicare PFS locality. Previously, the physician 
work GPCIs were developed using the median hourly earnings from the 
2000 Census of workers in seven professional specialty occupation 
categories which we used as a proxy for physicians' wages and 
calculated to reflect one-quarter of the relative cost differences for 
each locality compared to the national average. Physicians' wages are 
not included in the occupation categories because Medicare payments are 
a key determinant of physicians' earnings. Including physicians' wages 
in the physician work GPCIs would, in effect, have made the indices 
dependent upon Medicare payments.
    The physician work GPCIs were updated in CYs 2001, 2003, 2005, and 
2008 using professional earnings data from the 2000 Census. However, 
wage and earnings data are no longer available from the Census long 
form and the 2000 data are outdated. Therefore, for the proposed sixth 
GPCI update, we used the 2006 through 2008 Bureau of Labor Statistics 
(BLS) Occupational Employment Statistics (OES) data as a replacement 
for the 2000 Census data. The use of BLS OES data as a replacement for 
the 2000 Census data is discussed in more detail in the update of the 
PE GPCIs section. As noted above, the 1.0 work GPCI floor is set to 
expire under current statute on December 31, 2010. Therefore, the CY 
2011 proposed

[[Page 73253]]

physician work GPCIs reflected the removal of this floor.
b. Practice Expense GPCIs
(1) The Affordable Care Act Requirements for PE GPCIs
(A) General Methodology for the CY 2011 GPCIs
    The ACA added a new subparagraph (H) to section 1848(e)(1) of the 
Act which revised the methodology for calculating the PE GPCIs for CY 
2010 and CY 2011 so that the employee compensation and rent portions of 
the PE GPCIs reflect only one-half of the relative cost differences for 
each locality compared to the national average. Additionally, under 
section 1848(e)(1)(H)(iii) of the Act (as added by section 3102(b) of 
the ACA), each PFS locality is held harmless so that the PE GPCI will 
not be reduced as a result of the change in methodology for PE GPCIs. 
In accordance with section 1848(e)(1)(H)(ii) of the Act (as added by 
section 3102(b) of the ACA), the employee compensation and rent 
components of the proposed CY 2011 PE GPCIs were calculated to reflect 
one-half of the cost differences for each PFS locality relative to the 
national average cost. Additionally, as required by the statute, 
physicians' services furnished in each PFS locality would be adjusted 
by the higher of the locality's PE GPCI calculated with the limited 
recognition of employee compensation and rent cost differences or the 
PE GPCI calculated without the limited recognition of cost differences.
(B) Phase-In of PE GPCIs
    Section 1848(e)(1)(C) of the Act requires us to phase in GPCI 
adjustments over 2 years if there was more than 1 year between GPCI 
adjustments. In accordance with the statute, we proposed to phase in 
the updated PE GPCIs using one-half of the CY 2010 values and one-half 
of the fully implemented values (as described in this section). To 
apply the phase-in and hold harmless provisions of the Act, we 
calculated transitional PE GPCIs based on two scenarios. Under the 
first scenario, we calculated transitional CY 2011 PE GPCIs using the 
full recognition of employee compensation and rent cost differences for 
each locality as compared to the national average. As discussed below, 
the first scenario reflects the ``hold harmless'' transitional PE GPCI 
value that would apply to any PFS locality receiving a reduction to its 
PE GPCI resulting from the application of the limited recognition of PE 
cost differences. The CY 2011 transitional PE GPCI values with full 
recognition of cost differences were calculated using one-half of the 
CY 2010 PE GPCI values with full recognition of cost differences and 
one-half of the updated PE GPCIs with full recognition of cost 
differences. The first scenario represents the transitional PE GPCI 
values prior to the limited recognition of cost differences (the pre-
ACA CY 2011 transitional values). In other words, this scenario does 
not include the effects of sections 1848(e)(1)(H)(i) and (ii) of the 
Act (as added by section 3102(b) of the ACA).
    For the second scenario, we calculated transitional CY 2011 PE 
GPCIs with the limited recognition of cost differences for the employee 
compensation and rent components (as required by sections 
1848(e)(1)(H)(i) and (ii) of the Act (as added by section 3102(b) of 
the ACA)). The CY 2011 transitional PE GPCI values with the limited 
recognition of cost differences were calculated using one-half of the 
CY 2010 PE GPCIs with the limited cost differences and one-half of the 
updated PE GPCIs with the limited cost differences. The hold harmless 
provision under section 1848(e)(1)(H)(iii) of the Act (as added by 
section 3102(b) of the ACA) was applied by selecting the greater of the 
CY 2011 transitional PE GPCI value calculated with the limited 
recognition of cost differences or the CY 2011 transitional PE GCPI 
value calculated with full recognition of cost differences (the pre-ACA 
CY 2011 transitional values). The phase-in of the CY 2011 PE GPCIs and 
application of the hold harmless provision are illustrated in Table 23 
below.

                                                       Table 23--Phase-In of the CY 2011 PE GPCIs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  CY 2011 (transitional
                                          CY 2010             Updated GPCIs               year)                            Hold harmless
--------------------------------------------------------------------------------------------------------------------------------------------------------
File 1:
PE GPCI Without 3102(b) of ACA...  Without ACA..........  Without ACA (Updated  (\1/2\ of 2010) + (\1/2\   Greater of File 1 Transitional Value or File
                                                           Data).                Updated GPCI).             2 Transitional Value.
File 2:
PE GPCI With 3102(b) of ACA......  With ACA.............  With ACA (Updated     (\1/2\ of 2010 w/ACA) +
                                                           Data).                (\1/2\ Updated GPCI w/
                                                                                 ACA).
--------------------------------------------------------------------------------------------------------------------------------------------------------

(C) Data Analysis
    Section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) 
of the ACA) also requires the Secretary to ``analyze current methods of 
establishing practice expense adjustments under subparagraph (A)(i) and 
evaluate data that fairly and reliably establishes distinctions in the 
cost of operating a medical practice in different fee schedule areas.'' 
Section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of 
the ACA) requires that such analysis shall include an evaluation of the 
following:
     The feasibility of using actual data or reliable survey 
data developed by medical organizations on the costs of operating a 
medical practice, including office rents and non-physician staff wages, 
in different fee schedule areas.
     The office expense portion of the practice expense 
geographic adjustment, including the extent to which types of office 
expenses are determined in local markets instead of national markets.
     The weights assigned to each area of the categories within 
the practice expense geographic adjustment.
    This section also requires the Secretary to make appropriate 
adjustments to the PE GPCIs no later than by January 1, 2012. To begin 
to implement this statutory requirement based on our initial analysis, 
we proposed to implement changes in PE data sources and cost share 
weights discussed herein effective beginning in CY 2011.
    In accordance with section 1848(e)(1)(H)(iv) of the Act (as added 
by section 3102(b) of the ACA), we initially analyzed the current 
methods and data sources used in the establishment of the PE GPCIs. 
With respect to the method used, we began with a review of the GAO's 
March 2005 Report entitled, ``MEDICARE PHYSICIAN FEES: Geographic 
Adjustment Indices Are Valid in Design, but Data and Methods Need 
Refinement'' (GAO-05-119). While we have raised concerns in the past 
about some of the GAO's GPCI

[[Page 73254]]

recommendations, we noted that with respect to the PE GPCIs, the GAO 
did not indicate any significant issues with the methods underlying the 
PE GPCIs. Rather, the report focused on some of the data sources used 
in the method. For example, the GAO stated that the wage data used for 
the PE GPCIs are not current. Similarly, upon our reexamination of 
public comments we had received on the PE GPCIs for previous updates, 
we noted that the commenters predominately focused on either the data 
sources used in the method or raised issues such as incentivizing the 
provision of care in different geographic areas. However, the latter 
issue (incentivizing the provision of care) is outside the scope of the 
statutory requirement that the PE GPCIs reflect the relative costs of 
the mix of goods and services comprising practice expenses in the 
different fee schedule areas relative to the national average.
    One key component of the PE GPCI method that our analysis 
identified involved the office expense portion of the PE GPCIs and the 
cost share weight assigned to this component. Most significantly, we 
proposed that the weight for the office rent component be revised from 
12.209 percent to 8.410 percent to reflect our more detailed breakout 
of the types of office expenses that are determined in local markets 
instead of national markets. For example, for previous GPCI updates, we 
used the office expenses cost category as the cost share weight for 
office rent and, therefore, all individual components previously 
included in the office expenses category were adjusted for local area 
cost differences by the GPCIs. As discussed in section II.E. of this 
final rule with comment period, we proposed to disaggregate the broader 
office expenses component into 9 new cost categories as part of the 
proposed CY 2011 MEI rebasing. The disaggregation of the office 
expenses category indicates that the fixed capital cost category, for 
which the consumer price index (CPI) for owner's equivalent rent is the 
price proxy, is the office expense category applicable to the office 
rent component of the PE GPCI. Therefore, the fixed cost capital cost 
category is the only component of office expenses that we proposed to 
adjust for local area cost differences beginning in CY 2011. We 
proposed to assign other newly defined components of the office 
expenses category (for example, utilities, chemicals, paper, rubber and 
plastics, telephone, postage, and moveable capital) to the medical 
equipment, supplies, and other miscellaneous expenses cost component of 
the PE GPCIs. As discussed later in this section, the medical 
equipment, supplies, and other miscellaneous expenses component of the 
PE GPCIs is assumed to have a national market and, therefore, this 
component is not adjusted for local area cost differences.
    The proposed expense categories for the PE GPCIs, along with their 
respective cost share weights, are primarily derived from the 2006 
American Medical Association (AMA) Physician Practice Information 
Survey (PPIS) for self-employed physicians and selected self-employed 
non-medical doctor specialties. The PPIS is the most comprehensive, 
multispecialty, contemporaneous, and consistently collected PE data 
source available. It was developed by medical organizations and 
captures the costs of operating a medical practice, including office 
rents and nonphysician staff wages. Moreover, we also examined the 
feasibility of using the American Community Survey (ACS) and the Bureau 
of Labor and Statistics (BLS) Occupational Employment Statistics (OES) 
data for the employee compensation component of the PE GPCI. For 
previous updates, the employee compensation component was based on the 
2000 Decennial Census long form data. Since the Census data are 
significantly outdated and the 2010 Census no longer includes 
occupational wage data, we believe the ACS or BLS OES data might be 
viable alternatives. While the ACS 3-year public use microsample (PUMS) 
is currently available, it reflects only about 3 percent of households 
and the data exhibit significant variation due to the small sample. In 
particular, the ACS PUMS has fewer than 10 observations of pharmacists 
in the Manhattan; Beaumont, Texas; and Southern Maine localities. 
Therefore, we believe it would be premature to use the ACS data for 
determining GPCI values. The 2006, 2007, and 2008 panels from the BLS 
OES represent a larger sample than the ACS PUMS and more recent data 
than the 2000 Census. As such, we proposed to use the BLS OES data for 
updating the GPCIs. We look forward to exploring the use of the full 
ACS data when they become available. Additionally, we explored other 
sources of rent data (including commercial rental data and survey data) 
for use in calculating the PE GPCIs. We could not identify a reliable 
alternative rental data source available on a national basis with 
coverage of nonmetropolitan areas.
    We do not believe there is a national data source better than the 
Housing and Urban Development (HUD) data for determining the relative 
cost differences in office rents. Therefore, based on our review of the 
available data sources, we proposed to use the 2010 apartment rental 
data produced by HUD at the 50th percentile as a proxy for the relative 
cost difference in physician office rents.
    In the proposed rule (75 FR 40085), we indicated that we believe 
our analysis of the current methods of establishing PE GPCIs and our 
evaluation of data that fairly and reliably establish distinctions in 
the cost of operating a medical practice in the different fee schedule 
areas meet the statutory requirements of section 1848(e)(1)(H)(iv) of 
the Act (as added by section 3102(b) of the ACA). A more detailed 
discussion of our analysis of current methods of establishing PE GPCIs 
and evaluation of data sources is included in Acumen's draft report. 
Acumen's draft report and associated analysis of the sixth GPCI update, 
including the PE GPCIs, was posted on the CMS Web site after display of 
the CY 2011 PFS proposed rule. The draft report may be accessed from 
the PFS Web site at: http://www.cms.gov/PhysicianFeeSched/ under the 
``Downloads'' section of the CY 2011 PFS proposed rule Web page. 
Acumen's final report and associated analysis of the sixth GPCI update 
will be posted on the CMS Web site after publication of the CY 2011 PFS 
final rule with comment.
(D) Determining the PE GPCI Cost Share Weights
    To determine the cost share weights for the CY 2011 GPCIs, we 
proposed to use the proposed 2006-based Medicare Economic Index (MEI) 
as discussed in section II.E. of this final rule with comment period. 
The proposed MEI was rebased and revised to reflect the weighted-
average annual price change for various inputs needed to provide 
physicians' services. As discussed in detail in that section, the 
proposed expense categories in the MEI, along with their respective 
weights, were primarily derived from data collected in the 2006 AMA 
PPIS for self-employed physicians and selected self-employed non-
medical doctor specialties.
    For the cost share weight for the PE GPCIs, we used the 2006-based 
MEI weight for the PE category of 51.734 percent minus the professional 
liability insurance category weight of 4.295 percent. Therefore, we 
proposed a cost share weight for the PE GPCIs of 47.439 percent. For 
the employee compensation portion of the PE GPCIs, we used the 
nonphysician employee compensation category weight of 19.153 percent. 
The fixed capital category weight of 8.410, for which the CPI for

[[Page 73255]]

owner's equivalent rent is the price proxy, was used for the office 
rent component. To determine the medical equipment, supplies, and other 
miscellaneous expenses component, we removed professional liability 
(4.295 percent), nonphysician employee compensation (19.153 percent), 
and fixed capital (8.410 percent) from the PE category weight (51.734 
percent). Therefore, we proposed a cost share weight for the medical 
equipment, supplies, and other miscellaneous expenses component of 
19.876 percent.
    Furthermore, the physician compensation cost category and its 
weight of 48.266 percent reflected the proposed work GPCI cost share 
weight and the professional liability insurance weight of 4.295 percent 
was used for the malpractice GPCI cost share weight. In the proposed 
rule (75 FR 40085), we stated that we believe our analysis and 
evaluation of the weights assigned to each of the categories within the 
PE GPCIs meets the statutory requirements of section 1848(e)(1)(H)(iv) 
of the Act (as added by section 3102(b) of the ACA).
    The proposed cost share weights for the CY 2011 GPCIs are displayed 
in Table 24 below.

          Table 24--Cost Share Weights for CY 2011 GPCI Update
------------------------------------------------------------------------
                                                  Current      Proposed
               Expense category                  cost share   cost share
                                                weight  (%)  weight  (%)
------------------------------------------------------------------------
Physician Work................................       52.466       48.266
Practice Expense..............................       43.669       47.439
    --Employee Compensation...................       18.654       19.153
    --Office Rent.............................       12.209        8.410
    --Equipment, Supplies, Other..............       12.806       19.876
Malpractice Insurance.........................        3.865        4.295
Total.........................................      100          100
------------------------------------------------------------------------

 (E) PE GPCI Floor for Frontier States
    Section 10324(c) of the ACA added a new subparagraph (I) under 
section 1848(e)(1) of the Act to establish a 1.0 PE GPCI floor for 
physicians' services furnished in frontier States. In accordance with 
section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the 
ACA), beginning in CY 2011, we applied a 1.0 PE GPCI floor for 
physicians' services furnished in States determined to be frontier 
States. The statute requires us to define any State as a frontier State 
if at least 50 percent of the State's counties are determined to be 
frontier counties, which the statute defines as counties that have a 
population density less than 6 persons per square mile. However, 
section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the 
ACA) also specifies that this provision shall not apply to States 
receiving a non-labor related share adjustment under section 
1886(d)(5)(H) of the Act (which excludes Alaska and Hawaii from 
qualifying as a frontier State).
    Consistent with the proposed FY 2011 hospital inpatient prospective 
payment system (IPPS) 1.0 wage index floor for frontier States (as 
required by section 10324(a) of the ACA) (75 FR 30920 through 30921), 
we proposed to identify frontier counties by analyzing population data 
and county definitions based upon the most recent annual population 
estimates published by the U.S. Census Bureau. We divided each county's 
population total by each county's reported land area (according to the 
decennial census) in square miles to establish population density. We 
also proposed to update this analysis from time to time, such as upon 
publication of a subsequent decennial census, and if necessary, add or 
remove qualifying States from the list of frontier States based on the 
updated analysis.
    For a State that qualifies as a frontier State, in accordance with 
section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the 
ACA), we proposed that physicians' services furnished within that State 
would receive the higher of the applicable PE GPCI value calculated 
according to the standard CY 2011 methodology or a minimum value of 
1.00. Furthermore, in accordance with section 1848(e)(1)(I) of the Act 
(as added by section 10324(c) of the ACA), the frontier State PE GPCI 
floor is not subject to budget neutrality and would only be extended to 
physicians' services furnished within a frontier State.
    For determining the proposed CY 2011 PFS PE GPCI values, the 
frontier States are the following: Montana; Wyoming; North Dakota; 
Nevada; and South Dakota (as reflected in Table 25).

    Table 25--Frontier States Under Section 1848(e)(1)(I) of the Act
                [as Added by Section 10324(c) of the ACA]
------------------------------------------------------------------------
                                                               Percent
              State                   Total       Frontier     frontier
                                     counties     counties     counties
------------------------------------------------------------------------
Montana..........................           56           45           80
Wyoming..........................           23           17           74
North Dakota.....................           53           36           68
Nevada...........................           17           11           65
South Dakota.....................           66           34           52
------------------------------------------------------------------------

 (2) Summary of the CY 2011 PE GPCIs
    The PE GPCIs include three components: employee compensation, 
office rent, and medical equipment, supplies and miscellaneous expenses 
as discussed below:
     Employee Compensation: We used the 2006 through 2008 BLS 
OES data to determine the proposed employee

[[Page 73256]]

compensation component of the PE GPCIs. The proposed employee 
compensation component accounted for 40.4 percent of the total PE 
GPCIs.
     Office Rents: Consistent with the previous GPCI update, we 
used the most recent residential apartment rental data produced by HUD 
(2010) at the 50th percentile as a proxy for the relative cost 
differences in physician office rents. The proposed office rent 
component accounted for 17.7 percent of the PE GPCIs.
     Medical Equipment, Supplies, and other Miscellaneous 
Expenses: We assumed that items such as medical equipment and supplies 
have a national market and that input prices do not vary among 
geographic areas. As discussed in previous GPCI updates in the CY 2005 
and CY 2008 PFS proposed rules, specifically the fourth GPCI update (69 
FR 47503) and fifth GPCI update (72 FR 38138), respectively, some price 
differences may exist, but we believe these differences are more likely 
to be based on volume discounts rather than on geographic market 
differences. For example, large physicians' practices may utilize more 
medical equipment and supplies and therefore may or may not receive 
volume discounts on some of these items. To the extent that such 
discounting may exist, it is a function of purchasing volume and not 
geographic location. The proposed medical equipment, supplies, and 
miscellaneous expenses component was factored into the PE GPCIs with a 
component index of 1.000. The proposed medical equipment, supplies, and 
other miscellaneous expense component accounted for 41.9 percent of the 
PE GPCIs.
c. Malpractice GPCIs
    The malpractice GPCIs are calculated based on insurer rate filings 
of premium data for $1 million to $3 million mature claims-made 
policies (policies for claims made rather than services furnished 
during the policy term). The CY 2011 malpractice GPCI update reflects 
2006 and 2007 premium data.
d. Public Comments and CMS Responses on the Proposed 6th GPCI Update
    We received many public comments regarding the CY 2011 proposed 
GPCIs. Summaries of the comments and our responses follow.
    Comment: Many commenters requested that CMS delay implementation of 
the changes in underlying PE GPCI data and cost share weights until 
complete findings and recommendations from the Institute of Medicine's 
study of geographic adjustment factors for physician payment, the 
Secretary's Medicare Geographic Payment Summit, and the MEI technical 
advisory panel have been developed and considered. A few commenters 
acknowledged that the BLS OES data is the best data source for updating 
the GPCIs for CY 2011 but expressed concern that it provides data for 
MSAs and rest of state areas and not counties. The commenters believe 
that collecting data at the MSA level distorts the accuracy of the 
input costs and requested that CMS delay the update until the full ACS 
data can be evaluated and compared with the BLS OES data. A few 
commenters requested that CMS delay the GPCI update for CY 2011 as was 
done in the CY 2004 PFS final rule with comment period for the 4th GPCI 
update.
    Additionally, several commenters stated that a more comprehensive 
analysis and evaluation of the PE GPCI is required by the ACA, further 
noting that section 1848(e)(1)(H)(v) of the Act (as added by section 
3102(b) of the ACA) allows CMS until January 1, 2012 to implement the 
findings from the analysis of PE data. To that end, several commenters 
requested a more comprehensive analysis of the occupational groups used 
to determine the employee wage component of the PE GPCI to reflect the 
``true costs'' incurred by physician groups in the delivery of health 
care to Medicare beneficiaries. The commenters cited pharmaceutical, 
accounting, legal, computer science, and management professionals as 
examples of the types of nonphysician labor costs that should be 
included in the determination of the employee compensation index. 
Several commenters also stated that HUD rental data does not reflect 
the ``actual costs'' of physician office rent and therefore should be 
replaced by another data source.
    Response: Section 1848(e)(1)(C) of the Act requires us to review 
and update the GPCIs at least every 3 years. When updating the GPCIs we 
believe we should use the best data that are currently available. As 
mentioned by the commenters, the BLS OES data are more timely data than 
the 2000 census data (which has been used for previous GPCI updates). 
We believe that the BLS OES data, which are currently available, are an 
appropriate and relevant data source for updating the work GPCIs and 
employee compensation component of the PE GPCIs. Also because of the 
timeliness of the data, we believe that using the BLS OES data would 
result in a more accurate reflection of the geographic practice cost 
differences among PFS localities than not updating the GPCIs for CY 
2011.
    While we believe it is appropriate to finalize updated GPCIs for CY 
2011 using the most current data, we also acknowledge that there is 
much ongoing analysis that may inform future GPCI changes. Therefore, 
as discussed below, we are not using the revised cost share weights for 
the CY 2011 GPCIs that would apply under the revised and rebased MEI 
for CY 2011. We will address the GPCI cost share weights once again in 
the CY 2012 PFS proposed rule, and we may make additional proposals 
that would further modify the GPCI data and/or methods for CY 2012.
    Additionally, we will review the complete findings and 
recommendations from the Institute of Medicine's study of geographic 
adjustment factors for physician payment, the Secretary's Medicare 
Geographic Payment Summit, and the MEI technical advisory panel, and we 
will continue to study the issues as required by section 
1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA). 
We will once again consider the GPCIs for CY 2012 in the context of our 
annual PFS rulemaking beginning in CY 2011 based on the information 
available at that time. The CY 2011 GPCIs arising from the 6th GPCI 
update reflect our initial review and response to the currently 
available GPCI data, methods, and cost share weights. Once the full ACS 
data are available, we will reassess the occupational groups used to 
determine the employee compensation component of the PE GPCI and 
continue to explore the use of commercial rent data as part of our 
ongoing analysis of the GPCIs. We anticipate that further information, 
including our review of the full ACS data, may lead to proposed 
additional refinements to the GPCIs for future years. We have addressed 
the CY 2011 GPCI cost share weights in response to other public 
comments received on the CY 2011 PFS proposed rule that are summarized 
later in this section.
    With regard to the commenters who expressed concern that the BLS 
OES data are not collected at the county level, we note that the 2000 
Decennial Census data are only available at the county level for 
approximately 10 percent of counties. For previous updates, the GAFs 
for more than 90 percent of counties were developed based on MSAs or 
larger geographic areas (for example, data for all rural areas in a 
State were combined and used to proxy values for each rural county in a 
State). Therefore, using BLS OES data and disaggregating data to the 
county

[[Page 73257]]

level is not a significant departure from previous GPCI updates.
    Moreover, we acknowledge that in the CY 2004 PFS proposed and final 
rules (68 FR 49042 and 68 FR 63213 respectively), we updated only the 
malpractice GPCI because the special tabulation of census data used for 
the physician work GPCI and employee compensation portion of the PE 
GPCI was not yet available. We explained that no acceptable data 
sources could be found to update the work GPCIs and the employee 
compensation portion of the practice expense GPCIs. Therefore, we made 
no changes to the work GPCIs and PE GPCIs for CY 2004. However, in view 
of the statutory requirement to update the GPCIs at least every 3 
years, we do not believe it would be appropriate to finalize an update 
only for malpractice GPCIs for CY 2011, while delaying the update of 
the work GPCI and PE GPCI, when we currently have appropriate updated 
data available to us for this purpose. As discussed previously, we will 
review the GPCIs as part of the CY 2012 PFS rulemaking cycle (beginning 
in CY 2011) based on the information available at that time, and we may 
propose changes to the GPCIs prior to the next 3-year GPCI update.
    Comment: Several commenters stated that the use of HUD rental data 
is not an appropriate proxy for determining the office rent index and 
suggested that CMS use data on actual physician office rents instead. 
Additionally, one commenter questioned CMS' analysis of the Medical 
Group Management Association's (MGMA's) survey data on rent. The 
commenter raised questions as to why CMS rejected the use of MGMA 
rental data due to insufficiency in sample size and representation, 
despite admitting that the physician response rate on the MGMA survey 
was typical for surveys of business.
    Response: As we have previously explained in the CY 2005 and CY 
2008 final rules with comment period (69 FR 66262 and 72 FR 66245 
respectively), we recognize that apartment rents may not be a perfect 
proxy for measuring the relative cost differences in physician office 
rents. However, we believe the HUD rental data are the most 
comprehensive and valid indicator that is available of the real estate 
rental market in all areas of the country. We continue to believe that 
HUD rental data remain the best data source for determining the 
relative cost differences in physicians' office rent among all areas of 
the country. The data are regularly updated and available nationally, 
and retain consistency area-to-area and year-to-year. We would welcome 
any alternative rental data source that is available nationally with 
sufficient representation among PFS localities.
    With regard to our review of MGMA survey data, we have concerns 
with both the sample size and representativeness of the MGMA data. For 
example, the responses represent only about 2,250 physician practices 
nationwide and have disproportionate sample sizes by State, suggesting 
very uneven response rates geographically. In addition, we also have 
concerns that the MGMA data have the potential for response bias. The 
MGMA's substantial reliance on its membership base suggests a nonrandom 
selection into the respondent group. Some evidence for such issues in 
the MGMA data arises from the very different sample sizes by State. For 
example, in the MGMA data, 10 States have fewer than 10 observations 
each, and California, New York, and New Jersey have fewer than 10 
observations per locality. Therefore, we continue to believe the MGMA 
survey data would not be a sufficient rental data source for all PFS 
localities.
    Comment: One commenter expressed concern that the BLS OES wage data 
may result in the undervaluation of physician earnings because the data 
exclude incomes of self-employed professionals.
    Response: The GPCIs are not an absolute measure of physician 
earnings; rather, they are a measure of the relative cost differences 
for each of the three PFS components. We have no evidence to suggest 
that self-employment income would have different geographic variation 
than non-self-employed income. Absent such evidence, we would expect 
that including wage data from self-employed professionals would result 
in a geographic distribution of professional wages similar to the BLS 
OES data source.
    Comment: Many commenters stated that implementing PE GPCI changes 
in CY 2011 would reduce payment to urban areas and, therefore, would 
violate the ``hold harmless'' provision as required by the ACA.
    Response: Section 1848(e)(1)(H) of the Act (as added by section 
3102 (b) of the ACA) requires that we apply a limited recognition of 
cost differences for the rent component and employee compensation 
component of the PE GPCI as compared to the national average. This 
section also includes a ``hold harmless'' provision for CY 2010 and CY 
2011 for any PFS locality that would receive a reduction to its PE GPCI 
resulting from the limited recognition of PE cost differences. For CY 
2010 and CY 2011, we applied the limited recognition of PE cost 
differences and ``hold harmless provision'' in accordance with the 
statutory requirement, which is specific only to the limited 
recognition of rent and employee wage cost differences. In other words, 
the ``hold harmless'' (non-budget neutral) provision under section 
1848(e)(1)(H)(iii) of the Act (as added by section 3102 (b) of the ACA) 
does not apply to the effects of updated data incorporated into the 
GPCIs as a result of our normal GPCI update process. As discussed 
earlier in this section, the proposed GPCI update reflected our 
preliminary review based on the best information currently available. 
We anticipate that further information may lead to proposed additional 
refinements to the GPCIs in future years.
    Comment: One commenter recommended that CMS track the ``hold 
harmless'' transitional GPCIs to determine whether certain regions of 
the country are underpaid as a result of the application of the limited 
recognition of PE cost differences.
    Response: The ``hold harmless'' provision under section 
1848(e)(1)(H)(iii) of the Act (as added by section 3102(b) of ACA) was 
applied by selecting the greater of the CY 2011 transitional PE GPCI 
value calculated with the limited recognition of cost differences or 
the CY 2011 transitional PE GCPI value calculated with full recognition 
of cost differences. Therefore, no locality is ``underpaid'' by the 
application of the limited recognition of PE cost differences.
    Comment: One commenter requested that CMS consider applying a 1.0 
GPCI floor to non-frontier States that serve significant rural 
populations. The commenter was not specific as to which GPCI (work, PE, 
or malpractice) the floor should be applied.
    Response: As discussed previously in this section, section 
1848(e)(1)(I) of the Act (as added by section 10324(c) of the ACA) 
established a permanent 1.0 PE GPCI floor only for frontier States, and 
section 3102(a) of the ACA amended section 1848(e)(1)(E) of the Act to 
extend the 1.0 work GPCI floor for services furnished only through 
December 31, 2010. We do not otherwise have the authority to establish 
GPCI floors that do not consider the differences in physicians' 
resource costs among localities.
    Comment: A few commenters requested that CMS release underlying 
data sources, including county level GPCI values and budget neutrality 
estimates, which would allow interested parties to replicate GPCI 
calculations.
    Response: We strive to be as transparent as possible in all of our 
proposals. To that end, we have made

[[Page 73258]]

numerous files available on the CMS Web site under the downloads for 
the CY 2011 PFS proposed rule to assist in the public's review of the 
CY 2011 proposal. These files include: The preliminary contractor's 
report on data for the 6th GPCI update; the CY 2010 through CY 2012 
GPCIs, both as proposed (including the ACA provisions) and without the 
ACA provisions to permit isolation of the impacts of the updated data; 
and web links to the publicly available source data and copies of data 
files that are not otherwise publicly available, for example county and 
locality-specific RVUs from Medicare claims data and malpractice 
insurance premium data. In combination, this information allows the 
public to apply our methodology to replicate our calculations for the 
proposed GPCIs.
    Comment: Many commenters expressed concern about the proposed cost 
share weights for the rent component and medical equipment, supplies, 
and other miscellaneous component of the PE GPCI. The commenters stated 
that the proposed cost share weights would unjustifiably shift Medicare 
payment away from urban localities to rural localities. Several 
commenters suggested that portions of the ``all other services'' 
component of the office expenses cost category, (which includes 
maintenance services, storage, security and janitorial services, office 
equipment, information technology systems, and medical record systems) 
and the stand-alone ``other professional services'' cost category 
(which includes accounting services, legal services, office management 
services, continuing education, professional association memberships, 
journals, and professional care expenses) are wage-related and, 
therefore, should be adjusted for locality cost differences. 
Additionally, a few commenters stated that the cost share weight 
attributed to the rent component of the PE GPCI should vary by region 
because one national cost share weight for rent penalizes areas where 
office rent is a higher portion of practice expenses.
    Response: Although we typically update the GPCI cost share weights 
concurrently with the most recent MEI revision and rebasing, the 
commenters raised many points regarding the reallocation of labor-
related costs from the medical equipment and supplies and miscellaneous 
component to the employee compensation component of the PE GPCI. After 
consideration of the public comments we received on this issue, we will 
continue to use the current GPCI cost share weights for CY 2011. We 
have asked the Institute of Medicine to evaluate the accuracy of the 
geographic adjustment factors used for Medicare physician payment. The 
Institute of Medicine will prepare two reports for Congress and the 
Secretary of the Department of Health and Human Services. The first 
report, expected in spring 2011, will include an evaluation of the 
accuracy of geographic adjustment factors, and the methodology and data 
used to calculate them. The second report, expected in spring 2012, 
will evaluate the effects of the adjustment factors on the distribution 
of the health care workforce, quality of care, population health, and 
the ability to provide efficient, high-value care. For more information 
on the Institute of Medicine's study on Medicare geographic adjustment 
factors, we refer readers to the Institute of Medicine Web site: http://iom.edu/Activities/HealthServices/GeographicAdjustments.aspx.
    We will explore further the options that were raised to us by the 
commenters and the recommendations in the forthcoming Institute of 
Medicine report(s). We will also continue our analysis of the cost 
share weights attributed to the PE GPCI as required by section 
1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA), 
including the possibility of assigning cost share weights to the rent 
component of the PE GPCI that vary among fee schedule areas. We will 
address the GPCI cost share weights again in the CY 2012 PFS proposed 
rule.
    Comment: MedPAC suggested an alternative method for calculating the 
PE GPCI. This alternative PE GPCI method would account for variations 
in the cost share of equipment and supplies across services.
    Response: We appreciate MedPAC's suggestion of an alternative 
method that would vary the portion of PE that is geographically 
adjusted for locality differences based on the characteristics of 
individual services, rather than applying a uniform percentage across 
all PFS services. We recommend that MedPAC continue to analyze this or 
other alternative geographic adjustment methods, including their 
administrative feasibility.
    Comment: A few commenters stated that the ``range of disparity'' 
between the highest and lowest paid PFS localities is too large and 
contradicts data studies showing little to no distinction in physician 
practice expenses throughout the nation. For example, the commenters 
stated that the AMA's analysis of its own PPIS data concluded that 
``expenses did not differ significantly by either metro location or 
Census region.'' One commenter requested an explanation of the 
discrepancy between the AMA's findings of no measurable practice 
expense distinctions and CMS' findings that continue to show 
substantial distinctions in physician practice expenses among the 
Medicare payment localities. Another commenter stated that a 2007 
survey conducted by the journal, Medical Economics, indicated that the 
average practice expenses are highest in the Midwestern States (which 
is contrary to the proposed CY 2011 GPCIs).
    Response: We have reviewed the studies referenced by the commenters 
and compared their findings with the GPCI values calculated for the CY 
2011 PFS proposed rule. As mentioned by the commenters, both the AMA 
and Medical Economics studies aggregated per-physician expenses at the 
Census region level. The AMA PPIS analysis showed the Northeast as 
having the lowest per-physician expenses, followed by the Midwest then 
the West, with the South identified as having the highest expenses. 
Although there is about a 20 percent difference in total expenses 
between the Northeast and South, the study noted that the difference 
was not significant after controlling for practice setting and 
physician specialty. The Medical Economics survey findings showed about 
a 30 percent difference in costs, with the East showing the lowest 
expenses and the Midwest with the highest. Both studies demonstrated 
that rural areas have the highest per-physician expenses and highly 
populated areas the lowest.
    To compare the variation of PE GPCI values calculated for the CY 
2011 PFS proposed rule to the AMA and Medical Economics studies, we 
used PE RVUs to create weighted averages of the PE GPCIs by Census 
region. Additionally, because the AMA and Medical Economics data 
reported total per-physician practice expenses, whereas the GPCI is a 
cost index, we produced indices for each source to create comparable 
measures of variation. We then normalized each index to the lowest cost 
area from each data source. Consequently, the index values show the 
percent difference in costs relative to the lowest cost area. For 
example, the AMA study shows the Northeast as having the lowest per-
physician expenses, thus establishing an index value of 1.00 for that 
area. For the AMA study, the Midwest index value is 1.07 which 
signifies that costs in the Midwest are 7 percent above the Northeast 
AMA values. The PE GPCI data indicate that the Midwest has the lowest 
costs; and the South, with an

[[Page 73259]]

index value of 1.01, has costs that are 1 percent above the Midwest 
GPCI values. When aggregated to the Census region, the PE GPCIs showed 
less variation in costs than the comparison data sources (AMA PPIS and 
Medical Economics). Using the PE GPCI data to calculate Census region 
indices produced only a 16 percent difference in costs between the most 
costly and least costly areas, equating to roughly half the variation 
found in the Medical Economics survey and about 75 percent of the 
variation found in the PPIS study. Table 26 compares the results on the 
disparity in costs by Census region.

                               Table 26--Census Region Cost Indices by Data Source
----------------------------------------------------------------------------------------------------------------
                                                                                     PE GPCI components
                                                   Medical      PE GPCI   --------------------------------------
                                        AMA       economics       data                                  Office
                                                                               Rent        Wages       supplies
----------------------------------------------------------------------------------------------------------------
Midwest...........................         1.07         1.29         1.00         1.00         1.04         1.00
South.............................         1.21         1.20         1.01         1.12         1.00         1.00
West..............................         1.11         1.06         1.14         1.47         1.17         1.00
Northeast.........................         1.00         1.00         1.16         1.55         1.18         1.00
----------------------------------------------------------------------------------------------------------------

    Additionally, the conceptual approaches to the GPCIs and the data 
sources noted by the commenters are sufficiently different to make 
comparisons extremely difficult. The different rank ordering in the 
costs by regions, as shown in Table E4, may also reflect the different 
strategies used to measure costs. Specifically, the AMA and Medical 
Economics studies ordered areas based on total physicians' expenses, 
whereas the GPCIs are intended to provide a local cost index that is 
then applied to each PFS component; work, practice expense, and 
malpractice expense. Based on our review of the AMA PPIS and Medical 
Economics studies, a key factor in explaining differences with the 
proposed GPCI values is differences in practice patterns across the 
different areas. Specifically, rural practitioners tend to see more 
patients, incurring higher expenses. However, as noted in the Medical 
Economics study, higher patient loads result in higher payment. To 
place this in the context of Medicare PFS payment, seeing more patients 
produces more billed services, allowed charges, and payments. 
Therefore, the greater number of patients seen by rural physicians is 
accounted for in total RVUs to the physician, rather than through the 
GPCI values.
    Moreover, the very low cost ranking of the Northeast in both the 
AMA PPIS and Medical Economics datasets suggests a possible influence 
of economies of scale. The GPCIs are designed to capture differences in 
the prices of inputs facing physicians in each region. The input prices 
are used to create GPCI values as a measure of the relative cost 
differences in operating a medical practice in one locality versus 
another. It is likely that the AMA and Medical Economics studies are 
capturing differences in the production of services, distinct from the 
input prices. In particular, the geographic differences may reflect 
differences in economies of scale in more and less urbanized areas. 
More rural practitioners are less likely to work in large practices, 
leading to higher per-physician costs, all else being equal. For 
example, a two-physician practice may need the same number of front 
office staff as a one-physician practice. When this expense is measured 
on a per-physician basis, the single physician pays twice as much for 
front office support. This type of variation can occur within 
localities and may reflect the practitioner's choice to work in a small 
or large physician practice. Nevertheless, there is no mechanism within 
the existing GPCI approach to account for the influence of economies of 
scale, despite its potentially significant impact on the effective per-
unit costs of providing care.
    Comment: Several commenters recommended that CMS use data from a 
reliable survey of physicians' practices, such as the AMA PPIS or the 
MGMA survey, to develop the office rent index and employee compensation 
index.
    Response: Because of the limited sample sizes of the AMA PPIS (n = 
2,137) and MGMA studies (n = 2,246), we do not believe that it would be 
possible to calculate reliable indices for all Medicare PFS localities 
based upon these data. As mentioned previously, in the MGMA data, 10 
States have fewer than 10 observations each, and California, New York, 
and New Jersey have fewer than 10 observations per locality.
    In light of the comments received suggesting the use of survey data 
to determine GPCI values and the typical response rates for existing 
physician surveys, we are continuing to consider the possibility of 
establishing a physician cost report and requiring a sufficiently large 
sample of physicians in each locality to report data on actual costs 
incurred. However, we believe that a physician cost report could take 
years to develop and implement, and could be prohibitively expensive. 
We also have some concerns about the administrative burden this 
approach would place on physician's office staff. Therefore, we are 
requesting specific public comments regarding the potential benefits to 
be gained from establishing a physician cost report and whether this 
approach is appropriate to achieve potentially greater precision in 
measuring the relative cost differences in physicians' practices among 
PFS localities. We are also requesting public comments on the potential 
administrative burden of requiring physicians to routinely complete and 
submit a cost report and whether this requirement should be mandatory 
for all physician practices. Additionally, we have asked the Institute 
of Medicine to look at the use of survey data in the context of their 
geographic adjustment analysis. It is also our understanding that 
MedPAC is considering the issue of data sources used to determine 
geographic payment adjustments under the PFS.
    Comment: One commenter stated that all geographic adjustment 
factors should be eliminated from the Medicare PFS ``except for those 
designed to achieve a specific public policy goal, for example, to 
encourage physicians to practice in underserved areas.'' The commenter 
requested that CMS utilize the most broadly applicable methodology 
allowed by law to reduce geographic payment disparity.
    Response: We are required by section 1848(b)(1)(C) and (e)(1)(A) of 
the Act to develop and apply separate GPCIs to adjust for resource cost 
differences among localities compared to the national average for each 
of the three PFS components: work, practice expense, and malpractice 
expense. The purpose of the GPCIs is not to reduce

[[Page 73260]]

geographic payment disparity; rather, the GPCIs distribute PFS payments 
among areas in order to adjust for area cost differences. In general 
the data show that urban areas usually are higher cost, while rural 
areas are lower cost. However, there are several provisions currently 
in place that have the effect of reducing geographic payment 
disparities. For example, the statute requires that only one-quarter of 
area cost differences in physician work be recognized, and we assign a 
1.0 index to the medical equipment, supplies, and miscellaneous 
component of the PE GPCI because we believe there is a national market 
for these items. In addition, 34 States and 2 territories are 
``Statewide'' payment localities wherein all physicians, whether urban 
or rural, are paid the same. Moreover, many geographic areas are 
designated as Health Professional Shortage Areas (HPSAs). Physicians in 
these areas may be eligible for a 10 percent HPSA bonus payment in 
addition to the amount paid under the Medicare PFS for services they 
furnish. Beginning in CY 2011, general surgeons furnishing major 
surgical procedures in these areas may be eligible for the HPSA 
surgical incentive payment program (HSIP) that also pays 10 percent in 
addition to the amount paid under the PFS as discussed in section 
VI.S.2. of this final rule with comment period. For complete 
information on the HPSA bonus payment program and a list of eligible 
areas for both programs by zip code, we refer readers to the CMS Web 
site at: http://www.cms.hhs.gov/hpsapsaphysicianbonuses/01_overview.asp. All of these factors mentioned above have the effect of 
reducing geographic payment disparities under the Medicare PFS.
    Comment: One commenter encouraged CMS to follow the GAO's 
recommendations, as outlined in the GAO's March 2005 Report (GAO-05-
119), for improving underlying GPCI data and methods by taking the 
following actions:
     Transition from Census Bureau's Decennial Census data to 
the annual ACS for earning and wage data.
     Include physician assistant wage data to improve the 
measurement of the PE GPCI.
     Consider the feasibility of using a commercial rent index 
or a residential rent index directly based on ACS data for determining 
the rent component of the PE GPCI.
     Collect malpractice premium data from all States, 
accounting for at least half of the malpractice business in a State.
     Standardize collection of malpractice premium data, for 
example by using data from Physician Insurer's Association of America.
    Response: As previously discussed, the full ACS data were not 
available in time for the 6th GPCI update. We intend to explore the use 
of ACS data for determining the work GPCI and the employee compensation 
component of the PE GPCI, as well as evaluate its possible use as an 
office rent index once the data are fully available. We also intend to 
continue exploring the potential use of commercial rent data as part of 
our ongoing review and refinement of the GPCIs.
    Additionally, we have considered the use of physician assistant 
wages in calculating the employee compensation index. However, since 
physician assistants can furnish medical services and bill the Medicare 
program directly, their wages are influenced by Medicare PFS payment. 
Therefore, we have some concern that a circular effect could occur if 
we included physician assistants among the occupational groups 
comprising the employee compensation component, similar to our concern 
with including physicians' salaries in the determination of the work 
GPCI.
    With regard to the collection of malpractice premium data, the CY 
2011 malpractice GPCI update reflects 2006 and 2007 premium data which 
were also used for the CY 2010 update to the malpractice RVUs. As 
compared to previous malpractice RVU updates, we substantially 
increased the number of States from which we were able to collect rate 
filings. We were able to collect malpractice premium data from every 
State except for Mississippi and Puerto Rico. Premium data were 
selected from at least two companies in each State, with more selected 
if necessary to reach 50 percent of the market share in that State. To 
ensure consistency across States we collected premium data from State 
Departments of Insurance. For States where we were not able to collect 
rate fillings, we used premium information from the Medical Liability 
Monitor Survey data from 2005 through 2008.
e. Summary of Final CY 2011 GPCIs
    After consideration of the public comments received on the GPCIs, 
we are finalizing the 6th GPCI update using the most current data, with 
modifications; we are not finalizing the proposal to change the GPCI 
cost share weights for CY 2011. Instead, we are continuing to use the 
current GPCI cost share weights for determining the PE GPCI values and 
locality GAFs in CY 2011, and we will address the cost share weights 
again in the CY 2012 PFS proposed rule. As a result, the cost share 
weight for the physician work GPCI (as a percentage of the total) will 
be 52.5 percent (current and for CY 2011) rather than 48.3 percent (as 
proposed), and the cost share weight for the PE GPCI will be 43.7 
percent (current and for CY 2011) rather than 47.4 percent (as 
proposed) with only a slight difference in the employee compensation 
component (18.7 percent rather than 19.2 percent as proposed). However, 
the cost share weight for the office rent component of the PE GPCI will 
be 12.2 percent (current and for CY 2011) rather than 8.4 percent (as 
proposed), and the medical equipment, supplies, and other miscellaneous 
expenses component will be 12.8 percent (current and for CY 2011) 
rather than 19.9 percent (as proposed). Moreover, the cost share weight 
for the malpractice GPCI will be 3.9 percent (current and for CY 2011) 
rather than 4.3 percent (as proposed).
    Additionally, we will review the complete findings and 
recommendations from the Institute of Medicine's study of geographic 
adjustment factors for physician payment, the Secretary's Medicare 
Geographic Payment Summit, and the MEI technical advisory panel, and 
continue to study the issues as required by section 1848(e)(1)(H)(iv) 
of the Act (as added by section 3102(b) of the ACA). We will once again 
consider the GPCIs for CY 2012 in the context of our annual PFS 
rulemaking beginning in CY 2011 based on the information available at 
that time.
    We are using the 2006 through 2008 panels from the BLS OES data for 
updating the work GPCIs and the employee compensation component of the 
PE GPCIs. We are also using the 2010 apartment rental data produced by 
HUD at the 50th percentile as a proxy for the relative cost difference 
in physicians' office rents and 2006 and 2007 malpractice premium data 
for determining the malpractice GPCIs.
    As required by section 1848(e)(1)(H)(ii) and (iii) of the Act (as 
added by section 3102(b) of the ACA), the CY 2011 GPCIs reflect only 
one-half of the relative cost differences for the employee compensation 
and rent portions of the PE GPCI, and the ``hold harmless'' provision 
ensures that no locality receives a payment reduction resulting from 
the limited recognition of PE cost differences. For CY 2011, the ``hold 
harmless'' provision was applied by selecting the greater of the CY 
2011 transitional PE GPCI value calculated with the limited recognition 
of cost differences or the CY 2011 transitional

[[Page 73261]]

PE GPCI value calculated with full recognition of cost differences.
    In accordance with section 1848(e)(1)(I) of the Act (as added by 
section 10324(c) of the ACA), and consistent with the final FY 2011 
hospital IPPS (75 FR 5160 through 5161), we applied a 1.0 PE GPCI floor 
for services furnished in frontier States. The frontier States are the 
following: Montana; Wyoming; North Dakota; Nevada; and South Dakota. As 
we indicated above in this section, section 1848(e)(1)(E) of the Act 
(as amended by section 3102(a) of the ACA) extended the 1.0 work GPCI 
floor only through December 31, 2010. Therefore, the CY 2011 physician 
work GPCIs and summarized GAFs do not reflect the 1.0 work floor. 
However, the permanent 1.5 work GPCI floor for Alaska (as established 
by section 134(b) of the MIPPA) will remain in effect for CY 2011.
    We are finalizing the CY 2011 GPCIs shown in Addendum E. The GPCIs 
have been budget neutralized to ensure that nationwide, total RVUs are 
not impacted by changes in locality GPCIs. The 1.0 PE GPCI floor for 
frontier States and the PE GPCI ``hold harmless'' provision were 
applied to the budget neutralized GPCIs.
    Typically when we complete a review and update of the GPCIs, the 
values shown represent the first year of the 2-year GPCI update 
transition. Although the CY 2011 GPCIs have been set on that basis, we 
note that we will be assessing the results of the various studies 
regarding the GPCIs and cost share weights (once they are completed), 
and exploring the use of the full ACS data. Based on these assessments, 
we may make additional proposals that would further modify the GPCIs 
for CY 2012, which would result in changes to the CY 2012 GPCIs shown 
in Addendum E to this final rule with comment period. Therefore, the 
final CY 2011 GPCIs may not reflect a true mid-point ``phase-in'' to 
the updated GPCIs, although, as noted above, they have been set for CY 
2011 on that basis. The CY 2011 updated GAFs and GPCIs may be found in 
Addenda D and E of this final rule with comment period.
3. Payment Localities
    The current PFS locality structure was developed and implemented in 
1997. There are currently 89 localities; 34 localities are Statewide 
areas. There are 52 localities in the other 18 States, with 10 States 
having 2 localities, 2 States having 3 localities, 1 State having 4 
localities, and 3 States having 5 or more localities. The District of 
Columbia, Maryland, and Virginia suburbs, Puerto Rico, and the Virgin 
Islands are additional localities that make up the remainder of the 
total of 89 localities. The development of the current locality 
structure is described in detail in the CY 1997 PFS proposed rule (61 
FR 34615) and the subsequent final rule with comment period (61 FR 
59494).
    As we have previously noted in the CYs 2008 and 2009 proposed rules 
(72 FR 38139 and 73 FR 38513), any changes to the locality 
configuration must be made in a budget neutral manner within a State 
and can lead to significant redistributions in payments. For many 
years, we have not considered making changes to localities without the 
support of a State medical association in order to demonstrate 
consensus for the change among the professionals whose payments would 
be affected (with some increasing and some decreasing). However, we 
have recognized that, over time, changes in demographics or local 
economic conditions may lead us to conduct a more comprehensive 
examination of existing payment localities.
    For the past several years, we have been involved in discussions 
with physician groups and their representatives about recent shifts in 
relative demographics and economic conditions, most notably within the 
current California payment locality structure. We explained in the CY 
2008 PFS final rule with comment period that we intended to conduct a 
thorough analysis of potential approaches to reconfiguring localities 
and would address this issue again in future rulemaking. For more 
information, we refer readers to the CY 2008 PFS proposed rule (72 FR 
38139) and subsequent final rule with comment period (72 FR 66245).
    As a follow-up to the CY 2008 PFS final rule with comment period, 
we contracted with Acumen to conduct a preliminary study of several 
options for revising the payment localities on a nationwide basis. The 
contractor's interim report was posted on the CMS Web site on August 
21, 2008, and we requested comments from the public. The report 
entitled, ``Review of Alternative GPCI Payment Locality Structures,'' 
remains accessible from the CMS PFS Web page under the heading 
``Interim Study of Alternative Payment Localities under the PFS.'' The 
report may also be accessed directly from the following link: http://www.cms.hhs.gov/PhysicianFeeSched/10_Interim_Study.asp#TopOfPage.
    We accepted public comments on the interim report through November 
3, 2008. The alternative locality configurations discussed in the 
report are described briefly below in this section.
Option 1: CMS Core-Based Statistical Area (CBSA) Payment Locality 
Configuration
    This option uses the Office of Management and Budget (OMB's) 
Metropolitan Statistical Area (MSA) designations for the payment 
locality configuration. MSAs would be considered as urban CBSAs. 
Micropolitan Areas (as defined by OMB) and rural areas would be 
considered as non-urban (rest of State) CBSAs. This approach would be 
consistent with the IPPS pre-reclassification CBSA assignments and with 
the geographic payment adjustments used in other Medicare payment 
systems. This option would increase the number of PFS localities from 
89 to 439.
Option 2: Separate High-Cost Counties from Existing Localities 
(Separate Counties)
    Under this approach, higher cost counties are removed from their 
existing locality structure and they would each be placed into their 
own locality. This option would increase the number of PFS localities 
from 89 to 214, using a 5 percent GAF differential to separate high-
cost counties.
Option 3: Separate MSAs from Statewide Localities (Separate MSAs)
    This option begins with statewide localities and creates separate 
localities for higher cost MSAs (rather than removing higher cost 
counties from their existing locality as described in Option 2). This 
option would increase the number of PFS localities from 89 to 130, 
using a 5 percent GAF differential to separate high-cost MSAs.
Option 4: Group Counties Within a State Into Locality Tiers Based on 
Costs (Statewide Tiers)
    This option creates tiers of counties (within each State) that may 
or may not be contiguous but share similar practice costs. This option 
would increase the number of PFS localities from 89 to 140, using a 5 
percent GAF differential to group similar counties into statewide 
tiers.
    As discussed in Acumen's interim report, all four studied 
alternative locality configurations would increase the number of 
localities and separate higher cost areas from rural ``rest of state'' 
areas. As a result, payments to urban areas would increase, while rural 
areas would see a decrease in payment because they would no longer be 
grouped with higher cost ``urbanized'' areas. A number of public 
commenters

[[Page 73262]]

on the draft report expressed support for Option 3 (separate MSAs from 
Statewide localities) because the commenters believed this alternative 
would improve payment accuracy over the current locality configuration 
and could mitigate possible payment reductions to rural areas as 
compared to Option 1 (CMS CBSAs). Therefore, Acumen is conducting a 
more in-depth analysis of the dollar impacts that would result from the 
application of Option 3. For a detailed discussion of the public 
comments on the contractor's interim locality study report, we refer 
readers to the CY 2010 PFS proposed rule (74 FR 33534) and subsequent 
final rule with comment period (74 FR 61757).
    We note that the discussion of PFS payment localities and our 
preliminary study of alternative payment locality configurations in the 
CY 2011 PFS proposed rule was intended for informational purposes only. 
We did not make any proposals regarding the PFS locality configurations 
for CY 2011 and, therefore, public comments on the PFS locality 
configurations are not within scope of the CY 2011 PFS proposed rule. 
We thank the commenters for sharing their views and suggestions; 
however, we are not summarizing or responding to `out of scope' 
comments in this final rule with comment period.

E. PFS Update for CY 2010: Rebasing and Revising of the Medicare 
Economic Index (MEI)

1. Background
    The Medicare Economic Index (MEI) was originally required by 
section 1842(b)(3) of the Act, which states that prevailing charge 
levels beginning after June 30, 1973 may not exceed the level from the 
previous year except to the extent that the Secretary finds, on the 
basis of appropriate economic index data, that such higher level is 
justified by year-to-year economic changes. We continued to use the MEI 
as part of the statutory update formula (specified under section 1848 
of the Act) when the physician fee schedule was implemented in 1992 (56 
FR 59511).
    Beginning July 1, 1975, and continuing through today, the MEI has 
served these purposes by reflecting the weighted-average annual price 
change for various inputs needed to furnish physicians' services. As 
such, the index is necessarily a fixed-weight input price index, with 
an adjustment for the change in economy-wide, private nonfarm business 
multifactor productivity. The MEI is comprised of two broad categories: 
(1) Physician's own time; and (2) physician's practice expense (PE).
    The MEI was first published on June 16, 1975 (40 FR 25446), and 
became effective for services furnished beginning July 1, 1975. The 
original MEI had a base period of 1971. The structure of the original 
MEI remained essentially unchanged from its original until the CY 1993 
final rule (57 FR 55896) in which we finalized a comprehensive rebasing 
and revision process with a 1989 base year. The new index was based in 
part on the recommendations of a Congressionally-mandated meeting of 
experts held in March 1987. The MEI was again rebased in the CY 1999 
final rule (63 FR 58845), which moved the cost structure of the index 
from a 1989 base to a 1996 base. The methodology for the productivity 
adjustment was revised in the CY 2003 final rule (67 FR 80019) to 
reflect the percentage change in the 10-year moving average of economy-
wide private nonfarm business multifactor productivity (previously the 
index was adjusted by a measure of labor productivity). The current 
form of the MEI was detailed in the CY 2004 PFS final rule (68 FR 
63239) which updated the cost structure of the index from a base year 
of 1996 to 2000.
    We proposed to rebase and revise the MEI and incorporate it into 
the CY 2011 PFS update. The terms ``rebasing'' and ``revising'', while 
often used interchangeably, actually denote different activities. 
Rebasing refers to moving the base year for the structure of costs of 
an input price index, while revising relates to other types of changes 
such as changing data sources, cost categories, or price proxies used 
in the price index. As is always the case with a rebasing and revising 
exercise, we have used the most recently available, relevant, and 
appropriate information to develop the proposed MEI cost category 
weights and price proxies. In the following sections of this final rule 
with comment period, we detail our proposals and respond to comments 
regarding the updated cost weights for the MEI expense categories, our 
rationale for selecting the price proxies in the MEI, and the results 
of the rebasing and revising of the MEI.
2. Use of More Current Data
    The MEI was last rebased and revised in 2003 in the CY 2004 PFS 
final rule with comment period (68 FR 63239). The current base year for 
the MEI is 2000, which means that the cost weights in the index reflect 
physicians' expenses in 2000. However, we believe it is desirable to 
periodically rebase and revise the index so that the expense shares and 
their associated price proxies reflect more current conditions. For the 
CY 2011 PFS update, we are finalizing the proposal to rebase and revise 
the MEI to reflect appropriate physicians' expenses in 2006.
    Compared to the 2000-based MEI, we proposed to make several changes 
to the MEI cost structure. First, we proposed to exclude the 
Pharmaceutical cost category as pharmaceuticals are neither paid for 
under the PFS nor are they included in the definition of ``physicians' 
services'' for purposes of calculating the physician update via the SGR 
system (for more details see the CY 2010 PFS final rule with comment 
period (74 FR 61961 through 61962)). We also proposed to exclude the 
expenses associated with separately billable supplies since these items 
are not paid for under the PFS. Our primary data source, the 2006 
Physician Practice Information Survey (PPIS), collected data on these 
costs enabling us to accurately remove them from the index. In 
addition, we proposed to include nine new cost categories that 
disaggregate the costs under the broader Office Expenses cost category. 
The 2000-based MEI did not break these expenses into individual cost 
categories. As a result of comments received, which are described more 
fully below in this section, we are modifying this proposal to instead 
include ten detailed cost categories. As indicated in the CY 2011 PFS 
proposed rule, we proposed to continue to adjust the MEI for economy-
wide multifactor productivity based on changes in the 10-year moving 
average of private nonfarm business multifactor productivity. After 
considering the comments received, we are finalizing our proposal to 
continue to adjust the MEI for economy-wide multifactor productivity 
based on changes in the 10-year moving average of private nonfarm 
business multifactor productivity.
3. Rebasing and Revising Expense Categories in the MEI
    The MEI is used in conjunction with the SGR system to update the 
PFS and represents the price component of that update. The proposed 
expense categories in the index, along with their respective weights, 
are primarily derived from data collected in the 2006 AMA PPIS for 
self-employed physicians and selected self-employed non-medical doctor 
specialties. As noted, in addition to data on medical doctors, we 
included data from several non-medical doctor specialties in the MEI 
cost weight calculations (including optometrists, oral surgeons, 
podiatrists, and chiropractors) consistent with the definition of the 
term ``physician'' in section 1861(r) of the Act. In summary,

[[Page 73263]]

the term ``physician'' when used in connection with the performance of 
functions or actions an individual is legally authorized to perform 
means the following: (1) A doctor of medicine or osteopathy; (2) a 
doctor of dental surgery or of dental medicine; (3) a doctor of 
podiatric medicine; (4) a doctor of optometry; or (5) a chiropractor. 
For a complete definition, please see section 1861(r) of the Act. We 
weighted the expense data from the above-referenced specialties with 
the self-employed physician expense data using physician counts by 
specialty, the same methodology used in the AMA PPIS.
    The AMA PPIS data were used to determine the expenditure weights in 
the MEI for all of the major cost categories including total expenses, 
physicians' earnings, physicians' benefits, employed physician payroll, 
nonphysician compensation, office expenses, professional liability 
insurance (PLI), medical equipment, medical supplies, and other 
professional expenses. We are finalizing our proposal to further 
disaggregate both non-physician compensation and office expenses into 
subcategories reflecting more detailed expenses. We used several data 
sources for further disaggregation of expenses including: data from the 
2002 Bureau of Economic Analysis (BEA) Benchmark Input-Output table (I/
O), the 2006 Bureau of the Census Current Population Survey (CPS), the 
2006 Bureau of Labor Statistics (BLS) Occupational Employment Survey 
(OES), the 2006 Employment Cost for Employee Compensation Survey 
(ECEC), and the 2006 Internal Revenue Service (IRS) Statistics of 
Income (SOI) data. The development of each of the cost categories using 
these sources is described in detail below.
a. Developing the Weights for Use in the MEI
    Developing a rebased and revised MEI requires selecting a base year 
and determining the appropriate expense categories. We proposed to 
rebase the MEI to CY 2006. We choose CY 2006 as the base year as: 1) 
this is the most recent year for which comprehensive physician expense 
data are available; and (2) we believe these data represent an accurate 
proxy for the physician expense distribution in CY 2011.
    Table 27 lists the set of mutually exclusive and exhaustive cost 
categories that make up the final rebased and revised MEI, including 
the addition of the All Other Products category we are adopting in 
response to public comments.

  Table 27--Final 2006 MEI Cost Categories, Weights, and Price Proxies Compared to the 2000 MEI Cost Categories
                                                   and Weights
----------------------------------------------------------------------------------------------------------------
                                     Final 2006-
           Cost category             cost weights    2000 Cost                  2006 Price proxies
                                        (1,2)         weights
----------------------------------------------------------------------------------------------------------------
Total.............................        100.00         100.000
Physician's Compensation (Own              48.266         52.466
 Time) \(3)\.
    Wages and Salaries............         43.880         42.730  AHE Total Nonfarm Private for Production &
                                                                   Nonsupervisory Employees.\(5)\
    Benefits (3),(4)..............          4.386          9.735  ECI-Benefits Total Nonfarm Private.\(6)\
Physician's Practice Expense......         51.734         47.534
    Nonphysician Employee                  19.153         18.654
     Compensation.
    Nonphysician Employee Wages            13.752         13.809
     and Salaries.
        Prof/Tech Wages...........          6.006          5.887  ECI-Wages/Salaries: Private Professional
                                                                   &Technical.
        Managerial Wages..........          1.446          3.333  ECI-Wages/Salaries: Private Managerial.
        Clerical Wages............          4.466          3.892  ECI-Wages/Salaries: Private Clerical.
        Services Wages............          1.834          0.696  ECI-Wages/Salaries: Private Service.
    Nonphysician Employee Benefits          5.401          4.845  ECI-Ben: Private Blend.
     \(4)\.
    Office Expenses...............         20.035         12.209
        Utilities.................          1.266  .............  CPI Fuel & Utilities.\(7)\
        Chemicals.................          0.723  .............  PPI for Other Basic Organic Chemical
                                                                   Manufacturing.\(8)\
        Paper.....................          0.657  .............  PPI for Converted Paper.
        Rubber & Plastics.........          0.598  .............  PPI for Rubber and Plastics.
        Telephone.................          1.501  .............  CPI for Telephone Services.
        Postage...................          0.898  .............  CPI for Postage.
        All Other Services........          3.582  .............  ECI Compensation Services Occupations.
        All Other Products........          0.500  .............  CPI-U All Items Less Food and Energy.
        Fixed Capital.............          8.957  .............  CPI for Owner's Equivalent Rent.
        Moveable Capital..........          1.353  .............  PPI for Machinery and Equipment.
    PLI...........................          4.295          3.865  CMS-Prof. Liab. Phys. Premiums.
    Medical Equipment.............          1.978          2.055  PPI-Medical Instruments & Equip.
    Pharmaceuticals and Medical             1.760          4.320
     Materials and Supplies.
        Pharmaceuticals...........  .............          2.309
        Medical Materials and               1.760          2.011  PPI Surg. Appliances and Supplies/CPI(U) Med
         Supplies.                                                 Supplies.

[[Page 73264]]

 
    Other Professional Expenses...          4.513  .............  CPI-U All Items Less Food and Energy.
    Other Expenses................  .............          6.433
----------------------------------------------------------------------------------------------------------------
(1) Due to rounding, weights may not sum to 100.000 percent.
(2) Sources: 2006 Physician Practice Information Survey (PPIS), Center for Health Policy Research, American
  Medical Association; 2006 Employment Cost for Employee Compensation, U.S. Department of Labor, Bureau of Labor
  Statistics; 2006 Occupational Employment Statistics (OES), BLS; U.S. Department of Commerce, Bureau of
  Economic Analysis 2002 Benchmark Input Output Tables, and U.S. Department of Commerce, Bureau of the Census,
  2006 Current Population Survey.
(3) Includes employed physician payroll.
(4) Includes paid leave.
(5) Average Hourly Earnings (AHE)
(6) Employment Cost Index (ECI)
(7) Consumer Price Index (CPI)
(8) Producer Price Index (PPI)

    The development of each of the cost categories in the final 2006 
MEI is described, in detail, as follows.
b. Physician's Own Time
    The component of the MEI that reflects the physician's own time is 
represented by the net income portion of business receipts. The 
proposed 2006 cost weight associated with the physician's own time 
(otherwise referred to as the Physician Compensation cost weight) is 
based on 2006 AMA PPIS data for mean physician net income (physician 
compensation) for self-employed physicians and for the selected self-
employed specialties referenced previously in this rule.
    We proposed to continue to add employed physician compensation to 
self-employed physician compensation in order to calculate an aggregate 
Physician Compensation cost weight. By including the compensation of 
employed physicians in the Physician Compensation expense category, 
these expenses will be adjusted by the appropriate price proxies for a 
physician's own time. The proposed 2006 Physician Compensation cost 
weight is 48.266 percent as compared to a 52.466 percent share in the 
2000-based MEI. We split the Physician Compensation component into two 
subcategories: Wages & Salaries; and Benefits. For self-employed 
physician's compensation, the ratios for Wages & Salaries and Benefits 
were calculated using data from the PPIS. Self-employed physician wages 
& salaries accounted for 92.2 percent of physician compensation while 
physician benefits accounted for the remaining 7.8 percent. For 
employed physician payroll, the distribution for wages & salaries and 
benefits for 2006 was 85.8 percent and 14.2 percent, respectively. This 
ratio was determined by calculating a weighted average of available SOI 
data for partnerships, corporations, and S-corporations specific to 
physicians and outpatient care centers. Based on these methods, the 
proposed 2006 Physician Wages & Salaries cost weight was 43.880 percent 
and the proposed 2006 Physician Benefits cost weight was 4.386 percent.
c. Physician's Practice Expenses
    To determine the remaining individual Practice Expenses cost 
weights, we used mean expense data from the 2006 PPIS survey expressed 
as a percentage of total expenses. The detailed explanations for the 
derivation of the individual weights under Practice Expenses are listed 
below.
(1) Nonphysician Employee Compensation
    The cost weight for Nonphysician Employee Compensation was 
developed using the 2006 AMA PPIS mean expenses for these costs. We 
further divided this cost share into Wages & Salaries and Benefits 
using 2006 BLS Employer Costs for Employee Compensation (ECEC) data for 
the Health Care and Social Assistance (private industry) category. 
Although this survey does not contain data only for offices of 
physicians, data are available to help determine the shares associated 
with wages & salaries and benefits for private industry health care and 
social assistance services (which include offices of physicians, 
hospitals, nursing homes, and offices of dentists). We believe these 
data provide a reasonable estimate of the split between wages and 
benefits for employees in physicians' offices. Data for 2006 in the 
ECEC for Health Care and Social Assistance indicate that wages and 
benefits are 71.8 percent and 28.2 percent of compensation, 
respectively. The 2000-based MEI included a wage and benefit split of 
74.0 percent and 26.0 percent of compensation.
    We proposed to use 2006 Current Population Survey (CPS) data and 
2006 BLS Occupational Employment Statistics (OES) data to develop cost 
weights for wages for nonphysician occupational groups. These are the 
same data sources that were used in the 2000-based MEI. We determined 
total annual earnings for offices of physicians using employment data 
from the CPS and mean annual earnings from the OES. To arrive at a 
distribution for these separate categories, we determined annual 
earnings for each of the four categories (which are Professional & 
Technical workers, Managers, Clerical workers, and Service workers), 
using the Standard Occupational Classification (SOC) system. We then 
determined the overall share of the total for each. The resulting 
proposed distribution, as well as the distribution from the 2000-based 
MEI, are presented in Table 28.

    TABLE 28--Percent Distribution of Nonphysician Payroll Expense by
                    Occupational Group: 2006 and 2000
------------------------------------------------------------------------
                                   2006 Expenditure    2000 Expenditure
     BLS Occupational Group             shares              shares
------------------------------------------------------------------------
Total...........................             100.000             100.000

[[Page 73265]]

 
    Professional & Technical                  43.671              42.635
     Workers....................
    Managers....................              10.517              24.138
    Clerical Workers............              32.477              28.187
    Service Workers.............              13.336               5.040
------------------------------------------------------------------------
Values may not sum to 100 due to rounding.

    The decrease in the Managers expenditure share is directly related 
to a decrease in the total number of employees in Management 
occupations in physicians' offices, in particular, ``Medical and health 
service managers.'' The decrease in expenditure share may also be due, 
in part, to the methods used in this rebasing. That is, for the 2006-
based MEI, we are using data limited to ``Offices of physicians.'' In 
the 2000-based version of the index, the only data that were available 
to inform these estimates were inclusive of physician offices and 
clinics (``Offices of physicians and clinics''). An examination of 2006 
CPS and OES data comparing ``Outpatient care centers'' to ``Offices of 
physicians'' indicates that there is a higher share of management 
occupations in the ``Outpatient care centers'' than in ``Offices of 
physicians''.
    The increase in the Service Workers expenditures share is 
attributable to a substantive increase in the number of employees in 
service occupations, particularly, ``Medical assistants and other 
health care support occupations''.
(2) Office Expenses
    The aggregate Office Expenses cost weight was derived using the 
2006 AMA PPIS and was calculated as the mean office expenses expressed 
as a percentage of mean total expenses. This calculation resulted in a 
20.035 percent share of total costs in 2006 compared to a 12.209 
percent share in the 2000-based index. The Office Expenses cost weight 
used in the 2000-based MEI was based on the AMA 1997 Socioeconomic 
Monitoring System (SMS) survey, which defined office expenses as rent, 
mortgage interest, depreciation on medical buildings, utilities, and 
telephones. The AMA expanded the office expense question in the 2006 
PPIS survey to include additional expenses, described in more detail 
below in this section.
    As a result, and in order to provide for a higher level of 
precision in assigning appropriate price proxies to underlying costs, 
we proposed to further disaggregate the Office Expenses cost category 
into 9 detailed cost categories using the BEA 2002-Benchmark I/O data 
for Offices of Physicians, Dentists, and Other Health Practitioners 
(North American Industrial Classification System (NAICS) 621A00). In 
response to comments, and as described more fully below, we are 
finalizing those nine categories, as well as adding a tenth detailed 
cost category.
    The proposed Office Expenses cost categories and associated cost 
weights were developed by matching the BEA I/O data as closely as 
possible to the 2006 AMA PPIS survey, which defined office expenses as 
``office (non-medical) equipment and office (nonmedical) supplies, as 
well as rent, mortgage, interest, maintenance, refrigeration, storage, 
security, janitorial, depreciation on medical buildings used in your 
practice, utilities, or other office computer systems (including 
information management systems/electronic medical record systems) and 
telephone.'' In most instances, the proposed underlying detailed cost 
categories and associated cost weights were chosen to be consistent 
with the NAICS 3-digit classification. BEA I/O expense data is 
published on a NAICS-basis. Some of the proposed underlying detailed 
cost categories such as All Other Services include various 3-digit 
NAICS codes for service related industries. Similar methods are used in 
the other legislatively-required market baskets developed by CMS. After 
we categorized the BEA I/O data, we calculated the relative share for 
each category as a percentage of the total office expenses categories 
within the I/O data. We then aged the 2002 weights forward to 2006 to 
derive the 2006 detailed Office Expense cost weights as a percent of 
total Office Expenses. The methodology we used to age the data forward 
was to apply the annual price changes from each respective price proxy 
to the appropriate cost categories. We repeated this practice for each 
year of the interval from 2002 to 2006. We then applied the resulting 
2006 distributions to the aggregate 2006 AMA Office Expenses weight of 
20.035 percent to yield the detailed 2006 Office Expenses' weights as a 
percent of total expenses.
    In response to public comments that are detailed in the subsequent 
sections of this rule, we conducted an additional review of the BEA I/O 
data used to disaggregate the Office Expense cost category, comparing 
the I/O's detailed categories with the questions on the AMA PPIS 
survey. This review led to small revisions to the underlying Office 
Expense cost weights and resulted in the inclusion of one additional 
cost weight in that category: All Other Products. These products, which 
were previously assumed to be captured in the Other Professional 
Expenses category (as measured by the AMA PPIS survey), include a 
variety of miscellaneous products, such as miscellaneous wood and 
building products, that we believe respondents included in Office 
Expenses as maintenance expense. Table 27 provides the revised MEI 
weights.
    We believe the introduction of these new, more detailed categories 
for the 2006-based index allow for an increased level of precision 
while maintaining appropriate levels of aggregation in the index. The 
individual price proxies are described in more detail in section 
II.E.4.of this final rule.
    The following is a description of the types of expenses included in 
each of the detailed Office Expense cost categories.
     Utilities: The Utilities cost weight includes expenses 
classified in the fuel, oil and gas, water and sewage, and electricity 
industries. These types of industries are classified in NAICS and 
include NAICS 2211 (Electric power generation, transmission, and 
distribution), 2212 (Natural gas distribution), and 2213 (Water, 
sewage, and other systems). The cost weight for utilities is 1.266 
percent.
     Chemicals: The Chemicals cost weight includes expenses 
classified in the NAICS 325 (Chemical manufacturing), excluding 
pharmaceuticals and biologicals. This would include, but is not limited 
to, expenses such as soap and cleaning compounds, as well as 
photocopier

[[Page 73266]]

toners and laser printer toners. The cost weight for chemicals is 0.723 
percent.
     Paper: The Paper cost weight includes expenses classified 
in NAICS 322 (paper manufacturing) and NAICS 323 (printing and related 
support activities). This would include expenses associated with items 
such as paper, paperboard, sanitary paper products, and printing. The 
cost weight for paper is 0.657 percent.
     Rubber and Plastics: The Rubber and Plastics cost weight 
includes expenses classified in NAICS 326 (Plastics and Rubber Products 
Manufacturing). This would include, but is not limited to expenses 
associated with plastic bags, plastic trash cans, and plastic plumbing 
fixtures. The cost weight for Rubber and Plastics is 0.598 percent.
     Telephone: The Telephone cost weight includes expenses 
classified in NAICS 517 (Telecommunications) and NAICS 518 (Internet 
service providers), and NAICS 515 (Cable and other subscription 
programming). Telephone service, which is one component of the 
Telecommunications expenses, accounts for the majority of the 
expenditures in this cost category. The cost weight for Telephone 
services is 1.501 percent.
     Postage: The Postage cost weight includes expenses 
classified in NAICS 491 (Postal services) and NAICS 492 (Courier 
services). The cost weight for Postage is 0.898 percent.
     All Other Services: The All Other Services cost weight 
includes other service expenses including, but not limited to, 
nonresidential maintenance and repair, machinery repair, janitorial, 
and security services. This cost weight does not include expenses 
associated with professional services such as accounting, billing, 
legal, and marketing which are included in the Other Professional 
Expenses cost weight derived using the AMA PPIS survey. The cost weight 
for All Other Services is 3.582 percent.
     All Other Products: The All Other Products cost weight, 
which we are adding based upon our further review in response to public 
comments, includes other miscellaneous expenses, including but not 
limited to, a variety of miscellaneous building products (such as wood 
and concrete). The cost weight for All Other Products is 0.500 percent.
     Fixed Capital: The Fixed Capital cost weight includes 
expenses for building leases, mortgage interest, and depreciation on 
medical buildings. The cost weight for Fixed Capital is 8.957 percent.
     Moveable Capital: The Moveable Capital cost weight 
includes expenses and depreciation costs for non-medical equipment 
including but not limited to, computer equipment and software and the 
rental and leasing of industrial machinery equipment. The cost weight 
for Moveable Capital is 1.353 percent.
(3) Professional Liability Insurance (PLI) Expense
    The proposed weight for PLI expense was derived from the 2006 AMA 
survey and was calculated as the mean PLI expense expressed as a 
percentage of mean total expenses. This calculation resulted in a 
4.295-percent share of total costs in 2006 compared to a 3.865-percent 
share in the 2000-based index. The increase in the weight for PLI 
reflects the current prices of premiums, as well as an update to the 
level of coverage purchased by physicians in 2006 compared to 2000.
(4) Medical Equipment Expenses
    The proposed weight for Medical Equipment was calculated using the 
2006 AMA PPIS mean expense data expressed as a percentage of mean total 
expenses. This calculation resulted in a 1.978-percent share of total 
costs in 2006 compared to a 2.055-percent share in the 2000-based 
index. By definition, this category includes the expenses related to 
depreciation, maintenance contracts, and the leases or rental of 
medical equipment used in diagnosis or treatment of patients. The 
category would also include the tax-deductible portion of the purchase 
price or replacement value of medical equipment, if not leased.
(5) Medical Supplies Expenses
    The proposed weight for Medical Supplies was calculated using the 
2006 AMA PPIS mean expense data expressed as a percentage of mean total 
expenses. This calculation resulted in a 1.760-percent share of total 
costs in 2006 compared to a 2.011-percent share in the 2000-based 
index. By definition, this category includes the expenses related to 
medical supplies such as sterile gloves, needles, bandages, specimen 
containers, and catheters. Additionally, we proposed to exclude the 
expenses related to separately billable supplies as these expenses are 
not paid for under the PFS. The Medical Supply cost category does not 
include expenses related to drugs.
(6) Other Professional Expenses
    The proposed weight for Other Professional expenses was calculated 
using the 2006 AMA PPIS mean expense data expressed as a percentage of 
mean total expenses. This calculation resulted in a 4.513-percent share 
of total costs in 2006. By definition, this category includes the 
expenses related to tax-deductible expenses for any other professional 
expenses not reported in another category from the PPIS. These expenses 
would include fees related to legal, marketing, accounting, billing, 
office management services, professional association memberships, 
maintenance of certification or licensure, journals and continuing 
education, professional car upkeep and depreciation, and any other 
general expenses or other professional expenses not reported elsewhere 
on the PPIS.
    In summary, we are finalizing the proposed 2006-based MEI cost 
categories and respective cost weights for all categories except for 
the underlying detailed Office Expense cost categories and cost 
weights. In response to public comments, we reexamined the BEA I/O data 
and compared it again with the specific types of costs sought by the 
AMA PPIS survey question on Office Expenses. Although we are finalizing 
the proposed Office Expense cost weight of 20.035 percent, our re-
evaluation resulted in slight changes to the underlying detail of the 
Office Expense cost categories and cost weights. Specifically, we are 
finalizing the nine proposed detailed cost categories and adding one 
additional detailed cost category, All Other Products. The final 
detailed cost categories and cost weights for the underlying Office 
Expense cost categories are shown in Table 27.
    Table 29 shows a comparison of the proposed MEI Office Expense cost 
categories and weights to the final MEI Office Expense cost categories 
and weights. In addition to adding the subcategory All Other Products, 
the final Office Expenses' category weights were updated in response to 
public comments to reflect the removal of automobile-related expenses, 
which were in effect being double-counted, from the Movable Capital 
category. Further examination of the AMA's PPIS questions showed that 
automobile costs, such as those associated with leasing and 
depreciation, were captured in the question related to other 
professional expenses and are, thus accounted for in Other Professional 
Expenses (with a final cost weight of 4.513 percent). Notably, that 
cost weight is not impacted as, again, those costs were captured there 
in the survey.

[[Page 73267]]



Table 29--Comparison of Proposed Office Expense Cost Categories and Cost
  Weights to the Final Office Expense Cost Categories and Cost Weights
------------------------------------------------------------------------
                                                       2006       2006
                                                      Final     Proposed
                  Cost categories                     weight     weight
                                                       (%)        (%)
------------------------------------------------------------------------
Office Expenses...................................     20.035     20.035
    Utilities.....................................      1.266      1.139
    Chemicals.....................................      0.723      0.679
    Paper.........................................      0.657      0.616
    Rubber & Plastics.............................      0.598      0.563
    Telephone.....................................      1.501      1.415
    Postage.......................................      0.898      0.661
    All Other Services............................      3.582      4.718
    All Other Products............................      0.500  .........
    Fixed Capital.................................      8.957      8.410
    Moveable Capital..............................      1.353      1.834
------------------------------------------------------------------------

4. Selection of Price Proxies for Use in the MEI
    After the 2006 cost weights for the rebased and revised MEI were 
developed, we reviewed all of the price proxies to evaluate their 
appropriateness. As was the case in the development of the 2000-based 
MEI (68 FR 63239), most of the proxy measures we considered are based 
on BLS data and are grouped into one of the following five categories:
     Producer Price Indices (PPIs): PPIs measure price changes 
for goods sold in markets other than retail markets. These fixed-weight 
indexes are a measure of price change at the intermediate or final 
stage of production. They are the preferred proxies for physician 
purchases as these prices appropriately reflect the product's first 
commercial transaction.
     Consumer Price Indices (CPIs): CPIs measure changes in the 
prices of final goods and services bought by consumers. Like the PPIs, 
they are fixed-weight indexes. Since they may not represent the price 
changes faced by producers, CPIs are used if there are no appropriate 
PPIs or if the particular expenditure category is likely to contain 
purchases made at the final point of sale.
     Average Hourly Earnings (AHEs): AHEs are available for 
production and nonsupervisory workers for specific industries, as well 
as for the nonfarm business economy. They are calculated by dividing 
gross payrolls for wages & salaries by total hours. The series reflects 
shifts in employment mix and, thus, is representative of actual changes 
in hourly earnings for industries or for the nonfarm business economy.
     ECIs for Wages & Salaries: These ECIs measure the rate of 
change in employee wage rates per hour worked. These fixed-weight 
indexes are not affected by employment shifts among industries or 
occupations and thus, measure only the pure rate of change in wages.
     ECIs for Employee Benefits: These ECIs measure the rate of 
change in employer costs of employee benefits, such as the employer's 
share of Social Security taxes, pension and other retirement plans, 
insurance benefits (life, health, disability, and accident), and paid 
leave. Like ECIs for wages & salaries, the ECIs for employee benefits 
are not affected by employment shifts among industries or occupations.
    When choosing wage and price proxies for each expense category, we 
evaluate the strengths and weaknesses of each proxy variable using the 
following four criteria:
     Relevance: The price proxy should appropriately represent 
price changes for specific goods or services within the expense 
category. Relevance may encompass judgments about relative efficiency 
of the market generating the price and wage increases.
     Reliability: If the potential proxy demonstrates a high 
sampling variability, or inexplicable erratic patterns over time, its 
viability as an appropriate price proxy is greatly diminished. Notably, 
low sampling variability can conflict with relevance--since the more 
specifically a price variable is defined (in terms of service, 
commodity, or geographic area), the higher the possibility of high 
sampling variability. A well-established time series is also preferred.
     Timeliness of actual published data: For greater 
granularity and the need to be as timely as possible, we prefer monthly 
and quarterly data to annual data.
     Public availability: For transparency, we prefer to use 
data sources that are publicly available.
    The BLS price proxy categories previously described meet the 
criteria of relevance, reliability, timeliness, and public 
availability. Below we discuss the price and wage proxies for the 
rebased and revised MEI (as shown in Table E4), along with a summary of 
the public comments we received on our proposals and our responses to 
those comments.
a. Cost (Expense) Categories in the MEI
(1) Physician's Own Time (Physician Compensation)
    For the revised and rebased MEI, we proposed to continue to use the 
AHE for production and non-supervisory employees for the private 
nonfarm economy as the proxy for the Physician Wages & Salaries 
component (BLS series code: CEU0500000008).
    The AHE for the private nonfarm economy reflects general earnings 
including the impacts of supply, demand, and economy-wide productivity 
for the average worker in the economy. As such, use of this proxy is 
consistent with the original intent of the Congress for the change in 
the MEI to follow reflect changes in expenses of practice and general 
earnings levels.\1\ The current 2000-based MEI uses the ECI for Total 
Benefits (BLS series code: CIU2030000000000I) for total private 
industry as the price proxy for Physician Benefits. We proposed to 
continue using the same proxy for the 2006-based MEI and received no 
public comment on this particular aspect of the index. This means that 
both the wage and benefit proxies for physician earnings are derived 
from the private nonfarm business sector and are computed on a per-hour 
basis.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

(2) Nonphysician Employee Compensation
    For the 2006-based MEI, we proposed to use the same ECI private 
series for each occupational group as in the 2000-based MEI. In 
particular, we proposed to use the ECI for Professional and Technical 
Workers, the ECI for Managerial Services, the ECI for Administrative 
Support Services, and the ECI for Service Occupations.
    As described in the CY 2008 PFS proposed rule (72 FR 38190), as a 
result of the discontinuation of the White Collar Benefit ECI for 
private workers, we proposed to continue to use a composite ECI benefit 
index. We are continuing to use the composite ECI for non-physician 
employees in the proposed rebased and revised MEI; however, we proposed 
to rebase the weights within that blend in order to reflect the more 
recent 2006 data. Table 30 lists the four ECI series and corresponding 
weights used to construct the 2006 composite benefit index.

[[Page 73268]]



 Table 30--CMS Composite Price Index for Nonphysician Employee Benefits
------------------------------------------------------------------------
                                                                   2006
                           ECI series                             weight
                                                                   (%)
------------------------------------------------------------------------
Benefits, Private, Professional & Related......................       44
Benefits, Private, Management, Business, Financial.............       11
Benefits, Private, Office & Administrative Support.............       32
Benefits, Private, Service Occupations.........................       13
------------------------------------------------------------------------

(3) Utilities
    For the 2006-based MEI, we proposed to use the CPI for Fuel and 
Utilities (BLS series code CUUR0000SAH2) to measure the price 
growth of this cost category. This cost category was not broken out 
separately in the 2000-based MEI.
(4) Chemicals
    For the 2006-based MEI, we proposed to use the PPI for Other Basic 
Organic Chemical Manufacturing (BLS series code PCU32519-
32519) to measure the price changes of this cost category. We are using 
this industry-based PPI because BEA's 2002 benchmark I/O data show that 
the majority of the office of physicians' chemical expenses are 
attributable to Other Basic Organic Chemical Manufacturing (NAICS 
32519). This cost category was not broken out separately in the 2000-
based MEI.
(5) Paper
    For the 2006-based MEI, we proposed to use the PPI for Converted 
Paper and Paperboard (BLS series code WPU0915) to measure the 
price growth of this cost category. This cost category was not broken 
out separately in the 2000-based MEI.
(6) Rubber and Plastics
    For the 2006-based MEI, we proposed to use the PPI for Rubber and 
Plastic Products (BLS series code WPU07) to measure the price 
growth of this cost category. This cost category was not broken out 
separately in the 2000-based MEI.
(7) Telephone
    For the 2006-based MEI, we proposed to use the CPI for Telephone 
Services (BLS series code CUUR0000SEED) to measure the price 
growth of this cost category. This cost category was not broken out 
separately in the 2000-based MEI.
(8) Postage
    For the 2006-based MEI, we proposed to use the CPI for Postage (BLS 
series code CUUR0000SEEC01) to measure the price growth of 
this cost category. This cost category was not broken out separately in 
the 2000-based MEI.
(9) All Other Services
    For the 2006-based MEI, we proposed to use the ECI for Compensation 
for Service Occupations (private industry) (BLS series code 
CIU2010000300000I) to measure the price growth of this cost 
category. This cost category was not broken out separately in the 2000-
based MEI.
(10) All Other Products
    As noted previously, we are adding this category in this final rule 
with comment period in response to public comments. This category 
includes a variety of miscellaneous expenses such as miscellaneous 
building products; thus, we will use the CPI-U for All Items Less Food 
and Energy as a proxy for price changes. This cost category was not 
broken out separately in the 2000-based MEI.
(11) Fixed Capital
    For the 2006-based MEI, we proposed to use the CPI for Owner's 
Equivalent Rent (BLS series code CUUS0000SEHC) to measure the 
price growth of this cost category. This price index represents about 
50 percent of the CPI for Housing, which was used in the 2000-based MEI 
to proxy total Office Expenses.
(12) Moveable Capital
    For the 2006-based MEI, we proposed to use the PPI for Machinery 
and Equipment (series code WPU11) to measure the price growth 
of this cost category. This cost category was not broken out separately 
in the 2000-based MEI.
(13) Professional Liability Insurance (PLI)
    Each year, we solicit PLI premium data for physicians from a sample 
of commercial carriers. This information is not collected through a 
survey form, but instead is requested directly from, and provided by 
(on a voluntary basis), several national commercial carriers. As we 
require for our other price proxies, the professional liability price 
proxy is intended to reflect the pure price change associated with this 
particular cost category. Thus, it does not include changes in the mix 
or level of liability coverage. To accomplish this result, we obtain 
premium information from a sample of commercial carriers for a fixed 
level of coverage, currently $1 million per occurrence and a $3 million 
annual limit. This information is collected for every State by 
physician specialty and risk class. Finally, the State-level, 
physician-specialty data are aggregated by effective premium date to 
compute a national total, using counts of physicians by State and 
specialty as provided in the AMA publication, Physician Characteristics 
and Distribution in the U.S.
    The resulting data provide a quarterly time series, indexed to a 
base year consistent with the MEI, and reflect the national trend in 
the average professional liability premium for a given level of 
coverage, generally $1 million/$3 million of claims-made mature 
policies. From this series, quarterly and annual percent changes in PLI 
are estimated for inclusion in the MEI.
    The most comprehensive data on professional liability costs are 
held by the State insurance commissioners, but these data are available 
only with a substantial time lag and hence, the data currently 
incorporated into the MEI are much timelier. We believe that, given the 
limited data available on professional liability premiums, the 
information and methodology described above produces an adequate proxy 
of the PLI price trends facing physicians.
(14) Medical Equipment
    The Medical Equipment cost category includes depreciation, leases, 
and rent on medical equipment. We proposed to use the PPI for Medical 
Instruments and Equipment (BLS series code: WPU156201) as the price 
proxy for this category, consistent with the price proxy used in the 
2000-based MEI and other CMS input price indexes.
(15) Medical Materials and Supplies
    As was used in the 2000-based MEI, we proposed to use a blended 
index comprised of a 50/50 blend of the PPI Surgical Appliances (BLS 
series code: WPU156301) and the CPI-U for Medical Equipment and 
Supplies (BLS series code: CUUR0000SEMG). We believe physicians 
purchase the types of supplies contained within these proxies, 
including such items as bandages, dressings, catheters, intravenous 
(I.V.) equipment, syringes, and other general disposable medical 
supplies, via wholesale purchase, as well as at the retail level. 
Consequently, we proposed to combine the two aforementioned indexes to 
reflect those modes of purchase.

[[Page 73269]]

(16) Other Professional Expenses
    This category includes the residual subcategory of other 
professional expenses such as accounting services, legal services, 
office management services, continuing education, professional 
association memberships, journals, professional car expenses, and other 
general expenses and other professional expenses not captured 
elsewhere. Given this heterogeneous mix of goods and services, we are 
finalizing our proposal to use the CPI-U for All Items Less Food and 
Energy. In summary, we are finalizing the proposed 2006-based MEI price 
proxies with one modification. Since an additional cost category, All 
Other Products, was added to the office expense disaggregation, we are 
also finalizing the decision to use the CPI for All Items Less Food and 
Energy as the price proxy for that category.
(b) Productivity Adjustment to the MEI
    The MEI has been adjusted for changes in productivity since its 
inception. In the CY 2003 PFS final rule (67 FR 80019), we implemented 
a change in the way the MEI was adjusted to account for those changes 
in productivity. The MEI used for the 2003 physician payment update 
incorporated changes in the 10-year moving average of private nonfarm 
business 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 changes in the 10-year 
moving average of economy-wide private nonfarm business labor 
productivity.
    We proposed to continue to use the current method for adjusting the 
full MEI for multifactor productivity in the rebased and revised MEI, 
and are finalizing that proposal.
    As described in the CY 2003 PFS final rule, we believe this 
adjustment is appropriate because it explicitly reflects the 
productivity gains associated with all inputs (both labor and non-
labor). We believe that using the 10-year moving average percent change 
in private nonfarm business multifactor productivity is appropriate for 
deriving a stable measure that helps alleviate the influence that a 
peak (or a trough) of a business cycle may have on the measure. The 
adjustment will be based on the latest available historical e private 
nonfarm business multifactor productivity data as measured and 
published by BLS.
5. Results of Rebasing
    Table 31 illustrates the results of updating the MEI cost weights 
for Physician Compensation, Practice Expenses (excluding PLI), and PLI 
from a 2000-based cost distribution to a 2006-based cost distribution, 
including all the proposed and finalized revisions as specified in this 
final rule.

  Table 31--Percent Distribution of Selected Physician Expenses Used To
                    Calibrate RVUs: CYs 2006 and 2000
------------------------------------------------------------------------
                                                     CY 2006    CY 2000
                                                      weight     weight
                                                       (%)        (%)
------------------------------------------------------------------------
Physician Compensation (Own Time).................     48.266     52.466
Practice Expenses (less PLI)......................     47.439     43.669
PLI...............................................      4.295      3.865
------------------------------------------------------------------------

    The rebased and revised MEI has several differences as compared to 
the 2000-based MEI; these changes have been discussed in detail in 
prior sections of this rule. Table E8 shows the average calendar year 
percent change for CY 2004 to CY 2011 for both the 2000- and 2006-based 
MEIs. The 2006-based MEI annual percent changes differ from the 2000-
based MEI annual percent changes by 0.0 to 0.8 percentage point. For 
CYs 2007 through 2011, the annual percent change in the rebased and 
revised MEI was within 0.3 percentage point of the percent change in 
the 2000-based MEI. In the earlier years, there were larger differences 
between the annual percent change in the rebased and revised MEI and 
the 2000-based MEI. The majority of these differences can be attributed 
to the lower benefit cost weight, as measured by the 2006 AMA data, and 
the exclusion of the Pharmaceuticals cost category. The remaining 
differences are attributable to the higher cost weight for PLI, as 
measured by the 2006 AMA data.

  Table 32--Annual Percent Changes in the 2000-based and Revised 2006-
                                based MEI
------------------------------------------------------------------------
                                                               Current
               Update year \(A)\                Final 2006-   2000-based
                                                 based MEI       MEI
------------------------------------------------------------------------
CY 2004.......................................          2.3          2.6
CY 2005.......................................          1.8          2.6
CY 2006.......................................          1.8          2.4
CY 2007.......................................          1.6          1.9
CY 2008.......................................          1.9          1.8
CY 2009.......................................          1.6          1.6
CY 2010.......................................          1.5          1.2
CY 2011\(B)\..................................          0.4          0.3
Average Change for CYs 2004- 2011.............          1.6          1.8
------------------------------------------------------------------------
\(A)\ Update year based on historical data through the second quarter of
  the prior calendar year. For example, the 2010 update is based on
  historical data through the second quarter 2009.
\(B)\ Based on historical data through the 2nd quarter 2010.

    As shown in Table 33, the percent change of the rebased and revised 
MEI for the CY 2011 PFS final rule is an increase of 0.4 percent, one 
tenth of a percentage point higher than the 2000-based MEI for the same 
period. The proposed rule included an estimated increase of 0.3 percent 
for 2011 based on projected data from IHS Global Insight, Inc. The 0.4 
percent increase was calculated based on historical data through the 
second quarter of 2010, including revised data from the BLS on the 10-
year moving average of BLS private nonfarm business multifactor 
productivity published on October 6, 2010 (http://www.bls.gov/news.release/pdf/prod3.pdf). The 0.1 percentage point difference in the 
MEI update factor from the 0.3-percent estimate indicated in the 
proposed rule to our current figure of 0.4 percent is primarily related 
to the incorporation of more recent historical data for private nonfarm 
business multifactor productivity.

Table 33--Annual Percent Change in the 2000-based and Revised 2006-based
                             MEI for CY 2011
------------------------------------------------------------------------
                                                 2006-based   2000-based
                                                    MEI          MEI
------------------------------------------------------------------------
CY 2011.......................................          0.4          0.3
------------------------------------------------------------------------


[[Page 73270]]


 Table 34--Annual Percent Change in the Revised and Rebased MEI CY 2011,
                           All Categories \1\
------------------------------------------------------------------------
                                                               CY 2011
                Cost categories                 2006 weight    percent
                                                  \2\  (%)      change
------------------------------------------------------------------------
MEI Total, productivity adjusted..............      100.000          0.4
Productivity: 10[dash]year moving average of            N/A          1.2
 MFP..........................................
MEI Total, without productivity adjustment....      100.000          1.6
    Physician Compensation (Own Time) \3\.....       48.266          2.4
        Wages and Salaries....................       43.880          2.5
        Benefits..............................        4.386          1.7
    Physician's Practice Expenses.............       51.734          0.7
        Nonphysician Employee Compensation....       19.153          1.5
            Nonphysician Employee Wages.......       13.752          1.4
                Prof/Tech Wages...............        6.006          1.2
                Managerial Wages..............        1.446          1.2
                Clerical Wages................        4.466          1.7
                Services Wages................        1.834          1.7
            Nonphysician Employee Benefits....        5.401          1.6
        Other Practice Expenses...............       26.308          0.1
            Office Expenses...................       20.035          0.6
                Utilities.....................        1.266         -3.1
                Chemicals.....................        0.723         -2.5
                Paper.........................        0.657         -0.3
                Rubber & Plastics.............        0.598         -0.3
                Telephone.....................        1.501          0.8
                Postage.......................        0.898          4.7
                All Other Services............        3.582          1.8
                All Other Products............        0.500          1.4
                Fixed Capital.................        8.957          0.6
                Moveable Capital..............        1.353          0.1
        PLI \4\...............................        4.295         -2.9
        Medical Equipment.....................        1.978          0.5
        Medical Materials and Supplies........        1.760          0.4
        Other Professional Expenses...........        4.513          1.4
------------------------------------------------------------------------
\1\ The estimates are based upon the latest available Bureau of Labor
  Statistics data on the 10-year moving average of BLS private nonfarm
  business multifactor productivity published on October 6, 2010 (http://www.bls.gov/news.release/pdf/prod3.pdf).
\2\ The weights shown for the MEI components are the 2006 base-year
  weights, which may not sum to subtotals or totals because of rounding.
  The MEI is a fixed-weight, Laspeyres input price index whose category
  weights indicate the distribution of expenditures among the inputs to
  physicians' services for CY 2006. To determine the MEI level for a
  given year, the price proxy level for each component is multiplied by
  its 2006 weight. The sum of these products (weights multiplied by the
  price index levels) yields the composite MEI level for a given year.
  The annual percent change in the MEI levels is an estimate of price
  change over time for a fixed market basket of inputs to physicians'
  services.
\3\ The measures of Productivity, Average Hourly Earnings, Employment
  Cost Indexes, as well as the various Producer and Consumer Price
  Indexes can be found on the Bureau of Labor Statistics (BLS) Web site
  at http://stats.bls.gov.
\4\ Derived from a CMS survey of several major commercial insurers.
\N/A\ Productivity is factored into the MEI as a subtraction from the
  total index growth rate; therefore, no explicit weight exists for
  productivity in the MEI.

6. Medicare Economic Index Technical Advisory Panel
    In the CY 2011 PFS proposed rule, we notified the public of our 
intent to convene a Medicare Economic Index Technical Advisory Panel 
(MEI TAP) to study all aspects of the MEI including its cost 
categories, their associated cost weights and price proxies, and the 
adjustment of the index by an economy-wide measure of multi-factor 
productivity. We will be convening the MEI TAP. More details regarding 
this issue can be found in the next section of this rule.
7. Summary of Comments and the Associated Responses
a. Timing of Rebasing and Revising the MEI
    Comment: Many commenters support the rebasing and revising of the 
MEI using CY 2006 as a base year and the incorporation of practice cost 
changes reflected in the 2006 AMA PPIS. Many of these commenters also 
indicated their support for the upcoming MEI technical advisory panel, 
but stressed that CMS should not delay moving forward with rebasing and 
revising the MEI for CY 2011. Several people wrote that they believe 
that the rebasing, along with the addition of new product categories, 
will result in a more accurate distribution of expenses among physician 
compensation, practice expense, and professional liability. The 
commenters believe that the proposal to rebase to 2006 will make the 
MEI more representative of current conditions in the health care 
marketplace and, in particular, more reflective of the higher burden of 
practice expenses in relation to physician compensation in modern 
physician practices. The commenters agree that the use of more current 
data and the expansion of the categories used in determining the MEI 
update are a technical improvement over the 2000-based MEI and urge CMS 
to proceed accordingly.
    Response: We agree with the commenters that the 2006-based MEI 
reflects a more current estimate of the cost distribution associated 
with furnishing physicians' services. Therefore we are finalizing our 
proposals (with minor modifications described above) to rebase and 
revise the MEI, and are proceeding with implementation of the 2006-
based MEI for CY 2011.
    Comment: Many commenters indicated CMS should postpone 
implementation of the rebased and revised MEI until the MEI technical 
advisory panel can conduct a comprehensive review of all aspects of the 
index. These commenters believe that it is premature to finalize 
proposals

[[Page 73271]]

that will significantly change the MEI prior to receiving 
recommendations from the technical advisory panel and therefore 
strongly support convening the technical advisory panel first and 
rebasing and revising the MEI afterwards.
    Response: We agree with the commenters that the MEI technical 
advisory panel should move forward (discussed in more detail below). 
However, we do not find any compelling technical reason to postpone 
finalizing the proposed changes to the index. We believe rebasing and 
revising the index for CY 2011 to reapportion the work, practice 
expense, and malpractice weights will allow the MEI to appropriately 
reflect more recent data. For these reasons we disagree with the 
commenters that support delaying the rebasing of the MEI until the 
technical panel has had a chance to convene and make further 
recommendations. Should we concur with recommendations from the 
technical advisory panel that would result in technical improvements to 
the MEI, we would propose any changes in a future rulemaking exercise.
    Comment: One commenter questioned the need for changes in the MEI 
in 2011, particularly since there is no statutory timeframe for these 
changes and the most recent changes in practice expenses from the PPIS 
survey are in the first year of a 4-year phase-in.
    Response: The current MEI reflects the physician practice cost 
structure for 2000. Based on both our own analysis and supporting 
public comments, it is evident that this cost structure has changed 
from 2000 to 2006. Accordingly, we believe it is technically 
appropriate to update to a more recent base year for use in CY 2011.
    Comment: A commenter suggested that when rebasing is done in the 
future, CMS should propose phasing in the changes, perhaps over 2 
years, in order to mitigate negative consequences.
    Response: We do not believe it would be appropriate to phase in 
changes to the MEI associated with rebasing and revising the index. 
These periodic efforts are done to ensure that the MEI is reflecting 
the latest available information and echoes current cost distributions 
associated with furnishing physicians' services. Our approach is 
consistent across all of the Medicare market baskets in this regard and 
is likewise consistent with how technical improvements are incorporated 
into other published price indexes, such as the CPI or PPI.
    Comment: Some commenters asked CMS to delay rebasing the MEI until 
the summit on geographic practice costs and the IOM studies have been 
completed.
    Response: We believe that it is technically appropriate to update 
the MEI to reflect the more current cost structure as determined by 
using the 2006 AMA PPIS data. We note that the MEI is constructed 
independent of the GPCIs. While the GPCI weights have historically been 
linked to the MEI cost weights, we do not believe it would be 
appropriate to postpone rebasing the MEI in anticipation of the 
summit's or the IOM's findings.
b. PPIS Data
    Comment: Many commenters stated they, like CMS, are unaware of 
another more robust or more current source of available data on 
physician practice costs than the PPIS. Other commenters noted that CMS 
and the AMA have supported using PPIS data to update the practice 
expense per hour (PE/HR) calculations beginning in CY 2010. The 
commenters believe that if the data were sufficient to adjust PE/HR, 
then they are sufficient to update the MEI. Other commenters indicate 
they support periodic updates to the index, recognizing the 
difficulties associated with updating the MEI's cost categories and 
weights on an annual basis.
    Response: We agree with the commenters that the PPIS is the most 
up-to-date and comprehensive data source available on physician 
practice costs. We also believe that the estimates derived from the 
PPIS are current, valid, and appropriate for use in rebasing and 
revising the MEI. Likewise, we concur that a variety of data-related 
issues would make updating the MEI on an annual basis difficult and 
believe that periodic revisions such as the one we are adopting in this 
final rule with comment period are more appropriate.
    Comment: A few commenters expressed general concerns over using 
data from the PPIS. One commenter specifically notes that the MEI 
changes are allegedly being proposed to reflect changes in medical 
practice based on research using PE data. The commenter has reviewed 
some of the research, including the research process and questioned the 
research data itself. Their concerns over the raw data source include 
issues related to sample design, sample geographic distribution, and 
sample size sufficiency. They questioned the choice of the data 
collection firm used by AMA.
    Response: We conducted an extensive review of the PPIS data and 
continue to believe it appropriately reflects the cost distributions of 
physicians. We note that we rely upon the physician community to 
complete the AMA surveys as accurately as possible since unlike other 
provider types (such as hospitals and skilled nursing facilities) 
physicians are not required to submit annual Medicare cost report data.
    Comment: Some commenters indicated that CMS did not make clear why 
the rebased MEI would be based on PPIS data from 2006. Several 
expressed concerns that the use of 4-year old data is questionable as 
data this old would not reflect physician expenses in 2011 (and that 
more up-to-date data on physician costs is surely available).
    Response: As stated in the CY 2011 PFS proposed rule (75 FR 40088), 
we chose to rebase the MEI to 2006 in order to incorporate the 2006 AMA 
PPIS data. We believe the 2006 AMA PPIS data is the most up-to-date, 
complete, statistically valid data source available. We welcome any 
recommendations for more up-to-date data sources available on physician 
expenses. We would also note that the 2006 data from the PPIS are used 
to provide the cost structure that is used in the MEI. The increase in 
the CY 2011 MEI ultimately reflects the input price inflation, adjusted 
for productivity, that physicians face based on a 2006 distribution of 
costs. It does not, nor is it intended to, reflect physician input cost 
levels for 2011.
    Comment: Some commenters noted that in the interest of 
transparency, CMS should publish on its Web site all data from the PPIS 
that were used in rebasing the MEI.
    Response: We understand the commenter's request for transparency. 
Unfortunately, we are unable to publish the detailed micro level data 
from the AMA PPIS survey as it is proprietary information. We would 
suggest the commenter contact the AMA with their request.
c. Office Expenses
    Comment: Several commenters appreciated the intent of the new 
subcategories found in Office Expenses to include more medical office-
specific data and believe it will improve the index.
    Response: We agree with the commenters and believe that having 
greater detail under the Office Expense cost category in the MEI 
provides a technical improvement.
    Comment: Several commenters questioned the CMS proposal to create 
detailed categories under the broader Office Expense cost category. 
Some of the commenters had specific concerns about the particular 
subcategories. Examples included the following:
     The Chemicals and Rubber & Plastics categories (all 
derived from the BEA) might not be relevant (or

[[Page 73272]]

meaningful) to today's physicians' practice.
     Computers, computer expenses, billing, and scheduling 
technology and electronic medical records are high-cost, non-optional 
office expenses for medical practices that are not adequately captured 
and would represent more appropriate categories.
     CMS references data on the Office Expenses' components 
derived from the BEA, but the agency provided no rationale to justify 
the changes in Office Expenses, nor did it provide a detailed 
accounting methodology or solicit advice on new inputs to the index.
    Response: We proposed to disaggregate the Office Expense cost 
category into more detailed cost categories as a result of a change to 
the question in the 2006 AMA PPIS survey that captured these types of 
costs. In addition, in rulemaking for the CY 2008 Physician Fee 
Schedule, we received a comment from the industry about our use of the 
CPI for Housing to proxy Office Expenses (72 FR 66376). At that time, 
we notified the public of our intent to explore the feasibility of 
breaking the Office Expenses category into more descriptive cost 
categories during the next rebasing.
    In order to appropriately represent the information collected by 
the PPIS and to increase the level of precision of our price proxies, 
we proposed to disaggregate the Office Expense cost category and its 
associated weight into more detailed components and to proxy those 
costs with the most technically appropriate price proxies. Moreover, we 
believe it would be technically inappropriate to proxy the Office 
Expense cost category, which now includes a much broader range of 
expenses, by one price proxy, namely the CPI for Housing. For these 
reasons, we developed our proposals and solicited public comments.
    We disagree with the commenters' assertion that the Chemicals and 
Rubber & Plastics categories are not relevant to today's physician 
practice (and note that the commenters did not provide additional 
information or data to support the claim that the proposed categories 
are not relevant). The information we relied on came directly from the 
BEAs' Benchmark I/O files for Offices of Physicians, Dentists, and 
Other Health Practitioners. The Chemicals cost category includes 
expenses for items such as soaps and cleaning compounds, as well as 
photocopier toners and laser printer toners. The Rubber and Plastics 
category includes expenses for items such as plastic plumbing fixtures, 
plastic bags, and plastic trash cans. Although we will continue to 
explore further additional disaggregation of expenses, we believe that 
the aforementioned costs are associated with, and relevant to, 
furnishing physicians' services.
    As indicated previously, and in response to the comment, we 
conducted an additional review of the BEA I/O data used to disaggregate 
the Office Expense cost category, comparing the detailed underlying 
expenses with the questions on the AMA PPIS survey. This review led us 
to make small revisions to the underlying Office Expense cost weights, 
including the addition of another cost weight for the new subcategory, 
All Other Products. These products were initially assumed to be 
captured in Other Professional Expenses as measured by the AMA PPIS 
survey, but were determined to have been reported as Office Expenses. 
All Other Products would include a variety of miscellaneous products 
such as miscellaneous wood and apparel products. Table E4 provides the 
revised MEI weights. Also, as part of this additional analysis on the 
Office Expense categories, we determined that automobile-related 
expenses were captured in the PPIS question associated with Other 
Professional Expenses (and that its associated weight reflected 
respondents including those costs when answering that question). As a 
result, we removed automobile-related NAICS-based industry spending 
from the BEA I/O data that was being used to distribute expenses across 
the various Office Expense subcategories. As this spending was included 
in the Movable Capital subcategory for the proposed rule, the weight 
associated with that subcategory will be 1.353 rather than the 1.834 we 
proposed.
    We disagree with the commenters' statements that the MEI does not 
adequately capture high-level or high-cost technology expenses (and 
briefly note that Movable Capital includes only non-medical movable 
equipment). The Office Expense cost weight (20.035 percent) was 
calculated using the 2006 PPIS data, which specifically requested 
health information technology equipment and other nonmedical office 
equipment to be included in the Office Expense category as follows:

    Provide [your] share (dollar amount) of the specialty or 
department level's share (dollar amount) of the practice's total 
(dollar amount) for] 2006 office expenses, including office (non-
medical) equipment and office (non-medical) supplies, as well as 
rent, mortgage interest, maintenance, refrigeration, storage, 
security, janitorial, depreciation on medical buildings used in your 
practice, utilities, or other office computer systems (including 
information management systems/electronic medical record systems) 
and telephone.

    Given that the expenses related to information management systems 
and electronic medical record systems were included as ``office 
expenses'' in the 2006 PPIS, the 20.035 percent weight would include 
these costs. Unfortunately, given the data limitations, it remains 
difficult to determine a percentage associated specifically with 
computer equipment, computer-related depreciation, and computer-related 
leasing. For this rebasing, the costs we classified as Moveable Capital 
are comprised of the expenses paid by Office of Physicians industry to 
the following industries based on NAICS classification:


------------------------------------------------------------------------
 
------------------------------------------------------------------------
33329A............................  Other industrial machinery
                                     manufacturing.
33331A............................  Vending, commercial, industrial, and
                                     office machinery manufacturing.
333414............................  Heating equipment, except warm air
                                     furnaces.
333415............................  Air conditioning, refrigeration, and
                                     warm air heating equipment
                                     manufacturing.
33399A............................  Other general purpose machinery
                                     manufacturing.
33411A............................  Computer terminals and other
                                     computer peripheral equipment
                                     manufacturing.
334210............................  Telephone apparatus manufacturing.
334220............................  Broadcast and wireless
                                     communications equipment.
334290............................  Other communications equipment
                                     manufacturing.
334300............................  Audio and video equipment
                                     manufacturing.
334418............................  Printed circuit assembly (electronic
                                     assembly) manufacturing.
334613............................  Magnetic and optical recording media
                                     manufacturing.
335120............................  Lighting fixture manufacturing.
337110............................  Wood kitchen cabinet and countertop
                                     manufacturing.
337215............................  Showcase, partition, shelving, and
                                     locker manufacturing.
532400............................  Commercial and industrial machinery
                                     and equipment rental and leasing.
------------------------------------------------------------------------



[[Page 73273]]

    We believe technology-related expense are captured in the MEI and 
that the PPI for Machinery and Equipment is an appropriate price proxy 
to estimate price changes. However, we will actively monitor the data 
moving forward to ensure these types of expenses are adequately 
reflected in the MEI.
    Finally, we would note that the descriptions of the methodologies 
used to construct the subcategories under Office Expenses were both 
detailed and consistent with those provided in the recent proposed 
rules relating to the rebasing of other CMS market baskets. However, in 
response to the comment we hope the additional information provided 
here is helpful.
    Comment: One commenter found it most problematic that the CMS 
proposal related to Office Expenses would reduce the weight of rent 
within physician practice expenses. Currently, rent comprises 12.2 
percent of the practice expense GPCI. Under the proposed rule, rent 
would be reduced to 8.4 percent. The commenter also noted that their 
attempt to validate the proposal, using BEA 2002 Benchmark I/O use 
files for NAICS 621A00 as described in the proposed rule were not 
successful.
    Response: We proposed to disaggregate the Office Expense cost 
weight in the 2006-based MEI in order to recognize and take advantage 
of the expansion of the AMA PPIS survey question to include additional 
expenses not included in the 2000-based survey. Consistent with the 
methodology used for other CMS market baskets, we relied upon the BEA 
I/O data to disaggregate the Office Expense cost category, which we 
described in the proposed rule. This methodology required a series of 
calculations including classifying costs as office expenses consistent 
with AMA PPIS survey. As noted elsewhere, and based on public comment, 
we have refined our methodology, as well as added additional detail in 
this final rule which we believe will be helpful in validating our 
estimates. The new methodology has resulted in a cost weight of 8.957 
percent for Fixed Capital. Comments related to weights specifically 
associated with the PE GPCIs are found in section II.D. of this final 
rule with comment period.
    Comment: A commenter stated that it appeared that utility costs 
have been included twice in the MEI calculation. The HUD data used by 
CMS as a source for the rent data includes utilities. However, 
utilities have been included a second time as a new component of the 
``Office Expense'' category of ``Other Practice Expenses'' and it does 
not appear that the ``Fixed Capital'' (rent) component has been scaled 
down as a result. This error should be corrected, a new proposed rule 
published, and a new comment period opened.
    Response: We disagree with the commenter's assertions that 
utilities expenses in the MEI are double counted. The Utilities cost 
weight in the MEI was derived using the BEA I/O data for NAICS 621A 
(Offices of Physicians, Offices of Dentist, and Offices of Other 
Practitioners). The BEA I/O data provide information regarding 
physicians' purchases from other industries. Expenses classified in the 
Utilities cost weight, such as NAICS 22110 (Electric power generation, 
transmission, and distribution), were not included in the Fixed Capital 
cost weight; therefore, we did not include utility costs twice in the 
MEI calculation. The HUD data referenced by the commenter is used in 
conjunction with the GPCI rent update and is independent of the 
development of the cost weight for Utilities in the MEI.
d. Purpose of the MEI
    Comment: Several commenters requested that CMS address the problem 
that the ``market basket'' of inputs, whose prices are measured in the 
MEI, is outdated and, despite periodic rebasing, has not been 
comprehensively revised since it was originally developed in 1973. They 
indicated that the MEI does not reflect the inputs involved in 21st 
century medical practice and claim that the costs associated with 
complying with an array of government-imposed regulatory requirements, 
including increasing staffing levels, costs related to Medicare 
prescription drug plans and formulary compliance, compliance with rules 
governing referrals and interactions with other providers, and others, 
are not accounted for in the index. They also indicate that the MEI has 
not been adjusted for modern practice costs such as computers, copiers, 
and new medical technology.
    Response: We disagree with the commenters' statement that the MEI 
only measures changes in specific types of practice costs that existed 
in 1973. Since 1973, the MEI has been rebased four times. For each of 
those updates, the MEI methodology and data sources were thoroughly 
reviewed and evaluated to ensure that the index accurately reflected 
the cost distributions encountered by physicians. The revisions have 
included changes to the structure of the index, the price proxies used, 
the data sources used to develop the weights, the productivity 
adjustment, and, as proposed in the CY 2011 PFS proposed rule, 
disaggregating categories within the Office Expenses category into more 
detail.
    We also note that the MEI is a price index, not a cost index. 
Changes in physician costs are a function of changes in prices and 
changes in quantities. Examples of changes in quantities include 
purchasing more moveable equipment (such as health information 
technology), hiring additional office staff, or changing the mix of 
staff. The MEI was established in accordance with section 1842(b)(3) of 
the Act, which states the growth of prevailing charge levels is to be 
limited to growth in an ``appropriate economic index''. The relevant 
Senate Finance Committee report \2\ provides slightly more detail on 
such an index, stating that:
---------------------------------------------------------------------------

    \2\ 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. 190.

    [I]t is necessary to move in the direction of an approach to 
reasonable charge reimbursement that ties recognition of fee 
increases to appropriate economic indexes so that the program will 
not merely recognize whatever increases in charges are established 
in a locality but would limit recognition of charge increases to 
rates that economic data indicate would be fair to all concerned and 
---------------------------------------------------------------------------
follow rather than lead any inflationary trends.

    Thus, in accordance with Congressional intent that the index 
reflect and follow inflationary trends, and since its inception in 
1973, the MEI has been constructed as a fixed-weight price index that 
measures the inflationary trends of goods and services associated with 
furnishing physicians' services. The data sources that are used to 
construct the weights have been updated regularly to include the modern 
inputs required by physicians in running their respective practices. 
The MEI then appropriately apportions the various costs into their 
respective categories and calculates the associated weights. It is this 
distribution of costs, and not the level of costs, that the MEI 
appropriately incorporates. Based on this distribution, the MEI 
measures the weighted input price inflation, adjusted by productivity, 
faced by physicians. The MEI is then incorporated into the SGR formula 
to derive the final PFS update. Having an accurate and contemporary 
distribution of input costs is critical to producing an accurate 
measure of price inflation and is the major reason we are moving 
forward to rebase and revise the MEI for CY 2011.
    Finally, to date, we have not received any proposals from the 
public on how the MEI should be revised and still meet

[[Page 73274]]

its statutory requirements. We will continue to evaluate the validity 
and relevance of the index to ensure that it meets statutory 
requirements while adequately reflecting the evolution of the expense 
distribution associated with furnishing physicians' services.
    Comment: A commenter asserted that the time gap between the two 
surveys, the PPIS and the SMS, may not be directly comparable, but a 
comparison of the two indicates that medical practice costs increased 
79 percent from 2000 to 2006. However, the MEI only increased 18 
percent from 2000 to 2006. The commenter notes that every other 
available measure of physician expense growth shows faster growth than 
the MEI.
    Response: The MEI is strictly a fixed-weight price index expressly 
designed to measure the change in price of a fixed basket of goods. 
Changes in physician costs are a function of changes in prices and 
changes in quantities. As other commenters have noted to CMS, and CMS 
agrees, cost increases are only reflected in the MEI's weights to the 
extent the relative cost of an input changes over time. Comparing the 
MEI (reflecting price changes) to other cost metrics (that reflect both 
price changes, as well as changes in volume and mix) is inappropriate 
given the MEI's definition and purpose.
    Comment: A commenter noted that the proposed revisions to the MEI 
do not do anything to improve the adequacy of the MEI. The commenter 
also noted that in the proposed rule, CMS estimated the 2011 MEI at 
just 0.3 percent, and the addition of the new components that CMS has 
proposed based on BEA data does nothing to increase it.
    Response: The rebased and revised MEI is intended to more 
accurately reflect the cost structure of furnishing physicians' 
services, as well as measure the input price inflation encountered by 
physicians. Accordingly, we disagree with the commenter and believe 
that the 2006-based MEI offers numerous technical improvements. These 
improvements include updating the base year to reflect more current 
cost distributions, updating price proxies, and adding more detailed 
cost categories.
    Comment: A commenter stated that the MEI is used to annually update 
medical practice costs in the SGR calculation. Virtually all physician 
groups signed on to a January 2009 letter arguing that the MEI's price 
inputs as currently structured do not accurately reflect current 
medical practice costs. No action has been taken to remedy the 
situation.
    Response: We disagree with the commenter's claim the MEI annually 
updates the medical practice cost in the SGR. The purpose of the MEI in 
the SGR is to measure price increases related to the furnishing of 
physician services. It is not intended to measure cost increases, but 
rather to reflect the cost structure associated with furnishing 
physicians' services, and then subsequently measure the weighted price 
increases associated with that cost structure. We would also like to 
note that the MEI is currently part of the statutorily prescribed 
formula for physician payment updates and that revisions to the MEI are 
adopted through the notice and comment rulemaking process.
e. Technical Panel
    Comment: Many commenters expressed their support for the convening 
of a Medicare Economic Index Technical Advisory Panel (MEI TAP).
    Response: We agree that the MEI TAP should be convened and will be 
moving forward accordingly. This process includes announcing the 
panel's creation through an official CMS communication such as a 
Federal Register announcement. This announcement will provide details 
on the expected number of panel members, provide an opportunity for the 
public to nominate members, and inform the public of the objectives and 
scope of the panel's activities.
    We will be asking this group of independent experts to evaluate 
only technical aspects of the MEI, including the index's inputs, input 
weights, price-measurement proxies, and the productivity adjustment.
    Any formal recommendations made by the MEI TAP will be carefully 
considered by CMS. Suggested modifications that we believe would result 
in technical improvements to the MEI would appear in subsequent PFS 
proposed rules and be subject to public comment and the overall 
rulemaking process.
    Comment: Several commenters provided many suggestions on technical 
issues that they believe should be considered by the technical advisory 
panel. The commenters generally requested that the panel perform a 
thorough review of all aspects and elements of the MEI.
    Response: We appreciate the constructive comments on potential 
topics for the MEI technical advisory panel, which will be asked to 
fully evaluate the index. As noted above, the panel will be evaluating 
all technical aspects of the MEI including the cost categories, their 
associated weights and price proxies, and the productivity adjustment.
    Comment: A commenter stated that any recommendations that are made 
by the panel should be published with an opportunity for comment before 
they are finalized.
    Response: Any substantive recommendations from the technical 
advisory panel that CMS believes will result in technical improvements 
to the MEI will be subject to the rulemaking process, including giving 
the opportunity to the public to review and comment.
    Comment: Some commenters request that CMS reach out to the medical 
community to ensure that the panel's work is accurate and complete. 
Others indicated that pending the recommendations of the technical 
advisory panel, CMS should: (1) Include physicians and other 
stakeholders in the MEI revision process, so that the impact of any 
recommended changes can be studied prior to implementation; and (2) 
clearly state their rationale for proposed changes.
    Response: As mentioned previously, we will be reaching out to the 
public for suggestions as to the composition of an independent expert 
panel that will assist us in ensuring that the MEI is constructed 
accurately and completely, and fulfills its purpose to appropriately 
reflect the inflationary pressures faced by physicians in furnishing 
services. CMS will also present to the public any future proposed 
revisions to the MEI through notice and comment rulemaking, during 
which we will clearly state the rationale for any proposed changes and 
consider public comment before finalizing changes to the index.
    Comment: One commenter believes that one of the possible options 
for resolving the SGR problem involves replacing the SGR update formula 
with the MEI. The commenter noted that input from the MEI technical 
panel should better position the MEI as a viable alternative to the SGR 
update formula.
    Response: We welcome any technical comments the public has on the 
composition of the MEI, including the inputs, input weights, price-
measurement proxies, and productivity adjustment. Any recommendations 
from the MEI TAP will be evaluated and considered for possible future 
rulemaking. However, we note that replacement of, or adjustments to, 
the SGR is outside the scope of the MEI TAP.

[[Page 73275]]

f. Other
    Comment: Several commenters agreed with CMS' proposal to remove 
pharmaceuticals and separately billable medical supplies, since these 
are not paid under the PFS. Even though this change lessens the weight 
given to the practice expense component of the index, it made sense to 
the commenters given the separate line-item payments for these goods. 
Further, incident-to drugs are now paid based on average sales price 
(ASP) and, since last-year's changes, are no longer a factor in the SGR 
formula and the determination of the PFS conversion factor.
    Response: We agree with the commenters on the appropriateness of 
removing drugs and separately billable supplies from the MEI since they 
are not paid under the PFS and are no longer included as costs in the 
SGR formula.
    Comment: A commenter disagreed with the continued use of the AHE 
wage data for the total nonfarm business economy as a price proxy for 
physician income rather than using BLS data specific to all 
professional and technical workers.
    Response: We disagree with the commenter's suggestion. We believe 
that the use of the average hourly earnings data for the total nonfarm 
business economy, which captures skill mix shifts in the labor force, 
is the most appropriate index for use as the price proxy for physician 
income in the MEI. The AHE for the nonfarm business economy reflects 
general earnings including the impacts of supply, demand, and economy-
wide productivity for the average worker in the economy. Its use is 
consistent with the Congress's original intent that the index be based 
on changes in expenses of practice and general earnings levels.\3\ It 
is also consistent with our use of the BLS private nonfarm business 
multifactor productivity measure to adjust the index as economy-wide 
wage increases reflect economy-wide productivity increases. Therefore, 
we are finalizing our proposal to continue to use average hourly 
earnings for the total private nonfarm economy as a price proxy for 
physician income in the 2006-based MEI.
---------------------------------------------------------------------------

    \3\ 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.
---------------------------------------------------------------------------

    Comment: A commenter stated that although CMS has expanded the 
designation of the data underlying some of the GPCI and MEI constructs 
over the designations of previous years, the descriptions used are 
sometimes either inconsistent or contradictory. For example, CMS noted 
that ``for the proposed sixth GPCI update, we used the 2006 through 
2008 Bureau of Labor Statistics (BLS) Occupational Employment 
Statistics (OES) data as a replacement for the 2000 Census data.'' (75 
FR 40083). In contrast, CMS used ``2006 Occupational Employment 
Statistics (OES), BLS'' for the proposed 2006 MEI expense weights. (75 
FR 40089, note (2)). The commenter believes it is impossible to discern 
from the proposed rule whether inconsistent data sets were used or 
whether there is simply a misprint.
    Response: Because the MEI and GPCIs serve different purposes and 
are not interdependent, we may use data from different years and, in 
some instances, different sources. Both the MEI and the GPCI use the 
OES. However, because the MEI is based to 2006 it is appropriate to use 
the 2006 BLS Occupational Employment Statistics data to disaggregate 
the nonphysician wages cost weight into more detailed occupational cost 
weights.
    For the proposed sixth GPCI update, CMS proposed to use OES data 
for 2006 through 2008. The rationale for choosing this data for the 
proposed GPCI update was provided in the CY 2011 PFS proposed rule (75 
FR 40084).
8. Adjustments to the RVU Shares To Match the Proposed Rebased MEI 
Weights
    As described in the previous section, CMS proposed to rebase the 
MEI for CY 2011 based on the most current data and establish new 
weights for physician work, PE, and malpractice under the MEI. As 
stated in the previous section, the MEI was rebased to a CY 1996 base 
year beginning with the CY 1999 MEI (63 FR 58845), and to a CY 2000 
base year beginning with the CY 2004 MEI (68 FR 63239). For both the CY 
1999 and CY 2004 rebasing, we made adjustments to ensure that estimates 
of aggregate PFS payments for work, PE, and malpractice were in 
proportion to the weights for these categories in the rebased MEI (63 
FR 58829 and 69 FR 1095).
    Consistent with past practice when the MEI has been rebased, we 
proposed to make adjustments to ensure that estimates of aggregate CY 
2011 PFS payments for work, PE, and malpractice are in proportion to 
the weights for these categories in the rebased CY 2011 MEI.
    As explained in the CY 2011 PFS proposed rule (75 FR 40095), to 
match the proportions for work, PE, and malpractice in the rebased CY 
2011 MEI would necessitate increasing the proportion of aggregate CY 
2011 PFS payments for PE and malpractice and decreasing the proportion 
for work. This could be accomplished by applying adjustments directly 
to the work, PE, and malpractice RVUs. However, as stated in the 
proposed rule (75 FR 40095), we are cognizant of the public comments 
made during prior rulemaking on issues related to scaling the work 
RVUs. Many commenters have indicated a preference for the work RVUs to 
remain stable over time and for any necessary adjustments that would 
otherwise be made broadly to the work RVUs to be accomplished in an 
alternative manner. For example, in past 5-Year Reviews of the work 
RVUs, many commenters cited stability in the work RVUs, among other 
reasons, in their requests that any required budget neutrality 
adjustments not be made directly to the work RVUs. Given these prior 
comments, for CY 2011, we proposed to make the necessary MEI rebasing 
adjustments without adjusting the work RVUs. Instead, we proposed to 
increase the PE RVUs and the malpractice RVUs. Furthermore, as noted in 
the proposed rule (75 FR 40096), section 1848(c)(2)(B)(ii)(II) of the 
Act requires that changes to RVUs cannot cause the amount of 
expenditures for a year to differ by more than $20 million from what 
expenditures would have been in the absence of the changes. Therefore, 
as required by section 1848(c)(2)(B)(ii) of the Act, we proposed to 
make an adjustment to the CY 2011 conversion factor to ensure that the 
adjustments to the PE RVUs and the malpractice RVUs would not cause an 
increase in CY 2011 PFS expenditures.
    Comment: A number of commenters expressed support for the use of 
the most current and accurate data as inputs to ``formulas used by the 
Agency, whether the formula for the SGR, for practice expense inputs, 
malpractice expense inputs, or in this case to calculating the Medicare 
Economic Index.'' These commenters supported the proposal to rebase and 
revise the MEI using the AMA PPIS data and the corresponding 
adjustments to the work, PE, and MP RVUs. Some commenters noted 
particularly that since the AMA PPIS has been deemed appropriate for 
the purpose of the PE RVU update process begun in CY 2010, using this 
same data source to inform the MEI costs and weights in CY 2011 is also 
appropriate because it will ensure that all of the major cost-based 
components of the fee schedule methodology will now be tied to cost 
data collected in the same year (2006). Furthermore, a number of 
commenters supported the

[[Page 73276]]

proposed policy to adjust the RVU shares on the basis that the changes 
appear to have a modest positive impact on many of the services that 
were negatively affected by the implementation of the AMA PPIS data in 
CY 2010. These services were typically ones that are more heavily 
weighted to PE than work. In contrast, numerous commenters expressed 
dissatisfaction with the proposed policy on the premise that it 
``penalizes health care work that is not technology-intensive,'' that 
is, services that are typically more heavily weighted to physician work 
than PE, ``when in fact it is the technology-intensive health expenses 
that are actually driving up costs.'' A few of these commenters 
suggested that CMS insulate certain services that are work-intensive 
from the effects of the MEI rebasing.
    Response: We believe that using the most current and accurate data 
whenever practicable to update the PFS is a key principle for the 
payment system. We agree with the commenters that using the AMA PPIS 
data to rebase and revise the MEI in CY 2011 promotes consistency 
within the PFS. In using the AMA PPIS information to rebase and revise 
the MEI, the result is that the most current data drive the work RVU 
share down compared to the PE RVU and malpractice RVU shares. Since the 
PFS is both resource-based, relative, and budget neutral, if the data 
show that physicians' resources (that is, costs) have shifted 
proportionately more to PE and malpractice, the proportion for work 
must come down. We have tried to accommodate the preferences of 
previous commenters to preserve the stability of work RVUs by proposing 
to make the necessary MEI rebasing adjustments without adjusting the 
work RVUs. However, given the PFS budget neutrality requirement, we 
cannot implement some commenters' suggestion to insulate certain 
services that are work-intensive from the effects of the MEI rebasing 
without violating the inherent relativity of the system. That is, in 
order to insulate certain services from the effects of the MEI rebasing 
while adjusting the RVU shares to match the proportions for work, PE, 
and malpractice in the rebased MEI in a budget neutral manner as 
discussed previously, the individual work RVUs for those certain 
services would need to be increased. However, if we were to increase 
the work RVUs for those certain services, the services would no longer 
be appropriately valued relative to the other services under the PFS.
    Comment: Of the many commenters who supported CMS' proposal to 
adjust the RVU shares to match the proportions for work, PE, and 
malpractice in the rebased CY 2011 MEI, the vast majority also favored 
adjusting the RVU shares upward for PE and malpractice while making a 
corresponding adjustment to the conversion factor for budget neutrality 
without modifying the RVUs for work. These commenters stated that 
stability in the work RVUs was desirable. However, some commenters also 
expressed concern that CMS proposed an additional downward adjustment 
to the conversion factor when, under current law, the effect of the SGR 
update formula in December of 2010 and CY 2011 would reduce PFS 
payments significantly. These commenters generally opposed the MEI 
rebasing and the adjustment to the RVUs to match the MEI weights; 
however, if CMS were to proceed with the policy, the commenters 
suggested that, at the very least the adjustments be phased in over 2 
or 4 years. A few commenters suggested replacing the SGR update formula 
entirely with the MEI.
    Response: We are sympathetic to the commenters' concern that an 
additional downward adjustment to the conversion factor on top of the 
negative effect of the statutory SGR-based update is inopportune. 
However, as we explained in the proposed rule (75 FR 40095) and 
discussed previously in this section, rather than applying adjustments 
directly to the work, PE, and malpractice RVUs in order to match the 
rebased MEI weights for those categories, we believe that it is 
appropriate for the work RVUs to remain stable over time. The only way 
we can make the adjustments without affecting the work RVUs is to also 
make an adjustment to the conversion factor. We note that we did not 
receive a public comment suggesting that we make the downward 
adjustment to the work RVUs instead of the conversion factor in order 
to meet the requirements of section 1848(c)(2)(B)(ii) of the Act for 
budget neutrality. In response to the commenters that suggested 
replacing the SGR update with the MEI, we assume the commenters are 
making a general suggestion for a change in the current law, which is 
outside the purview of CMS.
    Comment: Many commenters addressed CMS' proposal to convene a 
technical advisory panel to review all aspects of the MEI. In light of 
this proposal, the majority of commenters urged CMS to delay 
implementation of the MEI rebasing and any other MEI changes, including 
the proposed adjustment to the RVU shares, until the advice of the 
technical advisory panel is reviewed by CMS and recommendations for 
change, if any, are considered. Additionally, while the commenters 
generally supported convening an MEI technical advisory panel, some 
commenters, including MedPAC, advised that CMS should go ahead and 
implement the rebased and revised MEI and the proposed adjustment to 
the RVU shares in CY 2011. These commenters noted that if the 
recommendations of the advisory panel indicated that the MEI should be 
adjusted, CMS could propose future changes accordingly.
    Response: We acknowledge the overwhelming support from commenters 
for the MEI technical advisory panel and refer readers to section 
II.E.6 of this final rule with comment period for a more detailed 
discussion of our plans to convene the panel. We note that a more 
detailed summary of the public comments and our responses is included 
in that section.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to make MEI rebasing adjustments to the 
PFS work and PE RVUs and to adjust the conversion factor to maintain 
budget neutrality. In light of the substantial support in general for 
us to make adjustments to match the proportions of the work, PE, and 
malpractice RVU shares to the categories in the revised and rebased CY 
2011 MEI and our decision, as described in section II.E.5 of this final 
rule, to proceed with rebasing the MEI for CY 2011, we are finalizing 
our proposal to adjust the RVU shares for CY 2011 to align the RVU 
shares with the rebased MEI weights. Specifically, we will not be 
making an adjustment directly to the work RVUs. Instead, we are 
increasing the PE RVUs by an adjustment factor of 1.181 and the 
malpractice RVUs by an adjustment factor of 1.358. The RVUs in Addendum 
B to this final rule with comment period reflect the application of 
these adjustment factors. We note that an application of the 1.358 
adjustment factor to the malpractice RVUs for services with malpractice 
RVUs of 0.01 will, due to rounding, result in malpractice RVUs of 0.01.
    Furthermore, section 1848(c)(2)(B)(ii)(II) of the Act requires that 
changes to RVUs cannot cause the amount of expenditures for a year to 
differ by more than $20 million from what expenditures would have been 
in the absence of the changes. Therefore, as required by section 
1848(c)(2)(B)(ii) of the Act, we are making an adjustment of 0.9181 to 
the CY 2011 conversion factor to ensure that the 1.181 adjustment to 
the PE RVUs and the 1.358 adjustment

[[Page 73277]]

to the malpractice RVUs do not cause an increase in CY 2011 PFS 
expenditures.

F. Allowed Expenditures for Physicians' Services and the Sustainable 
Growth Rate

1. Medicare Sustainable Growth Rate (SGR)
    The SGR is an annual growth rate that applies to physicians' 
services paid by Medicare. The use of the SGR is intended to control 
growth in aggregate Medicare expenditures for physicians' services. 
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 based on a 
comparison of allowed expenditures (determined using the SGR) and 
actual expenditures. If actual expenditures exceed allowed 
expenditures, the update is reduced. If actual expenditures are less 
than allowed expenditures, the update is increased.
    Section 1848(f)(2) of the Act specifies that the SGR for a year 
(beginning with CY 2001) is equal to the product of the following four 
factors:
    (1) The estimated change in fees for physicians' services;
    (2) The estimated change in the average number of Medicare fee-for-
service beneficiaries;
    (3) The estimated projected growth in real GDP per capita; and
    (4) The estimated change in expenditures due to changes in statute 
or regulations.
    In general, section 1848(f)(3) of the Act requires us to publish 
SGRs for 3 different time periods, no later than November 1 of each 
year, using the best data available as of September 1 of each year. 
Under section 1848(f)(3)(C)(i) of the Act, the SGR is estimated and 
subsequently revised twice (beginning with the FY and CY 2000 SGRs) 
based on later data. (The Act also provides for adjustments to be made 
to the SGRs for FY 1998 and FY 1999. See the February 28, 2003 Federal 
Register (68 FR 9567) for a discussion of these SGRs.) Under section 
1848(f)(3)(C)(ii) of the Act, there are no further revisions to the SGR 
once it has been estimated and subsequently revised in each of the 2 
years following the preliminary estimate. In this final rule with 
comment, we are making our preliminary estimate of the CY 2011 SGR, a 
revision to the CY 2010 SGR, and our final revision to the CY 2009 SGR.
2. Physicians' Services
    Section 1848(f)(4)(A) of the Act defines the scope of physicians' 
services covered by the SGR. The statute indicates that ``the term 
physicians' services includes other items and services (such as 
clinical diagnostic laboratory tests and radiology services), specified 
by the Secretary, that are commonly performed or furnished by a 
physician or in a physician's office, but does not include services 
furnished to a Medicare+Choice plan enrollee.''
    We published a definition of physicians' services for use in the 
SGR in the November 1, 2001 Federal Register (66 FR 55316). We defined 
physicians' services to include many of the medical and other health 
services listed in section 1861(s) of the Act. As discussed in the CY 
2010 PFS final rule with comment period (74 FR 61961), the statute 
provides the Secretary with clear discretion to decide whether 
physician-administered drugs should be included or excluded from the 
definition of ``physicians' services.'' Accordingly, we removed 
physician-administered drugs from the definition of ``physicians' 
services'' in section 1848(f)(4)(A) of the Act for purposes of 
computing the SGR and the levels of allowed expenditures and actual 
expenditures beginning with CY 2010, and for all subsequent years. 
Furthermore, in order to effectuate fully the Secretary's policy 
decision to remove drugs from the definition of ``physicians' 
services,'' we removed physician-administered drugs from the 
calculation of allowed and actual expenditures for all prior years.
    Additionally, payment was made under the PFS for several new 
benefit categories in CY 2010 including pulmonary rehabilitation (PR), 
cardiac rehabilitation (CR), intensive cardiac rehabilitation (ICR), 
and kidney disease education (KDE) services. We note further that 
section 101 of the MIPPA added a new benefit category for ``additional 
preventive services'' effective January 1, 2009. Although we neglected 
to identify and add these additional benefit categories when describing 
the scope of physicians' services for purposes of the SGR in course of 
rulemaking for CY 2010 and CY 2009, respectively, we did include 
payments for these services in calculating target and actual PFS 
expenditures beginning in CY 2009 for additional preventive services 
and beginning in CY 2010 for PR, CR, ICR, and KDE services.
    Section 4103 of the ACA added a new benefit category for 
``personalized prevention plan services'' (which include the annual 
wellness visit). Payment for these services will be made under the PFS, 
and payments for these services will be included in calculating target 
and actual PFS expenditures, beginning January 1, 2011.
    Thus, for purposes of determining allowed expenditures, actual 
expenditures for all years, and SGRs beginning with CY 2010 and for all 
subsequent years, we are specifying that physicians' services include 
the following medical and other health services if bills for the items 
and services are processed and paid by Medicare carriers (and those 
paid through intermediaries where specified) or the equivalent services 
processed by the Medicare Administrative Contractors (MACs):
     Physicians' services.
     Services and supplies furnished incident to physicians' 
services, except for the expenditures for drugs and biologicals which 
are not usually self-administered by the patient.
     Outpatient physical therapy services and outpatient 
occupational therapy services.
     Services of PAs, certified registered nurse anesthetists, 
certified nurse midwives, clinical psychologists, clinical social 
workers, NPs, and certified nurse specialists.
     Screening tests for prostate cancer, colorectal cancer, 
and glaucoma.
     Screening mammography, screening pap smears, and screening 
pelvic exams.
     Diabetes outpatient self-management training (DSMT) 
services.
     MNT services.
     Diagnostic x-ray tests, diagnostic laboratory tests, and 
other diagnostic tests (including outpatient diagnostic laboratory 
tests paid through intermediaries).
     X-ray, radium, and radioactive isotope therapy.
     Surgical dressings, splints, casts, and other devices used 
for the reduction of fractures and dislocations.
     Bone mass measurements.
     An initial preventive physical exam.
     Cardiovascular screening blood tests.
     Diabetes screening tests.
     Telehealth services.
     Physician work and resources to establish and document the 
need for a power mobility device.
     Additional preventive services.
     Pulmonary rehabilitation.
     Cardiac rehabilitation.
     Intensive cardiac rehabilitation.
     Kidney disease education services.
     Personalized prevention plan services.
3. Preliminary Estimate of the SGR for 2011
    Our preliminary estimate of the CY 2011 SGR is -13.4 percent. We 
first estimated the CY 2011 SGR in March

[[Page 73278]]

2010, and we made the estimate available to the MedPAC and on our Web 
site. Table 35 shows the March 2010 estimate and our current estimates 
of the factors included in the CY 2011 SGR. The majority of the 
difference between the March estimate and our current estimate of the 
CY 2011 SGR is explained by adjustments to reflect several intervening 
legislative changes that occurred after our March estimate was 
prepared.

                                        Table 35--CY 2011 SGR Calculation
----------------------------------------------------------------------------------------------------------------
            Statutory factors                    March estimate                     Current estimate
----------------------------------------------------------------------------------------------------------------
Fees....................................  0.2 percent (1.002)........  0.2 percent (1.002)
Enrollment..............................  3.1 percent (1.031)........  2.4 percent (1.024)
Real Per Capita GDP.....................  0.8 percent (1.008)........  0.7 percent (1.007)
Law and Regulation......................  -4.4 percent (0.956).......  -16.2 percent (0.838)
                                         -----------------------------------------------------------------------
    Total...............................  -0.4 percent (0.996).......  -13.4 percent (0.866)
----------------------------------------------------------------------------------------------------------------
Note: Consistent with section 1848(f)(2) of the Act, the statutory factors are multiplied, not added, to produce
  the total (that is, 1.002 x 1.024 x 1.007 x 0.838 = 0.866). A more detailed explanation of each figure is
  provided in section II.F.6.a. of this final rule with comment period.

4. Revised Sustainable Growth Rate for CY 2010
    Our current estimate of the CY 2010 SGR is 8.3 percent. Table 36 
shows our preliminary estimate of the CY 2010 SGR that was published in 
the CY 2010 PFS final rule with comment period (74 FR 61965) and our 
current estimate. The majority of the difference between the 
preliminary estimate and our current estimate of the CY 2010 SGR is 
explained by adjustments to reflect several intervening legislative 
changes that have occurred since publication of the CY 2010 final rule 
with comment period.

                                        Table 36--CY 2010 SGR Calculation
----------------------------------------------------------------------------------------------------------------
                                          Estimate from CY 2010 final
            Statutory factors                         rule                          Current estimate
----------------------------------------------------------------------------------------------------------------
Fees....................................  0.9 percent (1.009)........  0.9 percent (1.009)
Enrollment..............................  1.2 percent (1.012)........  1.6 percent (1.016)
Real Per Capita GDP.....................  0.7 percent (1.007)........  0.7 percent (1.007)
Law and Regulation......................  -11.3 percent (0.887)......  4.9 percent (1.049)
                                         -----------------------------------------------------------------------
    Total...............................  -8.8 percent (0.912).......  8.3 percent (1.083)
----------------------------------------------------------------------------------------------------------------
Note: A more detailed explanation of each figure is provided in section II.F.6.b. of this final rule with
  comment period.

5. Final Sustainable Growth Rate for CY 2009
    The SGR for CY 2009 is 6.4 percent. Table 37 shows our preliminary 
estimate of the CY 2009 SGR from the CY 2009 PFS final rule with 
comment period (73 FR 69904), our revised estimate from the CY 2010 PFS 
final rule with comment period (74 FR 61966), and the final figures 
determined using the best available data as of September 1, 2010.

                                        Table 37--CY 2009 SGR Calculation
----------------------------------------------------------------------------------------------------------------
                                      Estimate from CY      Estimate from CY
         Statutory factors             2009 final rule       2010 final rule                  Final
----------------------------------------------------------------------------------------------------------------
Fees..............................  2.1 percent (1.021).  1.8 percent (1.018).  1.8 percent (1.018)
Enrollment........................  -0.2 percent (0.998)  -0.8 percent (0.992)  -0.6 percent (0.994)
Real Per Capita GDP...............  1.2 percent (1.012).  0.9 percent (1.009).  1.0 percent (1.010)
Law and Regulation................  4.2 percent (1.042).  4.1 percent (1.041).  4.1 percent (1.041)
                                   -----------------------------------------------------------------------------
    Total.........................  7.4 percent (1.074).  6.1 percent (1.061).  6.4 percent (1.064)
----------------------------------------------------------------------------------------------------------------
Note: A more detailed explanation of each figure is provided in section II.F.6.b. of this final rule with
  comment period.

6. Calculation of CYs 2011, 2010, and 2009 Sustainable Growth Rates
a. Detail on the CY 2011 SGR
    All of the figures used to determine the CY 2011 SGR are estimates 
that will be revised based on subsequent data. Any differences between 
these estimates and the actual measurement of these figures will be 
included in future revisions of the SGR and allowed expenditures and 
incorporated into subsequent PFS updates.
(1) Factor 1--Changes in Fees for Physicians' Services (Before Applying 
Legislative Adjustments) for CY 2011
    This factor is calculated as a weighted-average of the CY 2011 
changes in fees for the different types of services included in the 
definition of physicians' services for the SGR. Medical and other 
health services paid using the PFS are estimated to account for 
approximately 89.4 percent of total allowed charges included in the SGR 
in CY 2011 and are updated using the MEI. The MEI for CY 2011 is 0.4 
percent. Diagnostic laboratory tests are estimated to represent 
approximately 10.6 percent of Medicare allowed charges included in the 
SGR for CY 2011. Medicare payments for these tests are updated by the 
Consumer Price Index for Urban Areas (CPI-U), which is 1.1 percent for 
CY 2011. However, section 3401 of the ACA reduces the CPI-U update 
applied to clinical laboratory tests by a productivity adjustment, but 
does not allow this adjustment to cause the

[[Page 73279]]

update to be negative. The applicable productivity adjustment for CY 
2011 is 1.2 percent. Adjusting the CPI-U update by the productivity 
adjustment results in a -0.1 percent (1.1 percent-1.2 percent) update 
for CY 2011. However, since section 3401 of the ACA does not allow the 
productivity adjustment to result in a negative CLFS update, the result 
is that the CLFS update for CY 2011 is 0.0 percent. Additionally, 
section 3401 of the ACA reduces the update applied to clinical 
laboratory tests by 1.75 percent for CYs 2011 through 2015. Therefore, 
for CY 2011, diagnostic laboratory tests will receive an update of -
1.75 percent. Additionally, as discussed in the CY 2010 PFS final rule 
with comment period (74 FR 61961), we removed physician-administered 
drugs from the definition of ``physicians' services'' in section 
1848(f)(4)(A) of the Act for purposes of computing the SGR and the 
levels of allowed expenditures and actual expenditures beginning with 
CY 2010, and for all subsequent years. Therefore, drugs represent 0.0 
percent of Medicare allowed charges included in the SGR in CY 2011.
    Table 38 shows the weighted-average of the MEI and laboratory price 
changes for CY 2010.

 Table 38--Weighted-Average of the MEI and Laboratory Price Changes for
                                 CY 2011
------------------------------------------------------------------------
                                              Weight          Update
------------------------------------------------------------------------
Physician...............................           0.894             0.4
Laboratory..............................           0.106            -1.8
Weighted-average........................           1.000             0.2
------------------------------------------------------------------------

    We estimate that the weighted-average increase in fees for 
physicians' services in CY 2011 under the SGR (before applying any 
legislative adjustments) will be 0.2 percent.
(2) Factor 2--The Percentage Change in the Average Number of Part B 
Enrollees From CY 2010 to CY 2011
    This factor is our estimate of the percent change in the average 
number of fee-for-service enrollees from CY 2010 to CY 2011. Services 
provided to Medicare Advantage (MA) plan enrollees are outside the 
scope of the SGR and are excluded from this estimate. We estimate that 
the average number of Medicare Part B fee-for-service enrollees will 
increase by 2.4 percent from CY 2010 to CY 2011. Table 39 illustrates 
how this figure was determined.

  Table 39--Average Number of Medicare Part B Fee-for-Service Enrollees
                         From CY 2010 to CY 2011
             [Excluding beneficiaries enrolled in MA plans]
------------------------------------------------------------------------
                                       2010                 2011
------------------------------------------------------------------------
Overall.......................  43.932 million...  45.010 million
Medicare Advantage (MA).......  11.683 million...  11.998 million
Net...........................  32.249 million...  33.012 million
Percent Increase..............  .................  2.4 percent
------------------------------------------------------------------------

    An important factor affecting fee-for-service enrollment is 
beneficiary enrollment in MA plans. Because it is difficult to estimate 
the size of the MA enrollee population before the start of a CY, at 
this time we do not know how actual enrollment in MA plans will compare 
to current estimates. For this reason, the estimate may change 
substantially as actual Medicare fee-for-service enrollment for CY 2011 
becomes known.
(3) Factor 3--Estimated Real Gross Domestic Product Per Capita Growth 
in 2011
    We estimate that the growth in real GDP per capita from CY 2010 to 
CY 2011 will be 0.7 percent (based on the 10-year average GDP over the 
10 years of 2002 through 2011). Our past experience indicates that 
there have also been changes in estimates of real per capita GDP growth 
made before the year begins and the actual change in GDP computed after 
the year is complete. Thus, it is possible that this figure will change 
as actual information on economic performance becomes available to us 
in CY 2011.
(4) Factor 4--Percentage Change in Expenditures for Physicians' 
Services Resulting From Changes in Statute or Regulations in CY 2011 
Compared With CY 2010
    The statutory and regulatory provisions that will affect 
expenditures in CY 2011 relative to CY 2010 are estimated to have an 
impact on expenditures of -16.2 percent. These include the Department 
of Defense Appropriations Act (DODAA), the Temporary Extension Act 
(TEA), and the Preservation of Access to Care for Medicare 
Beneficiaries and Pension Relief Act (PACMBPRA) which provided for 
physician updates.
    Furthermore, the ACA contained provisions regarding the policy on 
equipment utilization for imaging services, the multiple procedure 
payment reduction policy for imaging services, and the annual wellness 
visit providing personalized prevention plan services.
b. Detail on the CY 2010 SGR
    A more detailed discussion of our revised estimates of the four 
elements of the CY 2010 SGR follows.
(1) Factor 1--Changes in Fees for Physicians' Services (Before Applying 
Legislative Adjustments) for CY 2010
    This factor was calculated as a weighted-average of the CY 2010 
changes in fees that apply for the different types of services included 
in the definition of physicians' services for the SGR in CY 2010.
    We estimate that services paid using the PFS account for 
approximately 91.1 percent of total allowed charges included in the SGR 
in CY 2010. These services were updated using the CY 2010 MEI of 1.2 
percent. We estimate that diagnostic laboratory tests represent 
approximately 8.9 percent of total allowed charges included in the SGR 
in CY 2010. Medicare payments for these tests are updated by the CPI-U, 
which is -1.4 percent for CY 2010. However, section 145 of the MIPPA, 
as modified

[[Page 73280]]

by section 3401 of the ACA, reduced the update applied to clinical 
laboratory tests by 0.5 percent for CY 2009 and CY 2010. Therefore, for 
CY 2010, diagnostic laboratory tests received an update of -1.9 
percent. Since we removed physician-administered drugs from the 
definition of ``physicians' services'' for purposes of computing the 
SGR and the levels of allowed expenditures and actual expenditures 
beginning with CY 2010, and for all subsequent years, drugs represent 
0.0 percent of Medicare allowed charges included in the SGR in CY 2010.
    Table 40 shows the weighted-average of the MEI, laboratory, and 
drug price changes for CY 2010.

    Table 40--Weighted-Average of the MEI, Laboratory, and Drug Price
                           Changes for CY 2010
------------------------------------------------------------------------
                                              Weight          Update
------------------------------------------------------------------------
Physician...............................           0.911             1.2
Laboratory..............................           0.089            -1.9
Drugs...................................           0.000             0.0
Weighted-average........................           1.000             0.9
------------------------------------------------------------------------

    After considering the elements described in Table 40, we estimate 
that the weighted-average increase in fees for physicians' services in 
CY 2010 under the SGR (before applying any legislative adjustments) 
will be 0.9 percent. Our estimate of this factor in the CY 2010 PFS 
final rule with comment period was 0.9 percent (74 FR 61966).
(2) Factor 2--The Percentage Change in the Average Number of Part B 
Enrollees From CY 2009 to CY 2010
    We estimate that the average number of Medicare Part B fee-for-
service enrollees (excluding beneficiaries enrolled in Medicare 
Advantage plans) increased by 1.6 percent in CY 2010. Table 41 
illustrates how we determined this figure.

  Table 41--Average Number of Medicare Part B Fee-for-Service Enrollees
                         From CY 2009 to CY 2010
             [Excluding beneficiaries enrolled in MA plans]
------------------------------------------------------------------------
                                       2009                 2010
------------------------------------------------------------------------
Overall.......................  42.846 million...  43.932 million
Medicare Advantage (MA).......  11.098 million...  11.683 million
Net...........................  31.748 million...  32.249 million
Percent Increase..............  .................  1.6 percent
------------------------------------------------------------------------

    Our estimate of the 1.6 percent change in the number of fee-for-
service enrollees, net of Medicare Advantage enrollment for CY 2010 
compared to CY 2009, is a larger change than our original estimate of 
1.2 percent in the CY 2010 PFS final rule with comment period (74 FR 
61967). While our current projection based on data from 8 months of CY 
2010 differs from our original estimate of 1.2 percent when we had no 
actual data, it is still possible that our final estimate of this 
figure will be different once we have complete information on CY 2010 
fee-for-service enrollment.
(3) Factor 3--Estimated Real Gross Domestic Product Per Capita Growth 
in CY 2010
    We estimate that the growth in real GDP per capita will be 0.7 
percent for CY 2010 (based on the 10-year average GDP over the 10 years 
of CY 2001 through CY 2010). Our past experience indicates that there 
have also been differences between our estimates of real per capita GDP 
growth made prior to the year's end and the actual change in this 
factor. Thus, it is possible that this figure will change further as 
complete actual information on CY 2010 economic performance becomes 
available to us in CY 2011.
(4) Factor 4--Percentage Change in Expenditures for Physicians' 
Services Resulting From Changes in Statute or Regulations in CY 2010 
Compared With CY 2009
    The statutory and regulatory provisions that will affect 
expenditures in CY 2010 relative to CY 2009 are estimated to have an 
impact on expenditures of 4.9 percent. These include the DODAA, TEA, 
and PACMBPRA which provided for physician updates. Also included are 
the MIPPA provisions regarding the physician update, Physician Quality 
Reporting Initiative (PQRI) and e-prescribing bonuses, the work GPCIs, 
and payment provisions related to certain pathology services. 
Additionally, the ACA contained provisions regarding the work GPCIs, 
the policy on equipment utilization for imaging services, coverage of 
preventive services, and a physician enrollment requirement.
c. Detail on the CY 2009 SGR
    A more detailed discussion of our final revised estimates of the 
four elements of the CY 2009 SGR follows.
(1) Factor 1--Changes in Fees for Physicians' Services (Before Applying 
Legislative Adjustments) for CY 2009
    This factor was calculated as a weighted-average of the CY 2009 
changes in fees that apply for the different types of services included 
in the definition of physicians' services for the SGR in CY 2009. As we 
stated in the CY 2010 PFS final rule with comment period (74 FR 61965), 
although we removed drugs from the calculation of allowed and actual 
expenditures under sections 1848(d)(3)(C) and 1848(d)(4) of the Act 
retrospectively to the 1996/1997 base year, we determined that we were 
only authorized to remove drugs from the calculation of the SGR 
beginning with CY 2010. Therefore, we did not remove drugs from the SGR 
calculations for previous years, including CY 2009. Consistent with 
this determination, the revisions to our estimate of the CY 2009 SGR 
will be limited to revisions to reflect later data available as of 
September 1, 2010, that were not available when we published our 
previous estimates.
    Services paid using the PFS accounted for approximately 82.3 
percent of total Medicare-allowed charges included in the SGR for CY

[[Page 73281]]

2009 and are updated using the MEI. The MEI for CY 2009 was 1.6 
percent. Diagnostic laboratory tests represented approximately 8.0 
percent of total CY 2009 Medicare allowed charges included in the SGR 
and were updated by the CPI-U, which was 5.0 percent for CY 2009. 
However, section 145 of the MIPPA, as modified by section 3401 of the 
ACA, reduced the update applied to clinical laboratory tests by 0.5 
percent for CYs 2009 and 2010. Therefore, for CY 2009, diagnostic 
laboratory tests received an update of 4.5 percent. Drugs represented 
approximately 9.7 percent of total Medicare-allowed charges included in 
the SGR for CY 2009. We estimate a weighted-average change in fees for 
drugs included in the SGR of 1.6 percent for CY 2009. Table 42 shows 
the weighted-average of the MEI, laboratory, and drug price changes for 
CY 2009.

    Table 42--Weighted-Average of the MEI, Laboratory, and Drug Price
                           Changes for CY 2009
------------------------------------------------------------------------
                                              Weight          Update
------------------------------------------------------------------------
Physician...............................           0.823             1.6
Laboratory..............................           0.080             4.5
Drugs...................................           0.097             1.6
Weighted-average........................           1.000             1.8
------------------------------------------------------------------------

    After considering the elements described in Table 42, we estimate 
that the weighted-average increase in fees for physicians' services in 
CY 2009 under the SGR (before applying any legislative adjustments) was 
1.8 percent. This figure is a final one based on complete data for CY 
2009.
(2) Factor 2--The Percentage Change in the Average Number of Part B 
Enrollees From CY 2008 to CY 2009
    We estimate the change in the number of fee-for-service enrollees 
(excluding beneficiaries enrolled in MA plans) from CY 2009 to CY 2010 
was -0.6 percent. Our calculation of this factor is based on complete 
data from CY 2009. Table 43 illustrates the calculation of this factor.

   Table 43--Average Number of Medicare Part B From CY 2008 to CY 2009
             [Excluding beneficiaries enrolled in MA plans]
------------------------------------------------------------------------
                                      2008                 2009
------------------------------------------------------------------------
Overall.......................  41.958 million..  42.846 million
Medicare Advantage (MA).......  10.008 million..  11.098 million
Net...........................  31.950 million..  31.748 million
Percent Change................  ................  -0.6 percent
------------------------------------------------------------------------

 (3) Factor 3--Estimated Real Gross Domestic Product Per Capita Growth 
in CY 2009
    We estimate that the growth in real per capita GDP was 1.0 percent 
in CY 2009 (based on the 10-year average GDP over the 10 years of CY 
2000 through CY 2009). This figure is a final one based on complete 
data for CY 2009.
(4) Factor 4--Percentage Change in Expenditures for Physicians' 
Services Resulting From Changes in Statute or Regulations in CY 2009 
Compared With CY 2008
    Our final estimate for the net impact on expenditures from the 
statutory and regulatory provisions that affect expenditures in CY 2009 
relative to CY 2008 is 4.1 percent. These include the DRA provision 
regarding payments for imaging services, the Medicare, Medicaid, and 
SCHIP Extension Act of 2007 (Pub. L. 110-173) (MMSEA) provision 
regarding the PQRI bonuses payable in CY 2009, and the MIPPA provisions 
regarding the physician update, mental health services, and the change 
in application of budget neutrality to the CF.

G. The Update Adjustment Factor (UAF)

    Section 1848(d) of the Act provides that the PFS update is equal to 
the product of the MEI and the UAF. The UAF is applied to make actual 
and target expenditures (referred to in the statute as ``allowed 
expenditures'') equal. As discussed previously, allowed expenditures 
are equal to actual expenditures in a base period updated each year by 
the SGR. The SGR sets the annual rate of growth in allowed expenditures 
and is determined by a formula specified in section 1848(f) of the Act.
1. Calculation Under Current Law
    Under section 1848(d)(4)(B) of the Act, the UAF for a year 
beginning with CY 2001 is equal to the sum of the following--
     Prior Year Adjustment Component. An amount determined by--
    + Computing the difference (which may be positive or negative) 
between the amount of the allowed expenditures for physicians' services 
for the prior year (the year prior to the year for which the update is 
being determined) and the amount of the actual expenditures for those 
services for that year;
    + Dividing that difference by the amount of the actual expenditures 
for those services for that year; and
    + Multiplying that quotient by 0.75.
     Cumulative Adjustment Component. An amount determined by--
    + Computing the difference (which may be positive or negative) 
between the amount of the allowed expenditures for physicians' services 
from April 1, 1996, through the end of the prior year and the amount of 
the actual expenditures for those services during that period;
    + Dividing that difference by actual expenditures for those 
services for the prior year as increased by the SGR for the year for 
which the UAF is to be determined; and
    + Multiplying that quotient by 0.33.
    Section 1848(d)(4)(E) of the Act requires the Secretary to 
recalculate allowed expenditures consistent with section 1848(f)(3) of 
the Act. As discussed previously, section 1848(f)(3) specifies that the 
SGR (and, in turn, allowed expenditures) for the upcoming CY (CY 2011 
in this case), the current

[[Page 73282]]

CY (that is, CY 2010) and the preceding CY (that is, CY 2009) are to be 
determined on the basis of the best data available as of September 1 of 
the current year. Allowed expenditures for a year generally are 
estimated initially and subsequently revised twice. The second revision 
occurs after the CY has ended (that is, we are making the second 
revision to CY 2009 allowed expenditures in this final rule with 
comment).
    Table 44 shows the historical SGRs corresponding to each period 
through CY 2011.

Table 44--Annual and Cumulative Allowed and Actual Expenditures for Physicians' Services From April 1, 1996 through the End of the Current Calendar Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Cumulative        Cumulative
                                                          Annual allowed     Annual actual        allowed           actual
                         Period                           expenditures ($   expenditures ($   expenditures ($   expenditures ($       FY/CY SGR (%)
                                                           in billions)      in billions)      in billions)      in billions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
4/1/96-3/31/97.........................................         \1\ $46.8             $46.8             $46.8             $46.8                      N/A
4/1/97-3/31/98.........................................              48.3              47.0              95.2              93.9              FY 1998=3.2
4/1/98-3/31/99.........................................              50.4              47.8             145.6             141.7              FY 1999=4.2
1/1/99-3/31/99.........................................              12.7              12.4             \(2)\             141.7              FY 1999=4.2
4/1/99-12/31/99........................................              40.3              37.0             \(3)\             178.8              FY 2000=6.9
1/1/99-12/31/99........................................              53.0              49.5             185.8             178.8             FY 1999/2000
1/1/00-12/31/00........................................              56.8              54.1             242.7             232.9              CY 2000=7.3
1/1/01-12/31/01........................................              59.4              61.2             302.1             294.2              CY 2001=4.5
1/1/02-12/31/02........................................              64.3              64.6             366.4             358.7              CY 2002=8.3
1/1/03-12/31/03........................................              69.0              70.2             435.4             429.0              CY 2003=7.3
1/1/04-12/31/04........................................              73.6              78.3             509.0             507.2              CY 2004=6.6
1/1/05-12/31/05........................................              76.7              83.5             585.7             590.7              CY 2005=4.2
1/1/06-12/31/06........................................              77.8              84.6             663.5             675.3              CY 2006=1.5
1/1/07-12/31/07........................................              80.5              84.5             744.0             759.8              CY 2007=3.5
1/1/08-12/31/08........................................              84.2              86.7             828.2             846.4              CY 2008=4.5
1/1/09-12/31/09........................................              89.6              90.6             917.8             937.0              CY 2009=6.4
1/1/10-12/31/10........................................              97.0              92.9           1,014.7           1,029.9              CY 2010=8.3
1/1/11-12/31/11........................................              84.0                NA           1,098.7                NA            CY 2011=-13.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\(1)\ Allowed expenditures in the first year (April 1, 1996-March 31, 1997) are equal to actual expenditures. All subsequent figures are equal to
  quarterly allowed expenditure figures increased by the applicable SGR. Cumulative allowed expenditures are equal to the sum of annual allowed
  expenditures. We provide more detailed quarterly allowed and actual expenditure data on our Web site at the following address: http://www.cms.hhs.gov/SustainableGRatesConFact/ SustainableGRatesConFact/. We expect to update the web site with the most current information later this month.
\(2)\ Allowed expenditures for the first quarter of 1999 are based on the FY 1999 SGR.
\(3)\ Allowed expenditures for the last three quarters of 1999 are based on the FY 2000 SGR.

    Consistent with section 1848(d)(4)(E) of the Act, Table 44 includes 
our second revision of allowed expenditures for CY 2009, a 
recalculation of allowed expenditures for CY 2010, and our initial 
estimate of allowed expenditures for CY 2011. To determine the UAF for 
CY 2011, the statute requires that we use allowed and actual 
expenditures from April 1, 1996 through December 31, 2010 and the CY 
2011 SGR. Consistent with section 1848(d)(4)(E) of the Act, we will be 
making revisions to the CY 2010 and CY 2011 SGRs and CY 2010 and CY 
2011 allowed expenditures. Because we have incomplete actual 
expenditure data for CY 2010, we are using an estimate for this period. 
Any difference between current estimates and final figures will be 
taken into account in determining the UAF for future years.
    We are using figures from Table 44 in the following statutory 
formula:
[GRAPHIC] [TIFF OMITTED] TR29NO10.231

UAF11 = Update Adjustment Factor for CY 2011 = -2.9 percent
Target10 = Allowed Expenditures for CY 2010 = $97.0 billion
Actual10 = Estimated Actual Expenditures for CY 2010 = $92.9 
billion
Target 4/96-12/10 = Allowed Expenditures from 4/1/1996-12/
31/2010 = $1,014.7 billion
Actual 4/96-12/10 = Estimated Actual Expenditures from 4/1/
1996-12/31/2010 = $1,029.9 billion
SGR11 = -13.4 percent (0.866)
[GRAPHIC] [TIFF OMITTED] TR29NO10.232

    Section 1848(d)(4)(D) of the Act indicates that the UAF determined 
under section 1848(d)(4)(B) of the Act for a year may not be less than 
-0.07 or greater than 0.03. Since -0.029 is between -0.07 and 0.03, the 
UAF for CY 2010 will be -0.029.
    Section 1848(d)(4)(A)(ii) of the Act indicates that 1.0 should be 
added to the UAF determined under section 1848(d)(4)(B) of the Act. 
Thus, adding

[[Page 73283]]

1.0 to -0.029 makes the UAF equal to 0.971.

H. Physician and Anesthesia Fee Schedule Conversion Factors for CY 2011

    The CY 2011 PFS CF is $25.5217. The CY 2011 national average 
anesthesia CF is $15.8085.
1. Physician Fee Schedule Update and Conversion Factor
a. CY 2011 PFS Update
    The formula for calculating the PFS update is set forth in section 
1848(d)(4)(A) of the Act. In general, the PFS update is determined by 
multiplying the CF for the previous year by the percentage increase in 
the MEI times the UAF, which is calculated as specified under section 
1848(d)(4)(B) of the Act.
b. CY 2011 PFS Conversion Factor
    Generally, the PFS CF for a year is calculated in accordance with 
section 1848(d)(1)(A) of the Act by multiplying the previous year's CF 
by the PFS update.
    We note section 101 of the MIEA-TRHCA provided a 1-year increase in 
the CY 2008 CF and specified that the CF for CY 2009 must be computed 
as if the 1-year increase had never applied. Section 101 of the MMSEA 
provided a 6-month increase in the CY 2009 CF, from January 1, 2009, 
through June 30, 2009, and specified that the CF for the remaining 
portion of CY 2009 and the CFs for CY 2010 and subsequent years must be 
computed as if the 6-month increase had never applied. Section 131 of 
the MIPPA extended the increase in the CY 2009 CF that applied during 
the first half of the year to the entire year, provided for a 1.1 
percent increase to the CY 2010 CF, and specified that the CFs for CY 
2011 and subsequent years must be computed as if the increases for CYs 
2008, 2009, and 2010 had never applied. Section 1011(a) of the DODAA 
and section 5 of the TEA specified a zero percent update for CY 2010, 
effective January 1, 2010 through May 31, 2010. Subsequently, section 
101(a)(2) of the PACMBPRA provided for a 2.2 percent update to the CF, 
effective from June 1, 2010 to November 30, 2010. Therefore, under 
current law, the CF in effect in December 2010 is $28.3868.
    In addition, when calculating the PFS CF for a year, 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 
more than $20 million from what it would have been in the absence of 
these changes. If this threshold is exceeded, we must make adjustments 
to preserve budget neutrality. We estimate that CY 2011 RVU changes 
would result in a decrease in Medicare physician expenditures of more 
than $20 million. Accordingly, we are increasing the CF by 1.0045 to 
offset this estimated decrease in Medicare physician expenditures due 
to the CY 2011 RVU changes. Furthermore, as discussed in section II.E.6 
of this final rule with comment period, we are decreasing the CF by 
0.9181 in order to offset the increase in Medicare physician payments 
due to the CY 2011 rescaling of the RVUs so that the proportions of 
total payments for the work, PE, and malpractice RVUs match the 
proportions in the final revised and rebased MEI for CY 2011. 
Accordingly, we calculate the CY 2011 PFS CF to be $25.5217. This final 
rule with comment period announces a reduction to payment rates for 
physicians' services in CY 2011 under the SGR formula. These payment 
rates are currently scheduled to be reduced under the SGR system on 
December 1, 2010, and then again on January 1, 2011. The total 
reduction in MPFS rates between November 2010 and January 2011 under 
the SGR system will be 24.9 percent. By law, we are required to make 
these reductions in accordance with section 1848(d) and (f) of the Act, 
and these reductions can only be averted by an Act of Congress. While 
Congress has provided temporary relief from these reductions every year 
since 2003, a long-term solution is critical. We are committed to 
permanently reforming the Medicare payment formula.
    We illustrate the calculation of the CY 2011 PFS CF in Table 45.

               Table 45--Calculation of the CY 2011 PFS CF
------------------------------------------------------------------------
 
------------------------------------------------------------------------
December 2010 Conversion Factor....  ......................     $28.3868
CY 2011 Medicare Economic Index....  0.4 percent (1.0040)    ...........
CY 2011 Update Adjustment Factor...  -2.9 percent (0.9710)   ...........
CY 2011 RVU Budget Neutrality        0.5 percent (1.0045)    ...........
 Adjustment.
CY 2011 Rescaling to Match MEI       -8.2 percent (0.9181)   ...........
 Weights Budget Neutrality
 Adjustment.
CY 2011 Conversion Factor..........  ......................     $25.5217
------------------------------------------------------------------------

    We note payment for services under the PFS will be calculated as 
follows:
    Payment = [(RVU work x GPCI work) + (RVU PE x GPCI PE) + (RVU 
malpractice x GPCI malpractice)] x CF.
2. Anesthesia Conversion Factor
    We calculate the anesthesia CF as indicated in Table 45. Anesthesia 
services do not have RVUs like other PFS services. Therefore, we 
account for any necessary RVU adjustments through an adjustment to the 
anesthesia CF to simulate changes to RVUs. More specifically, if there 
is an adjustment to the work, PE, or malpractice RVUs, these 
adjustments are applied to the respective shares of the anesthesia CF 
as these shares are proxies for the work, PE, and malpractice RVUs for 
anesthesia services. Furthermore, as discussed in section II.E.6 of 
this final rule with comment period, we are rescaling the RVUs so that 
the proportions of total payments for the work, PE, and malpractice 
RVUs match the proportions in the final revised and rebased MEI for CY 
2011. Accordingly, we are adjusting the anesthesia CF to reflect the 
RVUs adjustments being made to all other physician fee schedule 
services to match the revised and rebased MEI weights.
    As explained previously, in order to calculate the CY 2011 PFS CF, 
the statute requires us to calculate the CFs for CYs 2009, 2010, and 
2011 as if the various legislative changes to the CFs for those years 
had not occurred. Accordingly, under current law, the anesthesia CF in 
effect in December 2010 is $16.6058. We illustrate the calculation of 
the CY 2011 anesthesia CF in Table 46.

    Table 46--Calculation of the CY 2011 Anesthesia Conversion Factor
------------------------------------------------------------------------
 
------------------------------------------------------------------------
December 2010 Anesthesia Conversion  ......................     $16.6058
 Factor.
CY 2011 Medicare Economic Index....  0.4 percent (1.0040)    ...........

[[Page 73284]]

 
CY 2011 Update Adjustment Factor...  -2.9 percent (0.9710)   ...........
CY 2011 Anesthesia Adjustment......  -2.3 percent (0.97651)  ...........
CY 2011 Anesthesia Conversion        ......................     $15.8085
 Factor.
------------------------------------------------------------------------

III. Code-Specific Issues for the PFS

A. Therapy Services

1. Outpatient Therapy Caps for CY 2011
    Section 1833(g) of the Act applies an annual, per beneficiary 
combined cap on expenses incurred for outpatient physical therapy and 
speech-language pathology services under Medicare Part B. A similar 
separate cap for outpatient occupational therapy services under 
Medicare Part B also applies. The caps apply to expenses incurred for 
therapy services furnished in outpatient settings, other than in an 
outpatient hospital setting which is described under section 
1833(a)(8)(B) of the Act. The caps were in effect during 1999, from 
September 1, 2003 through December 7, 2003, and continuously beginning 
January 1, 2006. The caps are a permanent provision, that is, there is 
no end date specified in the statute for therapy caps. Beginning 
January 1, 2006, the DRA provided for exceptions to the therapy caps 
until December 31, 2006. The exceptions process for therapy caps has 
been extended through December 31, 2009 pursuant to three subsequent 
amendments (in MEIA-TRHCA, MMSEA, and MIPPA).
    Section 1833(g)(5) of the Act (as amended by section 3103 of the 
ACA) extended the exceptions process for therapy caps through December 
31, 2010. The annual change in the therapy cap is computed by 
multiplying the cap amount for CY 2010, which is $1,860, by the MEI for 
CY 2011, and rounding to the nearest $10. This amount is added to the 
CY 2010 cap to obtain the CY 2011 cap. Since the MEI for CY 2011 is 0.4 
percent, the therapy cap amount for CY 2011 is $1870.
    The agency's authority to provide for exceptions to therapy caps 
(independent of the outpatient hospital exception) will expire on 
December 31, 2010, unless the Congress acts to extend it. If the 
current exceptions process expires, the caps will be applicable in 
accordance with the statute, except for services furnished and billed 
by outpatient hospital departments.
    Comment: The commenters unanimously requested repeal of the therapy 
caps, while characterizing caps as arbitrary and medically unfounded 
and the combination of cap amounts for PT and SLP services as 
groundless. A number of commenters argued that therapy caps restrict 
provision of medically necessary services to beneficiaries. Several 
commenters reported that patients are discharged for care prior to 
recovery due to payment restrictions and this leads to increased 
medical costs for Medicare.
    Response: Therapy caps are mandated by statute. We have no 
authority to repeal the caps, or to restructure the grouping of therapy 
disciplines to which the caps apply. However, we understand the 
concerns of the commenters, and we are actively exploring alternatives 
to therapy caps to inform the discussions about approaches to identify 
and pay for those therapy services that are necessary for patients to 
attain the best outcomes with the most efficient use of resources.
2. Alternatives to Therapy Caps
a. Background
    In section 4541 of the Balanced Budget Act of 1997 (Pub. L. 105-33) 
(BBA), the Congress enacted the financial limitations on outpatient 
therapy services (the ``therapy caps'' discussed above for physical 
therapy, occupational therapy, and speech-language pathology). At the 
same time, the Congress requested that the Secretary submit a Report to 
Congress that included recommendations on the establishment of a 
revised coverage policy for outpatient physical therapy services and 
outpatient occupational therapy services under the statute. The 
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113) (BBRA) placed 
the first of a series of moratoria on implementation of the limits. In 
addition, it required focused medical review of claims and revised the 
report requirements in section 4541(d)(2) of the BBA to request a 
report that included recommendations on the following: (A) The 
establishment of a mechanism for assuring appropriate utilization of 
outpatient physical therapy services, outpatient occupational therapy 
services, and speech-language pathology services; and (B) the 
establishment of an alternative payment policy for such services based 
on classification of individuals by diagnostic category, functional 
status, prior use of services (in both inpatient and outpatient 
settings), and such other criteria as the Secretary determines 
appropriate, in place of the limits. In 1999, therapy services were not 
defined, but services documented as therapy were billed and reported 
when furnished by a variety of individuals in many different settings. 
These services were not identified in a way that would allow analysis 
of utilization or development of alternative payment policies. Since 
that time, we have clarified the definition of therapy services and 
applied the qualifications of therapists consistently to outpatient 
settings, which have facilitated analysis of therapy services.
    We have studied therapy services with the assistance of a number of 
contractors over the past 11 years. Reports of these projects are 
available on the CMS Web site at http://www.cms.gov/TherapyServices/. 
On November 9, 2004, we delivered the Report to Congress, Number 
137953, ``Medicare Financial Limitations on Outpatient Therapy 
Services'' that referenced two utilization analyses. We periodically 
updated the utilization analyses and posted other contracted reports on 
the CMS web site in order to further respond to the requirements of the 
BBRA. Subsequent reports highlighted the expected effects of limiting 
services in various ways and presented plans to collect data about 
patient condition using available tools. The general belief was that if 
patient condition could be reliably described, that approach would 
ensure appropriate payment for appropriately utilized services.
    Over the past decade, significant progress has been made in 
identifying the outpatient therapy services that are billed to 
Medicare, the demographics of the beneficiaries who utilize those 
services, the types of services, the HCPCS codes used to bill the 
services, the allowed and paid amounts of the services, and the 
settings, geographic locations, and provider or supplier types where 
services are furnished.
    Some of the information that is necessary to ensure appropriate 
utilization and develop objective and equitable payment alternatives to 
therapy caps based on patient condition has proven difficult to 
develop. The influence of prior use of inpatient services on outpatient 
use of therapy services was not accessible due to systems issues and 
differences in the policies, billing, and reporting practices for 
inpatient and outpatient therapy

[[Page 73285]]

services. The weakness of the ICD-9-CM diagnostic codes in describing 
the condition of the rehabilitation patient obscured analyses of claims 
to assess the need for therapy services. The primary diagnosis on the 
claim is a poor predictor for the type and duration of therapy services 
required, which complicates assignment of patient cohorts for analysis. 
Although changes to the guidance in the Medicare Benefit Policy Manual 
(Pub. 100-02) on documentation of therapy services in 2005 improved the 
consistency of records and facilitated chart review, it became 
increasingly obvious that neither claims analysis nor chart review 
could serve as a reliable and valid method to determine a patient's 
need for services or to form the basis for equitable payment. We 
concluded that in order to develop alternative payment approaches to 
the therapy caps, we needed a method to identify patients with similar 
risk-adjusted conditions (cohorts) and then we would identify the 
therapy services that are necessary for the patients to attain the best 
outcomes with the most efficient use of resources.
    While we studied therapy utilization, a number of proprietary tools 
were developed by researchers in the professional community to assess 
the outcomes of therapy. Some tool sponsors collected sufficient 
information to predict with good reliability the amount or length of 
treatment that would result in the best expected outcomes. We 
encouraged the use of these proprietary tools in manual instructions, 
but proprietary tools do not serve our purposes because modification of 
proprietary tools may only be done by the tool sponsor. There now are 
some versions of the tools in the public domain and they are being 
utilized widely to identify patient conditions and, by some insurers, 
to pay for efficient and effective treatment. Examples of such tools 
include the National Outcomes Measurement System (NOMS) by the American 
Speech-Language Hearing Association and Patient Inquiry by Focus On 
Therapeutic Outcomes, Inc. (FOTO).
    In 2006, Focus on Therapeutic Outcomes, Inc. delivered to CMS a 
report titled, ``Pay for Performance for Physical Therapy and 
Occupational Therapy,'' which is also available on the CMS Web site at 
http://www.cms.gov/TherapyServices. The purpose of this project was to 
simulate a pay-for-performance implementation, designed to align 
financial incentives with the achievement of better clinical outcomes 
from services that were delivered efficiently. The project, funded by 
HHS/CMS Grant 18-P-93066/9-01, demonstrated the predictive validity of 
the risk-adjusted pay-for-performance model and the feasibility of 
reducing payments without affecting services to beneficiaries who need 
them.
b. Current Activities
    The Tax Relief and Health Care Act of 2006 (TRHCA) extended the 
therapy cap exceptions process through December 31, 2007 and provided 
funds used for two CMS projects related to developing alternative 
payment approaches for therapy services that are based on beneficiary 
needs. A 5-year project titled ``Development of Outpatient Therapy 
Alternatives'' (DOTPA), awarded to RTI International, was initiated in 
order to develop a comprehensive and uniform therapy-related data 
collection instrument, assess its feasibility, and determine the subset 
of the measures that we could routinely and reliably collect in support 
of payment alternatives. While DOTPA will identify measurement items 
relevant to payment, the project will not deliver a standardized 
measurement tool. We may either develop a tool or allow other tools to 
be used for payment purposes when they include those items that 
identify the following: (1) Beneficiary need; and (2) outcomes (that is 
effectiveness of therapy services). In addition to therapy caps, the 
DOTPA project considers our interest in value-based purchasing by 
identifying components of value, including beneficiary need and the 
effectiveness of therapy services. The DOTPA project reports are 
available on the contractor's Web site at http://optherapy.rti.org/. 
The data collection design and instrument development have been 
completed, and a Paperwork Reduction Act (PRA) package was submitted 
for approval of the data collection forms by the Office of Management 
and Budget (OMB). The Federal Register notice for the second round of 
public comment on this package was published on April 23, 2010 (75 FR 
21296). The PRA package has been approved; the contractor is recruiting 
potential participants in the data collection, developing training 
materials for participants, and updating the project web site. We did 
not seek public comments on the DOTPA project in the proposed rule.
    The TRCHA also funded the 2-year project contracted to Computer 
Sciences Corporation (CSC) entitled ``Short Term Alternatives for 
Therapy Services'' (STATS). STATS has provided recommendations 
regarding alternative payment approaches to therapy caps that could be 
considered before completion of the DOTPA project. The STATS project 
draws upon the analytical and clinical expertise of contractors and 
stakeholders to consider policies, measurement tools, and claims data 
that are currently available to provide further information about 
patient condition and the outcomes of therapy services. The final 
report, received September 13, 2010, included recommended actions we 
could take within 2 or 3 calendar years to replace the current cap 
limits on therapy services with a policy that pays appropriately for 
necessary therapy services.
c. Potential Short-Term Approaches to Therapy Caps
    On June 30, 2009, we received a draft of the CSC report titled 
``STATS Outpatient Therapy Practice Guidelines,'' a summary of expert 
workgroup discussions, and several short-term payment alternatives for 
consideration. CSC discussed options based on the assumption that 
short-term policy changes should facilitate the development of adequate 
function and/or outcomes reporting tools. In the longterm, CSC 
recommended that payment be based on function or quality measurements 
that adequately perform risk adjustment for episode-based payment 
purposes.
    Based on the draft report, additional stakeholder input, and 
subsequent communications with the contractor, in the CY 2011 PFS 
proposed rule (75 FR 40097 through 40099) we discussed several 
potential alternatives to the therapy caps that could lead to more 
appropriate payment for medically necessary and effective therapy 
services that are furnished efficiently. We solicited public comments 
on the proposed rule regarding all aspects of these alternatives, 
including the potential associated benefits or problems, clinical 
concerns, practitioner administrative burden, consistency with other 
Medicare and private payer payment policies, and claims processing 
considerations. We did not propose either short-term or long-term 
payment alternatives to the therapy caps. However, we referred readers 
to section II.C.4.(c) of the proposed rule for our CY 2011 proposal to 
expand the MPPR policy to ``always therapy'' services furnished in a 
single session in order to pay more appropriately for therapy services, 
taking into consideration the expected efficiencies when services are 
furnished together. While we did not propose the adoption of an MPPR 
policy for therapy services specifically as an alternative to the 
therapy caps, we acknowledged that by paying more appropriately for 
combinations of

[[Page 73286]]

therapy services that are commonly furnished in a single session, 
practitioners would be able to furnish more medically necessary therapy 
services to a given beneficiary before surpassing the caps. We noted 
that the proposed MPPR policy would have the potential to reduce the 
number of beneficiaries impacted by the therapy caps in a given year.
    Comment: Many commenters stated that use of the financial cap on 
therapy services as a rationale for the proposed MPPR was unacceptable 
and not a sound basis for such a significant policy proposal. Quite a 
few commenters contrasted the cap alternatives research with the MPPR 
which, in the commenters' opinion, did not reflect a similar level of 
analysis. Instead of implementing the proposed MPPR, a large majority 
of the commenters urged CMS to place a high priority in resources and 
funding for research to identify alternatives to the cap that would 
ensure patients receive medically necessary therapy services.
    While the commenters agreed that more therapy could be furnished to 
a beneficiary before surpassing the caps if the payments were reduced, 
the commenters believe that other, more serious access problems would 
result from arbitrary payment reductions under an MPPR. Many commenters 
were concerned that the proposed MPPR policy might restrict access to 
therapy services for patients with more severe problems, especially 
neurological problems and complex medical conditions. Less payment, 
explained the commenters, would force therapists to spend less time 
with patients, incentivize cutting corners, and encourage greater fraud 
and abuse. The commenters argued that the shortage of therapists, 
particularly physical therapists, would be exacerbated and access to 
therapy services would be severely jeopardized.
    Response: We appreciate the effort and resources contributed by 
stakeholders to the discussion and development of alternatives to 
therapy caps. We look forward to the continued cooperation of 
stakeholders as we continue our work in this area over the coming 
years. We refer readers to section II.C.4.(c) of this final rule with 
comment period for a detailed discussion of the public comments and our 
responses regarding the proposed therapy MPPR.
    The three specific short-term options that we discussed in the CY 
2011 PFS proposed rule would not have required statutory changes when 
CSC originally delivered them. In CY 2011, some would require extension 
of the therapy cap exceptions process. Some would require moderate 
reporting changes that would yield more detailed information about 
patient function and progress to inform future payment approaches and 
facilitate the medical review of services above the therapy caps at the 
present time. Others require new coding and bundled per-session payment 
that would be a first step toward episode-based payment. They are not 
necessarily independent of each other.
    Under each of these alternatives, administrative simplification 
with respect to current policies, such as HCPCS code edits and ``ICD-9-
CM to HCPCS code'' crosswalk edits that serve to limit utilization 
without regard to the patient's clinical presentation, could be pursued 
in the context of these options.
    The first option would modify the current therapy caps exceptions 
process to capture additional clinical information regarding therapy 
patient severity and complexity in order to facilitate medical review. 
This approach would complement the DOTPA project, which is identifying 
items to measure patient condition and outcomes. We believe the first 
option may have the greatest potential for rapid implementation that 
could yield useful information in the short-term. In the CY 2011 PFS 
proposed rule (75 FR 40097), we indicated that we were especially 
interested in detailed public comments on this option that could inform 
a potential proposal to adopt such an alternative through future 
rulemaking. The second option would involve introducing additional 
claims edits regarding medical necessity, in order to reduce 
overutilization. The third option would be to adopt a per-session 
bundled payment that would vary based on patient characteristics and 
the complexity of evaluation and treatment services furnished in the 
session. Each option would require significant provider and contractor 
education, and all would necessitate major claims processing systems 
changes. Moreover, some of the options may affect beneficiaries by 
changing the type or amount of services covered by Medicare or the 
beneficiary's cost sharing obligations.
    Comment: Many commenters agreed that a long term solution to the 
therapy caps is desirable. Generally, the commenters supported an 
evidence-based payment system grounded in accurate, comprehensive 
analysis of the clinical characteristics of the wide range of therapy 
patients in diverse settings and the concept of bundled payment for 
episodes of care based on clinical characteristics of patients. Many 
commenters urged CMS to place a high priority in resources and funding 
for research to identify alternatives to the cap that would ensure 
patients receive medically necessary therapy services. The commenters 
asserted that such research would be a key factor in identifying 
clinically appropriate ways to control spending. Those who commented on 
this issue commended CMS for proposing alternatives that reflect in-
depth analytical work, expressing appreciation to CMS and its 
contractor for the opportunity to participate on task forces and 
pledging continued assistance in trials of alternatives. The commenters 
also commend CMS for recommending better clinical information be 
included in payment decisions.
    MedPAC and some other commenters supported all three alternatives 
as reasonable steps consistent with the end goals of value for 
purchases based on the care needs of beneficiaries. Many commenters 
supported the first option or the third option, and very few supported 
the second option. Regardless of the alternative chosen, commenters 
consistently recommended further study and analysis, with a national 
demonstration or pilot project to test any alternative prior to 
implementation.
    Response: We continue to believe that the advice and assistance of 
stakeholders, including clinicians and practice administrators, are 
essential to the development of policies that are appropriate, 
realistic, and effective in allowing necessary therapy care while 
limiting overutilization. We appreciate the time and effort provided by 
the dedicated professionals involved in the STATS workgroups and DOTPA 
technical advisory panels.
    Comment: A commenter suggested that diagnoses cannot be used to 
predict medical necessity. The same commenter argued that if the 
patient were assessed using self-reported functional status measures 
that are risk-adjusted using many variables, it would be possible to 
predict outcomes, identify ineffective treatment, and reduce gaming 
without relying on clinician-generated estimates known to be biased and 
fraught with poor reliability and validity.
    Several other commenters stated that clinicians' judgment is 
essential to accurate outcomes assessment, and these commenters 
provided examples of clinical judgments believed essential to 
appropriate care planning.
    Response: None of the alternatives discussed in the proposed rule 
would require a measurement tool scored by either a clinician or the 
patient. We note the disagreement among the commenters on this point.

[[Page 73287]]

    Comment: While generally supportive of the development of 
alternatives to therapy caps, many commenters expressed concern that 
there were insufficient data and details of the options discussed in 
the proposed rule to develop a rational payment system based on the 
options at this time. Several commenters suggested that sophisticated 
multivariate statistical methods with a long list of clinically 
appropriate risk-adjustment variables would be required. Another 
commenter recommended using risk-adjustment models built on large 
aggregate datasets to develop efficiency and effectiveness projections 
on which payments could be based.
    Response: We agree that the alternatives presented were not fully 
developed and that statistically sound methods of evaluation of the 
fully developed alternatives would be appropriate. We made no specific 
proposal to adopt an alternative beginning in CY 2011, but instead 
presented three potential options in order to gather additional public 
input on the overall concepts and the details to inform our future 
developmental work in this area. We will continue to review and 
consider all the information provided to us and acknowledge that, in 
the context of any future proposal, we would need to provide further 
detail as part of notice and comment rulemaking in order for the public 
to provide meaningful comment prior to the adoption of changes to 
therapy payment.
    Comment: Many commenters complained that therapy payments have 
decreased relative to inflation over the past 10 years. The commenters 
described the practitioner's struggle to provide appropriate care and 
noted their fear of alternatives that could result in fewer resources 
with which to treat beneficiaries. Some commenters stated that Medicaid 
payments also decreased, leaving them with less flexibility to provide 
covered services to Medicare beneficiaries. Several commenters warned 
that those who bill therapy services will find ``creative'' ways to 
manage patients in the future, leading to reduced quality of care, or 
that therapists will be laid off, leading to access problems for 
beneficiaries.
    Some commenters recommended that CMS take time to consider the 
potential alternatives to therapy caps from all angles related to cost, 
including the costs of different health outcomes. Several commenters 
reported that outpatient physical therapy saves Medicare spending by 
preventing more expensive procedures and surgeries.
    Response: Achieving appropriate payment for quality services that 
quickly lead to good health outcomes is among the major goals of our 
payment policy. It is also our goal to limit overutilization of 
services, and to discourage the provision of services that are not 
medically reasonable and necessary or represent an abuse of Medicare 
funds. To that end, we will continue to develop policies aimed at 
paying for those therapy services that meet patients' needs. The clear 
challenge is to identify those needs and the services required.
    Comment: One commenter was concerned that underlying therapy 
utilization data are flawed due to inconsistent coverage and payment 
policies that also negatively affect good clinical practice by 
restricting the therapist's clinical judgment. The commenter provided 
detailed examples to illustrate inconsistencies in forms and billing 
rules between Part A and B providers and suppliers which in the 
aggregate, the commenter argued, impede CMS' ability to analyze claims 
data for comparison purposes. Differences due to National Correct 
Coding Initiative (NCCI) and Medically Unlikely Edit (MUE) policies and 
most particularly local coverage determinations (LCDs) were also 
identified by the commenter as creating significant variations among 
contractors. The commenter was particularly concerned about 
requirements for specific ICD-9-CM and CPT code combinations, which 
limit therapy diagnoses or require specific diagnoses as primary.
    Response: We develop national and local policies and guidelines as 
needed to interpret statutory requirements and to limit, whenever 
possible, abusive behaviors while encouraging high quality care and 
good outcomes for beneficiaries. Since no one method is entirely 
effective in curbing incorrect or fraudulent billing practices, a 
number of approaches have been adopted. We attempt to coordinate these 
policies and we recognize that it is sometimes difficult for providers 
and suppliers to stay informed about changes, especially when they 
treat beneficiaries whose services are impacted by different payment 
policies. We will continue to work cooperatively with interested 
stakeholders, as we did with the STATS project, to identify and resolve 
concerns or conflicts regarding our policies. We intend that any claims 
data collected in a pilot study would be unencumbered by conflicts that 
have been identified.
    Comment: Many commenters stated that the options are identified as 
alternatives to the cap exceptions process, which expires December 31, 
2010.
    Response: The short-term alternatives discussed are potential 
alternatives to the therapy caps, and while it may be possible to 
implement some as modifications to the exceptions process, we recognize 
that Congress would have to act to extend the authority for a therapy 
cap exceptions process or to otherwise provide for certain alternatives 
to therapy caps.
    Option (1): Revise therapy caps exceptions process by requiring the 
reporting of new patient function-related Level II HCPCS codes and 
severity modifiers.
    This option would require that clinicians submit beneficiary 
function-related nonpayable HCPCS codes to replace the -KX modifier 
(Specific required documentation on file). Codes would not be submitted 
on every claim, but at episode onset and at periodic intervals (for 
example, progress report intervals of 12 sessions or 30 days--whichever 
is less). Codes would be submitted for all patients in order for the 
claims to be paid and not only those claims approaching or surpassing 
the therapy caps. The current -KX modifier is not useful to identify 
claims exceeding therapy caps, because it is used for services both 
before and after the caps are exceeded, and it must be used on the 
entire claim for facilities. New codes also would not identify claims 
above the cap, but they would perform the same function as the current 
-KX modifier to signal that documentation in the medical record 
supported medical necessity that should lead to an exception to the 
therapy caps. The codes would also provide more information for medical 
review.
    Six Level II HCPCS G-codes representing functions addressed in the 
plan of care and 5 (or 7) modifiers representing severity/complexity 
would be utilized to report information on the claim. Examples of six 
new function-related G-codes:
     GXXXU--Impairments to body functions and/or structures--
current.
     GXXXV--Impairments to body functions and/or structures--
goal.
     GXXXW--Activity limitations and/or participation 
restrictions--current.
     GXXXX--Activity limitations and/or participation 
restrictions--goal.
     GXXXY--Environmental barriers--current.
     GXXXZ--Environmental barriers--goal.
    Two potential severity/complexity scales have been suggested that 
would require the adoption of 5 or 7 new severity modifiers, 
respectively. Under one scenario, modifiers based on the

[[Page 73288]]

International Classification of Function would identify severity as 
follows:
     None (0 to 4 percent).
     MILD (5 to 24 percent).
     MODERATE (25 to 49 percent).
     SEVERE (50 to 95 percent).
     COMPLETE (96 to 100 percent).
    Alternatively, a proportional severity/complexity scale would use 7 
modifiers to describe impairments, limitations, or barriers--
     0 percent;
     1 to 19 percent;
     20 to 39 percent;
     40 to 59 percent;
     50 to 79 percent;
     80 to 99 percent; or
     100 percent.
    Implementation of this general approach might require 6 months to 2 
years to modify claims processing for the current therapy caps and 
exceptions processing of claims, and to develop, pilot test, and refine 
coding before applying the approach nationally. While therapists 
initially would need to learn the new codes and update their billing 
systems, ultimately their reporting burden might be reduced because the 
-KX modifier would not be required on each claim line for patients with 
expenditures approaching or exceeding the therapy caps. This option 
could potentially result in a small reduction in outpatient therapy 
expenditures due to increased Medicare contractor scrutiny of episodes 
where functional severity scores did not change over time, or to other 
atypical reporting patterns associated with the new codes.
    In the longterm, these codes and modifiers could be mapped to 
reliable and validated measurement tools (either currently available 
tools in the public domain or newly developed tools from items on the 
DOTPA instrument or the Continuity Assessment Record and Evaluation 
(CARE) tool). If statistically robust patient condition information 
were collected from claims data, it may be possible to develop Medicare 
payment approaches for outpatient therapy services that could pay 
appropriately and similarly for efficient and effective services 
furnished to beneficiaries with similar conditions who have good 
potential to benefit from the services furnished. At a minimum, the new 
codes could allow contractors to more easily identify and limit the 
claims for beneficiaries who show no improvement over reasonable 
periods of time.
    Comment: Most commenters supported the concept of Option (1) 
although often not without concerns about the details of 
implementation. The commenters generally endorsed the concept of 
describing patients' goals in terms of activity participation and 
environmental barriers, in addition to impairments based on the World 
Health Organization's (WHO's) International Classification of 
Functioning, Disability and Health (ICF). Some supported Option (1) as 
the best of the three options as it could begin providing a national 
overview of functional status and severity of patients which would be 
essential if CMS were to pursue future episode-based payment. The 
majority of commenters agreed with the concept of developing an 
infrastructure to work toward payment reform based on episodes of care, 
patient characteristics, functional status, rehabilitation complexity, 
severity, and outcomes. Many commenters supported Option (1) as the 
first step in a plan to move toward Option (3) that would introduce 
per-session codes to bundle payment, as described in detail below, and 
ultimately episode-based payments, although a few suggested the 
severity codes could be used, after adequate testing and definition, to 
inform appropriate payment. Some commenters recommended developing 
Option (1) and suggested that further development should include: 
definition of terms (including the ICD-10 diagnosis codes in 2013), 
input from therapists, field testing, and data analysis to ensure that 
payment appropriately reflects patient complexity and risk before 
application of the codes to individual therapy disciplines.
    The commenters in favor of this option supported the use of ICF 
language in descriptions, but consistently preferred a 7-point rating 
scale for severity over the 5-point scale based on the ICF. Several 
commenters also noted that sufficient training would be required for 
contractors and providers of service under this option.
    Response: We appreciate the perspectives of the commenters who see 
Option (1) as a first step in the process of exploring alternatives to 
the therapy caps that could move toward payment based on the needs of 
beneficiaries.
    Comment: Many commenters opposed this option as burdensome, easy to 
``game,'' and lacking the potential for saving money. The commenters in 
opposition to the option claimed it could require a great deal of 
research to establish, validate and value codes, and then pilot test, 
refine, establish inter-tester reliability, and modify the claims 
processing process, which could take 2 years. Instead, the same 
commenters recommended the use of valid and reliable measurement tools 
currently in the public domain and in use by clinicians. One commenter 
requested that CMS not use clinician-graded single item assessment 
scales of patient severity or complexity, unless such methodology 
possessed published reliability and validity on the selection and 
grading processes because there are more psychometrically sound 
published scales available that include a risk adjustment process to 
predict treatment success and number of visits and are less vulnerable 
to gaming. If scales were used, several commenters recommended that 
they must be sensitive and cardinal so each change would represent an 
equal increment.
    Response: We recognize that Option (1) is not yet fully developed 
and would require further study. As we consider this option further, we 
will also assess the feasibility of using currently available validated 
measurement scales in the public domain. The issues of ``gaming'' and 
savings remain of interest in relationship to this and the other 
options.
    Comment: Several commenters voiced serious concerns about the 
concept of using function-related codes and severity modifiers on the 
claim to monitor patient improvement. The commenters were alarmed that 
contractors would deny services when improvement was insufficiently 
demonstrated, or when the beneficiary's goal was to prevent 
deterioration of function. Several commenters were concerned that a 
contractor's attention to function and severity modifiers might cause 
the contractor to unduly limit the therapy sessions a patient needed to 
maintain or increase functionality.
    A few commenters interpreted the statute to require only that a 
service be medically necessary to treat the underlying illness or 
condition, and not to require that the service lead to improvement. 
According to the commenters, a service required to maintain current 
function is medically necessary but the focus on identifying 
improvement would prevent those patients with progressive diseases from 
receiving therapy to prevent further decline in function when there is 
little probability of meeting an undefined improvement standard. A few 
commenters provided citations of court cases that rejected Medicare 
policies and practices that denied therapy services based on arbitrary 
rules of thumb without consideration of the patient's individual 
condition. Therefore, the same commenters recommended that CMS omit 
reference to improvement standards in any proposal related to Option 
(1).
    Response: The policies for Medicare Part B outpatient therapy 
services require payment for therapy services that require the skills 
of a therapist. In

[[Page 73289]]

contrast, ``Unskilled services are palliative procedures that are 
repetitive or reinforce previously learned skills, or maintain function 
after a maintenance program has been developed * * *. services related 
to activities for the general good and welfare of patients, for 
example, general exercises to promote overall fitness and flexibility 
and activities to provide diversion or general motivation, do not 
constitute therapy services for Medicare purposes'' (Medicare Benefit 
Policy Manual, Pub. 100-02, chapter 15, section 220.2.A.). We note that 
when the goal of therapy is to halt degeneration of function due to 
disease, therapy is not palliative or related to general welfare, but 
may be an active treatment with measurable outcomes. For that reason, 
we do not anticipate that function-related codes and severity modifiers 
would be used exclusively as a proxy for the determination of medical 
necessity.
    The Medicare policy goes on to state, `` * * * services must be 
necessary for the establishment of a safe and effective maintenance 
program required in connection with a specific disease state. In the 
case of a progressive degenerative disease, service may be 
intermittently necessary to determine the need for assistive equipment 
and/or establish a program to maximize function * * *.'' (Pub. L. 100-
02, chapter 15, section 220.2.A.). Further details concerning 
maintenance therapy and examples of covered services to patients with 
degenerative neurological diseases are found in Pub. 100-02, chapter 
15, section 220.2.D.
    Option (2): Enhance existing therapy caps exceptions process by 
applying medical necessity edits when per-beneficiary expenditures 
reach a predetermined value.
    The existing automatic process for exceptions, and the revised 
exceptions process described in Option (1) above, pay practitioners 
indefinitely for services if they attest on the claim by appending a 
specific modifier to therapy HCPCS codes that the services being 
furnished are medically necessary and that supporting documentation is 
included in the medical record. Unless the local contractor uses claims 
edits or does post-payment review, these processes do not identify or 
limit unusually high annual per-beneficiary utilization. High 
utilization is not limited to beneficiaries with multiple or complex 
conditions. We would use existing therapy utilization data to develop 
annual per-beneficiary medical necessity payment edits, such as limits 
to the number of services per-session, per-episode, or per-diagnostic 
grouping, for exceptions to the therapy caps which would be set at 
benchmark payment levels that only a small percentage of beneficiaries 
would surpass in a single year. Once these levels were reached, 
additional claims would be denied and practitioners would need to 
appeal those denials if they wished to challenge Medicare's nonpayment.
    This alternative would require 1 to 2 years to implement as an 
expansion of existing policy, and its effects would be anticipated by 
analysis of the current utilization of therapy services. Additional 
practitioner burden would be incurred in the small number of cases 
exceeding the per beneficiary expenditure edits if the practitioner 
chose to appeal the medical necessity denial.
    Comment: Few commenters preferred Option (2) over the other two. In 
addition, the commenters stated that they were familiar with this 
approach because other insurers use a similar system of edits, so the 
adoption of Option (2) for Medicare patients would not represent an 
additional administrative burden. The commenters who favored this 
option reported that it would be the easiest for CMS to implement and 
would be the only option likely to save money in the very short-term. 
Some commenters who favored this option would still prefer the use of 
existing measurement tools to gather data about therapy services. One 
commenter pointed out that limits per-diagnosis should be based on 
reasonable data that reflect good patient outcomes.
    Most of the commenters who supported Option (2) also noted that 
this option could influence therapy utilization and possibly outcomes, 
creating flawed data that were not representative of needed services. 
The commenters were concerned that future payment policy decisions 
might later be based on those flawed data.
    Response: We agree that Option (2) has the benefit of being 
relatively easy to implement and we appreciate the perspective of some 
commenters on the low anticipated burden. We also recognize that a 
database of limited services would not be appropriate to use for 
estimating the full cost of medically necessary services.
    Comment: Some commenters took a neutral position on this option, 
finding that it could be part of a viable alternative to therapy caps 
but only after considerable study and development. MedPAC noted that 
Option (2) would implement more meaningful therapy caps in the interim, 
while longer-term solutions were being developed and tested. At the 
same time, MedPAC supported CMS' efforts to identify medically 
unnecessary care and to implement payment systems that ensure that the 
program obtains value for its purchases. Other commenters were 
concerned that the benchmark levels for edits be realistic and not 
arbitrary. The commenters requested that CMS consider a method to deal 
with outliers without forcing denials and appeals.
    Response: Option (2) could be used in combination with other 
options. We recognize the description we provided was not specific 
about the edit levels and that further deliberation would be 
appropriate before edits could be implemented.
    Comment: The majority of commenters opposed Option (2). Although 
some commenters agreed that edits for medically unlikely services are 
useful and appropriate, they expressed concerns about this approach 
because edits can often be arbitrary, are not based on patient needs, 
and may improperly limit necessary services. Some commenters asserted 
that individuals with degenerative conditions may require shorter 
sessions over longer periods of time to address functional loss and 
slow deterioration and to maximize health outcomes. The commenters also 
opposed edits that would fail to address the affects of cognitive 
impairment on treatment. Several commenters cited the existing ICD-9-
CPT code crosswalks, LCDs, NCCI edits, and MUEs as examples of similar 
edits that commenters often found to be clinically inappropriate. The 
commenters argued that current edits and policies based on unsupported 
information led to denials and appeals that were costly to therapists 
and CMS. The commenters urged CMS to avoid edits that lack clinical 
relevance or a scientific basis and create anomalies in claims data.
    Response: Option (2) was developed with input from therapy 
professionals based on their review of therapy utilization data. If 
this option were to be implemented, we would, at a minimum, review the 
advice and recommendations of stakeholders, along with any available 
utilization data to inform our decisions regarding the edit levels.
    Comment: A few commenters criticized Option (2) as scientifically 
flawed. One commenter reported that use of a combined effectiveness 
(that is, functional status change) and efficiency (that is, number of 
treatment visits) algorithm in a value-based payment process is one of 
the few methods where one could determine if the patient needs more or 
less treatment to reach optimal risk-adjusted gains in functional 
status. The same commenter referenced numerous research efforts that 
have analyzed functional status outcomes in

[[Page 73290]]

rehabilitation using sophisticated risk-adjustment methods and 
requested that CMS use these as a basis for a new payment policy.
    Other commenters asserted that currently available utilization data 
are inadequate to develop predetermined edit values, citing studies of 
therapy utilization under contract to CMS and studies performed by 
industry that demonstrate why ICD-9 coding, lack of function/severity 
data, and lack of a definition for ``episode'' are problematic.
    Response: Current therapy utilization data reveal that one percent 
of beneficiaries who receive services incur costs that proportionately 
far exceed those of the other 99 percent of beneficiaries. However, we 
are also aware that without some knowledge of the condition of the 
beneficiary, it is impossible to determine which, if any, of those 
services were medically necessary. While it would be desirable to 
analyze more detailed utilization data that include patient function/
severity outcomes for setting edit values, those data are not available 
to us in the short-term. We believe that the existing limited 
utilization data, albeit not fully descriptive of patients, could 
inform potential future edit values for therapy services.
    Comment: If CMS plans to move forward with edits, many commenters 
strongly requested that professional organizations be consulted to 
determine whether such edits are clinically appropriate and realistic. 
Some commenters specifically urged CMS to await the results of the 
DOTPA pilot in the hope of capturing meaningful clinical differences 
between patients before applying edits. Before such edits could 
reliably be applied to payment, other commenters recommended that CMS 
design, test, and evaluate additional data on functional status and 
barriers to participation. Many commenters indicated that more data are 
needed; especially thresholds based on episodes, condition groupings, 
and similar criteria that could trigger medical review, but not support 
denial. To that end, some commenters stated that it might be possible 
to support this approach under Option (2), but after Option (1) was 
implemented.
    Response: We understand the commitment of stakeholders to the 
development of alternatives to the therapy caps based on clinically 
appropriate policies. We will consider the potential benefit of Option 
(1) to develop data on which to base the edits required under Option 
(2) as we further contemplate alternatives to the therapy caps.
    Comment: A few commenters opposed Option (2) edits because the 
edits would virtually eliminate the exceptions process mandated by law 
and replace it with denial of claims at a predetermined value, which 
may be inconsistent with the statutory requirement for an exceptions 
process. The same commenters stated that there would be no basis for 
edits until Option (1) was implemented to provide more detailed claims-
based information. Several commenters reported research showing 10 
percent of Part B patients in nursing facilities have highly complex 
problems, with multidisciplinary needs and inconsistent patterns of 
therapy service use. The commenters were concerned that denials would 
interfere with treatment of these complex patients with special needs.
    Response: Option (2) would require an existing exception to the 
therapy caps, which would be enhanced to allow limited billing and 
payment for medically necessary services that exceed the caps. The 
option could not be used if the exceptions process were not extended. 
However, the Deficit Reduction Act of 2005 that established exceptions 
to the caps for medically necessary therapy services also required 
implementation of clinically appropriate code edits in order to 
identify and eliminate improper payments for therapy services. CMS 
currently applies NCCI and MUE edits to therapy services that fail to 
meet a reasonable assumption of medical necessity. We view 
implementation of Option (2) as consistent with our current authority 
to create edits to control inappropriate billings.
    Benchmark levels for Option (2) would be based on existing therapy 
utilization data and limits would be set at levels that a high 
percentage of beneficiaries would not exceed. While it may be helpful 
to have more data related to patient condition as described in Option 
(1) before implementing Option (2), we do not consider such information 
vital to the development of limits that affect a very small percentage 
of beneficiaries whose service payments would so far exceed average 
payments that they would be likely to include inappropriate billings 
and would be unlikely to interfere with the delivery of medically 
necessary services.
    Comment: If the option of implementing edits were pursued, several 
commenters indicated that the edits should be variable based on 
clinical criteria, result in medical review instead of denials, and 
reflect issues of multidisciplinary care, care coordination, and 
clinical issues.
    Response: If Option (2) were to be further developed, we would 
consider the commenters' suggestions prior to finalizing a plan for 
implementation, along with any new information available from 
additional research studies, OIG reports, or other sources.
    Option (3): Introduce per-session ``Evaluation/Assessment and 
Intervention'' (E&I) codes to bundle payment for groups of current 
therapy HCPCS codes into a single per-session payment.
    As discussed in section II.C.4.(c) of this final rule with comment 
period, multiple therapy services are often furnished in a single 
session, and we proposed to expand the MPPR policy to ``always 
therapy'' services in CY 2011 in order to take into consideration the 
efficiencies that occur when multiple services (the typical therapy 
scenario) are furnished in one session to a beneficiary. Furthermore, 
we note that section 1848(c)(2)(K) of the Act (as added by section 3134 
of the ACA) regarding potentially misvalued codes under the PFS 
specifies that the Secretary may make appropriate coding changes, which 
may include consolidation of individual services into bundled codes for 
payment under the PFS, as part of her review and adjustment of the 
relative values for services identified as potentially misvalued.
    This option would require that practitioners submit a single new 
Level II HCPCS code to represent all the therapy services currently 
reported and paid separately for an outpatient therapy session. Payment 
for the HCPCS code would be based on patient characteristics (as 
identified through prior CMS contractor analyses) and the complexity of 
the evaluation/assessment and intervention services furnished during 
the session. The new coding requirements would not necessarily disrupt 
the current exceptions process or the revised exceptions process 
described in Option (1) above. Approximately 12 E&I codes would be 
needed for each discipline, taking into consideration the basic 
algorithm shown in Table 47.

[[Page 73291]]



                                           Table 47--Evaluation/Assessment & Intervention Level II HCPCS Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Evaluation/assessment complexity
                                                                  --------------------------------------------------------------------------------------
                                                                             Minimal                      Moderate                   Significant
--------------------------------------------------------------------------------------------------------------------------------------------------------
Intervention level..................  None.......................  E&I Code 1........  E&I Code 2........  E&I Code 3.
                                      Minimal....................  E&I Code 4........  E&I Code 5........  E&I Code 6.
                                      Moderate...................  E&I Code 7........  E&I Code 8........  E&I Code 9.
                                      Significant................  E&I Code 10.......  E&I Code 11.......  E&I Code 12.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We would need to develop and test operational definitions for each 
E&I code so that practitioners would be able to properly report 
services and appropriate relative values could be established for each 
per-session code. We believe that a pilot study might reveal that the 
different practice patterns for the three therapy professions (physical 
therapy, occupational therapy, and speech-language pathology) could 
necessitate separate relative value determinations for each E&I code by 
type of therapy service furnished. As a result, up to 36 total new 
Level II HCPCS codes could be needed (12 per discipline).
    We anticipate that the definitions of E&I codes 1 through 3 and 7 
through 12 would describe services that may only be furnished by a 
``clinician'' (therapist, physician, or non-physician practitioner). 
E&I codes 1 through 3 would be reported for sessions that consisted 
only of evaluations. In addition, the definitions of E&I codes 4 
through 6 would describe services that could be furnished by or under 
the permissible supervision of all qualified outpatient therapy 
professionals. Based upon historical therapy utilization patterns, the 
vast majority of E&I codes submitted would likely fall in the 4 through 
9 code range. We would expect the RVUs under the PFS for all E&I codes 
to take into consideration the efficiencies when multiple services 
(those that would be currently reported under multiple CPT codes) are 
furnished.
    This option would require 2 to 4 years to add new codes and conduct 
a short-term pilot study to refine coding and value the 12 new HCPCS 
codes (or 36 if they are specific to each therapy discipline). There 
would be significant initial practitioner administrative burden to 
learn new codes and update billing systems. However, ultimately, with 
elimination of the practitioner's reporting of 76 different codes and 
many of the associated claims processing edits, the administrative 
burden of reporting therapy services to Medicare would be minimized.
    This bundled approach to reporting and payment could result in more 
appropriate valuation of therapy services that reflects efficiencies 
when individually reported services are furnished in the same session. 
As a result, it could lead to reduced therapy expenditures, as well as 
a reduction in the number of beneficiaries affected by the therapy caps 
in a given year.
    Comment: The vast majority of commenters concurred that provider 
payments should be influenced by underlying beneficiary 
characteristics. Most commenters agreed that following research and 
development, an episode-based payment alternative would be the most 
feasible payment model for outpatient therapy services in the longterm, 
and some recommended it be developed in a performance-based model. The 
commenters generally supported this option as a foundation to those 
goals, but recommended expert therapist input into the process and 
further study to determine how such an approach might affect different 
therapy types and settings. Several commenters noted that it would be 
critical to ensure clear nomenclature, the availability of an 
appropriate reporting methodology, and adequate payment for these codes 
that reflects the resources used to provide these services.
    To assure appropriate payment for needed services, the commenters 
agreed that the outcomes resulting from provider interventions must be 
incorporated in payment models. The commenters believe that experience 
gained in a transparent development process could be carried over into 
future payment system reform. Therefore, the majority of commenters who 
supported Option (3) also requested that there be a transparent process 
of development and testing in which expert therapists from various 
settings were included. Many also argued that Option (3) should be 
developed only after Option (1) had been implemented and function and 
severity data had been collected to inform the development of Option 
(3).
    Response: We appreciate the support of commenters for Option (3) 
and their interest in moving toward long-term goals by implementing 
short-term approaches as an incremental step. We agree that the 
information presented in the proposed rule was limited regarding Option 
(3) and that further study would be necessary before a bundled per-
session payment approach could be implemented. We will consider the 
commenters' recommendations to develop an episode-based payment 
alternative in the future.
    Comment: The concept of moving toward per-session codes that would 
be based on the severity of the patient and intensity of therapist 
clinical judgment and work involved in the provision of the therapy 
service was welcomed by many commenters. Those commenters who 
encouraged CMS to use this option to reduce the administrative burden 
of counting minutes and eliminate NCCI edits and MUEs anticipated 
corresponding improvement in the effective and efficient delivery of 
clinical interventions. The commenters urged CMS to ensure compliance 
of policies related to Option (3) with other payment policies, such as 
the delivery of medically necessary care driven by the development of 
an appropriate functional goal-based plan of care.
    Response: While a per-session payment methodology could result in 
modification of current policies regarding counting treatment time, it 
would not necessarily result in deleting claims edits. If we were to 
adopt such a methodology, we would assess the current claims processing 
edits and determine whether they continued to be appropriate and/or 
implement new edits to address potential issues under the revised 
payment approach.
    Comment: Some commenters suggested a modified definition of 
severity. The commenters recommended two separate severity tables of 
``severity or complexity,'' one for evaluation and the other for 
intervention. For each table separately, severity/complexity of 
clinical presentation would be rated as low, moderate, or high. In all 
cases, the commenters believe CMS should identify the factors to be 
used to determine severity for both evaluations and interventions. The 
commenters urged that CMS defer to professional standards of practice 
and state law with respect to the provision of services in each 
category. Other commenters

[[Page 73292]]

recommended modifiers for complex patients and comprehensive 
multidisciplinary rehabilitation settings to facilitate application of 
special policies for those circumstances.
    Response: The tables presented in the proposed rule were 
illustrative of the potential Level II per-session HCPCS codes, and 
these codes would require further development prior to implementation. 
We appreciate the commenters' suggestions and will consider them as we 
weigh this option.
    Comment: Some commenters who supported the general premise of 
Option (3) and some commenters who opposed it were not optimistic that 
per-session payment could be developed in a reliable and valid manner 
in the shortterm.
    Response: This alternative was developed as a short-term action 
that would start the process toward bundled payments for therapy 
episodes. The work completed by expert therapist advisors to the STATS 
workgroups laid a foundation that could facilitate development of the 
initial per-session HCPCS codes, which could reasonably be based on 
utilization data that demonstrated which services were historically 
billed together most of the time. We have analyzed data regarding 
common therapy code combinations. While a per-session payment approach 
could have a significant impact on payment for therapy services, we 
would not expect that developing and valuing per-session E&I codes 
would be a particularly lengthy or complex process. We note that over 
the past several years, the CPT Editorial Panel has bundled multiple 
services into a single code numerous times in different medical 
specialty areas and the AMA RUC has then valued the new comprehensive 
service by taking into account the expected efficiencies in the 
physician work and/or practice expense.
    Comment: Rather than consign the code definition and valuation 
processes integral to Option (3) to the CPT Editorial Panel and AMC RUC 
processes, which have little transparency, several commenters 
recommended that CMS develop Level II HCPCS codes for this purpose and 
allow for continued stakeholder input as to their valuation. Some 
commenters expressed appreciation for being included in the STATS 
process and suggested it as a model for future transparency in 
developing payment policies.
    Response: We appreciate the confidence stakeholders expressed 
regarding our capacity to develop HCPCS codes and values using a 
transparent process that includes input from stakeholders. If we were 
to move toward per-session payment in the future, we would need to 
consider the most appropriate approach to the development and valuation 
of new codes to describe those services. In the meantime, we note that 
if the CPT Editorial Panel were to develop new codes for comprehensive 
therapy services, as they have developed new CY 2011 comprehensive 
codes for cardiac catheterization and lower extremity endovascular 
revascularization services that bundle services that are commonly 
furnished together, we would consider those therapy codes for adoption 
under the PFS and would value them if we recognized them for PFS 
payment.
    Comment: Due to the nature of certain services when assessment and 
intervention are inseparable, some commenters asserted that 
interventions should not be included in this model but should be 
separately identified. The commenters provided the examples of active 
wound care management and prosthetic/orthotic management.
    Response: The details of therapy E&I codes have not been proposed 
or finalized. We appreciate the perspective of the commenters and will 
keep it in mind if we were to pursue the creation of per-session 
therapy codes in the future.
    Comment: While some commenters stated that Option (3) has the 
potential to simplify and increase consistency in coding for therapy 
services, several commenters who opposed this option and Option (1) 
mentioned that providers would learn to ``game the system'' and that 
all patients would be documented as severe on initial intake.
    Response: We too are concerned about approaches where providers 
could learn to game the system. The commenters who criticized this 
option generally preferred the edits in Option (2).
    Restriction on utilization of certain codes sometimes increases the 
risk of billing different codes, billing more of the same codes, or 
increasing patient visits, resulting in the same or greater cost to the 
Medicare program. The edits described in Option (2) would prevent high 
payments for individual beneficiaries, but might have little or no 
effect on the payments to providers or suppliers who increase the 
number of beneficiaries treated. Generally, we apply a number of 
different methods concurrently to reduce risk.
    At times, it may be difficult to know whether the clinical judgment 
and objective measurements have been accurately reported or documented 
in the record and whether the service furnished is appropriately 
represented by the billed HCPCS code. Providers focused on billing 
inappropriately may also document inappropriately. In the long term, we 
hope to incentivize honest and ethical providers and suppliers of 
services to furnish effective and efficient, high quality services. 
Possible fraudulent activity may be identified by aberrant billing 
patterns, and the new codes could facilitate the identification of such 
patterns.
    Several commenters expanded on the options presented as 
alternatives to the therapy caps or recommended options of their own. A 
few presented their own analyses of utilization to support their 
recommendations.
    Comment: Several commenters recommended incorporation of currently 
and publicly available validated tools to inform the collection of 
patient-specific information and move toward performance-based payment. 
A few commenters suggested that the study ``Pay-for-Performance for 
Outpatient Physical Therapy and Occupational Therapy'' that Focus On 
Therapeutic Outcomes (FOTO) completed in 2006 under Grant 18-
P-93066-/0-01 might be a good template from which to start a process to 
replace caps and ultimately develop a value-based purchasing process. 
The commenters suggested the FOTO predictive model could be used, after 
pilot testing, to develop a reimbursement process where care is based 
on need and payment is based on results.
    Response: We recognize the importance of demonstrating the 
application of a value-based purchasing approach to physical and 
occupational therapy services. We posted the FOTO study on the CMS Web 
site at: http://www.cms.gov/TherapyServices/downloads/P4PFinalReport06-01-06.pdf.
    We are aware that research continues on the functional status 
indicator and that other measurement tools are also available in the 
public domain. The STATS discussions resulted in some improvements in 
the feasibility of matching outcomes data to claims. However, there are 
a number of problems that would have to be resolved before any of the 
currently available versions of therapy outcomes tools could be 
incorporated into payment policy. The FOTO study did not address value-
based purchasing for speech-language pathology services and there 
remain questions about applying the FOTO functional status indicator, 
or any self-reported measure, to certain cognitively impaired patients 
or to the Medicare population without further refinement.

[[Page 73293]]

    As we continue to explore various options, we would be interested 
in the feasibility of using historical research, existing electronic 
input systems, and registry information to provide a conceptual 
framework for alternative payment systems.
    Comment: Although CMS did not discuss the option of establishing 
therapy payments based on episodes in the discussion of short-term 
options, many commenters encouraged CMS to pursue that goal. Using data 
obtained from the severity/complexity codes described in Option (1), 
DOTPA, and other data initiatives, several commenters urged CMS to 
undertake research to develop a new episodic prospective payment system 
for Part B therapy services. Some commenters described the details of a 
plan to base therapy episode payment on groups based on patient 
clinical characteristics, considering mean episode costs, adjusting for 
high and low outliers or interrupted episodes, setting a default 
payment for unmapped episode groups, and also adjusting for local wage 
indices and providing an annual market basket payment rate update.
    The opportunity for CMS to define sessions and episodes more 
clearly and the potential to support the overall goal of payment reform 
was eagerly anticipated by several commenters. The commenters applauded 
CMS for recognizing the potential opportunity to gather these data on 
episodes for payment of therapy services furnished in the institutional 
setting.
    Episode-based payment was recommended as an alternative to the 
proposed therapy MPPR by numerous commenters. The commenters explained 
that the fundamental problem with fee-for-service payment is the 
incentive to over utilize therapy services in the outpatient setting 
and limit institutional providers from using resources flexibly. The 
commenters described analysis of a large database of Medicare 
beneficiaries as the basis for a methodology for grouping diagnosis 
codes to create episodes of care on which therapy payment would be 
based. The commenters noted that adjustment would be needed to payments 
for complex patients and readmissions. The same commenters supported 
episode payments for separate therapy disciplines based on a patient's 
medical diagnosis and goals. A critical goal for these commenters was 
to identify and account for differences in the conditions and needs of 
patients in skilled nursing facilities as opposed to other outpatient 
therapy settings.
    Response: We did not discuss development of episode-based payments 
as an option in the CY 2011 PFS proposed rule because we recognize that 
substantially more research would be necessary to define the episodes 
and determine what resources would be needed for different groups or 
categories of patients before the episodes could be incorporated into a 
payment system, particularly one that also addressed quality, 
efficiency, and good health outcomes. However, the absence of 
discussion in our proposed rule of an episode-based payment methodology 
as a short-term therapy cap alternatives option should not be 
interpreted as our reluctance to pursue the definition of episodes or 
the refinement of the concept of episode-based payments.
    Comment: A number of commenters supported testing variables they 
believe to be important in making a clinical judgment concerning a 
patient's severity, including: general type of patient (orthopedic, 
neurological, medical, etc.); impairment (body part treated); intake 
functional status; patient age; symptom acuity; surgical history; 
payer; gender; level of fear-avoidance of physical activities; and 
number of co-morbid conditions. Other commenters urged inclusion of 
clinical judgment of severity based on medical condition, physical 
impairments resulting from these conditions, patient function, and 
ability to participate in activities of daily living.
    Response: As we progress in the analysis of payment alternatives to 
the therapy caps, we appreciate the information on variables believed 
to be critical by stakeholders who have conducted related research and/
or furnished therapy services to a wide array of patients in different 
clinical settings. We welcome their expert contributions and 
collaboration with us on this important issue.
    In conclusion, we emphasize that we continue to be committed to 
developing alternatives to the therapy caps that would provide 
appropriate payment for medically necessary and effective therapy 
services furnished to Medicare beneficiaries based on patient needs, 
rather than the current therapy caps which establish financial 
limitations on Medicare payment for therapy services in some outpatient 
settings regardless of medical necessity. The Congress has repeatedly 
intervened to allow exceptions to these caps for certain time periods, 
and the current exceptions are automatically processed based on a 
practitioner's attestation that medical necessity is documented in the 
chart for an individual patient. We believe that, ultimately, payment 
for therapy services should incentivize the most effective and 
efficient care, consistent with Medicare's focus on value in its 
purchasing.
    The STATS contractor has worked closely with a broad variety of 
clinicians, administrators, scientists, researchers, and other 
contractors to develop the three alternatives presented in this 
discussion in CY 2011 rulemaking for the PFS. We are grateful for all 
public comments on the proposed rule from interested stakeholders, 
including individual therapists from both facility and nonfacility 
outpatient settings paid under Medicare Part B.
    We are committed to finding alternatives to the current therapy cap 
limitations on expenditures for outpatient therapy services that will 
ensure that beneficiaries continue to receive those medically necessary 
therapy services that maximize their health outcomes. We continue to 
dedicate our resources to identifying alternatives that would encourage 
the most efficient and cost-effective treatments. We believe motivated 
therapists, with attention to the most cost-effective practices, can 
incorporate practice efficiencies that benefit patients by achieving 
the best possible results at the lowest cost. Our STATS and DOTPA 
projects, which are currently engaged in data collection and analysis 
to inform short-term and long-term alternatives to the therapy caps, 
respectively, lay the foundation for future payment alternatives for 
outpatient therapy services. We are optimistic that the STATS project 
has identified short-term, feasible alternatives that may be tested in 
the future. The DOTPA project will create a tool and test its use to 
collect patient condition information that could then be applied to 
identify patient need for therapy services. Together, these projects 
may provide the basis for a long-term plan to reshape Medicare's 
payment policy for outpatient therapy services to align with the value-
based purchasing principles that are now guiding principles of the 
Medicare program.

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

1. Background
    Section 1861(s)(2)(S) of the Act provides for coverage of DSMT in 
outpatient settings without limiting this coverage to hospital 
outpatient departments. DSMT services consist of educational and 
training services furnished to an individual with diabetes by a 
certified provider in an outpatient setting.
    Section 1861(qq)(2)(A) of the Act stipulates that training must be

[[Page 73294]]

furnished by a ``certified provider'' which is a physician or other 
individual or entity that also provides other items or services for 
which payment may be made under Medicare. This program is intended to 
educate beneficiaries in the successful self-management of diabetes. 
The program includes instructions in self-monitoring of blood glucose; 
education about diet and exercise; an insulin treatment plan developed 
specifically for the patient who is insulin-dependent; and motivation 
for patients to use the skills for self-management. DSMT services are 
reported under HCPCS codes G0108 (Diabetes outpatient self-management 
training services, individual, per 30 minutes) and G0109 (Diabetes 
outpatient self-management training services, group session (2 or 
more), per 30 minutes).
2. Payment for DSMT Services
    In accordance with section 1848(j)(3), Medicare payment for 
outpatient DSMT services is made under the PFS as specified in Sec.  
414.1 through Sec.  414.48. When we created HCPCS codes G0108 and 
G0109, the only direct costs included in the PE were registered nurse 
labor. Section 410.144(a)(4)(a) states that the DSMT team includes at 
least a registered dietitian and a certified diabetes educator. We 
initially did not establish work RVUs for DSMT services because we 
believed training would typically be performed by individuals other 
than a physician, such as a registered nurse (65 FR 83130). However, 
since that time, we have received requests from a number of 
stakeholders, including the American Association of Clinical 
Endocrinologists (AACE), the American Association of Diabetes Educators 
(AADE), and the Juvenile Diabetes Research Foundation, to include 
physician work in valuing DSMT services that is similar to the 
physician work that has been included in medical nutrition therapy 
(MNT) services since CY 2007 and kidney disease education (KDE) 
services since CY 2010. The stakeholders argued that because physicians 
coordinate DSMT programs, provide patient instruction, and communicate 
with referring physicians, physician work should be included in the 
RVUs for DSMT services. The stakeholders also requested that we 
reconsider the direct PE inputs for DMST services and include clinical 
labor for diabetes educators at a higher hourly rate instead of 
registered nurse labor. In addition, they stated that the supplies and 
equipment in the PE for DSMT services should be the same as for KDE 
services, with additional direct PE inputs for a diabetes educator 
curriculum, data tracking software, and DSMT program accreditation.
    For CY 2011, we proposed the following:
     To assign physician work RVUs to DSMT services that are 
comparable, as adjusted for the service times of the HCPCS codes, to 
the work RVUs for MNT services. The rationale for the proposed work 
RVUs for the DSMT HCPCS G-codes was based on the similarity of DSMT 
services to MNT services in the individual (CPT code 97803) and group 
(CPT code 97804) setting.
     That HCPCS G0108 for 30 minutes of individual DSMT 
services would be crosswalked to CPT code 97803 (Medical nutrition 
therapy; re-assessment and intervention, individual, face-to-face with 
the patient, each 15 minutes) for purposes of assigning work RVUs, with 
the physician work RVUs for CPT code 97803 multiplied by two to account 
for the greater time associated with HCPCS code G0108 (that is, 30 
minutes).
     That HCPCS G0109 for 30 minutes of group DSMT services 
would be crosswalked to CPT code 97804 (Medical nutrition therapy; 
group (2 or more individuals(s)), each 30 minutes) for purposes of 
assigning work RVUs.
     To modify the PE inputs for DSMT services to reflect the 
current equipment and supplies for the KDE HCPCS G-codes implemented in 
the CY 2010 PFS final rule with comment period (74 FR 61901) (that is, 
HCPCS codes G0420 (Face-to-face educational services related to the 
care of chronic kidney disease; individual, per session, per one hour) 
and G0421 (Face-to-face educational services related to the care of 
chronic kidney disease; group, per session, per one hour)), based on 
the similarity in the equipment and supplies necessary for DSMT and KDE 
services. We made adjustments to some of the equipment times for the 30 
minute DSMT individual and group services as compared to the one hour 
individual and group KDE services.
     To include a diabetes educator curriculum and data 
tracking software in the PE inputs for DSMT services, while noting that 
we did not include the DSMT program accreditation costs because it is 
our general practice not to include these costs in the PE inputs.
     To utilize the same approach for clinical labor as we 
adopted for MNT services when we provided physician work RVUs for those 
services in CY 2007 (71 FR 69645), rather than changing the current 
labor type for DSMT services. Specifically, we removed all of the 
clinical labor from the group DSMT code and most of the clinical labor 
from the individual DSMT code, given that we proposed work RVUs for 
both DSMT HCPCS codes for CY 2011.
    In the CY 2011 PFS proposed rule (75 FR 40100), we stated our 
belief that these proposals would value DSMT services more consistently 
with other similar services that are paid under the PFS. As a result of 
our proposed CY 2011 changes, the proposed work RVUs for HCPCS codes 
G0108 and G0109 were 0.90 and 0.25, respectively. As described above, 
we also proposed to modify the direct PE inputs for these codes for CY 
2011.
    Comment: Numerous commenters specifically supported the 
establishment of work RVUs for the DSMT services based on the work RVUs 
of the similar MNT services, CPT codes 97803 for 15 minutes of 
individual MNT services and 97804 for 30 minutes of group MNT services. 
Some commenters explained that addition of work RVUs would lead to 
higher payment rates for DSMT services, resulting in a significant 
positive impact on diabetes education practices and increased patient 
access to care for DSMT services. Several commenters suggested that 
this change would appropriately recognize the active role many 
physicians contribute to ensuring that their patients have access to 
DSMT services and providing care coordination and communication with 
the multidisciplinary DSMT team members. One commenter concurred with 
the proposal to update the direct PE inputs for the DSMT HCPCS codes 
based on those assigned to the HCPCS codes for KDE services.
    Response: We appreciate the commenters' support for our proposal to 
establish work RVUs and to update the direct PE inputs for the DSMT 
services.
    In conducting our review of the public comments on this issue for 
this final rule with comment period, we examined newly available PFS 
claims data for same day billings from one provider for a single 
Medicare beneficiary. In response to that analysis and in accordance 
with our PFS methodology which values services as delivered to the 
typical patient, we note that we have made minor adjustments to some of 
the direct PE inputs for supplies and equipment times for both HCPCS G-
codes for DSMT services, G0108 and G0109, under our final CY 2011 
policy. We made these refinements after a review of our PFS utilization 
data indicated that 2 units of HCPCS code G0108 (a total of 60 minutes) 
were typically billed together on the same day for the same patient, 
instead of the one unit of HCPCS code G0108 (30

[[Page 73295]]

minutes) which was used as the assumption for the typical session at 
the time of our CY 2011 proposal. As a result, we have assigned half of 
the amount of the direct inputs for supplies and equipment time in 
HCPCS code G0420 (60 minutes individual KDE services) to HCPCS code 
G0108 (30 minutes individual DSMT services). Regarding the direct PE 
inputs for HCPCS code G0109, we continue to believe that there is a 
similarity among the group and individual DSMT and KDE services and the 
education practices when these services are delivered, as reflected in 
their PFS utilization patterns. For this reason, we have made minor 
modifications to the PE inputs for HCPCS code G0109 (30 minutes of 
group DSMT services) to reflect half of each input for HCPCS code G0421 
(60 minutes of group KDE services) that parallel the modifications we 
made for the individual DSMT HCPCS code described previously. We 
further note that these refinements to the direct PE inputs for DSMT 
services are based on the final adjustments that were made to the 
direct PE inputs for HCPCS codes G0420 and G0421 for KDE services, 
discussed in section V. B.2.e. of this final rule with comment period, 
because our approach to establishing the direct PE inputs for the DMST 
HCPCS G-codes is based on the inputs for KDE services.
    As a result, the modifications we made to the supplies and 
equipment inputs for the DSMT HCPCS G-codes, G0108 and G0109, equal 
half of the same supply and equipment times in the one hour HCPCS G-
codes for KDE services, G0420 and G0421.
    In addition, because the $200 price of the diabetes educator 
curriculum does not meet the $500 floor we established for inclusion in 
the equipment database, we have bundled the diabetes educator 
curriculum price with the $500 data tracking software one because the 
patient's curriculum information is typically recorded in the tracking 
software. The equipment descriptor for the data tracking software was 
modified to read: Diabetes education data tracking software, includes 
curriculum. Accordingly, we changed the price input from $500 to $700 
and assigned the bundled equipment a total of 4 minutes. In this way, 
we are including the cost of the curriculum in the direct PE inputs for 
DSMT services as we proposed for CY 2011, while remaining consistent 
with the established $500 floor on inclusion of equipment in the PE 
database.
    After consideration of the public comments we received, we are 
finalizing the proposed work RVUs and direct PE input for DSMT 
services, with modification to make the PE adjustments described 
previously. The final CY 2011 direct PE database that lists the direct 
PE inputs is available on the CMS Web site under the downloads for the 
CY 2011 PFS final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage. The final CY 2011 RVUs for 
HCPCS codes G0108 and G0109 are displayed in Addendum B to this final 
rule with comment period.

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

1. End-Stage Renal Disease Home Dialysis Monthly Capitation Payment 
Services (CPT codes 90963, 90964, 90965, and 90966)
    In the CY 2004 PFS final rule with comment period (68 FR 63216), we 
established new Level II HCPCS G-codes for end-stage renal disease 
(ESRD) monthly capitation payment (MCP) services. For center-based 
patients, payment for the G-codes varied based on the age of the 
beneficiary and the number of face-to-face visits furnished each month 
(for example, 1 visit, 2-3 visits and 4 or more visits). Under the MCP 
methodology, the lowest payment applied when a physician provided one 
visit per month; a higher payment was provided for two to three visits 
per month. To receive the highest payment, a physician would have to 
provide at least four ESRD-related visits per month. However, payment 
for home dialysis MCP services only varied by the age of beneficiary. 
Although we did not initially specify a frequency of required visits 
for home dialysis MCP services, we stated that we ``expect physicians 
to provide clinically appropriate care to manage the home dialysis 
patient'' (68 FR 63219).
    Effective January 1, 2009, the CPT Editorial Panel created new CPT 
codes to replace the G-codes for monthly ESRD-related services, and we 
accepted the new codes for use under the PFS in CY 2009. The CPT codes 
for monthly ESRD-related services for home dialysis patients include 
the following, as displayed in Table 32 of the CY 2011 PFS proposed 
rule (75 FR 40101) and reprinted as Table 48 below: 90963, 90964, 
90965, and 90966. In addition, the clinical vignettes used for the 
valuation of CPT codes 90963, 90964, 90965, and 90966 include scheduled 
(and unscheduled) examinations of the ESRD patient.
    Given that we pay for a physician (or nonphysician practitioner 
(NPP)) to evaluate the ESRD patient over the course of an entire month 
under the MCP, we believe that it is clinically appropriate for the 
physician (or NPP) to have at least one in-person, face-to-face 
encounter with the patient per month. As such, for CY 2011 we proposed 
to require the MCP physician (or NPP) to furnish at least one in-person 
patient visit per month for home dialysis MCP services (as described by 
CPT codes 90963 through 90966). The proposed requirement would be 
effective for home dialysis MCP services beginning January 1, 2011. As 
stated in the CY 2011 PFS proposed rule (75 FR 40100), we believe this 
requirement reflects appropriate, high quality medical care for ESRD 
patients being dialyzed at home and generally would be consistent with 
the current standards of medical practice.
    Comment: Many commenters stated that a monthly visit embodies the 
standard of care for home dialysis patients. However, many of the same 
commenters also stated that it may not always be feasible to furnish a 
face-to-face visit every month for home dialysis patients due to 
extenuating circumstances. A number of commenters explained that, in 
contrast to patients who dialyze in a dialysis center, home dialysis 
patients would need to travel to the doctor's office (or the physician 
would need to visit the patient's home) which would be an undue burden 
on both the physician and the patient. To that end, several commenters 
urged CMS to provide flexibility in cases where a patient does not show 
up for their scheduled appointment and for those that cannot travel due 
to significant geographic distance between the patient and the 
nephrologist. For example, some specialty societies stated that 
pediatric home dialysis patients may experience exceptional 
circumstances due to the scarcity of pediatric nephrologists and remote 
geographic locations, making the monthly face-to-face visit requirement 
harder to fulfill. In these circumstances, one commenter requested that 
CMS consider allowing the MCP physician to furnish at least 1 visit 
every 3 months and allowing the other monthly visits to be furnished as 
a telehealth service. Additionally, several commenters explained that 
the monthly management of a home dialysis patient involves many tasks 
(in addition to face-to-face visits) including: Reviewing lab tests, 
treatment data and the dialysis prescription; monitoring the patient's 
vascular access; and overseeing quality improvement activities (as well 
as incurring the practice expense

[[Page 73296]]

associated with managing the patient's care). The commenters stated 
that the MCP physician should not be ``penalized'' if the patient 
chooses not to attend the monthly visit. Moreover, many of the 
commenters who agreed that monthly visits are optimal care did not 
support a monthly visit requirement for the home dialysis MCP service. 
The commenters stated that the frequency of face-to-face visits should 
remain at the discretion of the nephrologist and patient. Several of 
the commenters who did not support a policy change also stated that 
requiring a monthly visit could create disincentives for providing 
beneficiaries with home dialysis therapy in circumstances where it may 
be difficult for the MCP physician to furnish a visit every month. The 
commenters explained that nephrologists may not want to encourage home 
dialysis therapy if they will not get paid as a result of a patient 
``opting out'' of a scheduled visit.
    Response: We continue to believe that furnishing monthly face-to-
face visits is an important component of high quality medical care for 
ESRD patients being dialyzed at home and generally would be consistent 
with the current standards of medical practice. However, we also 
acknowledge that extenuating circumstances may arise that make it 
difficult for the MCP physician (or NPP) to furnish a visit to a home 
dialysis patient every month. Therefore, we will allow Medicare 
contractors the discretion to waive the requirement for a monthly face-
to- face visit for the home dialysis MCP service on a case-by-case 
basis, for example, when the MCP physician's (or NPP's) notes indicate 
that the MCP physician (or NPP) actively and adequately managed the 
care of the home dialysis patient throughout the month. Additionally, 
as we explained in the CY 2004 PFS final rule with comment period (68 
FR 63219 through 63220), we also believe that the use of other 
practitioners working with the MCP physician (or NPP) to furnish the 
required monthly visit for the home dialysis MCP service could help 
alleviate scheduling issues and problems related to geographic 
distance.
    With regard to the comment on furnishing the proposed required 
visit for the home dialysis MCP as a telehealth service, we note that 
any interested parties may submit requests to add services to the list 
of Medicare telehealth services. Requests submitted before the end of 
CY 2010 will be considered for the CY 2012 PFS proposed rule. 
Requestors should be advised that each request to add a service to the 
list of Medicare telehealth services must include any supporting 
documentation the requestor wishes us to consider as we review the 
request. For more information on submitting a request for an addition 
to the list of Medicare telehealth services, including where to 
directly mail these requests, we refer readers to section IV.B. of this 
final rule with comment period and the CMS Web site at: http://www.cms.hhs.gov/telehealth.
    Comment: Several commenters stated that the conditions for coverage 
for dialysis facilities require a monthly interaction between a 
clinician representing the facility and the home dialysis patient. The 
commenters believe that the conditions for coverage for dialysis 
facilities permit flexibility in the monthly visit requirement if the 
patient chooses to opt out of the monthly visit and requested that CMS 
align the proposed visit requirement for the home dialysis MCP service 
with the ``flexibility'' permitted under the conditions for coverage 
for dialysis facilities.
    Response: With regard to conditions for coverage for dialysis 
facilities, Sec.  494.90(b)(4) of the regulations specifies that the 
dialysis facility must ensure that all dialysis patients are seen by a 
physician, nurse practitioner, clinical nurse specialist, or 
physician's assistant providing ESRD care at least monthly. Section 
494.100 requires ``a dialysis facility that is certified to provide 
service to home patients to ensure that home dialysis services are at 
least equivalent to those provided to in-facility patients and meet all 
applicable conditions of this part.'' In addition, the interpretive 
guidance for part 494 entitled ``Conditions for Coverage for ESRD 
Facilities'' specifies that a monthly visit is required for each home 
patient by a physician, an advanced practice registered nurse, or a 
physician assistant. The visit may be conducted in the dialysis 
facility, at the physician's office, or in the patient's home. The 
guidelines state that ``any patient may choose not to be seen by a 
physician every month'' but also specify that if there is a pattern of 
a patient consistently missing physician and or practitioner visits, 
the lack of medical oversight should be addressed with the patient in 
the plan of care.
    The requirement for at least one monthly visit with a clinician 
associated with the dialysis facility is a condition for coverage for 
the dialysis facility for purposes of participating in the Medicare 
program and not a direct factor in determining the payment amount for 
the dialysis facility. In other words, the clinician visit is not a 
component of the facility's composite rate. However, as mentioned in 
the background section, the clinical vignettes used for the valuation 
of the home dialysis MCP service under the PFS include scheduled (and 
unscheduled) examinations of the ESRD patient. Given that physician or 
NPP visits are a factor in determining the PFS payment amount for the 
home MCP service that is furnished to the typical Medicare beneficiary, 
we do not believe that the monthly visit requirement for the home 
dialysis MCP service is analogous to the visit requirement under the 
conditions for coverage for dialysis facilities that has no 
implications for setting payment rates under the PFS. Therefore, we do 
not agree that the visit requirement for the home dialysis MCP service 
necessarily should be ``aligned'' with the conditions for coverage for 
dialysis facilities.
    Comment: One commenter suggested that CMS consider structuring the 
home dialysis MCP similar to the center-based MCP. Under this approach, 
the commenter suggested that a higher payment amount could be made for 
home dialysis MCP services with at least one in person, face-to-face 
visit per month.
    Response: We will consider the commenter's suggestion as we 
continue to develop and refine Medicare payment policy for physicians 
and practitioners managing patients on dialysis. In the event we decide 
to make changes in the payment amount(s) for the home dialysis MCP 
services, we would do so in a future proposed rule where the public 
would have the opportunity to provide comments as afforded by the 
rulemaking process.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal, with modification. We will require the 
MCP physician (or NPP) to furnish at least one in-person patient visit 
per month for home dialysis MCP services (as described by CPT codes 
90963 through 90966). However, Medicare contractors will have the 
discretion to waive the monthly visit requirement for the home dialysis 
MCP service on a case-by-case basis.
2. Daily and Monthly ESRD-Related Services (CPT Codes 90951 Through 
90970)
    In CY 2008, the AMA RUC submitted recommendations for valuing the 
new CY 2009 CPT codes displayed in Table 48 that replaced the MCP HCPCS 
G-codes for monthly ESRD-related services. We accepted these codes for 
use under the PFS.

[[Page 73297]]



                                  Table 48--MCP Codes Recognized Under the PFS
----------------------------------------------------------------------------------------------------------------
                MCP Code                                             Long descriptor
----------------------------------------------------------------------------------------------------------------
90951..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          younger than 2 years of age to include monitoring for the adequacy of
                                          nutrition, assessment of growth and development, and counseling of
                                          parents; with 4 or more face-to-face physician visits per month.
90952..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          younger than 2 years of age to include monitoring for the adequacy of
                                          nutrition, assessment of growth and development, and counseling of
                                          parents; with 2-3 face-to-face physician visits per month.
90953..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          younger than 2 years of age to include monitoring for the adequacy of
                                          nutrition, assessment of growth and development, and counseling of
                                          parents; with 1 face-to-face physician visit per month.
90954..................................  End-stage renal disease (ESRD) related services monthly, for patients 2-
                                          11 years of age to include monitoring for the adequacy of nutrition,
                                          assessment of growth and development, and counseling of parents; with
                                          4 or more face-to-face physician visits per month.
90955..................................  End-stage renal disease (ESRD) related services monthly, for patients 2-
                                          11 years of age to include monitoring for the adequacy of nutrition,
                                          assessment of growth and development, and counseling of parents; with
                                          2-3 face-to-face physician visits per month.
90956..................................  End-stage renal disease (ESRD) related services monthly, for patients 2-
                                          11 years of age to include monitoring for the adequacy of nutrition,
                                          assessment of growth and development, and counseling of parents; with
                                          1 face-to-face physician visit per month.
90957..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          12-19 years of age to include monitoring for the adequacy of
                                          nutrition, assessment of growth and development, and counseling of
                                          parents; with 4 or more face-to-face physician visits per month.
90958..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          12-19 years of age to include monitoring for the adequacy of
                                          nutrition, assessment of growth and development, and counseling of
                                          parents; with 2-3 face-to-face physician visits per month.
90959..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          12-19 years of age to include monitoring for the adequacy of
                                          nutrition, assessment of growth and development, and counseling of
                                          parents; with 1 face-to-face physician visit per month.
90960..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          20 years of age and older; with 4 or more face-to-face physician
                                          visits per month.
90961..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          20 years of age and older; with 2-3 face-to-face physician visits per
                                          month.
90962..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          20 years of age and older; with 1 face-to-face physician visit per
                                          month.
90963..................................  End-stage renal disease (ESRD) related services for home dialysis per
                                          full month, for patients younger than 2 years of age to include
                                          monitoring for the adequacy of nutrition, assessment of growth and
                                          development, and counseling of parents.
90964..................................  End-stage renal disease (ESRD) related services for home dialysis per
                                          full month, for patients 2-11 years of age to include monitoring for
                                          the adequacy of nutrition, assessment of growth and development, and
                                          counseling of parents.
90965..................................  End-stage renal disease (ESRD) related services for home dialysis per
                                          full month, for patients 12-19 years of age to include monitoring for
                                          the adequacy of nutrition, assessment of growth and development, and
                                          counseling of parents.
90966..................................  End-stage renal disease (ESRD) related services for home dialysis per
                                          full month, for patients 20 years of age and older.
----------------------------------------------------------------------------------------------------------------

    There are four additional CPT codes for ESRD-related services that 
are reported on a per-day basis. These daily CPT codes are: 90967 (End-
stage renal disease (ESRD) related services for dialysis less than a 
full month of service, per day; for patients younger than 2 years of 
age); 90968 (End-stage renal disease (ESRD) related services for 
dialysis less than a full month of service, per day; for patients 2-11 
years of age); 90969 (End-stage renal disease (ESRD) related services 
for dialysis less than a full month of service, per day; for patients 
12-19 years of age); and 90970 (End-stage renal disease (ESRD) related 
services for dialysis less than a full month of service, per day; for 
patients 20 years of age and older).
    For the MCP codes displayed in Table 32 of the CY 2011 PFS proposed 
rule, the AMA RUC initially recommended 36 minutes of clinical labor 
time for the pre-service period. They also recommended an additional 6 
minutes in the post-period for CPT codes 90960, 90961, 90962, and 
90966. For the four codes describing daily services (CPT codes 90967 
through 90970), the AMA RUC recommended including 1.2 minutes of 
clinical labor per day, which is the prorated amount of pre-service 
clinical labor included in the monthly codes. The AMA RUC also 
recommended that CPT codes 90952 and 90953 be contractor-priced.
    In the CY 2009 PFS final rule with comment period (73 FR 69898), we 
asked the AMA RUC to reconsider their recommended PE inputs in the 
interest of making certain that they accurately reflected the typical 
direct PE resources required for these services. In addition, we asked 
the AMA RUC to review the physician times for CPT codes 90960 and 90961 
that are used in the calculation of the PE RVUs. We accepted the work 
values for the new CPT codes for ESRD-related services that were 
recommended by the AMA RUC.
    Since CY 2009, we have continued to calculate the PE RVUs for the 
entire series of MCP codes displayed in Table 32 of the CY 2011 PFS 
proposed rule (75 FR 40101) by using the direct PE inputs from the 
predecessor HCPCS G-codes, except for CPT codes 90952 and 90953 which 
are contractor-priced. We have also continued to use the physician time 
associated with the predecessor HCPCS G-codes for CPT codes 90960 and 
90961 for purposes of calculating the PE RVUs.
    In CY 2009, the AMA RUC submitted new recommendations for CPT codes 
90951 and 90954 through 90970. For each of the MCP codes (CPT code 
90951 and CPT codes 90954 through 90966), the AMA RUC recommended an 
increased pre-service clinical staff time of 60 minutes. For each of 
the daily dialysis service codes (CPT codes 90967 through 90970), the 
AMA RUC

[[Page 73298]]

recommended an increased clinical labor time of two minutes, which is 
the prorated amount of clinical labor included in the monthly codes. 
The AMA RUC also recommended an additional 38 minutes of physician time 
for CPT codes 90960 and 90961. This resulted in a total physician time 
of 128 minutes and 113 minutes, respectively, for these codes. The AMA 
RUC continued to recommend that CPT codes 90952 and 90953 be 
contractor-priced.
    For CY 2011, we proposed to accept these AMA RUC recommendations as 
more accurate reflections of the typical direct PE resources required 
for these services. Therefore, we proposed to develop the PE RVUs for 
CPT code 90951 and CPT codes 90954 through 90970 using the direct PE 
inputs as recommended by the AMA RUC and reflected in the proposed CY 
2011 PE database, which is available on the CMS Web site under the 
supporting data files for the CY 2011 PFS proposed rule at: http://www.cms.gov/PhysicianFeeSched/. We also proposed to use the AMA RUC-
recommended physician times for CPT codes 90960 and 90961. Consistent 
with the AMA RUC's recommendations, we proposed to continue to 
contractor-price CPT codes 90952 and 90953.
    We did not receive public comment on our proposal to accept these 
AMA RUC recommendations as more accurate reflections of the typical 
direct PE resources required for these services. Therefore, we are 
finalizing our CY 2011 proposal to develop the PE RVUs for CPT code 
90951 and CPT codes 90954 through 90970 using the direct PE inputs as 
recommended by the AMA RUC and reflected in the CY 2011 direct PE 
database, which is available on the CMS Web site under the supporting 
data files for the CY 2011 PFS final rule with comment period at: 
http://www.cms.gov/PhysicianFeeSched/. We will also use the AMA RUC-
recommended physician times for CPT codes 90960 and 90961. Consistent 
with the AMA RUC's recommendations, we will continue to contractor-
price CPT codes 90952 and 90953.

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

    When a portable x-ray is furnished to a single patient, as many as 
four component HCPCS codes may be billed and paid for the service, 
including the portable x-ray transportation (HCPCS code R0070 
(Transportation of portable x-ray equipment and personnel to home or 
nursing home, per trip to facility or location, one patient seen)); the 
portable x-ray set-up (HCPCS code Q0092 (Set-up of portable x-ray 
equipment)); and the professional and technical components of the x-ray 
service itself (CPT 70000 series). Currently, the direct PE database 
contains x-ray equipment in both the radiology codes in the 70000 
series of CPT and HCPCS code Q0092, the code for the set-up of a 
portable x-ray. In the technical component of the x-ray service is the 
direct PE input of a radiology room which contains x-ray equipment for 
the various radiology codes in the 70000 series of CPT. In addition, 
portable x-ray equipment is included as a direct PE input for HCPCS 
code Q0092. Thus, x-ray equipment currently is recognized within the 
direct PE values for two of the HCPCS codes that would be reported for 
the portable x-ray service, resulting in an overvaluation of the 
comprehensive portable x-ray service.
    Therefore, for CY 2011 we proposed to remove portable x-ray 
equipment as a direct PE input for HCPCS code Q0092, in order to pay 
more appropriately for the x-ray equipment used to furnish a portable 
x-ray service. We believe the resulting payment for the comprehensive 
portable x-ray service would more appropriately reflect the resources 
used to furnish portable x-ray services by providing payment for the x-
ray equipment solely through payment for the technical component of the 
x-ray service that is furnished.
    Comment: Several commenters opposed the removal of portable x-ray 
equipment as a direct PE input for HCPCS code Q0092. The commenters 
believe the elimination of the equipment from HCPCS code Q0092 is 
inconsistent with longstanding CMS payment policy recognizing the 
unique and additional costs incurred by portable x-ray suppliers in 
furnishing services that involve special equipment requiring extra 
assembly and disassembly time. In addition, the commenters believe that 
the proposed equipment elimination conflicts with the statutory mandate 
of section 1848(c) of the Act that CMS calculate the PFS RVUs based on 
the actual resources used in furnishing a service because equipment is 
a legitimate direct PE component of the set-up component service (HCPCS 
code Q0092).
    Response: We agree that x-ray equipment is used to furnish a 
portable x-ray service and the equipment set-up is reported with HCPCS 
code Q0092. However, because the portable x-ray set-up service would 
always be reported along with the technical component of the x-ray 
service (CPT 70000 series) that already includes x-ray equipment as a 
direct PE input, to include x-ray equipment again in the PE of the set-
up code would clearly be duplicative. Only one item of equipment, that 
is, a single x-ray machine, is used in furnishing the portable x-ray 
service. We are, therefore, eliminating the portable x-ray equipment 
from HCPCS code Q0092 and, instead, recognizing the cost of such 
equipment in the direct PE for the technical component of the x-ray 
service.
    Comment: According to several commenters, because CMS has not 
undertaken a review of all combinations of services paid under the PFS 
that together might comprise a ``comprehensive service'' to identify 
potentially duplicative direct PE inputs when the services are 
furnished together, CMS should refrain from applying the proposed 
policy to suppliers of portable x-ray services.
    Response: While it would require an extensive analysis to review 
all combinations of PFS services that may be furnished together and 
identify potentially duplicative PE inputs, the PFS has several 
longstanding policies that were adopted to provide appropriate payment 
when certain services are furnished together. For example, existing 
multiple procedure payment reduction policies reduce payment for the 
second and subsequent surgical procedures or technical components of 
imaging services when furnished to the same patient by the same 
physician on the same day, based partly on the presence of efficiencies 
in the PE under such circumstances. Furthermore, as discussed in 
section II.C.4. of this final rule with comment period, we are adopting 
a new multiple procedure payment reduction policy for CY 2011 for 
therapy services because of the duplication in the PE when therapy 
services are furnished together. Finally, we note that for those CPT 
codes that are designated as add-on codes to primary services, we 
ensure that the direct PE inputs do not duplicate inputs in the primary 
services. Given our ongoing efforts to more appropriately value 
services furnished together, we believe that HCPCS code Q0092 
essentially functions as an ``add-on'' code to the primary service that 
it generally accompanies, which is the technical component of an x-ray 
service. Therefore, we believe it is fully consistent with our ongoing 
efforts to recognize efficiencies through payment policy when multiple 
services are furnished together to remove the duplicative x-ray 
equipment from the direct PE inputs for HCPCS code Q0092.
    Comment: A few commenters believe that elimination of x-ray 
equipment in HCPCS code Q0092 would have a negative impact on the 
financial status

[[Page 73299]]

of portable x-ray suppliers who are typically small business owners. 
According to the commenters, CMS should heed the statutory mandates of 
the Regulatory Flexibility Act (RFA) which require mitigation of such 
adverse effects.
    Response: We note that the RFA requires only that we analyze 
regulatory options for small businesses that include a justification 
for 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. The CY 2011 PFS proposed rule included a 
regulatory impact analysis (75 FR 40230 through 40245), as does section 
XI.A. of this final rule with comment period. As a specialty, the 
aggregate impact on portable x-ray suppliers from the PFS changes 
proposed for CY 2011 was an increase of 8 percent in the proposed rule 
(75 FR 40232), and it is an increase of 6 percent for CY 2011 as 
displayed in Table 101 of this final rule with comment period. 
Therefore, the combined effect of all final PFS policies for CY 2011 
will not adversely impact portable x-ray suppliers.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to remove portable x-ray equipment as a 
direct PE input for HCPCS code Q0092.

E. Pulmonary Rehabilitation Services (HCPCS Code G0424)

    In the CY 2010 PFS proposed rule (74 FR 33614), we proposed to 
create new HCPCS G-code G0424 (Pulmonary rehabilitation, including 
aerobic exercise (includes monitoring), per session, per day) to 
describe the services of a pulmonary rehabilitation (PR) program as 
specified in section 144(a) of the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA). Using CPT code 93797 (Cardiac rehab 
without telemetry) as a reference code, we proposed to assign 0.18 work 
RVUs and 0.01 malpractice RVUs to G0424. To establish PE RVUs, we 
reviewed the PE inputs of similar services, particularly those of the 
respiratory therapy HCPCS codes G0237 (Therapeutic procedures to 
increase strength or endurance or respiratory muscles, face to face, 
one on one, each 15 minutes (includes monitoring)) and G0238 
(Therapeutic procedures to improve respiratory function, other than 
described by G0237, one on one, face to face, per 15 minutes (includes 
monitoring)), as well as the cardiac rehabilitation codes, CPT codes 
93797 and 93798 (Physician services for outpatient cardiac 
rehabilitation; with continuous ECG monitoring (per session)). In the 
CY 2010 PFS final rule with comment period (74 FR 61886), we finalized 
our proposal with modifications to the code descriptor and PE inputs, 
as recommended by some commenters.
    Based on commenters' recommendations from the CY 2010 PFS final 
rule with comment period and further information furnished by 
stakeholders, for CY 2011 we proposed to increase the work RVUs for 
HCPCS code G0424 to 0.28 for CY 2011 to be comparable to the work RVUs 
for cardiac rehabilitation with monitoring (CPT code 93798) in view of 
the monitoring required for HCPCS code G0424.
    We also proposed to increase the clinical labor time for the 
respiratory therapist from 15 minutes to 30 minutes and to crosswalk 
the PE equipment inputs for HCPCS code G0424 to those for respiratory 
treatment services (HCPCS code G0238), which include a 1-channel ECG 
and a pulse oximeter. We retained the treadmill currently assigned to 
HCPCS code G0424 and adjusted the equipment time to 45 minutes. While 
several public commenters recommended this equipment, these commenters 
also requested a full 60 minutes of respiratory therapist time be 
included in the PE for HCPCS code G0424, comparable to the 15 minutes 
of respiratory therapist time included in the one-on-one codes for 15 
minutes of respiratory treatment services (HCPCS codes G0237 and 
G0238). However, because pulmonary rehabilitation services reported 
under HCPCS code G0424 can be furnished either individually or in 
groups, we believe that 30 minutes of respiratory therapist time would 
be more appropriate for valuing the typical pulmonary rehabilitation 
service.
    Comment: Many commenters applauded CMS for its proposal to increase 
the work RVUs for HCPCS code G0424 to 0.28. While the commenters 
supported the increase in work RVUs in the short term, they believe 
that an accurate, independent assessment of the work value associated 
with physician's office-based pulmonary rehabilitation is the only 
reasonable way to determine actual physician work. The commenters 
stated that continuing to rely on work values related to cardiac 
rehabilitation is flawed, noting that the clinical characteristics of 
the cardiac rehabilitation patient are different from the pulmonary 
rehabilitation patient. Due to the expected frequency and duration of 
acute events, the commenters explained that the pulmonary 
rehabilitation patient would require greater physician involvement.
    Response: Until we gain more data and experience on the use of this 
code to report pulmonary rehabilitation services furnished to Medicare 
beneficiaries under the new comprehensive benefit, we believe using the 
work RVUs for cardiac rehabilitation with monitoring (CPT code 93798) 
as a crosswalk is appropriate for this service. We further note that 
the crosswalk methodology is commonly used by the AMA RUC in 
recommending work RVUs to us for new or revised codes.
    Comment: A number of commenters generally supported the increase in 
the clinical labor time for a respiratory therapist from 15 minutes to 
30 minutes. While the commenters generally agreed with CMS' reasoning 
for not increasing the respiratory therapist time to 60 minutes, the 
commenters noted that in the physician's office setting, pulmonary 
therapy items and services are routinely provided one-on-one, face-to-
face, requiring 60 minutes of individualized therapy services by a 
respiratory therapist. Some commenters believe that the proposal to 
increase the respiratory therapist time to only 30 minutes would place 
physicians at an economic disadvantage in the provision of pulmonary 
rehabilitation items and services when furnished in an office setting 
due to the limited amount of office space available to treat more than 
one patient in the same time period. One commenter suggested that the 
respiratory therapist time be increased to 45 minutes or that CMS 
consider the development of a HCPCS code for the provision of pulmonary 
rehabilitation items and services to patients on a one-on-one, face-to-
face per 15 minute basis to ensure that physicians can provide this 
service in the office setting. Another commenter believed that HCPCS 
code G0424 is undervalued at 0.46 PE RVUs in comparison to the PE RVUs 
for other PFS services that are conceptually similar but do not include 
a treadmill, arm ergometer, monitoring devices, or emergency carts.
    Response: Payment for services under the PFS is resource-based, and 
individual services are valued based upon the resources needed to 
provide the typical service. As we noted in the CY 2011 PFS proposed 
rule (75 FR 40103), pulmonary rehabilitation services reported under 
HCPCS code G0424 can be furnished either individually or in groups and 
we continue to believe that 30 minutes of respiratory therapist time is 
appropriate for valuing the typical pulmonary rehabilitation service. 
We believe that

[[Page 73300]]

pulmonary rehabilitation in the physician's office is most commonly 
furnished to a group of patients, rather than one-on-one for 60 minutes 
of respiratory therapist time. Regarding the commenter who was 
concerned that the PE for HCPCS code G0424 was undervalued in 
comparison to similar services that do not use the equipment necessary 
for HCPCS code G0424, we note that we have utilized the standard PFS PE 
methodology to develop the PE RVUs for HCPCS code G0424 based on the 
direct PE inputs we consider to be appropriate.
    Comment: One commenter suggested that the valuing of HCPCS code 
G0424 is flawed and does not fully account for the inclusion of all 
professionals who are involved in the pulmonary rehabilitation program, 
specifically physical therapists. In addition, the commenter referenced 
the CY 2010 PFS final rule with comment (74 FR 61884) where CMS stated 
and recognized that physical therapists provide pulmonary 
rehabilitation services. The commenter believes that by only basing the 
value on services performed by respiratory therapists, CMS has 
miscalculated the payment for the comprehensive, multidisciplinary 
pulmonary rehabilitation program and recommended that CMS create a 
separate HCPCS code with a higher value that could be used to delineate 
those patients who require individualized physical therapy within the 
pulmonary rehabilitation program.
    Response: Like all services paid under the PFS, pulmonary 
rehabilitation is valued based on the staff type who would typically 
perform this service, a respiratory therapist. Because the items and 
services furnished by a pulmonary rehabilitation program are 
individualized, we expect that evaluations and individualized 
treatments would be conducted by one or more members of the 
multidisciplinary team of the pulmonary rehabilitation program with the 
appropriate expertise. Therefore, individualized treatment by a 
physical therapist would be furnished when required by the patient as 
part of the pulmonary rehabilitation plan of care. However, we do not 
believe individualized treatment would be typical and, therefore, we do 
not believe the creation of a separate HCPCS code with a higher value 
is necessary to recognize those cases that require individualized 
physical therapy as part of a pulmonary rehabilitation program.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to increase the work RVUs for HCPCS 
code G0424 to 0.28 for CY 2011 to be comparable to the work RVUs for 
cardiac rehabilitation with monitoring (CPT code 93798). In addition, 
we are finalizing our CY 2011 proposal to increase the clinical labor 
time for the respiratory therapist from 15 minutes to 30 minutes and to 
crosswalk the PE equipment inputs for HCPCS code G0424 to those for 
respiratory treatment services (HCPCS code G0238), which include a 1-
channel ECG and a pulse oximeter.

F. Application of Tissue Cultured Skin Substitutes to Lower Extremities 
(HCPCS Codes G0440 and G0441)

    There are currently two biological products, Apligraf and 
Dermagraft, which are FDA-approved for the treatment of diabetic foot 
ulcers. While commonly used by podiatrists for this purpose, these 
products are also used by other specialists in the treatment of other 
clinical conditions, such as burns.
    Many Medicare contractors have established local coverage 
determinations specifying the circumstances under which these services 
are covered. In the case of diabetic foot ulcers, clinical studies of 
Apligraf application were based on up to 5 treatments over a 12-week 
period. In contrast, Dermagraft was applied weekly, up to 8 treatments 
over a 12-week period.
    The skin substitute CPT codes were reviewed and new codes were last 
created by the CPT Editorial Panel for CY 2006. There are currently 2 
skin repair CPT codes that describe Apligraf application, one primary 
code, CPT code 15340 (Tissue cultured allogeneic skin substitute; first 
25 sq cm or less) and one add-on code, CPT code 15341 (Tissue cultured 
allogeneic skin substitute; each additional 25 sq cm, or part thereof 
(List separately in addition to code for primary procedure)) and 4 
codes that describe Dermagraft application, two initial codes based on 
body area, CPT codes 15360 (Tissue cultured allogeneic dermal 
substitute, trunk, arms, legs; first 100 sq cm or less, or 1% of body 
area of infants and children) and 15365 (Tissue cultured allogeneic 
dermal substitute, face, scalp, eyelids, mouth, neck, ears, orbits, 
genitalia, hands, feet, and/or multiple digits; first 100 sq cm or 
less, or 1% of body area of infants and children) and two add-on codes, 
CPT codes 15361 (Tissue cultured allogeneic dermal substitute, trunk, 
arms, legs; each additional 100 sq cm, or each additional 1% of body 
area of infants and children, or part thereof (List separately in 
addition to code for primary procedure)) and 15366 (Tissue cultured 
allogeneic dermal substitute, face, scalp, eyelids, mouth, neck, ears, 
orbits, genitalia, hands, feet, and/or multiple digits; each additional 
100 sq cm, or each additional 1% of body area of infants and children, 
or part thereof (List separately in addition to code for primary 
procedure)).
    In the CY 2011 PFS proposed rule (75 FR 40103), we noted that 
several stakeholders had expressed concern about the appropriateness 
and equity of the coding and payment for these services, given their 
similar uses and the office resources required when the products are 
applied repeatedly over a number of weeks for treatment of lower 
extremity ulcers. They were concerned that current coding, with the 
associated payment policies and relative values, does not provide for 
appropriate payment for the services based on how they are furnished. 
In addition, some stakeholders believe that the current coding and 
payment provides a financial incentive for the selection of one tissue 
cultured product over another, rather than facilitating clinical 
decision-making based solely on the most clinically appropriate product 
for the patient's case. For example, the Dermagraft and Apligraf 
application codes have 90-day and 10-day global periods, respectively, 
and their current values include several follow-up office visits. When 
patients are treated periodically with repeated applications of the 
products over several weeks, the patients may be seen in follow-up by 
the physician. However, those encounters would not be evaluation and 
management visits but, instead, would be procedural encounters that 
would typically be valued differently under the PFS than the follow-up 
office visits currently included in the values for the Dermagraft and 
Apligraf application codes. Furthermore, while different stakeholders 
indicated that debridement and site preparation are variably performed 
when these products are applied, the CPT codes for Dermagraft 
application allow separate reporting of these preparation services when 
they are performed, while the Apligraf application codes bundle these 
services. Since CY 2006, the PFS has accepted the AMA RUC work and PE 
recommendations for the Dermagraft and Apligraf application codes and 
has paid accordingly.
    With respect to Medicare payment policy, some Medicare contractors 
allow the use of modifier -58 (Staged or related procedure or service 
by the same physician during the postoperative period) to be reported 
with the skin substitute application codes and provide full payment for 
the service

[[Page 73301]]

each time it is performed, even if the subsequent application(s) is 
within the global period of the service. Other contractors do not allow 
the use of modifier -58 and, therefore, provide a single payment for a 
series of applications over 90 days or 10 days, as applicable to the 
particular code reported for the product's initial application.
    Because of the current inconsistencies in valuing similar skin 
substitute application services and the common clinical scenarios for 
their use for Medicare beneficiaries, in the CY 2011 PFS proposed rule 
(75 FR 40103), we stated that we believe it would be appropriate to 
temporarily create Level II HCPCS G-codes to report application of 
tissue cultured skin substitutes applied to the lower extremities in 
order to provide appropriate and consistent payment for the services as 
they are commonly furnished. Therefore, we proposed to create two new 
HCPCS G-codes for CY 2011, GXXX1 (Application of tissue cultured 
allogeneic skin substitute or dermal substitute; for use on lower limb, 
includes the site preparation and debridement if performed; first 25 sq 
cm or less) and GXXX2 (Application of tissue cultured allogeneic skin 
or dermal substitute; for use on lower limb, includes the site 
preparation and debridement if performed; each additional 25 sq cm), 
that would be recognized for payment under the PFS for the application 
of Apligraf or Dermagraft to the lower limb. These codes would not 
allow separate reporting of CPT codes for site preparation or 
debridement. We emphasized that we would expect that the use of these 
HCPCS G-codes for payment under Medicare would be temporary, while 
stakeholders work through the usual channels to establish appropriate 
coding for these services that reflects the current common clinical 
scenarios in which the skin substitutes are applied. Furthermore, we 
stated that we would expect to receive recommendations from the AMA RUC 
for appropriate work values and direct practice expense inputs for the 
applicable codes, according to the usual process for new or revised 
codes.
    Under the PFS, as a temporary measure, the HCPCS G-codes would be 
assigned a 0-day global period so payment would be made each a time a 
covered service was furnished. We proposed to base payment on the 
physician work relative values and the direct PE inputs for the 
existing CPT codes for Apligraf application, with adjustments for the 
global period differences because the HCPCS G-codes and the Apligraf 
application CPT codes. These CPT codes resemble the new HCPCS G-codes 
in terms of wound size description and the inclusion of site 
preparation and debridement in their current values so we believe they 
appropriately represent the physician work involved in the proposed 
HPCPCS G-codes. However, we proposed to adjust the work RVUs of the 
Apligraf application codes to derive the HCPCS G-code proposed CY 2011 
work values by extracting the values for any office visits and 
discharge day management services because the HCPCS G-codes have a 0-
day global period. In addition, we proposed to adjust the direct PE 
inputs of the Apligraf application codes to develop the proposed CY 
2011 direct PE inputs of the HPCPS G-codes that have a 0-day global 
period.
    Our crosswalks and adjustments resulted in proposed CY 2011 work 
RVUs of 2.22 for HPCPCS code GXXX1 and 0.50 for HCPCPS GXXX2. The 
proposed direct PE inputs for HCPCS codes GXXX1 and GXXX2 are included 
in the direct PE database for the CY 2011 proposed rule that is posted 
on the CMS Web site at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp.
    We noted that many Medicare contractors currently have local 
coverage policies that specify the circumstances under which Medicare 
covers the application of skin substitutes. The local coverage policies 
may include diagnostic or prior treatment requirements, as well as 
frequency limitations on the number and periodicity of treatments. We 
stated our expectation that these policies would be updated in the 
context of the temporary new HCPCS G-codes that we proposed for use in 
CY 2011 to report the application of tissue cultured allogeneic skin or 
dermal substitutes. We proposed to establish the HCPCS G-codes for 
temporary use in CY 2011 in order to improve the consistency and 
resource-based nature of PFS payments for skin substitute application 
services that require similar resources. However, we noted our 
continued interest in ensuring that skin substitutes are properly 
utilized for Medicare beneficiaries who will benefit from that 
treatment. We indicated that we would continue to monitor the 
utilization of these services and plan to identify any concerning 
trends in utilization that contractors may want to examine further 
through medical review or other approaches.
    Comment: While acknowledging concerns with the existing CPT codes 
for the application of skin substitutes, several commenters opposed the 
proposed HCPCS G-codes because the commenters believe that CMS should 
wait for new codes to be created by the CPT Editorial Panel and the 
associated recommendations to be developed by the AMA RUC for physician 
work and direct PE inputs for any new codes. The commenters argued that 
CMS' proposal to create new temporary codes would circumvent or 
otherwise influence the well-established processes already underway to 
address issues identified by the stakeholders. Several commenters 
pointed out that CMS' proposal would not treat the application of skin 
substitutes that are not tissue cultured similarly to the procedures 
for the application of Apligraf and Dermagraft. Because these 
commenters argued that inconsistencies in coding and payment for the 
other products would continue, several commenters recommended that CMS 
await a more comprehensive solution from the CPT Editorial Panel.
    On the other hand, a number of commenters supported the proposal to 
establish the two new HCPCS G-codes, and a few of these commenters 
recommended no changes to the proposed HCPCS code descriptors. However, 
one commenter who generally supported the proposal recommended that CMS 
expand the proposed HCPCS code descriptors to incorporate the 
application of a broader range of skin substitutes that were not tissue 
cultured, specifically to include the application of biologically 
active skin substitutes.
    Another commenter requested that CMS clarify the meaning of 
``dermal substitute.'' This commenter also requested that CMS delete 
the words ``for use on lower limb'' and allow the new codes to be used 
for application of tissue cultured skin or dermal substitutes on 
locations other than the lower limb. Consistent with this perspective, 
the commenter further recommended that CMS not recognize the existing 
CPT codes for application of Apligraf and Dermagraft on other areas of 
the body. The commenter argued that, as proposed, the HCPCS G-codes 
would lead to confusion and the potential for fraudulent billing 
because both a HCPCS G-code and a CPT code could describe the 
application of the same product to the lower extremities. The commenter 
believes that CMS should only recognize the proposed G-codes under the 
PFS for the application of tissue cultured skin or dermal substitutes 
to any body site, to allow for consistency in reporting and payment of 
these services.
    Several commenters requested that CMS provide guidance on the 
proper use of the current CPT codes and new HCPCS G-codes for reporting 
the application of skin substitutes. Other

[[Page 73302]]

commenters were concerned that the temporary HCPCS G-codes could create 
confusion, disrupt physician's office billing policies, and otherwise 
burden coding staff and advised CMS to not finalize the proposal.
    Response: We appreciate the perspectives of stakeholders and we 
share the commenters' desire for appropriate and consistent payment 
that is resource-based for the application of skin substitutes as these 
services are commonly furnished for appropriate clinical indications. 
We appreciate and value the work of the CPT Editorial Panel in 
evaluating the complexities and nuances in this area and look forward 
to reviewing any new codes created for CY 2012 or later years and the 
AMA RUC recommendations for the physician work and direct PE inputs for 
those new codes. We note that there are no new codes for CY 2011 that 
describe the application of skin substitutes and, therefore, new codes 
would not be available before CY 2012 at the earliest.
    In proposing to create two temporary HCPCS G-codes for CY 2011, we 
sought a fair and balanced temporary alternative to provide appropriate 
and equitable payment for the application of tissue cultured skin or 
dermal substitutes to the lower extremities. While we understand from 
stakeholders that the work of the CPT Editorial Panel is ongoing in 
this area, our proposal was specifically to establish temporary HCPCS 
G-codes that would allow for more appropriate reporting and payment 
under certain scenarios in the short term while a more comprehensive 
solution is being developed and refined by expert advisors. Because our 
proposal was so limited in scope and temporary, clearly it was not our 
intention to circumvent or unduly influence the CPT Editorial Panel or 
the AMA RUC as these groups proceed in their comprehensive work to 
establish new codes and values for the application of skin substitutes. 
We would also not expect that the characteristics of the temporary 
HCPCS G-codes, in terms of terminology in the code descriptors, global 
periods, work values, or direct PE inputs, should shape or otherwise 
affect the ongoing work of stakeholders who are developing a complete 
approach to coding for the application of skin substitutes. We 
acknowledge that new CPT codes and their AMA RUC-recommended values and 
direct PE inputs arising from these processes may appropriately differ 
in one or multiple characteristics from the temporary HCPCS G-codes.
    With regard to the commenters who were concerned about the limited 
scope of our proposal and suggested that we not proceed or that we 
broaden the scope of the proposed code descriptors to address 
inequities and inconsistencies that the commenters believe would 
persist under our proposal, we believe that the limited proposal 
continues to be the most appropriate temporary approach for CY 2011. 
First, it was not our intention to comprehensively address the issue of 
coding revisions for the application of skin substitutes because we are 
aware of the ongoing work of the CPT Editorial Panel in this area and 
would not want to undermine its deliberative process. Moreover, based 
on the public comments we received, we have reason to believe that a 
revised coding structure for the application of skin substitutes will 
be available soon. Second, the HCPCS G-codes that we proposed had a 0-
day global period based on the FDA-approved indications and regimens 
for the application of the tissue cultured products to which the codes 
would apply, and we are not certain to what extent a 0-day global 
period would be appropriate for the application of other skin 
substitutes. Third, while several commenters provided suggestions 
regarding alternative language that could be used in the HCPCS G-code 
descriptors, it is unclear which skin substitutes products would be 
incorporated under the revised terms. Some of the suggested 
alternatives would use phrases such as ``biologically active'' that, as 
far as we know, are not fully defined in the medical community and are 
not currently used in the CPT code descriptors that describe the 
application of skin substitutes. Because of our uncertainty in this 
regard, we would be hesitant to make such significant revisions to the 
HCPCS G-code descriptors without the opportunity for public notice and 
comment, which would allow stakeholders the opportunity to provide 
input about revised code descriptors and the appropriateness of the 
values for the HCPCS G-codes. In contrast, our proposal relied upon the 
use of terms in the HCPCS G-code descriptors that are already included 
in the descriptors for established CPT codes and, therefore, we do not 
believe we would be setting a precedent that would affect the current 
work of the CPT Editorial Panel on this issue. Finally, we do not see a 
need to further clarify terms, such as ``dermal substitute,'' in the 
HCPCS G-code descriptors because these are currently used in the CPT 
code descriptors and the same definitions would apply to the G-codes.
    Furthermore, we believe it would continue to be appropriate to 
recognize the existing CPT codes for the application of tissue cultured 
skin or dermal substitutes to areas of the body other than the lower 
extremities. We established the 0-day global period, the physician work 
values, and the direct PE inputs for the proposed HCPCS G-codes based 
on the specific clinical scenarios where Apligraf or Dermagraft would 
be applied to treat lower extremity ulcers. We do not necessarily 
believe that the same global periods and values would be appropriate 
for the application of these products to other body areas under 
different clinical scenarios. The usual coding guidance that providers 
should report the most specific HCPCS code that describes the service 
furnished would apply in the case of the application of Apligraf or 
Dermagraft. If one of these products were applied to the lower 
extremities, we would expect the HCPCS G-codes to be reported, rather 
than the CPT codes, as the HCPCS G-codes are more specific to 
application in that body area.
    Finally, because it is our common practice to create one or more 
new HCPCS G-codes for payment under the PFS each year, we believe that 
physicians' offices are experienced in integrating new codes into the 
reporting of services furnished and paid under the PFS. Not only are 
local coverage determinations commonly applicable to the application of 
skin substitutes, we also understand that there are a subset of 
physicians who regularly apply tissue cultured skin or dermal 
substitutes to lower extremities to treat ulcers. In this context, we 
believe that our national educational efforts, in addition to education 
by local contractors, will quickly disseminate information to the 
relevant practitioners about these new HCPCS G-codes and their 
appropriate use in CY 2011.
    After consideration of the public comments we received, we are 
finalizing our proposal, with editorial modification, to create two new 
HCPCS G-codes for reporting the application of tissue cultured skin 
substitutes and dermal substitutes to the lower extremities in CY 2011. 
For internal consistency, we are changing the descriptors of HCPCS 
codes GXXX1 and GXXX2 from the proposed language to both refer to 
``skin substitute or dermal substitute.'' HCPCS code GXXX2 as proposed 
read ``Application of tissue cultured allogeneic skin or dermal 
substitute; for use on lower limb, includes the site preparation and 
debridement if performed; each additional 25 sq cm.'' The final codes 
are HCPCS code G0440 (Application of

[[Page 73303]]

tissue cultured allogeneic skin substitute or dermal substitute; for 
use on lower limb, includes the site preparation and debridement if 
performed; first 25 sq cm or less) and HCPCS code G0441 (Application of 
tissue cultured allogeneic skin substitute or dermal substitute; for 
use on lower limb, includes the site preparation and debridement if 
performed; each additional 25 sq cm) that will be recognized for 
payment under the PFS in CY 2011.
    Comment: A number of commenters supported the assignment of a 0-day 
global period to the application of tissue cultured skin or dermal 
substitutes. Many expressed the view that assigning a 0-day global 
period to the codes would allow the products to be prescribed and 
administered based on their clinical value, without concern for payment 
differences between products. The commenters who did not support the 0-
day global period were those who believe that the proposal would 
further payment inequities between products used similarly. For 
example, one commenter reasoned that, insofar as a patient is likely to 
require multiple administrations of a skin substitute product during a 
90-day period, providers would have a significant incentive to use the 
products whose application would be reported under the proposed codes 
rather than a product whose application procedure continues to have a 
90-day global period.
    Another commenter addressed the bundling of site preparation and 
debridement into the proposed HCPCS codes GXXX1 and GXXX2. The 
commenter argued that the proposed values for the new codes HCPCS G-
codes would not be sufficient to account for this work. The commenter 
recommended that the proposed values should be adjusted upward or 
separate payment should be allowed for site preparation and/or 
debridement.
    In reviewing CMS' proposed methodology for setting the physician 
work values for the HCPCS G-codes, one commenter contended that CMS 
should finalize a total of 2.86 works RVUs for GXXX1 instead of the 
proposed 2.22 work RVUs. The commenter claimed that the work RVUs for 
GXXX1 should be crosswalked from CPT code 15340 less only the physician 
work for the two post-procedure visits in CPT code 15340 which are not 
included in HCPCS code GXXX1.
    Another commenter recommended that CMS review the proposed PE 
inputs for the new HCPCS G-codes. Specifically, the commenter explained 
that the only difference in clinical labor time between CPT code 15340 
and HCPCS code GXXX1 should be an adjustment to account for the 
difference in the global period (10 days for CPT code 15340 and 0 days 
for HCPCS code GXXX1). The commenter also stated that HCPCS code GXXX1 
should include all the pre-service clinical staff time in CPT code 
15340, yet did not for the proposed rule. The commenter was unclear on 
whether the post-service clinical labor time was properly adjusted to 
account for the change in global period from CPT code 15340 to HCPCS 
code GXXX1.
    Response: We agree with the commenters that a 0-day global period 
is the most appropriate for the application of tissue cultured skin 
substitutes or dermal substitutes to the lower limb for purposes of the 
temporary HCPCS G-codes, pending a comprehensive change in coding 
established by the CPT Editorial Panel. As discussed in the previous 
response, we sought a fair and balanced temporary solution to provide 
appropriate and consistent payment for the application of tissue 
cultured skin substitutes or dermal substitutes to the lower limb. The 
commenters who did not support the 0-day global period were those who 
were more broadly against the creation of the new HCPCS G-codes codes 
because of potential payment imbalances between products that would be 
included in the new codes and those that would not be. No commenters 
asserted that the 0-day global period would be inappropriate for the 
codes to which we proposed to apply that period.
    The proposed physician work values for HCPSC G-codes G0440 and 
G0441 (proposed as HCPCS codes GXXX1 and GXXX2, respectively) were 
crosswalked, with adjustment for the different global periods, from CPT 
codes 15340 and 15341. CPT codes 15340 and 15341 currently include site 
preparation and debridement and, as such, the additional reporting of a 
separate CPT code for these activities, if performed on the same site 
as the skin substitute application procedure, is not permitted. We 
believe that the values for both the current CPT codes and the HCPCS G-
codes are clinically appropriate for the services they describe, with 
payment for site preparation and debridement bundled if furnished.
    In response to a commenter's concern, we reviewed the proposed 
valuation of the physician work for HCPCS codes G0440 and G0441 to 
ensure consistency with our proposed methodology, and we continue to 
believe that the appropriate work value for HCPCS code G0440 is 2.22 
RVUs as we proposed. HCPCS code G0440 was crosswalked to CPT code 
15340, with adjustments to account for the 0-day global period of the 
HCPCS G-code. CPT code 15340, with a 10-day global period, is currently 
valued to include two CPT code 99212 (level 2 established patient 
office or other outpatient visit) post-operative visits (0.48 RVUs 
each, 0.96 RVUs total) and half of one CPT code 99238 (Hospital 
discharge day management; 30 minutes or less) visit (1.28 RVUs each, 
0.64 RVUs total). CPT code 15340 has a current total physician work 
value of 3.82 RVUs. To adjust for the 0-day global period for the minor 
procedure described by HCPCS code G0440, we believe it would be 
appropriate to deduct the value of both the two post-operative office 
visits and the discharge day visit. In the case of post-operative 
office visits, these may be separately reported and paid if medically 
reasonable and necessary. In addition, we also do not believe that a 
half discharge day visit should be a building block based on the 
clinical characteristics of the procedure described by HCPCS code 
G0440. When we make these adjustments to the work value of 3.82 RVUs 
for CPT code 15340, 2.22 work RVUs, the value we proposed for HCPCS 
code G0440, remain.
    We also reviewed the proposed PE inputs included in the direct PE 
database for the CY 2011 PFS proposed rule. Like the physician work 
values, to determine the PE inputs we crosswalked HCPCS code G0440 from 
CPT code 15340 and HCPCS code G0441 from CPT code 15341. As one 
commenter observed, the difference in the values should reflect the 
shift from a 10-day global period to a 0-day global period. However, 
for PE inputs, the change in global period typically affects both the 
pre- and post-service PE inputs. To establish the post-operative 
clinical labor time for HCPCS code G0440, we subtracted out the time 
associated with the two CPT code 99212 visits that were removed (32 
minutes total) and the half discharge day visit (19 minutes total) that 
was eliminated, bringing the post-operative clinical labor time down 
from 54 minutes to three minutes. For the pre-service activities, while 
0-day global period procedures generally have 0 minutes of pre-service 
clinical labor time allocated to them, we believe that 5 minutes in the 
nonfacility setting and 10 minutes in the facility setting reflect more 
appropriate pre-service clinical labor times in the instance of HCPCS 
code G0440. These revised pre- and post-service clinical labor times 
were reflected in the proposed CY 2011 direct PE database for HCPCS 
code G0440.
    While we valued the physician work and clinical labor time PE 
inputs

[[Page 73304]]

according to the crosswalk methodology as described in the CY 2011 PFS 
proposed rule (75 FR 40103 through 40104), upon review of the new CY 
2011 HCPCS G-codes for this final rule with comment period, we noticed 
that we had not applied the proposed methodology to the PE inputs for 
equipment and supplies. Therefore, consistent with our proposal, we 
have adjusted the supply and equipment PE inputs for HCPCS codes G0440 
and G0441 in the final CY 2011 PE database to reflect the shift to a 0-
day global period from a 10-day global period for these HCPCS codes. As 
the equipment and supply PE inputs for the 10-day global period CPT 
codes reflect those necessary for multiple visits to the provider, the 
equipment and supply inputs for the new HCPCS G-codes codes should 
reflect more appropriate values for codes with a 0-day global period.
    After consideration of the public comments we received, we are 
finalizing our proposal to value HCPCS codes G0440 and G0441 as 0-day 
global procedures into which site preparation and debridement are 
bundled. As we proposed, under our final policy we have crosswalked the 
physician work RVUs and direct PE inputs from CPT codes 15340 and 15341 
to HCPCS codes G0440 and G0441, respectively, with adjustments. We have 
adjusted the work RVUs and the direct PE inputs (clinical labor, 
equipment, and supplies) to reflect the shift from a 10-day global 
period to a 0-day global period for the new HCPCS G-codes.
    Comment: Several commenters were concerned about the use of the -58 
modifier for 10-day and 90-day global surgical procedures for the 
application of skin substitutes when repeated application of a product 
within the global period is the typical case. The commenters were 
largely supportive of eliminating the use of the -58 modifier for the 
two new HCPCS codes which, the commenters remarked, has been the source 
of some confusion and has been interpreted inconsistently by Medicare 
contractors. The commenters explained that the change to a 0-day global 
period would result in no need for the -58 modifier to be reported with 
the HCPCS G-codes. Several commenters recommended that CMS provide 
guidance on use of the -58 modifier with the existing CPT codes for the 
application of skin substitutes, most of which have 90-day global 
period and all of which would continue to be recognized for payment 
under the PFS.
    Response: Assignment of a 0-day global period for the two HCPCS G-
codes eliminates the need for use of the -58 modifier with these two 
new codes. We recognize that the -58 modifier may continue to be used 
in conjunction with the other CPT codes with 10-day or 90-day global 
periods for the application of skin substitutes. Specific 
determinations of the appropriate use of the -58 modifier will continue 
to be the responsibility of individual Medicare contractors.
    In summary, after consideration of the public comments we received, 
we are finalizing our CY 2011 proposal, with modification to adjust the 
supply and equipment direct PE inputs, as well as editorial 
modification to the code descriptors for consistency, to create two new 
HCPCS G-codes for CY 2011, G0440 (Application of tissue cultured 
allogeneic skin substitute or dermal substitute; for use on lower limb, 
includes the site preparation and debridement if performed; first 25 sq 
cm or less) and G0441 (Application of tissue cultured allogeneic skin 
substitute or dermal substitute; for use on lower limb, includes the 
site preparation and debridement if performed; each additional 25 sq 
cm), that will be recognized for payment under the PFS for the 
application of products described by the codes to the lower limb. These 
codes do not allow separate reporting of CPT codes for site preparation 
or debridement. Providers reporting the application of tissue cultured 
allogeneic skin substitute or dermal substitutes to the lower limb for 
payment under the PFS in CY 2011 should report HCPCS code G0440, along 
with HCPCS code G0441 if applicable based on wound size, and not CPT 
code 15340, 15341, 15360, 16361, 15365, or 15366.
    Under the PFS, as a temporary measure, the HCPCS G-codes are 
assigned a 0-day global period so payment is made each a time a covered 
service is furnished. As proposed, we are basing payment on the 
physician work relative values and the direct PE inputs for the 
existing CPT codes 15340 and 15341 for Apligraf application, with 
adjustments for the global period differences between the HCPCS G-codes 
and the Apligraf application CPT codes. However, as we proposed, we 
have adjusted the work RVUs of the Apligraf application codes to derive 
the final CY 2011 HCPCS G-code work values by extracting the values for 
any office visits and discharge day management services because the 
HCPCS G-codes have a 0-day global period. In addition, with 
modifications of our proposed PE equipment and supply inputs to be 
fully consistent with our crosswalk proposal, we have adjusted the 
direct PE inputs of the Apligraf application codes to develop the final 
CY 2011 direct PE inputs for the HPCPS G-codes that have a 0-day global 
period.
    Our crosswalks and adjustments result in CY 2011 final work RVUs of 
2.22 for HCPCS code G0440 and 0.50 for HCPCS G0441. The final direct PE 
inputs for HCPCS codes G0440 and G0442 are included in the direct PE 
database for the CY 2011 PFS final rule with comment period rule.

G. Canalith Repositioning (CPT code 95992)

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

[[Page 73305]]

95992 to the ``sometimes therapy'' list on the therapy code abstract 
file.
    Comment: Many commenters supported CMS' proposal to acknowledge the 
distinct and separate nature of CPT code 95992 from an E/M service by 
recognizing CPT code 95992 for separate payment and agreed with the 
proposed use of the AMA RUC- recommended values for work RVUs (0.75) 
and PE inputs for establishing payment in CY 2011.
    Response: We appreciate the commenters' support for our proposal.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to recognize CPT code 95992 for payment 
under the PFS. As a result, the code's status has been changed to ``A'' 
in Addendum B to this final rule with comment period and the CY 2009 
AMA RUC recommendations for work RVUs (0.75) and PE inputs will be used 
for establishing its payment in CY 2011. (That is, status ``A'' means 
Active code. These codes are separately payable under the PFS if 
covered.) CPT code 95992 has also been added to the ``sometimes 
therapy'' list on the therapy code abstract file.

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

    To ensure that the PE RVUs are consistent between the intranasal/
oral and injectable immunization administration CPT codes that describe 
services that utilize similar PE resources, we proposed to crosswalk 
the PE values for CPT code 90471 (Immunization administration (includes 
percutaneous, intradermal, subcutaneous, or intramuscular injections); 
one vaccine (single or combination vaccine/toxoid)) to CPT codes 90467 
(Immunization administration younger than age 8 years (includes 
intranasal or oral routes of administration) when the physician 
counsels the patient/family; first administration (single or 
combination vaccine/toxoid), per day) and 90473 (Immunization 
administration by intranasal or oral route; one vaccine (single or 
combination vaccine/toxoid)).
    Similarly, we also proposed to crosswalk the PE values for CPT code 
90472 (Immunization administration (includes percutaneous, intradermal, 
subcutaneous, or intramuscular injections); each additional vaccine 
(single or combination vaccine/toxoid) (List separately in addition to 
code for primary procedure)) to CPT codes 90468 (Immunization 
administration younger than age 8 years (includes intranasal or oral 
routes of administration) when the physician counsels the patient/
family; each additional administration (single or combination vaccine/
toxoid), per day (List separately in addition to code for primary 
procedure)) and 90474 (Immunization administration by intranasal or 
oral route; each additional vaccine (single or combination vaccine/
toxoid) (List separately in addition to code for primary procedure)).
    Comment: Many commenters expressed support for the proposal. One 
commenter questioned why the PE values are currently different and 
several other commenters urged CMS to utilize the AMA RUC 
recommendations and the resource-based methodology to develop PE RVUs 
for these services in CY 2011, rather than crosswalk the PE RVUs.
    Response: We appreciate the support from the commenters for our 
proposal. We would note that, even with the same direct PE inputs, 
somewhat different PE RVUs for the various CPT codes may result from 
our PE methodology that relies upon the historical specialty mix, as 
reflected in the most recent PFS utilization data, of providers who 
furnished the services to allocate the indirect PE. Therefore, because 
we believe it is especially important to have consistent PE values for 
payment of these similar services under the PFS, we are unable to 
utilize the AMA RUC direct PE input recommendations and the resource-
based methodology to develop PE RVUs for these services. While in 
general we value services under the PFS with reference to the direct PE 
inputs recommended by the AMA RUC and our standard resource-based 
approach to establishing PE RVUs, we note that we also commonly use 
crosswalks to other similar codes to establish the values for services 
in certain circumstances. In this instance, we believe a crosswalk is 
particularly appropriate in order to maintain appropriate relativity 
between similar services and avoid the potential for non-clinically-
based bias in favor of one vaccine administration technique over 
another.
    Comment: A few commenters questioned why the CY 2011 proposed rule 
referenced ``physician'' counseling when identifying CPT codes 90467 
and 90468 and requested clarification that nurse practitioners (NPs) 
and physician assistants (PAs) also be included within the scope of 
this proposal.
    Response: We would like to clarify that the reference to 
``physician'' counseling noted by the commenters is part of the 
official CPT code descriptors for CPT codes 90467 and 90468. Consistent 
with our usual interpretation of CPT codes that include the term 
physician in the code descriptor, for Medicare payment purposes this 
specificity does not exclude NPs or PAs from providing counseling to 
the patient/family that is within the NP's or PA's scope of practice.
    Comment: Several commenters recommended modifying the proposal by 
crosswalking the PE RVUs for CPT code 90466 (Immunization 
administration younger than age 8 years of age (includes percutaneous, 
intradermal, subcutaneous, or intramuscular injections) when the 
physician counsels the patient/family; each addition injection (single 
or combination vaccine/toxoid) per day (List separately in addition to 
code for primary procedure)) to CPT code 90468 to achieve parity and 
reflect the additional clinical time and other practice expenses 
expended to provide immunizations to young children.
    Response: For CY 2011, the CPT Editorial Panel revised the 
reporting of immunization administration services for the pediatric 
population. As a result, CPT codes 90466 and 90468 have been deleted 
and replaced with CPT code 90461 (Immunization administration through 
18 years of age via any route of administration, with counseling by 
physician or other qualified health professional; each additional 
vaccine/toxoid component (List separately in addition to code for 
primary procedure)). In addition, CPT codes 90465 (Immunization 
administration younger than 8 years of age (includes percutaneous, 
intradermal, subcutaneous, or intramuscular injections) when the 
physician counsels the patient/family; first injection (single or 
combination vaccine/toxoid), per day) and 90467 were deleted and 
replaced with CPT code 90460 (Immunization administration through 18 
years of age via any route of administration, with counseling by 
physician or other qualified health care professional; first vaccine/
toxoid component).
    We agree with the commenters who believe that consistency in the PE 
RVUs across CPT codes with different code descriptors reflecting 
immunization services to different populations or using different 
routes of administration is desirable. As a matter of longstanding 
policy (69 FR 66307), we have crosswalked the nonfacility PE value from 
CPT code 96372 (Therapeutic, prophylactic, or diagnostic injection 
(specify substance or drug); subcutaneous or intramuscular) 
[predecessor CPT codes 90782 and 90772] to the PE values for CPT code 
90471 and to the HCPCS G-codes for administration of specific vaccines. 
We

[[Page 73306]]

will continue this crosswalk for CY 2011 and, as we proposed, also 
crosswalk the nonfacility PE value of CPT code 90471 to CPT code 90473. 
The PE value for CPT code 90472 is based on the direct PE inputs for 
that code, according to the usual PFS methodology. We will crosswalk 
the nonfacility PE value of CPT code 90472 to CPT code 90474 for CY 
2011 as we proposed. Finally, we are modifying our CY 2011 proposal and 
crosswalking the nonfacility PE RVUs for CPT codes 90472 and 90474 to 
new CPT code 90461 (replacement code for CPT codes 90466 and 90468) for 
CY 2011. In addition, we will crosswalk the nonfacility PE RVUs for CPT 
codes 90471 and 90473 to new CPT code 90460 (replacement code for CPT 
codes 90465 and 90467).
    After consideration of the public comments we received and the CY 
2011 changes in codes for pediatric immunization services by the CPT 
Editorial Panel, we are finalizing our CY 2011 proposals, with the 
following modifications. In summary, for CY 2011 we will--
     Crosswalk the nonfacility PE RVUs for CPT codes 90472 and 
90474 to new CPT code 90461; and
     Crosswalk the nonfacility PE RVUs for CPT codes 90471 to 
90473 to new CPT code 90460.

I. Refinement Panel Process

    As discussed in the 1993 PFS final rule with comment period (57 FR 
55938), we adopted a refinement panel process to assist us in reviewing 
the public comments on interim physician work RVUs for CPT codes with 
an interim final status in each year and developing final work values 
for the subsequent year. We decided that the panel would be comprised 
of a multispecialty group of physicians who would review and discuss 
the work involved in each procedure under review, and then each 
individual would individually rate the work of the procedure. We 
believed that establishing the panel with a multispecialty group would 
balance the interests of those who commented on the work RVUs against 
the budgetary and redistributive effects that could occur if we 
accepted extensive increases in work RVUs across a broad range of 
services. Historically, the refinement panel has based its 
recommendation to change a work value or to retain the interim value 
has hinged solely on the outcome of a statistical test on the ratings 
(an F-test).
    Depending on the number and range of codes that public commenters, 
typically specialty societies, request be subject to refinement, we 
establish refinement panels with representatives from 4 groups of 
physicians: Clinicians representing the specialty most identified with 
the procedures in question; physicians with practices in related 
specialties; primary care physicians; and contractor medical directors 
(CMDs). Typically the refinement panels meet in the summer prior to the 
promulgation of the final rule finalizing the RVUs for the codes. 
Typical panels have included 8 to 10 physicians across the 4 groups. 
Over time, the statistical test used to evaluate the RVU ratings of 
individual panel members have become less reliable as the physicians in 
each group have tended to select a previously discussed value, rather 
than independently evaluating the work. In addition, the resulting RVUs 
have occasionally exhibited rank order anomalies (that is, a more 
complex procedure is assigned lower RVUs than a less complex 
procedure).
    Recently, section 1848(c)(2)(K) of the Act (as added by section 
3134 of the ACA) authorized the Secretary to review potentially 
misvalued codes and make appropriate adjustments to the relative 
values. In addition, MedPAC has encouraged CMS to critically review the 
values assigned to the services under the PFS. MedPAC has stated its 
belief that CMS has historically relied too heavily on specialty 
societies to identify services that are misvalued by accepting a high 
proportion of the recommendations of the AMA RUC.
    We believe the refinement panel process continues to provide 
stakeholders with a meaningful opportunity to review and discuss the 
interim work RVUs with a clinically diverse group of experts which then 
provides informed recommendations to CMS. Therefore, in the CY 2011 
proposed rule (75 FR 40105), we indicated that we would like to 
continue the refinement process, including the established composition 
that includes representatives from the 4 groups of physicians, but with 
administrative modification and clarification. Specifically, for 
refinement panels beginning in CY 2011 (that is, for those codes with 
CY 2011 interim values that would be subject to refinement during CY 
2011), we proposed to eliminate the use of the F-test and instead base 
revised RVUs on the median work value of the panel members' ratings. We 
believe this approach will simplify the refinement process 
administratively, while resulting in a final panel recommendation that 
reflects the summary opinion of the panel members based on a commonly 
used measure of central tendency that is not significantly affected by 
outlier values. In addition, we clarified that we have the final 
authority to set the RVUs and, therefore, may make adjustments to the 
work RVUs resulting from refinement if policy concerns warrant their 
modification.
    Comment: Most commenters expressed support for the proposal to 
eliminate the F-test, including the increased transparency of the 
refinement panel process that the commenters believe would result from 
this change. Many commenters, including the AMA RUC, agreed with the 
use of the median work value of the panel members' ratings and believe 
the median would provide a clearer view of the central tendency of the 
estimates provided by the survey respondents. On the other hand, 
several commenters believe the current process is effective and 
eliminates the effects of agreement between the panel members' ratings.
    The AMA RUC recommended that CMS be mindful when assigning 
individuals to the refinement panel to ensure that all members, 
including CMDs, are not from the same specialties that were involved in 
the public comment originating the issue under review. Another 
commenter cautioned CMS that the refinement panels need to be balanced 
and should ensure that there is at least one representative on the 
panel who has direct experience with the procedure or service under 
review.
    Response: We appreciate the support of the commenters regarding our 
proposal to use the median work value of the panel members' ratings and 
will move forward to finalize our proposal for refinement panels 
beginning in CY 2011 (refinement of CY 2011 new/revised codes with 
interim values).
    When identifying individuals for the refinement panel, including 
CMDs, we attempt to select individuals from each of the different 
specialties with an interest in the codes being refined, not just the 
specialty or specialties responsible for the public comment originating 
the request for refinement. We also take steps to ensure that the panel 
members have direct experience and knowledge of the procedure or 
service under review. We will certainly continue our efforts in this 
regard. However, we note that in recent years the number of physicians 
who are available to participate in the refinement panel has been 
limited at times, and some specialty societies have had difficulty 
obtaining representation for the panel.

[[Page 73307]]

    Comment: Several commenters urged CMS to use a methodology that 
would allow the AMA RUC-recommended value to prevail when appropriately 
supported by the pertinent specialty societies and when the value is 
strongly supported by the rank order and resources of the procedure, 
since the PFS final rule with comment period is the first opportunity 
for the public to see the RVUs for the coming calendar year. These 
commenters also believe a full and fair review process is warranted 
prior to the publication of these values in the final rule with comment 
period.
    Response: We note that PFS payments for services are resource-
based. When reviewing the AMA RUC recommendations, our decisions to 
value services are based on the resources needed to perform the typical 
service and, therefore, these decisions are based upon a thorough 
review of the AMA RUC recommendations in the context of the specific 
new or revised codes. In those cases where we reject the AMA RUC 
recommendations, we publish our rationale in the PFS final rule with 
comment period where we first make the values public. These values are 
published as interim final values that are subject to public comment. 
The public comment period serves as the opportunity for public review 
and we see no other alternative to this timing, given the timeframes in 
which the new or revised CPT codes and the AMA RUC recommendations 
regarding their values are available to us and in which the new or 
revised CPT codes must be incorporated into the PFS for payment.
    Comment: Several commenters expressed concerns about the proposal 
to allow CMS to have the final authority to set the work RVUs if policy 
concerns warrant modifications to the values derived from the 
refinement process. These commenters opposed this proposal and 
recommended that the decisions of the refinement panels remain 
unchanged by CMS. The commenters believe a major strength of the 
current process is that is gives stakeholders a strong incentive to 
participate, knowing that the outcomes of the process will not be 
overturned by CMS.
    Response: Although we appreciate the concerns raised by the 
commenters, by law, we retain the final responsibility and authority to 
set the RVUs and, therefore, may make adjustments to the work RVUs 
resulting from refinement if policy concerns (such as a rank order 
anomaly) warrant their modifications.
    Comment: One commenter urged CMS to make the refinement process 
transparent and open to the public.
    Response: We believe our proposal would make the refinement process 
more transparent, as noted by some commenters. We further believe that 
representation from specialty societies as part of the AMA RUC process 
for valuing the codes allows the input of physicians who have direct 
experience with the procedure or service under review.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to eliminate the use of the F-test for 
the refinement panels and, instead, we will base the revised RVUs on 
the median work value of the panel members' ratings. In addition, we 
note that CMS retains the final authority to set the RVUs and, 
therefore, make adjustments to the work RVUs resulting from refinement 
if policy concerns warrant their modification.

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

    In the CY 2011 PFS proposed rule (75 FR 40105), we reiterated our 
concerns about the issue of developing PE RVUs for services that are 
utilized 24 hours a day, 7 days a week (24/7), such as those that 
require certain centralized monitoring system equipment and which have 
been discussed in earlier PFS rulemaking cycles, most recently in the 
CY 2010 PFS final rule with comment period (74 FR 61755). We stated 
that the PE equipment methodology was developed for equipment that is 
in use during standard physician's office business hours and not 
equipment that is used in furnishing such continuous services, and that 
we would conduct further analysis of this issue. We indicated that 
services that were contractor-priced in CY 2009 remained contractor-
priced in CY 2010 and that any proposed changes would be communicated 
through future rulemaking.
    In the CY 2011 PFS proposed rule (75 FR 40105), we explained that 
since publication of the CY 2010 PFS final rule with comment period, we 
focused our additional analysis on 4 of the CPT codes that commenters 
have brought to our attention because they involve concurrent, remote, 
24/7 attended monitoring of multiple patients from a central location: 
CPT code 93012 (Telephonic transmission of post-symptom 
electrocardiogram rhythm strip(s); 24-hour attended monitoring, per 30 
day period of time; tracing only); CPT code 93229 (Wearable mobile 
cardiovascular telemetry with electrocardiographic recording, 
concurrent computerized real time data analysis and greater than 24 
hours of accessible ECG data storage (retrievable with query) with ECG 
triggered and patient selected events transmitted to a remote attended 
surveillance center for up to 30 days; technical support for connection 
and patient instructions for use, attended surveillance, analysis and 
physician prescribed transmission of daily and emergent data reports); 
CPT code 93268 (Wearable patient activated electrocardiographic rhythm 
derived event recording with presymptom memory loop, 24-hour attended 
monitoring, per 30 day period of time; includes transmission, physician 
review and interpretation); and CPT 93271 code (Wearable patient 
activated electrocardiographic rhythm derived event recording with 
presymptom memory loop, 24-hour attended monitoring, per 30 day period 
of time; monitoring, receipt of transmissions, and analysis).
    We pointed out that of these four codes, CPT code 93229 is 
currently contractor-priced in CY 2010, meaning that the local Medicare 
contractors determine payment rates for the service within the PFS 
geographic areas in their jurisdiction. The three services that are 
currently nationally-priced on the PFS are in the first year of a 4-
year transition to lower payment rates based on the use of the PPIS 
data adopted in the CY 2010 PFS final rule with comment period. We 
refer readers to section II.A.2. of this final rule with comment period 
for a description of the general PFS PE methodology that is the basis 
for the following discussion of approaches to establishing PE RVUs for 
these four CPT codes.
    In the CY 2011 PFS proposed rule, we explained that we examined 
several alternative methods for developing PE RVUS upon which PFS 
payment rates for these four CPT codes could be based. Each of these 
services involves transmission of information from multiple patients 
who wear individual monitoring devices that transmit patient-specific 
information to centralized equipment that is simultaneously in use for 
multiple patients. We stated that we believed it would be most 
consistent with the principles underlying the PFS PE methodology to 
classify the centralized monitoring equipment as an indirect cost since 
it is servicing multiple patients at the same time. We explained that 
after classifying this equipment as an indirect cost, we used our 
standard methodology to calculate an indirect practice cost index value 
for each code based on the PE/HR survey data of the historical mix of 
specialties providing these services. We went on to state that

[[Page 73308]]

establishing payment rates for these codes based on this approach would 
result in decreases in the payment rates for these services, including 
the typical contractor's price for CPT code 93229. For the three 
services that are nationally priced, these decreases would be relative 
to the lower payment rates based on the use of the PPIS data after the 
4-year transition.
    In the CY 2011 PFS proposed rule, we acknowledged that we had also 
received PE/HR data from the Remote Cardiac Services Provider Group 
(RCSPG), a group of Independent Diagnostic Testing Facility (IDTF) 
suppliers of these types of services. We explained that for sensitivity 
analysis purposes, we substituted these data for the PE/HR data of the 
specialties performing these services, while continuing to treat the 
centralized monitoring equipment as an indirect cost. We stated that we 
found that establishing payment rates for these codes based on the 
approach of using the submitted RCSPG PE/HR data would again result in 
decreases in the payment rates for these services, including the 
typical contractor's price for CPT code 93229. As in the prior 
alternative, the decreases for the nationally priced codes would be 
relative to the payment rates reflecting the 4-year transition to the 
PPIS data.
    We indicated that although we believed that it would be most 
consistent with the principles underlying the PE methodology to 
classify the centralized monitoring equipment as an indirect cost, we 
also performed a sensitivity analysis of the payment rates if the 
centralized monitoring equipment were classified as a direct cost. In 
this simulation, we assumed that the centralized monitoring equipment 
was in year-round use, 7 days per week for 24 hours per day. We found 
that establishing payment rates for these codes based on the approach 
of classifying the centralized monitoring equipment as a direct cost 
would again result in decreases in the payment rates for the nationally 
priced services relative to their payment rates after the 4-year 
transition to the use of the PPIS data, as well as to the typical 
current contractor's price for CPT code 93229.
    Finally, we explained that we considered proposing contractor-
pricing for all four of these services for CY 2011 but were cognizant 
of past public comments on this issue that had requested that all of 
these services be priced nationally on the PFS, including the one 
service (CPT code 93229) that is currently contractor-priced.
    In the CY 2011 PFS proposed rule, we also considered that the 
services currently priced nationally on the PFS were scheduled to 
receive lower payment rates under the 4-year transition to the PPIS 
data and that the contractor's price for CPT 93229 was recently reduced 
in the area where the majority of the billings for this service 
currently occur.
    We concluded that after taking all these factors into 
consideration, we were not proposing CY 2011 methodological or direct 
cost input changes for CPT codes 93012, 93268, or 93271--the services 
that are nationally priced under the PFS. We proposed to continue 
contractor-pricing for CPT 93229 for CY 2011. We solicited public 
comments on this issue, including responses to our analysis of 
alternative approaches to establishing PE RVUs for 24/7 services, and 
further discussion of the issues we identified in our alternative 
pricing methodologies. In addition, while we had focused the 24/7 
services analysis up until that point in time on developing the PE RVUS 
for remote cardiac monitoring services, we observed that there may be 
24/7 services in other areas of medicine, either currently paid under 
the PFS or in development for the future. Therefore, we also solicited 
public comments on these current or emerging 24/7 services, including 
descriptions of the similarities or differences between these other 
services and remote cardiac monitoring services, particularly with 
respect to the issues we identified in our analysis of alternative 
approaches to establishing PE RVUs for remote cardiac monitoring 
services under the PFS.
    Comment: Several commenters expressed concerns regarding CMS' 
discussion of PFS payment for remote cardiac monitoring, which included 
no proposal of changes for CY 2011. The commenters pointed out the 
benefits of 24/7 remote monitoring services for cardiac and other 
specialty services and argued that these types of services can differ 
in complexity and frequency from one another and from traditional 
medical services. In general, the commenters expressed interest in CMS 
accurately capturing the cost components for all of these services, 
primarily arguing for the consideration of these costs as direct costs.
    One commenter explained that the current methodology for assigning 
PE RVUs does not work for remote cardiac providers whose businesses are 
structured differently from physicians' practices and, as a result, the 
RVUs assigned to the services do not reflect their proper relative 
cost. Although CMS focused its analysis on services characterized by 
concurrent, remote, 24/7 attended monitoring of multiple patients from 
a single location, the commenter addressed cardiac event monitoring, 
pacemaker monitoring, Holter monitoring, International Normalized Ratio 
(INR) monitoring, and a number of new monitoring technologies such as 
cardiac telemetry under the umbrella term of remote cardiac monitoring. 
The commenter asserted that the IDTF providers of remote cardiac 
monitoring services operate on a 24/7 basis because the services that 
they furnish require round-the-clock service and are, therefore, 
structured very differently from physicians' offices and other IDTFs. 
The commenter argued that CMS should utilize PE/HR data submitted by 
RCSPG, a group of IDTF suppliers of these types of services, to the 
entire ranging of cardiac monitoring services furnished by these 
providers. Alternatively, the commenter indicated that CMS could use 
the all physician indirect percentage, use an indirect practice cost 
index (IPCI) of one, and add equipment costs to the PE formula for 
allocating indirect costs in setting the PE RVUs for cardiac monitoring 
services. Finally, the commenter requested that if CMS did not adopt 
one of the previous two suggestions, then CMS should temporarily 
suspend the phase-in of the use of PPIS data for cardiac monitoring 
services. Several other commenters also requested that CMS suspend the 
PPIS transition for remote cardiac monitoring services.
    Several commenters disagreed with CMS regarding the appropriateness 
of treating the centralized monitoring equipment as an indirect cost, 
arguing that the equipment is used specifically for patients that are 
receiving a specific service and, therefore, represents a direct cost 
like other medical equipment. The commenters contended that the 
centralized equipment is inherently different from other indirect 
practice expenses that are used to run a practice and are not tied 
directly to any one particular service. One commenter speculated that 
considering the cardiac monitoring equipment as an indirect expense 
would dilute the payment for this cardiac telemetry by distributing it 
to many people who are not providing it. Another commenter expressed 
concern that an indirect cost approach does not appropriately account 
for the significant differences in remote monitoring services and thus 
cannot accurately capture the cost components of each.
    With respect to the remote cardiac monitoring service described by 
CPT code 93229 which is contractor-priced, one commenter made several 
specific requests, namely that CMS: (1) Nationally price CPT code 93229 
rather

[[Page 73309]]

than contractor-price the service; (2) consider the centralized 
monitoring equipment associated with CPT code 93229 as a direct cost; 
(3) adjust the equipment utilization assumption for the centralized 
monitoring equipment from 100 percent to 50 percent; (4) use new direct 
cost inputs (for example, the cost of the monitoring device worn by 
patient) supplied by the commenter; (5) incorporate a new PE/HR, based 
on the cardiac monitoring industry-wide RCSPG PE/HR data applied to all 
cardiac monitoring services, based on data from two telemetry providers 
for CPT code 93229 that yields a PE/HR of $243.22 that would be applied 
to CPT code 93229, or based on data for telemetry and cardiac event 
monitoring (CEM) which results in a PE/HR of $214.79 that would be 
applied to telemetry and CEM services; and (6) apply an additional 
indirect allocation in the CMS PE methodology based on the equipment 
direct costs as previously recommended by one telemetry provider. The 
commenter provided equipment inputs and the associated prices and 
further recommended that CMS should continue to apply the clinical 
labor and supply input items associated with this services as 
recommended by the AMA RUC.
    Response: We appreciate the continuing interest of the commenters 
in the pricing of cardiac monitoring services under the PFS. After 
further review of this issue, while we continue to recognize there are 
some unique aspects to the services, we do not agree with the 
commenters that the PE for cardiac monitoring services cannot be 
appropriately valued using the PFS PE methodology. After our review, we 
believe that we can appropriately identify and price the direct cost 
inputs for these services. Furthermore, we note that the PPIS data for 
allocating indirect costs is from a multispecialty, nationally 
representative PE survey of both physicians and NPPS and, as the most 
comprehensive source of PE information available to date, appropriate 
for use for cardiac monitoring services. Therefore, we disagree that we 
should suspend the PE transition to the PPIS data or otherwise change 
our established methodology for setting the PE RVUs furnished by a 
subset of providers in a certain specialty area.
    We continue to believe that it is more appropriate to classify the 
costs associated with the centralized monitoring equipment, including 
the hardware and software, workstation, webserver, and call recording 
system, as indirect costs since it is difficult to allocate those costs 
to services furnished to individual patients in a manner that 
adequately reflects the number of patients being tested. This would be 
true for CPT code 93229 which has not previously been nationally 
priced. We believe that the ability to appropriately allocate costs to 
individual services is a key concept that should guide our adoption of 
the direct PE inputs for services paid under the PFS. Having drawn this 
conclusion, we plan to review the direct PE inputs for other nationally 
priced services that include centralized monitoring equipment under the 
PFS and, if we find that we have not consistently treated that 
equipment as an indirect cost, we may propose changes to the direct PE 
inputs for existing codes in a future PFS rulemaking cycle.
    We agree with several commenters that it would be appropriate at 
this time to nationally price CPT code 93229, especially in light of 
our conclusion regarding how the centralized monitoring system should 
be treated under the PFS PE methodology and the fact that the 
commenters have provided current prices and associated documentation 
for the direct PE inputs used in the typical case. Therefore, we are 
accepting the AMA RUC recommendations originally made for CY 2009 (73 
FR 69896) for clinical labor and supplies for CPT code 93229 and are 
utilizing these direct PE inputs for CY 2011. With respect to the 
equipment inputs provided to us by one commenter who currently 
furnishes the majority of services described by CPT code 93229, under 
our final CY 2011 policy the only piece of equipment that would be 
appropriately treated as a direct PE input is the cardiac telemetry 
monitoring device worn by the patient. The other equipment items, 
including the monitoring system software and hardware, workstation, 
webserver, and call recording system are indirect practice costs. 
Therefore, we are accepting the commenter's submission of $21,575 as 
the price for this device in the typical case, and applying a 50 
percent utilization rate and useful life of 3 years as recommended by 
the commenter.
    We do not believe it would be appropriate to deviate from our 
standard PFS PE methodology to adopt a PE/HR that is specific to CPT 
code 93229 or any other set of cardiac monitoring codes based on data 
from two telemetry providers, from a subset of services provided by 
certain specialty cardiac monitoring providers, or from a certain group 
of specialty providers that overall furnish only a portion of cardiac 
monitoring services, nor to change our established indirect PE 
allocation methodology. We believe the current PE methodology 
appropriately captures the relative costs of these services in setting 
their PE RVUs, based on the conclusion we have drawn following our 
assessment of the centralized monitoring system that is especially 
characteristic of services such as CPT code 93229. We note that these 
direct PE inputs are included in the final CY 2011 direct PE database 
that is posted on the CMS Web site under downloads for this CY 2011 PFS 
final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage. We further note that the 
CY 2011 payment for CPT code 93229 (without considering the negative 
PFS update that will apply for CY 2011 under current law) is close to 
the current typical contractor's price for the service in CY 2010.
    After consideration of the public comments we received, we are 
establishing a national price for CPT code 93229 based on nationally 
set RVUs, instead of maintaining the code as contractor-priced as we 
proposed. We are adopting the AMA RUC's recommendations for the 
clinical labor and supply inputs, and utilizing price, utilization, and 
useful life information provided by the commenters as equipment inputs 
for the cardiac telemetry monitoring device worn by the patient. The 
final CY 2011 RVUs for CPT code 93229 are displayed in Addendum B to 
this final rule with comment period. While we are making no changes to 
the direct PE inputs for other remote cardiac monitoring CPT codes for 
CY 2011, we will consider in the future whether changes could be 
appropriate if we conclude that these services utilize a centralized 
monitoring system that would most appropriately be treated an indirect 
cost.
    Comment: While most of the commenters addressed remote cardiac 
monitoring services specifically discussed in the CY 2011 PFS proposed 
rule, several commenters addressed other types of emerging 24/7 
services. One commenter described a pilot program that utilizes 
telehealth to monitor certain health status indicators for cardiac 
patients. This monitoring occurs during the day and night and includes 
an assessment by a nurse. The commenter stated that the initial results 
of the pilot show a lower rate of hospital readmissions for 
participants. The commenter asserted that there is currently no payment 
for this service, and urged CMS to consider funding for these types of 
programs.
    Outside of cardiac monitoring, another commenter noted that there 
are many types of remote monitoring

[[Page 73310]]

services that provide important benefits, especially for chronically 
ill patients. The commenter explained that these may include health 
status monitoring services, activity and sensor monitoring services, 
and medication dispensing and monitoring services. The commenter 
asserted that the resource requirements for these types of services can 
differ in complexity and frequency and may involve varied resources, 
including equipment and other fees; training and coaching; data 
collection, monitoring and documentation; and personal emergency 
response. As such, the commenter recommended that CMS' PE methodology 
for remote monitoring services be as transparent and flexible as 
possible to allow for these differences, and to accurately capture the 
cost components for each. Therefore, the commenter, concluded that a 
direct cost approach would be the most appropriate approach in most 
cases.
    Response: We thank the commenters for providing information on 
other current and emerging 24/7 services. We will consider appropriate 
payment for other 24/7 services under the PFS as specific codes for 
such services are created by the CPT Editorial Panel. Regarding direct 
PE inputs for other remote monitoring services, we acknowledge 
diversity in the direct and indirect costs to providers for furnishing 
various monitoring services--and all services--and believe that our 
current PE methodology, as discussed earlier in this section, is able 
to yield appropriate values across this wide range. As stated earlier 
in the context of remote cardiac monitoring, we believe that the 
ability to appropriately allocate costs to the services furnished to 
individual patients is a key concept that should guide our adoption of 
the direct PE inputs for services paid under the PFS, including remote 
monitoring and other 24/7 services.
    We look forward to continuing a dialogue with stakeholders involved 
in developing and furnishing 24/7 services as medical practice evolves 
in order to ensure that the PFS pays appropriately for those 24/7 
services that are covered by Medicare and paid as physicians' services.

IV. Medicare Telehealth Services for the Physician Fee Schedule

A. Billing and Payment for Telehealth Services

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

[[Page 73311]]

originating sites authorized by the statute are as follows:
     Offices of a physician or practitioner
     Hospitals
     CAHs
     RHCs
     FQHCs
     Hospital-Based or Critical Access Hospital-Based Renal 
Dialysis Centers (including Satellites)
     SNFs
     CMHCs
    Currently approved Medicare telehealth services include the 
following:
     Initial inpatient consultations
     Follow-up inpatient consultations
     Office or other outpatient visits
     Individual psychotherapy
     Pharmacologic management
     Psychiatric diagnostic interview examination
     End Stage Renal Disease (ESRD) related services
     Individual medical nutrition therapy (MNT)
     Neurobehavioral status exam
     Individual health and behavior assessment and intervention 
(HBAI).
    In general, the practitioner at the distant site may be any of the 
following, provided that the practitioner is licensed under State law 
to furnish the service being furnished via a telecommunications system:
     Physician
     Physician assistant (PA)
     Nurse practitioner (NP)
     Clinical nurse specialist (CNS)
     Nurse midwife
     Clinical psychologist
     Clinical social worker
     Registered dietitian or nutrition professional.
    Practitioners furnishing Medicare telehealth services are located 
at a distant site, and they submit claims for telehealth services to 
the Medicare contractors that process claims for the service area where 
their distant site is located. Section 1834(m)(2)(A) of the Act 
requires that a practitioner who furnishes a telehealth service to an 
eligible telehealth individual be paid an amount equal to the amount 
that the practitioner would have been paid if the service had been 
furnished without the use of a telecommunications system. Distant site 
practitioners must submit the appropriate HCPCS procedure code for a 
covered professional telehealth service, appended with the -GT (Via 
interactive audio and video telecommunications system) or -GQ (Via 
asynchronous telecommunications system) modifier. By reporting the -GT 
or -GQ modifier with a covered telehealth procedure code, the distant 
site practitioner certifies that the beneficiary was present at a 
telehealth originating site when the telehealth service was furnished. 
The usual Medicare deductible and coinsurance policies apply to the 
telehealth services reported by distant site practitioners.
    Section 1834(m)(2)(B) of the Act provides for payment of a facility 
fee to the originating site. To be paid the originating site facility 
fee, the provider or supplier where the eligible telehealth individual 
is located must submit a claim with HCPCS code Q3014 (Telehealth 
originating site facility fee), and the provider or supplier is paid 
according to the applicable payment methodology for that facility or 
location. The usual Medicare deductible and coinsurance policies apply 
to HCPCS code Q3014. By submitting HCPCS code Q3014, the originating 
site authenticates that it is located in either a rural HPSA or non-MSA 
county or is an entity that participates in a Federal telemedicine 
demonstration project that has been approved by (or receives funding 
from) the Secretary as of December 31, 2000 as specified in section 
1834(m)(4)(C)(i)(III) of the Act.
    As described above, certain professional services that are commonly 
furnished remotely using telecommunications technology, but that do not 
require the patient to be present in-person with the practitioner when 
they are furnished, are covered and paid in the same way as services 
delivered without the use of telecommunications technology when the 
practitioner is in-person at the medical facility furnishing care to 
the patient. Such services typically involve circumstances where a 
practitioner is able to visualize some aspect of the patient's 
condition without the patient being present and without the 
interposition of a third person's judgment. Visualization by the 
practitioner can be possible by means of x-rays, electrocardiogram or 
electroencephalogram tracings, tissue samples, etc. For example, the 
interpretation by a physician of an actual electrocardiogram or 
electroencephalogram tracing that has been transmitted via telephone 
(that is, electronically, rather than by means of a verbal description) 
is a covered physician's service. These remote services are not 
Medicare telehealth services as defined under section 1834(m) 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).

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

    As noted above, in the December 31, 2002 Federal Register (67 FR 
79988), we established a process for adding services to or deleting 
services from the list of Medicare telehealth services. This process 
provides the public with an ongoing opportunity to submit requests for 
adding services. We assign any request to make additions to the list of 
Medicare telehealth services to one of the following categories:
     Category 1: Services that are similar to professional 
consultations, office visits, and office psychiatry services. In 
reviewing these requests, we look for similarities between the 
requested and existing telehealth services for the roles of, and 
interactions among, the beneficiary, the physician (or other 
practitioner) at the distant site and, if necessary, the telepresenter. 
We also look for similarities in the telecommunications system used to 
deliver the proposed service, for example, the use of interactive audio 
and video equipment.
     Category 2: Services that are not similar to the current 
list of telehealth services. Our review of these requests includes an 
assessment of whether the use of a telecommunications system to deliver 
the service produces similar diagnostic findings or therapeutic 
interventions as compared with the in-person delivery of the same 
service. Requestors should submit evidence showing that the use of a 
telecommunications system does not affect the diagnosis or treatment 
plan as compared to in-person delivery of the requested service.
    Since establishing the process to add or remove services from the 
list of approved telehealth services, we have added the following to 
the list of Medicare telehealth services: individual HBAI services; 
psychiatric diagnostic interview examination; ESRD services with 2 to 3 
visits per month and 4 or more visits per month (although we require at 
least 1 visit a month to be furnished in-person by a physician, CNS, 
NP, or PA in order to examine the vascular access site); individual 
MNT; neurobehavioral status exam; and initial and follow-up inpatient 
telehealth consultations for beneficiaries in hospitals and skilled 
nursing facilities (SNFs).

[[Page 73312]]

    Requests to add services to the list of Medicare telehealth 
services must be submitted and received no later than December 31 of 
each calendar year to be considered for the next rulemaking cycle. For 
example, requests submitted before the end of CY 2010 are considered 
for the CY 2012 proposed rule. Each request for adding a service to the 
list of Medicare telehealth services must include any supporting 
documentation the requester wishes us to consider as we review the 
request. Because we use the annual PFS rulemaking process as a vehicle 
for making changes to the list of Medicare telehealth services, 
requestors should be advised that any information submitted is subject 
to public disclosure for this purpose. For more information on 
submitting a request for an addition to the list of Medicare telehealth 
services, including where to mail these requests, we refer readers to 
the CMS Web site at http://www.cms.gov/telehealth/.

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

    We received requests in CY 2009 to add the following services as 
Medicare telehealth services effective for CY 2011: (1) Individual 
kidney disease education (KDE) services; (2) individual diabetes self-
management training (DSMT) services; (3) group KDE, DSMT, MNT, and HBAI 
services; (4) initial, subsequent, and discharge day management 
hospital care services; (5) initial, subsequent, discharge day 
management, and other nursing facility care services; (6) 
neuropsychological testing services; (7) speech-language pathology 
services; and (8) home wound care services. The following presents a 
discussion of these requests, including our proposed additions to the 
CY 2011 telehealth list.
1. Individual KDE Services
    The American Society of Nephrology, Dialysis Patient Citizens, 
AMGEN, and Kidney Care Partners submitted requests to add individual 
KDE services, reported by HCPCS code G0420 (Face-to-face educational 
services related to the care of chronic kidney disease; individual, per 
session, per one hour), to the list of approved telehealth services for 
CY 2011 on a category 1 basis.
    Individual KDE services, covered under the new Medicare KDE benefit 
effective for services furnished beginning in CY 2010, are defined as 
face-to-face educational services provided to a patient with stage IV 
chronic kidney disease (CKD). We believe the interaction between a 
practitioner and a beneficiary receiving individual KDE services is 
similar to the education, assessment, and counseling elements of 
individual MNT services, reported by HCPCS code G0270 (Medical 
nutrition therapy; reassessment and subsequent intervention(s) 
following second referral in same year for change in diagnosis, medical 
condition or treatment regimen (including additional hours needed for 
renal disease), individual, face to face with the patient, each 15 
minutes); CPT code 97802 (Medical nutrition therapy; initial assessment 
and intervention, individual, face-to-face with the patient, each 15 
minutes); and CPT code 97803 (Medical nutrition therapy; re-assessment 
and intervention, individual, face-to-face with the patient, each 15 
minutes), all services that are currently on the telehealth list.
    Therefore, we proposed to add HCPCS code G0420 to the list of 
telehealth services for CY 2011 on a category 1 basis and to revise our 
regulations at Sec.  410.78(b) and Sec.  414.65(a)(1) to include 
individual KDE as a Medicare telehealth service.
    Comment: Several commenters expressed support for CMS' proposal to 
add KDE services to the list of Medicare telehealth services for CY 
2011. One commenter stated that the proposal would provide patients at 
risk for developing chronic kidney disease and ESRD with access to 
educational services that may help in controlling the progression of 
disease. Another commenter suggested that delivery of KDE services 
through telehealth would provide beneficiaries with the flexibility to 
interact with practitioners in a manner tailored to their needs, thus 
facilitating a more patient-centered approach. Another commenter noted 
that greater flexibility in the provision of KDE services is 
particularly important in rural areas where individuals do not have as 
much access to dialysis centers.
    Response: We agree with the commenters that adding KDE services to 
the list of Medicare telehealth services may be valuable to Medicare 
beneficiaries, especially insofar as it helps provide greater access to 
the services for beneficiaries in rural or other isolated areas.
    Comment: One commenter who supported the proposal also encouraged 
the CMS to maintain its existing policy regarding the qualified 
providers for KDE services in order to appropriately ensure the quality 
and content conveyed to patients in educational sessions and remain 
concordant with the intent of MIPPA.
    Response: We note that the addition of KDE to the list of Medicare 
telehealth services does not alter the qualifications for providers of 
KDE services as specified in Sec.  410.48 of the regulations.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to add HCPCS code G0420 to the list of 
telehealth services for CY 2011 on a category 1 basis and to revise our 
regulations at Sec.  410.78(b) and Sec.  414.65(a)(1) to include 
individual KDE as a Medicare telehealth service.
2. Individual DSMT Services
    The Tahoe Forest Health System and the Marshfield Clinic submitted 
requests to add individual DSMT services, reported by HCPCS code G0108 
(Diabetes outpatient self-management training services, individual, per 
30 minutes), to the list of telehealth services for CY 2011 on a 
category 1 basis. In the CY 2009 PFS final rule with comment period (73 
FR 69743), we stated that we believe individual DSMT services are not 
analogous to individual MNT services because of the element of skill-
based training that is encompassed within individual DSMT services that 
is not an aspect of individual MNT services (or any other services 
currently approved for telehealth). Due to the statutory requirement 
that DSMT services include teaching beneficiaries the skills necessary 
for the self-administration of injectable drugs, we have stated our 
belief that DSMT, whether provided to an individual or a group, must be 
evaluated as a category 2 service as specified in the CY 2009 PFS 
proposed rule (73 FR 38516). Prior to CY 2011 rulemaking, we had 
considered several previous requests to add DSMT to the list of 
Medicare telehealth services. We had not added individual DSMT to the 
list of telehealth services because we believe that skill-based 
training, such as teaching patients how to inject insulin, would be 
difficult to accomplish effectively without the physical presence of 
the teaching practitioner (70 FR 45787 and 70157, and 73 FR 38516 and 
69743).
    In considering the new request to add individual DSMT services to 
the list of telehealth services in CY 2011, we took into account 
requestors' argument that individual DSMT services are highly similar 
to individual MNT services and that injection training constitutes just 
a small proportion of DSMT services. Except for the component of 
individual DSMT services that involves instruction in self-
administration of injectable drugs for eligible beneficiaries, we 
agreed with the requestors that individual DSMT

[[Page 73313]]

services are similar to individual MNT services, which are currently on 
the list of Medicare telehealth services. We note that Medicare 
coverage of DSMT services was initially authorized in the BBA. After 
more than a decade of Medicare coverage, the most recent information 
shows that DSMT continues to be significantly underutilized in the 
context of the eligible population of Medicare beneficiaries. While we 
are uncertain to what extent geographic barriers to care contribute to 
this underutilization, given the morbidity associated with poorly 
managed diabetes and the growing evidence-base regarding effective DSMT 
services, we believe it is very important to facilitate Medicare 
beneficiary access to these underutilized services. While we were 
previously concerned about treating the components of DSMT services 
differently in the context of considering DSMT services for the 
telehealth list, in the CY 2011 PFS proposed rule (75 FR 40108), we 
stated our belief that our concern regarding the skill-based injection 
training component of DSMT services could be addressed by imposing a 
requirement that a minimum portion of the training be furnished in-
person. We noted that for beneficiaries who meet the coverage criteria, 
Medicare covers 10 hours of DSMT services in the year following the 
initial training, as described in the Medicare Benefit Policy Manual 
(Pub. 100-02, Chapter 15, Section 300.3). Taking into consideration the 
initial year coverage of DSMT services, for CY 2011 we proposed that a 
minimum of 1 hour of instruction in injection training must be 
furnished in-person during the year following the initial DSMT service. 
Imposing this condition would allow us to expand access to DSMT 
services by adding individual DSMT services to the list of telehealth 
services, while ensuring effective injection training for 
beneficiaries.
    Therefore, we proposed to add HCPCS code G0108 to the list of 
telehealth services beginning in CY 2011. We also proposed that, as a 
condition of payment for individual DSMT services furnished as 
telehealth services to an eligible telehealth individual, a minimum of 
1 hour of in-person instruction in the self-administration of 
injectable drugs must be furnished to the individual during the year 
following the initial DSMT service. The injection training may be 
furnished through either individual or group DSMT services. By 
reporting the -GT or -GQ modifier with HCPCS code G0108 as a telehealth 
service, the distant site practitioner would certify that the 
beneficiary has received or will receive 1 hour of in-person DSMT 
services for purposes of injection training during the year following 
the initial DSMT service. Consistent with this proposal, we proposed to 
revise our regulations at Sec.  410.78(b) and Sec.  414.65(a)(1) to 
include individual DSMT services as a Medicare telehealth service, with 
the exception of 1 hour of in-person instruction in self-administration 
of injectable drugs which must be furnished to the eligible telehealth 
individual as individual or group DSMT services during the year 
following the initial DSMT service.
    Comment: A number of commenters expressed support for CMS' proposal 
to add DSMT services to the list of Medicare telehealth services. One 
commenter requested that CMS clarify that this proposal would permit 
NPs and PAs in all patient care settings to provide and bill for DSMT 
services furnished through telehealth technologies.
    Response: As we stated in the CY 2011 PFS proposed rule (75 FR 
40109), our proposal is consistent with the statutory requirements of 
section 1834(m)(1) of the Act and as provided in Sec.  410.141(e) that 
individual DSMT services may be furnished by a physician, individual, 
or entity that furnishes other services for which direct Medicare 
payment may be made and that submits necessary documentation to, and is 
accredited by, an accreditation organization approved by us as 
described in the Benefit Policy Manual (Pub. 100-04, chapter 15, 
section 300.2). However, consistent with the statutory requirements of 
section 1834(m)(1) of the Act and as provided in Sec.  410.78(b)(1) and 
(b)(2) of our regulations, Medicare telehealth services, including 
individual DSMT furnished as a telehealth service, can only be 
furnished by a licensed physician, PA, NP, CNS, certified nurse-
midwife, clinical psychologist, clinical social worker, or registered 
dietitian or nutrition professional. Additionally, the site of the 
beneficiary must conform with the statutory requirements of telehealth 
originating sites from section 1834(m)(3)(C) of the Act and described 
in section IV.A. 2. of this final rule with comment period.
    Comment: One commenter requested that pharmacists be added to the 
list of eligible Medicare telehealth distant site practitioners. The 
commenter stated that since pharmacists are already providing valuable 
DSMT services to patients in-person, these practitioners should not be 
excluded from providing those same valuable services via telehealth.
    Response: Under section 1834(m) of the Act, payment is made for a 
Medicare telehealth service furnished by a physician or practitioner in 
a distant site. For purposes of Medicare telehealth services, the 
physician or practitioner must either be a physician as defined in 
section 1861(r) of the Act or another practitioner as defined in 
section 1842(b)(18)(C) of the Act. Because pharmacists do not fall 
within these statutory definitions, we do not have the authority to 
make payment to pharmacists as eligible distant site practitioners for 
Medicare telehealth services.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to add HCPCS code G0108 to the list of 
telehealth services beginning in CY 2011. As a condition of payment for 
individual DSMT services furnished as telehealth services to an 
eligible telehealth individual, a minimum of 1 hour of in-person 
instruction in the self-administration of injectable drugs must be 
furnished to the individual during the year following the initial DSMT 
service. The injection training may be furnished through either 
individual or group DSMT services. By reporting the -GT or -GQ modifier 
with HCPCS code G0108 as a telehealth service, the distant site 
practitioner certifies that the beneficiary has received or will 
receive 1 hour of in-person DSMT services for purposes of injection 
training during the year following the initial DSMT service. Consistent 
with this final policy, we are revising our regulations at Sec.  
410.78(b) and Sec.  414.65(a)(1) to include individual DSMT services as 
a Medicare telehealth service, with the exception of 1 hour of in-
person instruction in self-administration of injectable drugs which 
must be furnished to the eligible telehealth individual as individual 
or group DSMT services during the year following the initial DSMT 
service.
    We note that, as specified in Sec.  410.141(e), individual DSMT 
services may be furnished by a physician, individual, or entity that 
furnishes other services for which direct Medicare payment may be made 
and that submits necessary documentation to, and is accredited by, an 
accreditation organization approved by CMS. However, consistent with 
the statutory requirements of section 1834(m)(1) of the Act and as 
provided in Sec.  410.78(b)(1) and (b)(2) of our regulations, Medicare 
telehealth services, including individual DSMT furnished as a 
telehealth service, can only be furnished by a licensed physician, PA, 
NP, CNS, certified nurse-midwife, clinical psychologist, clinical 
social worker, or registered dietitian or nutrition professional.

[[Page 73314]]

3. Group KDE, MNT, DSMT, and HBAI Services
    The American Society of Nephrology, Dialysis Patient Citizens, 
AMGEN, Tahoe Forest Health Systems, Kidney Care Partners, the American 
Telemedicine Association, and the Marshfield Clinic submitted requests 
to add one or more of the following group services to the telehealth 
list for CY 2011:
     Group KDE services, reported by HCPCS code G0421 (Face-to-
face educational services related to the care of chronic kidney 
disease; group, per session, per one hour);
     Group MNT services, reported by CPT code 97804 (Medical 
nutrition therapy; group (2 or more individual(s)), each 30 minutes);
     Group DSMT services, reported by HCPCS code G0109 
(Diabetes outpatient self-management training services, group session 
(2 or more), per 30 minutes); and/or
     Group HBAI services, reported by CPT code 96153 (Health 
and behavior intervention, each 15 minutes, face-to-face; group (2 or 
more patients)) and 96154 (Health and behavior intervention, each 15 
minutes, face-to-face; family (with the patient present)).
    When furnished as individual services, HBAI and MNT services are 
currently on the list of Medicare telehealth services. Furthermore, we 
proposed to add individual KDE and DSMT services to the list of 
Medicare telehealth services beginning in CY 2011 as described above.
    In the CY 2007 and CY 2010 PFS rulemaking cycles (70 FR 45787 and 
70157, and 74 FR 33543 and 61764), we stated that we did not believe 
that group services could be appropriately delivered through 
telehealth. In the CY 2011 PFS proposed rule (75 FR 40109), we observed 
that currently there are no group services approved as Medicare 
telehealth services and that there is a different interactive dynamic 
between the practitioner and his or her patients in group services as 
compared to individual services. We previously had considered requests 
to add various group services to the list of Medicare telehealth 
services on a category 2 basis because we had believed that, especially 
given the interactive dynamic between practitioners and their patients, 
group services were not similar to other services on the list of 
Medicare telehealth services. Therefore, we had maintained that it was 
necessary to evaluate the addition of group services by comparing 
diagnostic findings or therapeutic interventions when services are 
furnished via telehealth versus when services are furnished in-person.
    In the CY 2011 proposed rule (75 FR 40109), we stated that we 
continue to believe that the group dynamic may be a critical and 
defining element for certain services, and that this characteristic 
precludes many group services from being considered on a category 1 
basis for addition to the list of Medicare telehealth services. For 
example, we believe that due to the therapeutic nature of the group 
dynamic that is integral to group psychotherapy, group psychotherapy is 
fundamentally different from other Medicare telehealth services and, 
therefore, could not be considered on a category 1 basis for addition 
to the telehealth services list. For the same reason, in the absence of 
evidence to the contrary, we do not believe group psychotherapy 
services could be appropriately delivered through telehealth.
    However, upon further consideration, with regard to the particular 
group education and training services for which we received requests 
for addition to the Medicare telehealth services list, for CY 2011 we 
concluded that we believe the group dynamic is not central to the core 
education and training components of these particular services, 
specifically DSMT, MNT, KDE, and HBAI services. We believe that these 
group services are sufficiently similar to the individual, related 
services that are already on the telehealth services list or were 
proposed for addition beginning in CY 2011. Specifically, we believe 
that for these group services, which consist principally of an 
information exchange for the purpose of education and training, the 
roles of, and interactions between, the patients and the practitioner 
are sufficiently similar to the related individual education and 
training services that the services can be furnished appropriately as a 
telehealth service.
    Therefore, we proposed to add HCPCS code G0421 for group KDE 
services, CPT code 97804 for group MNT services, HCPCS code G0109 for 
group DSMT services, and CPT codes 96153 and 96154 for group HBAI 
services to the Medicare telehealth services list on a category 1 basis 
for CY 2011. Furthermore, because the concerns we raised above 
regarding adequate injection training with the addition of individual 
DSMT are also present for group DSMT, we proposed to require the same 
minimum of 1 hour of in-person instruction for injection training 
within the year following the initial DSMT service for any beneficiary 
that receives DSMT services via telehealth. By reporting the -GT or -GQ 
modifier with HCPCS code G0109, the distant site practitioner would 
certify that the beneficiary has received or will receive 1 hour of in-
person instruction in self-administration of injectable drugs which 
must be furnished to the eligible telehealth individual as individual 
or group DSMT services during the year following the initial DSMT 
service. Consistent with this proposal to add these group education and 
training services, we also proposed to revise our regulations at Sec.  
410.78(b) and Sec.  414.65(a)(1) to include group KDE, MNT, DSMT, and 
HBAI services as Medicare telehealth services, with the exception of 1 
hour of in-person instruction in self-administration of injectable 
drugs which must be furnished to the eligible telehealth individual as 
individual or group DSMT services in the year following the initial 
DSMT service.
    Comment: Many commenters agreed with CMS' proposal to add group 
KDE, MNT, DSMT, and HBAI to the list of Medicare telehealth services 
for CY 2011. Some commenters commended CMS' willingness to expand the 
list of Medicare telehealth services and explained that the additions 
would facilitate beneficiary access to care.
    Many commenters also urged CMS to make further additions to the 
list of Medicare telehealth services beyond those proposed for CY 2011.
    Response: We believe adding these group services to the list of 
Medicare telehealth services will facilitate beneficiary access to 
care, and we appreciate the commenters' shared interest in that goal.
    The process for requesting additional services to be added to the 
list of Medicare telehealth services is described in section IV.B. of 
this final rule with comment period. Requests for additions for CY 2012 
must be received by the end of CY 2010. Further information is 
available about the process on the CMS web site at: http://www.cms.gov/telehealth/.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to add HCPCS code G0421 for group KDE 
services, CPT code 97804 for group MNT services, HCPCS code G0109 for 
group DSMT services, and CPT codes 96153 and 96154 for group HBAI 
services to the Medicare telehealth services list on a category 1 
basis. Furthermore, because we have the same concerns for group DSMT 
services that we raised above regarding adequate injection training for 
individual DSMT services, we are requiring the same minimum of 1 hour 
of in-person instruction for injection training within

[[Page 73315]]

the year following the initial DSMT service for any beneficiary that 
receives DSMT services via telehealth. By reporting the -GT or -GQ 
modifier with HCPCS code G0109, the distant site practitioner would 
certify that the beneficiary has received or will receive 1 hour of in-
person DSMT services for purposes of injection training during the year 
following the initial DSMT service. Consistent with the addition of 
these group education and training services, we are also revising our 
regulations at Sec.  410.78(b) and Sec.  414.65(a)(1) to include group 
KDE, MNT, DSMT, and HBAI services as Medicare telehealth services, with 
the exception of 1 hour of in-person instruction for injection training 
within the year following the initial DSMT service.
    As described above for individual DSMT services, we note that group 
DSMT services may be furnished by a physician, individual, or entity 
that furnishes other services for which direct Medicare payment may be 
made and that submits necessary documentation to, and is accredited by, 
an accreditation organization approved by CMS, as specified in Sec.  
410.141(e) for DSMT services. However, consistent with the statutory 
requirements of section 1834(m)(1) of the Act and as provided in Sec.  
410.78(b)(1) and (b)(2) of our regulations, Medicare telehealth 
services, including group DSMT furnished as a telehealth service, can 
only be furnished by a licensed physician, PA, NP, CNS, certified 
nurse-midwife, clinical psychologist, clinical social worker, or 
registered dietitian or nutrition professional.
4. Initial, Subsequent, and Discharge Day Management Hospital Care 
Services
    The University of Louisville School of Medicine, the American 
Telemedicine Association, and Mille Lacs Health System submitted 
various requests to add initial hospital care services (reported by CPT 
codes 99221 (Level 1 initial hospital care), 99222 (Level 2 initial 
hospital care), and 99223 (Level 3 initial hospital care)); subsequent 
hospital care services (reported by CPT codes 99231 (Level 1 subsequent 
hospital care), 99232 (Level 2 subsequent hospital care), and 99233 
(Level 3 subsequent hospital care)); and/or hospital discharge day 
management services (reported by CPT codes 99238 (Hospital discharge 
day management; 30 minutes or less) and 99239 (Hospital discharge day 
management; more than 30 minutes) to the Medicare telehealth services 
list beginning in CY 2011, generally on a category 1 basis. Some of the 
requestors also recommended that we limit the delivery of these 
services through telehealth to the provision of services to patients 
with a psychiatric diagnosis or to those treated in a psychiatric 
hospital or licensed psychiatric bed.
    We appreciate the recommendations of the requestors to 
substantially expand the list of Medicare telehealth services. The 
requestors submitted a number of studies regarding the outcomes of 
telehealth services in caring for patients with psychiatric diagnoses. 
However, we note that the CPT codes for hospital care services are used 
to report care for hospitalized patients with a variety of diagnoses, 
including psychiatric diagnoses. In the CY 2011 PFS proposed rule (75 
FR 40110), we stated our belief that it would not be appropriate to add 
services to the telehealth list only for certain diagnoses because the 
service described by a HCPCS code is essentially the same service, 
regardless of the patient's diagnosis. When evaluating the addition of 
services for telehealth on a category 1 basis, our focus is on the 
roles of, and interactions among, the beneficiary, the physician or 
practitioner, and the telepresenter (if applicable), which generally 
are similar across diagnoses for services that may be reported with the 
same HCPCS codes. Even in the unique case of certain ESRD services, we 
limited additions to the list of Medicare telehealth services based on 
the appropriateness of certain specific codes, taking into 
consideration the full service descriptions (69 FR 47511). Therefore, 
we continue to believe that it is most appropriate to consider 
additions to the list of telehealth services based on the overall 
suitability of the services described by the relevant HCPCS codes to 
delivery through telehealth.
    In the CY 2005, CY 2008, and CY 2009 PFS rulemakings (69 FR 47510 
and 66276, 72 FR 38144 and 66250, and 73 FR 38517 and 69745, 
respectively), we did not add initial, subsequent, or discharge day 
management hospital care services to the list of approved telehealth 
services because of our concern regarding the use of telehealth for the 
ongoing evaluation and management (E/M) for the generally high acuity 
of hospital inpatients. While we continue to have some concern in this 
area, we also share the requestors' interest in improving access for 
hospitalized patients to care furnished by treating practitioners. 
Therefore, we reevaluated these services in the context of the CY 2011 
requests, including considering the possibility that these services 
could be added on a category 1 basis based on their resemblance to 
services currently on the telehealth list, such as initial and follow-
up inpatient telehealth consultations. The following presents a 
discussion of our review for the CY 2011 proposed rule of the 
subcategories of hospital care services included in these requests.
    Currently, one of the three codes for an initial hospital care 
service (specifically CPT codes 99221, 99222, or 99223) is reported for 
the first hospital inpatient E/M visit to the patient by the admitting 
or a consulting practitioner when that visit is furnished in person. In 
addition, we note that currently there are several HCPCS G-codes on the 
Medicare telehealth services list that may be reported for initial and 
follow-up inpatient consultations through telehealth, specifically 
HCPCS codes G0406 (Follow-up inpatient telehealth consultation, 
limited, physicians typically spend 15 minutes communicating with the 
patient via telehealth); G0407 (Follow-up inpatient telehealth 
consultation, intermediate, physicians typically spend 25 minutes 
communicating with the patient via telehealth); G0408 (Follow-up 
inpatient telehealth consultation, complex, physicians typically spend 
35 minutes or more communicating with the patient via telehealth); 
G0425 (Initial inpatient telehealth consultation, typically 30 minutes 
communicating with the patient via telehealth); G0426 (Initial 
inpatient telehealth consultation, typically 50 minutes communicating 
with the patient via telehealth); and G0427 (Initial inpatient 
telehealth consultation, typically 70 minutes or more communicating 
with the patient via telehealth).
    While initial inpatient consultation services are currently on the 
list of approved telehealth services, there are no services on the 
current list of telehealth services that resemble initial hospital care 
for an acutely ill patient by the admitting practitioner who has 
ongoing responsibility for the patient's treatment during the hospital 
course. Therefore, we were unable to consider initial hospital care 
services on a category 1 basis for the telehealth list for CY 2011.
    We reviewed the documentation submitted in support of adding the 
initial hospital care codes to the Medicare telehealth services list as 
category 2 requests. Most of the studies provided by the requestors 
were specific to the treatment of patients with particular diagnoses. 
Additionally, the studies were not specific to initial hospital care 
visits by admitting practitioners. Finally, most of the studies 
concluded that more research was required in order to establish medical 
equivalence between telehealth

[[Page 73316]]

and in-person services. Therefore, we received no information that 
provides robust support for the addition of initial hospital care 
services to the approved telehealth list on a category 2 basis. The 
initial hospital care codes describe the first visit to the 
hospitalized patient by the admitting practitioner who may or may not 
have seen the patient in the decision-making phase regarding 
hospitalization. We believe it is critical that the initial hospital 
visit by the admitting practitioner be conducted in-person to ensure 
that the practitioner with ongoing treatment responsibility 
comprehensively assesses the patient's condition upon admission to the 
hospital through a thorough in-person examination. Therefore, we did 
not propose to add initial hospital care services to the Medicare 
telehealth services list for CY 2011.
    We again considered adding subsequent hospital care services 
reported by CPT codes 99231 through 99233 to the telehealth list for CY 
2011 on a category 1 basis. In the CY 2005 and CY 2008 PFS proposed 
rules (69 FR 47511 and 72 FR 38155), we stated that the potential 
acuity of patients in the hospital setting precludes consideration of 
subsequent hospital visits as similar to existing telehealth services. 
However, as stated earlier, we also note that HCPCS codes for initial 
and follow-up inpatient consultation services are on the list of 
telehealth services. These E/M services are furnished to high acuity 
hospitalized patients, although not by the admitting practitioner 
himself or herself. However, in light of the increasingly prevalent 
care model that entails multidisciplinary team care for patients with 
complex medical illnesses that involve multiple body systems, 
consulting practitioners may often play a key, intensive, and ongoing 
role in caring for hospitalized patients. Therefore, we believe that 
subsequent hospital care visits by a patient's admitting practitioner 
may sufficiently resemble follow-up inpatient consultation services to 
consider these subsequent hospital care services on a category 1 basis 
for the telehealth list. While we still believe the potential acuity of 
hospital inpatients is greater than those patients likely to receive 
currently approved Medicare telehealth services, we also believe that 
it would be appropriate to permit some subsequent hospital care 
services to be furnished through telehealth in order to ensure that 
hospitalized patients have frequent encounters with their admitting 
practitioner. However, we also continue to believe that the majority of 
these visits should be in-person to facilitate the comprehensive, 
coordinated, and personal care that medically volatile, acutely ill 
patients require on an ongoing basis.
    Therefore, for CY 2011 we proposed that subsequent hospital care 
services, specifically CPT codes 99231, 99232, and 99233, be added to 
the list of telehealth services on a category 1 basis for CY 2011, but 
with some limitations on the frequency with which these services may be 
furnished through telehealth. Because of our concerns regarding the 
potential acuity of hospital inpatients, we proposed to limit the 
provision of subsequent hospital care services through telehealth to 
once every 3 days. We were confident that admitting practitioners would 
continue to make appropriate in-person visits to all patients who need 
such care during their hospitalization. Consulting practitioners should 
continue to use the inpatient telehealth consultation HCPCS G-codes, 
specifically G0406, G0407, G0408, G0425, G0426, or G0427 when reporting 
consultations furnished to inpatients via telehealth.
    Consistent with this proposal, we proposed to revise Sec.  
410.78(b) and Sec.  414.65(a)(1) to include subsequent hospital care 
services as Medicare telehealth services, with the limitation of one 
telehealth subsequent hospital care service every 3 days.
    We also considered adding hospital discharge day management 
services to the list of telehealth services. These services, reported 
by CPT codes 99238 and 99239, include the final examination of the 
patient, discussion of the hospital stay, instructions for continuing 
care to all relevant caregivers, and preparation of discharge records, 
prescriptions, and referral forms. These services are furnished when a 
practitioner deems it medically reasonable and necessary to assess a 
patient's readiness for discharge and to prepare a patient for 
discharge from an acute care environment to a less intensive setting. 
There are no services on the current list of telehealth services that 
resemble such preparation of a patient for discharge. We believe it is 
especially important that, if a practitioner furnishes a discharge day 
management service, the service be furnished in-person in order to 
allow the practitioner to comprehensively assess the patient's status 
in preparation for discharge so that the patient will have a higher 
likelihood of making a successful transition to the less intensive 
setting. Therefore, we did not consider hospital discharge day 
management services for addition to the Medicare telehealth services 
list on a category 1 basis.
    We reviewed the documentation submitted by requestors in support of 
adding these codes to the Medicare telehealth services list on a 
category 2 basis. Most of the submitted studies were specific to the 
treatment of patients with specific diagnoses and were not specific to 
discharge services. Additionally, most of the studies concluded that 
more research was required in order to establish medical equivalence 
between telehealth and in-person services. The submitted documentation 
did not provide the necessary evidence to alter our previous conclusion 
that hospital discharge day management services should be provided in-
person in light of the acuity of hospitalized patients, their typically 
complex post-hospitalization care needs, and the importance of patient 
education by the admitting practitioner who had ongoing responsibility 
for the patient's treatment during the hospital stay. Therefore, we did 
not propose to add hospital discharge day management services to the 
list of telehealth services for CY 2011.
    Comment: Many commenters expressed support for all of CMS' proposed 
additions to the list of Medicare telehealth services, including 
subsequent hospital care services. One commenter urged CMS to focus on 
adding services where research demonstrates that technology can 
facilitate medically equivalent services and improve beneficiary access 
to providers, and to carefully monitor implementation of any new 
telehealth services to ensure that patients' experience of the care is 
positive and that patient outcomes are not compromised. The commenter 
encouraged CMS' continued attention to the evidence and the role of 
patient needs as CMS evaluates telehealth requests. The commenter cited 
CMS' decision not to propose the addition of hospital discharge day 
management services as a Medicare telehealth service as an example of 
the agency applying appropriate rigor to best reflect patient needs and 
preferences.
    Response: We appreciate the support for our proposed additions, as 
well as our consideration and decisions regarding requested additions 
to telehealth services that we did not propose to add to the list of 
telehealth services for CY 2011.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to add subsequent hospital care 
services, specifically CPT codes 99231, 99232, and 99233, to the list 
of telehealth services on a category 1 basis for CY 2011, but with the 
limitation of one

[[Page 73317]]

subsequent hospital care service furnished through telehealth every 3 
days. We are revising Sec.  410.78(b) and Sec.  414.65(a)(1) 
accordingly to include subsequent hospital care services as Medicare 
telehealth services, with the limitation of one telehealth subsequent 
hospital care service every 3 days. We are also finalizing our decision 
not to add initial or discharge day management hospital care services 
to the list of Medicare telehealth services.
5. Initial, Subsequent, Discharge Day Management, and Other Nursing 
Facility Care Services
    The American Telemedicine Association and the Marshfield Clinic 
submitted requests to add nursing facility care codes, covering the 
spectrum of initial (reported by CPT codes 99304 (Level 1 initial 
nursing facility care), 99305 (Level 2 initial nursing facility care) 
and 99306 (Level 3 initial nursing facility care)); subsequent 
(reported by CPT codes 99307 (Level 1 subsequent nursing facility 
care), 99308 (Level 2 subsequent nursing facility care), 99309 (Level 3 
subsequent nursing facility care), and 99310 (Level 4 subsequent 
nursing facility care)); discharge day management (reported by CPT 
codes 99315 (Nursing facility discharge day management; 30 minutes or 
less) and 99316 (Nursing facility discharge day management; more than 
30 minutes)); and other (reported by CPT code 99318 (Evaluation and 
management of a patient involving an annual nursing facility 
assessment)) services, to the Medicare telehealth services list 
beginning in CY 2011. The commenters requesting the addition of these 
services expressed concerns regarding limited access to care if we did 
not allow these services to be furnished through telehealth, and 
requested that CMS acknowledge the recent Congressional inclusion of 
nursing facilities as telehealth originating sites by adding these 
codes to the list of Medicare telehealth services.
    In the CY 2010 PFS proposed and final rules (74 FR 33544 and 74 FR 
61762), we discussed concerns about potential disparities in patient 
acuity between nursing facility services and the current list of 
Medicare telehealth services. We also declined to add HCPCS codes to 
the Medicare telehealth services list that are used exclusively to 
describe Federally-mandated nursing facility visits. As discussed in 
the CY 2010 PFS proposed rule (74 FR 33543), the long-term care 
regulations at Sec.  483.40(c) require that residents of SNFs receive 
initial and periodic personal visits. These regulations ensure that at 
least a minimal degree of personal contact between a practitioner and a 
SNF resident is maintained, both at the point of admission to the 
facility and periodically during the course of the resident's stay. We 
continue to believe that these Federally-mandated visits should be 
conducted in-person, and not as Medicare telehealth services. 
Therefore, in the CY 2010 PFS final rule with comment period, we 
revised Sec.  410.78 to preclude physicians and other practitioners 
from furnishing the physician visits required under Sec.  483.40(c) 
through telehealth.
    We reviewed the use of telehealth for each of the subcategories of 
nursing facility services included in the requests for CY 2011. We 
identified the E/M services that fulfill Federal requirements for 
personal visits under Sec.  483.40(c), and we did not propose for CY 
2011 to add any HCPCS codes to the Medicare telehealth services list 
that are used exclusively to describe these Federally-mandated visits. 
These codes include the CPT codes for initial nursing facility care 
(CPT codes 99304 through 99306) that are used to report the initial E/M 
visit that fulfills Federally-mandated requirements under Sec.  
483.40(c) and other nursing facility service (CPT code 99318) that is 
only payable by Medicare if the visit is substituted for a Federally-
mandated visit under Sec.  483.40(c).
    The nursing facility discharge day management services reported 
under CPT code 99315 and 99316 are E/M visits that prepare a nursing 
facility resident for discharge from the facility. There are no 
Medicare requirements that such a service be furnished. If a 
practitioner chooses to furnish this service, we continue to believe 
that an in-person visit is most appropriate in order to ensure the 
resident is prepared for discharge from the nursing facility. These 
services are furnished when a practitioner deems it medically 
reasonable and necessary to assess a patient's readiness for and to 
prepare a patient being discharged from the monitored nursing facility 
environment to another typically less intensive setting. There are no 
services on the current list of telehealth services that resemble such 
preparation of a patient for discharge. As in the case of hospital 
discharge day management services, we believe it is especially 
important that, if a practitioner furnishes a nursing facility 
discharge day management service, the service be furnished in-person. 
The practitioner must be able to comprehensively assess the patient's 
status in preparation for discharge so that the patient will have a 
higher likelihood of making a successful transition from the nursing 
facility to another setting. Therefore, we did not consider nursing 
facility discharge day management services for addition to the Medicare 
telehealth services list on a category 1 basis for CY 2011. When we 
considered the addition of these services under category 2, we had no 
evidence that nursing facility discharge services furnished through 
telehealth are equivalent to in-person discharge services. Therefore, 
we did not propose to add nursing facility discharge day management 
services to the CY 2011 telehealth list.
    Subsequent nursing facility services, reported by CPT codes 99307 
through 99310, may be used to report either a Federally-mandated 
periodic visit under Sec.  483.40(c) or another E/M visit, prior to or 
after the initial nursing facility care visit, as long as the 
subsequent nursing facility care visit is medically reasonable and 
necessary for the resident's care. While we continue to believe that 
many SNF residents have complex medical care needs, we believe that it 
is appropriate to consider the addition of these codes to the 
telehealth list on a category 1 basis. As we state above in the context 
of our discussion of subsequent hospital care services, the HCPCS codes 
for initial and follow-up inpatient consultation services for nursing 
facility patients are on the list of Medicare telehealth services, and 
subsequent nursing facility services are similar to those services. 
These E/M services are furnished to high acuity, complex SNF patients, 
although not by the admitting practitioner himself or herself. 
Therefore, we believe that subsequent nursing facility visits by a 
patient's admitting practitioner sufficiently resemble follow-up 
inpatient consultation services to consider them on a category 1 basis 
for the telehealth list. We concluded for CY 2011 that it would be 
appropriate to permit some subsequent nursing facility care services to 
be furnished through telehealth to ensure that complex nursing facility 
patients have frequent encounters with their admitting practitioner, 
although we continue to believe that the Federally-mandated visits 
should be in-person to facilitate the comprehensive, coordinated, and 
personal care that these complex patients require on an ongoing basis.
    Therefore, we proposed that subsequent nursing facility care 
services, specifically CPT codes 99307, 99308, 99309 and 99310, be 
added to the list of Medicare telehealth services on a category 1 basis 
beginning in CY 2011, with some limitations on furnishing these 
services through telehealth. Because of our concerns regarding the 
potential acuity and

[[Page 73318]]

complexity of SNF inpatients, we proposed to limit the provision of 
subsequent nursing facility care services furnished through telehealth 
to once every 30 days. We were especially interested in public 
comments, including any evidence regarding patterns of high quality 
care and clinical outcomes, regarding this proposal to limit the 
provision of subsequent nursing facility care services furnished 
through telehealth to once every 30 days. We remain committed to 
ensuring that SNF inpatients receive appropriate in-person visits and 
that Medicare pays only for medically reasonable and necessary care. 
Currently and continuing in CY 2011, an unlimited number of initial and 
follow-up consultation services may be furnished through telehealth to 
these patients, so we believe that only a limited number of subsequent 
nursing facility care services by the admitting practitioner would be 
appropriate for SNF inpatients. Finally, we specified that subsequent 
nursing facility care services reported for a Federally-mandated 
periodic visit under Sec.  483.40(c) may not be furnished through 
telehealth. In light of this CY 2011 proposal, we were confident that 
admitting practitioners would continue to make appropriate in-person 
visits to all patients who need such care during their SNF stay.
    Consistent with our proposal, we proposed to revise Sec.  410.78(b) 
and Sec.  414.65(a)(1) to include subsequent nursing facility care 
services as Medicare telehealth services, with the limitation of one 
telehealth subsequent nursing facility care service every 30 days. 
Federally-mandated periodic visits may not be furnished through 
telehealth, as specified currently in Sec.  410.78(e)(2).
    Comment: One commenter recommended that CMS limit the use of 
telehealth for subsequent nursing facility care services to CPT codes 
99307 and 99308, the lower two levels of care. The commenter stated 
that the subsequent nursing facility care services described by CPT 
codes 99309 and 99310, the higher two levels of care, require a 
detailed to comprehensive history and examination, along with moderate 
to complex decisionmaking that warrant an in-person visit with the 
physician. The same commenter disagreed with the limitation of one 
telehealth subsequent nursing facility care service every 30 days and 
suggested that unless and until evidence of overutilization is 
obtained, the limit could hinder access to appropriate care under the 
telehealth benefit. The commenter agreed with the CMS policy that all 
Federally-mandated visits as defined by the long-term care regulations 
Sec.  483.40(c) should be conducted in-person and not as Medicare 
telehealth services.
    Response: We appreciate the response to our specific request for 
public comment regarding the addition of subsequent nursing facility 
care services to the list of Medicare telehealth services with the 
limitation of one telehealth subsequent nursing facility care service 
every 30 days. As we stated in the proposed rule (75 FR 40112), 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 received no new evidence from the commenter 
regarding patterns of high quality care and clinical outcomes in terms 
of our proposal to limit the provision of subsequent nursing facility 
care services furnished through telehealth to once every 30 days. 
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 would be appropriate to permit the full range of 
subsequent nursing facility care services to be furnished through 
telehealth. At the same time, because of our concerns regarding the 
potential acuity and complexity of SNF inpatients, we want to ensure 
that these patients continue to receive in-person visits as appropriate 
to manage their care. We are adding these services as Medicare 
telehealth services with the limitation as we proposed, and we remain 
confident that admitting practitioners will continue to make 
appropriate in-person visits to all patients who need such care during 
their SNF stay.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to add subsequent nursing facility care 
services, specifically CPT codes 99307, 99308, 99309 and 99310, to the 
list of Medicare telehealth services on a category 1 basis beginning in 
CY 2011, with limits to the provision of subsequent nursing facility 
care services furnished through telehealth to once every 30 days. We 
are revising Sec.  410.78(b) and Sec.  414.65(a)(1) to include 
subsequent nursing facility care services as Medicare telehealth 
services, with the limitation of one telehealth subsequent nursing 
facility care service every 30 days. Federally-mandated periodic visits 
may not be furnished through telehealth, as specified currently in 
Sec.  410.78(e)(2).
6. Neuropsychological Testing Services
    The American Telemedicine Association submitted a request to add 
neuropsychological testing services, described by CPT codes 96119 
(Neuropsychological testing (for example, Halstead-Reitan 
Neuropsychological Battery, Wechsler Memory Scales and Wisconsin Card 
Sorting Test), per hour of the psychologist's or physician's time, both 
face-to-face time administering tests to the patient and time 
interpreting these test results and preparing the report); and 96119 
(Neuropsychological testing (for example, Halstead-Reitan 
Neuropsychological Battery, Wechsler Memory scales and Wisconsin Card 
Sorting Test), with qualified health care professional interpretation 
and report, administered by technician, per hour of technician time, 
face-to-face), to the list of telehealth services for CY 2011 based on 
their similarity to other telehealth services.
    In the CY 2008 PFS final rule with comment period (72 FR 66251), we 
stated that we have received conflicting comments and data regarding 
the appropriateness of furnishing neuropsychological testing via 
telehealth. While we appreciate the recent request for addition of 
these same services to the Medicare telehealth services list, we did 
not believe that these services are similar to services currently on 
the Medicare telehealth services list and, therefore, we concluded that 
they would not be appropriate for consideration or addition under 
category 1 for CY 2011. In the CY 2011 request for the addition of the 
these services, we received no information to indicate that the 
diagnostic findings of neuropsychological testing through telehealth 
are similar to those based upon in-person testing, and therefore that 
testing through telehealth does not affect the patient's diagnosis. 
Consequently, we did not propose to add neuropsychological testing 
services to the list of approved Medicare telehealth services for CY 
2011.
    We received no public comments regarding our discussion of the 
request to add neuropsychological testing to the list of Medicare 
telehealth services. Therefore, we are finalizing our decision not to 
add neuropsychological testing to the list of Medicare telehealth 
services for CY2011.
7. Speech-Language Pathology Services
    The Marshfield Clinic submitted a request to add various speech-
language pathology services to the list of approved telehealth services 
for CY

[[Page 73319]]

2011. Speech-language pathologists are not permitted under section 
1842(b)(18)(C) of the Act to furnish and receive payment for Medicare 
telehealth services. Therefore, we did not propose to add any speech-
language pathology services to the list of Medicare telehealth services 
for CY 2011. For further discussion of these services in the context of 
telehealth, we refer readers to the CY 2005 and CY 2007 PFS proposed 
and final rules with comment period (69 FR 47512 and 66276, and 71 FR 
48995 and 69657).
    Comment: One commenter stated that research has proven that 
audiology procedures offered via telehealth services have great 
potential. The commenter also stated that CMS should use its broad 
discretion in implementing programs to expand the list of available 
telehealth services to include audiology.
    Response: It is not within our administrative authority to pay 
speech language pathologists and audiologists for services furnished 
via telehealth. The statute authorizes the Secretary to pay for 
telehealth services only when furnished by a physician or a 
practitioner as those terms are defined in section 1834(m)(4)(D) and 
(E) of the Act.
    After consideration of the public comment we received, we are 
finalizing our decision not to add various speech-language pathology 
services to the list of approved telehealth services for CY 2011.
8. Home Wound Care Services
    Wound Care Associates, LLC, submitted a request to add wound care 
in the home setting to the list of Medicare telehealth services. A 
patient's home is not permitted under current statute to serve as an 
originating site for Medicare telehealth services. Therefore, we did 
not propose to add home wound care services to the list of Medicare 
telehealth services for CY 2011.
    We received no public comments regarding our discussion of the 
request to add wound care in the home setting to the list of Medicare 
telehealth services. Therefore, we are finalizing our decision not to 
add wound care in the home setting to the list of Medicare telehealth 
services for CY2011.
9. Other Issues
    We received other public comments on matters related to Medicare 
telehealth services that were not the subject of proposals in the CY 
2011 PFS proposed rule. We thank the commenters for sharing their views 
and suggestions. Because we did not make any proposals regarding these 
matters, we do not generally summarize or respond to such comments in 
this final rule with comment period. However, we are summarizing and 
responding to the following comments in order to reiterate certain 
information.
    Comment: One commenter requested an explanation of the acceptable 
time and format to request or recommend changes to the criteria set in 
2003 by which CMS considers specific services for Medicare coverage 
when furnished through telehealth.
    Response: As we discussed in the CY 2010 PFS final rule with 
comment period (74 FR 61766), our established criteria and process for 
reviewing requests to add to the list of approved Medicare telehealth 
services were subject to full notice and comment procedures in the CY 
2003 PFS proposed and final rules. Since we did not make any proposals 
relating to the criteria or process for CY 2011, any potential 
revisions to the process for adding or deleting services from the list 
of approved Medicare telehealth services are outside the scope of this 
CY 2011 final rule with comment period.
    Throughout the year, we regularly meet with parties who want to 
share their views on topics of interest to them. These discussions may 
provide us with information regarding changes in medical practice and 
afford opportunities for the public to bring to our attention issues 
they believe we should consider for future rulemaking. Thus, we 
encourage stakeholders to contact us at any time if there are topics 
related to physician payment policy that they would like to discuss.
    Comment: One commenter requested an explanation regarding how the 
payment rates for telehealth consultations are set in a manner that is 
consistent with section 1834(m)(2)(A) of the Act that requires Medicare 
to pay a practitioner who furnishes a telehealth service 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.
    Response: As we stated in the CY 2009 PFS final rule with comment 
period (73 FR 69745), we established the RVUs for follow-up inpatient 
telehealth consultations at the same level as the RVUs established for 
subsequent hospital care (as described by CPT codes 99231 through 
99233). For CY 2010, we established the RVUs for initial inpatient 
telehealth consultations at the same level as the RVUs for initial 
hospital care (as described by CPT codes 99221 through 99223) (75 FR 
61775). We believe this is appropriate because a physician or 
practitioner furnishing a telehealth service is paid an amount equal to 
the amount that would have been paid if the service had been furnished 
without the use of a telecommunication system. Since physicians and 
practitioners furnishing follow-up inpatient consultations in an in-
person encounter must continue to utilize subsequent hospital care 
codes (as described by CPT codes 99231 through 99233) and those 
furnishing initial inpatient consultations in an in-person encounter 
must generally utilize initial hospital care codes (as described by CPT 
codes 99221 through 99223), we believe it is appropriate that the RVUs 
for the subsequent and initial telehealth HCPCS G-codes are set at the 
same level as the subsequent and initial hospital care codes, 
respectively.

D. Summary of CY 2011 Telehealth Policies

    In summary, we are finalizing our proposals to add the following 
requested services to the list of Medicare telehealth services for CY 
2011:
     Individual and group KDE services (HCPCS codes G0420 and 
G0421, respectively);
     Individual and group DSMT services, with a minimum of 1 
hour of in-person instruction to be furnished in the year following the 
initial DSMT service to ensure effective injection training (HCPCS 
codes G0108 and G0109, respectively);
     Group MNT and HBAI services (CPT codes 97804, and 96153 
and 96154, respectively);
     Subsequent hospital care services, with the limitation for 
the patient's admitting practitioner of one telehealth visit every 3 
days (CPT codes 99231, 99232, and 99233); and
     Subsequent nursing facility care services, with the 
limitation for the patient's admitting practitioner of one telehealth 
visit every 30 days (CPT codes 99307, 99308, 99309, and 99310).
    Furthermore, we are revising Sec.  410.78(b) and Sec.  414.65(a)(1) 
accordingly. Specifically, we are adding individual and group KDE 
services, individual and group DSMT services, group MNT services, group 
HBAI services, and subsequent hospital care and nursing facility care 
services to the list of telehealth services for which payment will be 
made at the applicable PFS payment amount for the service of the 
practitioner. In addition, we have reordered the listing of services in 
these two sections and removed ``initial and follow-up inpatient 
telehealth consultations furnished to beneficiaries in hospitals and 
SNFs'' in Sec.  410.78(b) because these are described by the more 
general term ``professional

[[Page 73320]]

consultations'' that is in the same section. Finally, we are continuing 
to specify that the physician visits required under Sec.  483.40(c) may 
not be furnished as telehealth services.

E. Telehealth Originating Site Facility Fee Payment Amount Update

    Section 1834(m) of the Act establishes the payment amount for the 
Medicare telehealth originating site facility fee for telehealth 
services provided from October 1, 2001, through December 31 2002, at 
$20. For telehealth services provided on or after January 1 of each 
subsequent calendar year, the telehealth originating site facility fee 
is increased by the percentage increase in the MEI as defined in 
section 1842(i)(3) of the Act. The MEI increase for 2011 is 0.4 
percent. Therefore, for CY 2011, the payment amount for HCPCS code 
Q3014 (Telehealth originating site facility fee) is 80 percent of the 
lesser of the actual charge or $24.10. The Medicare telehealth 
originating site facility fee and MEI increase by the applicable time 
period is shown in Table 49.

 Table 49--The Medicare Telehealth Originating Site Facility Fee and MEI
                 Increase by the Applicable Time Period
------------------------------------------------------------------------
              MEI
 Facility   increase                        Period
   fee        (%)
------------------------------------------------------------------------
   $20.00        N/A  10/01/2001-12/31/2002
   $20.60        3.0  01/01/2003-12/31/2003
   $21.20        2.9  01/01/2004-12/31/2004
   $21.86        3.1  01/01/2005-12/31/2005
   $22.47        2.8  01/01/2006-12/31/2006
   $22.94        2.1  01/01/2007-12/31/2007
   $23.35        1.8  01/01/2008-12/31/2008
   $23.72        1.6  01/01/2009-12/31/2009
   $24.00        1.2  01/01/2010-12/31/2010
   $24.10        0.4  01/01/2011-12/31/2011
------------------------------------------------------------------------

V. Addressing Interim Final Relative Value Units From CY 2010 and 
Establishing Interim Relative Value Units for CY 2011

A. Background

    In accordance with section 1848(c) of the Act, CMS determines work, 
PE, and malpractice RVUs for each service paid under the PFS. On an 
annual basis, the AMA RUC provides CMS with recommendations regarding 
physician work values for new, revised, and potentially misvalued 
codes. Over the last several years, CMS, in conjunction with the AMA 
RUC, has identified and reviewed numerous potentially misvalued CPT 
codes. In 2006, the AMA RUC established the Five-Year Review 
Identification Workgroup to identify potentially misvalued services 
using the following screens: ``New Technology;'' ``Site-of-Service 
Anomalies;'' `` High Volume Growth;'' ``CMS Fastest Growing;'' ``High 
Intra-Service Work per Unit Time (IWPUT);'' ``Services Surveyed by One 
Specialty--Now Performed by a Different Specialty;'' ``Harvard-Valued, 
Utilization over 1 Million;'' ``Harvard Valued, Utilization over 
100,000;'' and ``Codes Reported Together/Bundled CPT Services.'' In 
addition to providing recommendations to CMS for work RVUs, the AMA 
RUC's Practice Expense Subcommittee reviews and then the AMA RUC 
recommends direct PE inputs (clinical labor, medical supplies, and 
medical equipment) for individual services. To guide the establishment 
of malpractice RVUs for new and revised codes before the next 5-Year 
Review of Malpractice, the AMA RUC also provides crosswalk 
recommendations, that is, ``source'' codes with a similar specialty mix 
of practitioners furnishing the source code and the new/revised code. 
CMS reviews the AMA RUC recommendations on a code-by-code basis. For 
AMA RUC recommendations regarding physician work RVUs, we determine 
whether we agree with the recommended work RVUs for a service (that is, 
we agree the valuation is accurate), or, if we disagree, we determine 
an alternative value that better reflects our estimate of the physician 
work for the service. Because of the timing of the CPT Editorial Panel 
decisions, AMA RUC recommendations, and our rulemaking cycle, we 
publish these work RVUs in the PFS final rule with comment period as 
interim final values, subject to public comment. Similarly, we assess 
the AMA RUC's recommendations for direct PE inputs and malpractice 
crosswalks, and establish PE and malpractice interim final values, 
which are also subject to comment. We note that, with respect to 
interim final PE RVUs, the main aspect of our valuation that is open 
for public comment for a new, revised, or potentially misvalued code is 
the direct PE inputs and not the other elements of the PE valuation 
methodology, such as the indirect cost allocation methodology, that 
also contribute to establishing the PE RVUs for a code. The public 
comment period on the PFS final rule with comment period remains open 
for 60 days after the rule is issued.
    If we receive public comments on the interim final work RVUs for a 
specific code indicating that refinement of the interim final work 
value is warranted based on sufficient information from the commenters 
concerning the clinical aspects of the physician work associated with 
the service (57 FR 55917), we refer the service to a refinement panel, 
as discussed in further detail in sections III.I. and V.B.1. of this 
final rule with comment period.
    In the interval between closure of the comment period and the 
subsequent year's PFS final rule with comment period, we consider all 
of the public comments on the interim final work, PE, and malpractice 
RVUs for the new, revised, and potentially misvalued codes and the 
results of the refinement panel, if applicable. Finally, we address the 
interim final RVUs (including the interim final direct PE inputs) by 
providing a summary of the public comments and our responses to those 
comments, including a discussion of any changes to the interim final 
work or malpractice RVUs or direct PE inputs, in the following year's 
PFS final rule with comment period. We then typically finalize the 
direct PE inputs and the work, PE, and malpractice RVUs for the service 
in that year's PFS final rule with comment period, unless we determine 
it would be more appropriate to continue their interim final status for 
another year and solicit further public comment.

B. Addressing Interim Final RVUs From CY 2010

    In this section, we address the interim final values published in 
Appendix C of the CY 2010 PFS final rule with comment period (74 FR 
62144 through 62146), as subsequently corrected in the December 10, 
2009 (74 FR 65449) and May 11, 2010 correction notices (75 FR 26350). 
We discuss the results of the CY 2010 refinement panel, respond to 
public comments received on specific interim final values (including 
direct PE inputs) from CY 2010, address the status of the interim final 
values of a number of potentially misvalued codes from CY 2009 and CY 
2010, and address the other new, revised, or potentially misvalued 
codes with interim final values for CY 2010 that are not specifically 
discussed elsewhere in this final rule with comment period.
    We note that the final CY 2011 direct PE database that lists the 
direct PE inputs is available on the CMS Web site under the downloads 
for the CY 2011 PFS final rule with comment period at: http://
www.cms.gov/PhysicianFeeSched/PFSFRN/

[[Page 73321]]

list.aspTopOfPage. The final CY 2011 work, PE, and malpractice 
RVUs are displayed in Addendum B to this final rule with comment 
period.
1. CY 2010 Interim Final Work RVUs Referred to the Refinement Panel
    We received public comments on 4 CPT codes with CY 2010 interim 
final work values. We referred these services to the CY 2010 refinement 
panel for further review. For ease of discussion, we will be referring 
to these services as ``refinement codes.'' Consistent with past 
practice (62 FR 59084), we convened a multispecialty panel of 
physicians to assist us in the review of the comments. The panel was 
moderated by our physician advisors, and consisted of the following 
voting members:
     One or two clinicians representing the commenting 
organization.
     Two primary care clinicians nominated by the American 
Academy of Family Physicians and the American College of Physicians.
     Three contractor medical directors (CMDs).
     Clinicians with practices in related specialties who were 
expected to have knowledge of the services under review.
    We assembled a set of 300 reference services and asked the panel 
members to compare the clinical aspects of physician work for the 
refinement code to one or more of the reference services. In compiling 
the set of reference services, we attempted to include: (1) Services 
that are commonly performed for which the work RVUs are not 
controversial; (2) services that span the spectrum of work intensity; 
and (3) at least three services performed by each of the major 
specialties that furnish the refinement codes so that the perspective 
of relevant specialties would be represented. The panel process was 
designed to capture each participant's independent judgment and his or 
her clinical experience which informed and drove the discussion of the 
refinement code during the refinement panel proceedings. Following the 
discussion, each voting participant rated the physician work of the 
refinement code. Ratings were obtained individually and confidentially, 
with no attempt to achieve consensus among the panel members.
    We then analyzed the ratings for each refinement code based on a 
presumption that the interim final work RVUs were correct unless the 
ratings clearly indicated a different result. Ratings of work were 
analyzed for consistency among the four different groups (commenting 
organization, primary care physicians, CMDs, and related clinicians) 
represented on the panel. In addition, we used statistical tests to 
determine whether there was sufficient agreement among the groups of 
the panel and whether the agreed-upon RVUs differed significantly from 
the interim final RVUs published in Addendum C of the CY 2010 final 
rule with comment period. We did not modify the interim final RVUs 
unless there was clear agreement for a change. If there was agreement 
across groups for change, but the groups did not agree on what the new 
RVUs should be, we eliminated the outlier group and looked for 
agreement among the remaining groups as the basis for new RVUs for the 
refinement code. This methodology is consistent with the historical 
refinement process as established in the November 25, 1992 PFS final 
rule with comment period (57 FR 55938).
    Our decision to convene multispecialty panels of physicians and to 
apply the statistical tests described above has historically been based 
on our need to balance the interests of those who commented on the 
interim final work values with the redistributive effects that would 
occur in other specialties if the work values were changed. We refer 
readers to section III.I. of this final rule with comment period for a 
full discussion of the changes to the refinement process that we are 
adopting for refinement panels beginning in CY 2011.
    Table 50 lists those refinement codes reviewed under the CY 2010 
refinement panel process described in this section. The table includes 
the following information:
     CPT Code. This is the CPT code for a service.
     Short Descriptor. This is an abbreviated version of the 
narrative description of the code.
     CY 2010 Interim Final Work RVUs. The interim final work 
RVUs that appeared in the CY 2010 PFS final rule with comment period 
(74 FR 61949 through 61953), as subsequently corrected in the December 
10, 2009 (74 FR 65449) and May 11, 2010 correction notices (75 FR 
26350), are shown for each reviewed code.
     Requested Work RVUs. This column identifies the work RVUs 
requested by the commenters.
     CY 2011 Final Work RVUs. This column contains the final 
work RVUs after consideration by the refinement panel.
    We note that we are accepting the results of the CY 2010 refinement 
panel for all of these codes as the final work RVUs for CY 2011. These 
final values are also displayed in Addendum B to this final rule with 
comment period.

                     Table 50--CPT Codes Reviewed Under the CY 2010 Refinement Panel Process
----------------------------------------------------------------------------------------------------------------
                                                               CY 2010 interim   Requested work   CY 2011 final
             CPT Code               Mod     Short descriptor   final work RVUs        RVUs          work RVUs
----------------------------------------------------------------------------------------------------------------
74261............................     26  Ct colonography, w/             2.28             2.40             2.40
                                           o dye.
78451............................     26  Ht muscle image                 1.38             1.40             1.38
                                           spect, sing.
78452............................     26  Ht muscle image                 1.62             1.75             1.62
                                           spect, mult.
95905............................     26  Motor/sens nrve                 0.05             0.15             0.05
                                           conduct test.
----------------------------------------------------------------------------------------------------------------

2. CY 2010 Interim Final RVUs for Which Public Comments Were Received
a. Insertion of Breast Prosthesis (CPT Code 19340)
    CPT code 19340 (Immediate insertion of breast prosthesis following 
mastopexy, mastectomy or in reconstruction) was identified by CMS for 
AMA RUC review as requested by the specialty society. The AMA RUC 
recommended 13.78 work RVUs for CY 2010, which CMS accepted. However, 
as noted by a public comment on the CY 2010 PFS final rule with comment 
period, the interim final CY 2010 work RVUs published in the CY 2010 
PFS final rule with comment period (74 FR 61779, 62023 and 62144) for 
this service did not reflect the increases in the evaluation and 
management services for the post-operative visits associated with this 
service that resulted from the CY 2010 changes to the consultation code 
policy. The work RVUs for CPT code 19340 with these increases included 
are 13.99 RVUs. This correction was included in the May 11, 2010 
correction notice to the CY 2010 final rule with comment period (75 FR 
26356). We are finalizing the interim work RVUs for CPT code 19340 of 
13.99 for CY 2011.

[[Page 73322]]

b. Computed Tomographic Colonography (CPT Code 74261)
    For CPT code 74261, (Computed tomographic (CT) colonography, 
diagnostic, including image postprocessing; without contrast material), 
the AMA RUC recommended 2.40 work RVUs. During the AMA RUC meeting, 
this code was compared to two CPT codes: 75635 (Computed tomographic 
angiography, abdominal aorta and bilateral iliofemoral lower extremity 
runoff, with contrast material(s), including noncontrast images, if 
performed, and image postprocessing (work RVUs = 2.40)) and 78815 
(Positron emission tomography (PET) with concurrently acquired computed 
tomography (CT) for attenuation correction and anatomical localization 
imaging; skull base to mid-thigh (work RVUs = 2.44)). Based on the 
comparisons of similar physician work, physician time, and intensity/
complexity measures, the AMA RUC determined that work RVUs of 2.40 were 
appropriate for CPT code 74261. We disagreed with the AMA RUC-
recommended work RVUs and believe CPT code 74263 (Computed tomographic 
(CT) colonography, screening, including image postprocessing) 
represents a more comparable service because it has virtually the same 
description of work, pre-, intra-, and post-service time for which the 
AMA RUC recommended work RVUs of 2.28. Therefore, we assigned interim 
final work RVUs of 2.28 to CPT code 74261 for CY 2010.
    Comment: Several commenters disagreed with the interim final work 
RVUs assigned by CMS and believe that equalizing the work RVUs for 
diagnostic and screening computed tomographic colonography ignores the 
reality that patients referred for diagnostic study, by definition, 
have greater complexity. These commenters believed that for this reason 
and the increased time involved with a diagnostic study, higher work 
RVUs are necessary to maintain the proper relativity with the 
corresponding screening CPT code 74263. The commenters recommended that 
CMS accept the AMA RUC-recommended work RVUs of 2.40 for CPT code 74261 
and refer this code to the CY 2010 refinement panel for review.
    Response: Based on the concerns expressed by the commenters, we 
referred this code to the CY 2010 refinement panel for review. As a 
result of the statistical analysis of the CY 2010 refinement panel 
ratings, we are assigning 2.40 work RVUs to CPT code 74261 as the final 
value for CY 2011.
c. Myocardial Perfusion Imaging (CPT Codes 78451, 78452, 78453, and 
78454)
    For CPT code 78451 (Myocardial perfusion imaging, tomographic 
(SPECT) (including attenuation correction, qualitative or quantitative 
wall motion, ejection fraction by first pass or gated technique, 
additional quantification, when performed); single study, at rest or 
stress (exercise or pharmacologic)), the AMA RUC recommended 1.40 work 
RVUs, while the AMA RUC recommended 1.75 work RVUs for CPT code 78452 
(Myocardial perfusion imaging, tomographic (SPECT) (including 
attenuation correction, qualitative or quantitative wall motion, 
ejection fraction by first pass or gated technique, additional 
quantification, when performed); multiple studies, at rest and/or 
stress (exercise or pharmacologic) and/or redistribution and/or rest 
reinjection).
    Upon review of the AMA RUC recommendations for these codes, it was 
unclear what methodology the AMA RUC used to calculate the recommended 
work RVUs for CPT code 78451. Therefore, we disagreed with the AMA RUC-
recommended work RVUs of 1.40 for CPT code 78451 and believe the work 
RVUs for the survey 25th percentile were more appropriate. Therefore, 
we assigned interim final work RVUs of 1.38 to CPT code 78451 for CY 
2010.
    For CPT code 78452, we disagreed with the reference code used, CPT 
code 70496 (Computed tomographic angiography, head, with contrast 
material(s), including noncontrast images, if performed, and image 
postprocessing (work RVUs = 1.75)). We believe CPT code 78452 is 
comparable to CPT code 73219 (Magnetic resonance (eg, proton) imaging, 
upper extremity, other than joint; with contrast material(s) (work RVUs 
= 1.62)), which has the same pre-, intra-, and post-service time. 
Therefore, we assigned interim final work RVUs of 1.62 to CPT code 
78452 for CY 2010.
    We accepted the CY 2010 recommendations of the AMA RUC for the 
direct PE inputs for CPT codes 78451, 78452, 78453, and 78454 (75 FR 
61955).
    Comment: Several commenters disagreed with the interim final work 
RVUs assigned by CMS for these two services. The commenters pointed out 
that the specialty and AMA RUC recommendations for both of these 
services already reflected a tremendous reduction from the work RVUs 
for the services as reported by multiple component codes in previous 
years and expressed disappointment that additional reductions were made 
by CMS. The commenters explained that in an effort to maintain 
relativity between CPT codes 78451 and 78452, the recommended RVUs for 
78451 were derived by calculating the relationship between the median 
survey RVUs for CPT codes 78451 and 78452 and maintaining this 
relationship between the recommended RVUs for CPT codes 78451 and 
78452. That is, the survey work RVU relationship between CPT code 
78451: 78452 is [1.50: 1.87], leading to the same relationship between 
the AMA RUC-recommended RVUs for 78451: 78452 of [1.40: 1.75]. The AMA 
RUC agreed that the computed work RVUs, 1.40 for CPT code 78451, 
maintain the relativity of the original survey data and provide an 
appropriate measure of the work for CPT code 78451.
    The commenters believe that CMS does not have the special expertise 
necessary to choose a different reference code than the code selected 
by the multispecialty AMA RUC panel and disagreed with the reference 
code used by CMS for establishing work RVUs for CPT code 78452. The AMA 
RUC pointed out that the reference code has no associated computer 
post-processing analysis, requires the interpretation of fewer images, 
and has no additional cine-motion images to analyze and interpret, all 
of which are included in the myocardial perfusion imaging procedures.
    The commenters requested that CMS accept the AMA RUC 
recommendations of 1.40 work RVUs for CPT code 78451 and 1.75 work RVUs 
for CPT code 78452 and refer these codes to the CY 2010 refinement 
panel for review.
    Response: Based on the concerns expressed by the commenters, these 
codes were referred to the CY 2010 refinement panel for review. As a 
result of the statistical analysis of CY 2010 refinement panel ratings, 
the work RVUs for these codes were unchanged. Therefore, we are 
adopting the interim final values for these codes as final, with 1.38 
work RVUs for CPT code 78451 and 1.62 work RVUs for CPT code 78452 for 
CY 2011.
    Comment: Several commenters asserted that CMS had incorrectly 
crosswalked equipment time inputs for several myocardial perfusion 
imaging codes (CPT codes 78451, 78452, 78453, and 78454), rather than 
accepting the AMA RUC recommendations for these codes as CMS had stated 
in the CY 2010 PFS final rule with comment period (74 FR 61955). One 
commenter further suggested that the useful life of 5 years for the 
Cobalt-57 flood source was incorrect.

[[Page 73323]]

    Response: We appreciate the commenters' assistance, and we 
corrected the equipment times in the May 11, 2010 correction notice to 
the CY 2010 PFS final rule with comment period (75 FR 26356 and 26570). 
We are finalizing these direct PE inputs for CY 2011. We also proposed 
to change the useful life of the Cobalt-57 flood source from 5 to 2 
years for CY 2011 (75 FR 40056). We address our final policies 
regarding this proposal in section II.A.3.b.(4) of this final rule with 
comment period.
    Comment: Several commenters expressed concern that CMS applied 
fully transitioned PE RVUs to the new and revised CY 2010 CPT codes, 
specifically CPT codes 78451, 78452, 78453, and 78554. The commenters 
argued that the result of the lack of a transition to use of the PPIS 
data was an immediate 26 percent reduction for myocardial perfusion 
imaging services, simply because the CPT code descriptors had been 
revised to capture multiple procedure components. The commenters 
requested that the new CPT codes follow the same blend of new and 
previous PE RVUs that was applied to the existing CPT codes in CY 2010 
and later years.
    Response: Our longstanding policy is that if the CPT Editorial 
Panel creates a new code for a given year, the new code would be paid 
at its fully implemented PFS amount and not at a transition rate for 
that year. Consistent with this policy, the new CY 2010 myocardial 
perfusion imaging codes, and all other new CY 2010 CPT codes, are not 
being paid based on transitional PE RVUs in CY 2010. We will continue 
to pay these services based on the fully implemented PE RVUs in CY 
2011, the same approach we are applying to other CPT codes that were 
new for CY 2010 or CY 2011.
d. Nerve Conduction Test (CPT Code 95905)
    For CPT code 95905 (Motor and/or sensory nerve conduction, using 
preconfigured electrode array(s), amplitude and latency/velocity study, 
each limb, includes F-wave study when performed, with interpretation 
and report), the AMA RUC recommended 0.05 work RVUs, which we accepted 
in the CY 2010 PFS final rule with comment (74 FR 61953).
    Comment: One commenter requested that CMS refer CPT code 95905 to 
the CY 2010 refinement panel for review. The commenter believes the AMA 
RUC erred in its recommendation to CMS in regard to the physician work 
involved. The commenter noted that when this code was discussed at the 
AMA RUC meeting, the commenter and other specialty societies that 
presented this code to the AMA RUC recommended assignment of 0.15 work 
RVUs. The commenter also believes that the undervaluation of the 
physician work for this service may undermine the ability of physicians 
to provide the service.
    Response: Based on the concerns expressed by the commenter, this 
code was referred to the CY 2010 refinement panel for review. As a 
result of the statistical analysis of the CY 2010 refinement panel 
ratings, the work RVUs for this code were unchanged. Therefore, we are 
finalizing the interim final values for CPT code 95905 as 0.05 work 
RVUs for CY 2011.
e. Kidney Disease Education Services (HCPCS Codes G0420 and G0421)
    During rulemaking for CY 2010, we adopted policies to provide for 
the implementation of section 152(b) of the MIPPA which created a new 
benefit category for kidney disease education (KDE) services for 
Medicare beneficiaries diagnosed with Stage IV chronic kidney disease 
(CKD). The MIPPA also amended section 1848(j)(3) of the Act which 
allows for payment of KDE services under the PFS. For CY 2010, we 
proposed and finalized the RVUs for the two HCPCS G-codes established 
for the payment of KDE services (74 FR 61901), G0420 (Face-to-face 
educational services related to the care of chronic kidney disease; 
individual, per session, per one hour) and G0421 (Face-to-face 
educational services related to the care of chronic kidney disease; 
group, per session, per one hour). For purposes of valuing the HCPCS 
codes for KDE services, we based the work RVUs and the PE inputs, with 
minor modifications, on CPT codes for medical nutrition therapy (MNT) 
services, specifically CPT code 97802 (Medical nutrition therapy; 
initial assessment and intervention, individual, face-to-face with the 
patient, each 15 minutes) and CPT code 97804 (Medical nutrition 
therapy; group (2 or more individual(s)), each 30 minutes), because we 
believed these services to be similar. We crosswalked the work RVUs for 
HCPCS code G0420 from CPT code 97802 and for HCPCS code G0421 from CPT 
code 97804. We multiplied the work RVUs for HCPCS code G0420 by four 
and the work RVUs for HCPCS code G0421 by two to account for the fact 
that we crosswalked a 15 minute code to a 60 minute code (CPT code 
97802 to HCPCS code G0420) and a 30 minute code to a 60 minute code 
(CPT code 97804 to HCPCS code G0421). In order to determine the direct 
PE inputs for the KDE services, we indicated that we did not perform 
straight multiplication of the actual MNT inputs because we did not 
believe that the required equipment and supplies for the KDE services 
would increase in direct proportion to the increased time for the 
codes. For both HCPCS codes G0420 and G0421, we noted that we did not 
increase the equipment time-in-use for the body analysis machine, 
printer, or scale, and that we did increase the inputs for the table, 
computer, paper, and other printed materials.
    Comment: Several commenters expressed support for the CY 2010 work 
RVUs for the KDE HCPCS codes G0420 and G0421. However, one commenter 
requested that CMS include the supplies for the KDE services as 
directly proportional multiple units of the MNT services in order to 
appropriately pay for the costs of care, noting that HCPCS code G0420 
(60 minutes) should have 4 times as many supplies as those in CPT code 
97802 (15 minutes) and HCPCS code G0421 (60 minutes) should have 2 
times as many as those in CPT code 97804 (30 minutes).
    Response: We appreciate the commenters' support for the interim 
final work
    Response: We appreciate the commenters' support for the interim 
final work RVUs we established for HCPCS codes G0420 and G0421 for KDE 
services and we are finalizing those work RVUs for CY 2011. After 
reviewing the direct PE inputs for supplies in both the KDE HCPCS G-
codes (G0420 and G0421) and the MNT CPT codes (CPT codes 97802 and 
97804), we agree with the commenter that we had not increased the 
number of sheets of paper for either HCPCS code G0420 or G0421 as we 
indicated we would (74 FR 61901). Therefore, we have increased the 
number of paper sheets from 2 in CPT code 97802 (15 minutes) to 8 in 
HCPCS code G0420 (60 minutes) and from 2 in CPT code 97804 (30 minutes) 
to 4 in HCPCS code G0421 (60 minutes). We have also made conforming 
changes to the printer times for both KDE HCPCS G-codes in the 
equipment file because we base the printer time on the number of sheets 
of paper. We are adopting these modified direct PE inputs for HCPCS 
codes G0420 and G0421 as final for CY 2011.

[[Page 73324]]

f. Excision of Soft Tissue and Bone Tumors (CPT codes 21011 through 
21016, 21552, 21554 through 21558, 21930 through 21933, 21395, 21936, 
22900 through 22905, 23071, 23073, 23075 through 23078, 23200, 23210, 
23220, 24071, 24073, 24075 through 24077, 24079, 24150 through 24153, 
25071, 25073, 25075 through 25078, 25170, 26111, 26113, 26115 through 
26118, 26250, 26255, 26260, 26262, 27043, 27045, 27047 through 27049, 
27059, 27075 through 27078, 27327 through 27329, 27337, 27339, 27364, 
27365, 27615, 27616, 27618, 27619, 27632, 27634, 27619, 27645 through 
27647, 28039, 28041, 28043, 28045 through 28047, 28171, 28173, and 
28175)
    For CY 2010, the CPT Editorial Panel split 31 excision codes into 
62 codes differentiated by the size of the excised lesion, 18 codes 
were revised, and 12 additional codes were created. Although we had 
significant concerns with the pre-service times and the AMA RUC-
recommended work RVUs for these codes for CY 2010, in the context of 
public comments on the CY 2010 proposed rule regarding the site-of-
service anomaly codes, we agreed to accept the AMA RUC-recommended work 
values for these codes on an interim final basis for CY 2010 (74 FR 
61954). We also requested that the AMA RUC reexamine the minutes 
allocated for positioning of the patient for these codes. We noted that 
we would work with the AMA RUC to address our concerns about the 
valuation of these codes and would consider whether it would be 
appropriate to propose further changes in future rulemaking. We 
indicated that we did not agree with the AMA RUC's recommendations for 
the inclusion of inpatient hospital care services in these codes, 
particularly in the cases of codes that would be reported for the 
smaller-sized tumors. As a result, we stated that we would monitor the 
frequency data for these codes and may propose further changes to the 
work RVUs in the future based on these data. We emphasized that the AMA 
RUC itself recommended that these services be re-reviewed to determine 
the accuracy of the utilization assumptions once 2 years of utilization 
data were available.
    In addition, we noted that the CPT 2010 instructions regarding the 
use of the excision and resection of soft tissue and bone tumor codes 
advised that a complex repair may be separately reported. However, 
longstanding Medicare policy generally includes payment for all simple, 
intermediate, and complex repairs of procedural incisions and, 
therefore, Medicare would not separately pay for complex repairs 
associated with procedures reported by these codes.
    Comment: Several commenters were pleased that CMS agreed to accept 
the AMA RUC-recommended values for these new and revised codes. One 
commenter endorsed CMS' decision to closely monitor the utilization 
rates for these codes and believes this would be important to ensure 
accurate payment. The commenters did not see a need for CMS or the AMA 
RUC to review the pre-service times assigned to the codes and stated 
that all of these times were derived from the AMA RUC's pre-service 
time package methodology, a methodology that CMS has historically 
supported. The commenters asserted that the times assigned are 
reflective of the actual patient positioning times. Therefore, the 
commenters urged CMS to withdraw the request that the AMA RUC revisit 
the pre-service times for these codes. The commenters asserted that 
further review would add extra time and work to the already significant 
workload of the AMA RUC and would not result in any changes.
    Response: We appreciate the commenters' support for our acceptance 
of the AMA RUC-recommended values for these new and revised codes and 
we are finalizing the interim final work RVUs for these codes for CY 
2011. As we stated in the CY 2010 PFS final rule with comment period, 
we will continue to monitor the frequency data for these codes and work 
with the AMA RUC to address our concerns and, if appropriate, propose 
further changes in future rulemaking. In addition, we are reiterating 
our request originally made in the CY 2010 PFS final rule with comment 
period (74 FR 61954) that the AMA RUC review the pre-service times for 
these codes and provide their recommendations to us.
g. Cryoablation of Prostate (CPT code 55873)
    In June 2008, CMS requested that the AMA RUC review the nonfacility 
direct PE inputs for CPT code 55873 (Cryosurgical ablation of the 
prostate (includes ultrasonic guidance for interstitial cryosurgical 
probe placement). During this review, the AMA RUC recognized that this 
service was initially reviewed as a new code by the AMA RUC in February 
2001. The AMA RUC believed that the intra-service physician time since 
the initial review had declined (from 200 minutes) as the service is 
now more commonly performed. The AMA RUC agreed with the specialty 
society that the service should be surveyed for physician work and also 
recommended revisions in the direct PE inputs. As a result of the AMA 
RUC review and input from the specialty society, the AMA RUC 
recommended 13.45 work RVUs and revisions to the direct PE inputs for 
this service for CY 2010. We reviewed these recommendations and 
accepted the AMA RUC-recommended work RVUs for this code and the direct 
PE inputs in the CY 2010 PFS final rule with comment (74 FR 61954 and 
61955).
    Comment: One commenter expressed concern about the reduction in the 
work RVUs for CPT code 55873 and the lack of public notice given prior 
to the reduction. The commenter believes that the intra-service time 
was underestimated and could vary based on the skill set of the 
physician. The commenter requested that CMS reinstate the work RVUs as 
included in the CY 2010 PFS proposed rule for CY 2010 (74 FR 33740).
    Response: While we originally requested that the AMA RUC review the 
nonfacility direct PE inputs for CPT code 55873, we believe that it is 
appropriate for the AMA RUC to respond to its findings during a limited 
review by taking other actions that it believes to be appropriate for 
the particular circumstances, such as requesting that procedures be 
resurveyed. We followed our usual methodology for revised codes whereby 
we respond to the AMA RUC work recommendations and adopt interim final 
values in the final rule with comment period for the upcoming year. In 
this way, we facilitate appropriate payment for the services on an 
interim final basis while providing public notice and the opportunity 
for public comment prior to finalizing the values in the following 
year.
    We note that the RVUs for services paid under the PFS are resource-
based, and individual services are valued based upon the typical 
resources used to provide the service. Because clinical utilization of 
this service has increased over the last several years and information 
from the current AMA RUC survey suggests there has been a decrease in 
intra-service time from 200 to 100 minutes, we continue to believe the 
reduction in intra-service time and the revised work RVUs as 
recommended to us by the AMA RUC are clinically appropriate for this 
service. We commonly expect greater work efficiency as clinical 
experience with a new service increases over time, and this service 
fits that profile. Therefore, we are finalizing the interim final work 
RVUs of 13.60 for CPT code 55873 for CY 2011.

[[Page 73325]]

    Comment: One commenter stated that the 162 minutes of clinical 
labor time for CPT code 55873 in the final CY 2010 PFS direct PE 
database should be 168 minutes. The commenter also indicated that 
supply code SD074 be included as an input for CPT code 55873 based on 
the AMA RUC's CY 2010 recommendations.
    Response: We appreciate the commenter bringing this information to 
our attention and agree with the commenter's assessment. The 6 minutes 
of clinical labor time missing from the direct PE inputs for CPT code 
55873 have now been included, as has the filiform, and these changes 
are reflected in the final CY 2011 PFS direct PE database. We are 
finalizing these direct PE inputs for CPT code 55873 for CY 2011.
h. Urodynamics Studies (CPT Codes 51728 and 51729)
    In February 2008, the AMA RUC identified CPT codes 51726 (Complex 
cystometrogram (ie, calibrated electronic equipment)); 51772 (Urethral 
pressure profile studies (UPP) (urethral closure pressure profile), any 
technique); 51795 (Voiding pressure studies (VP); bladder voiding 
pressure, any technique); and 51797 (Voiding pressure studies, intra-
abdominal (ie, rectal, gastric, intraperitoneal) (List separately in 
addition to code for primary procedure)) through the ``Codes Reported 
Together'' potentially misvalued codes screen as combinations of codes 
that were reported together more than 95 percent of the time. The AMA 
RUC referred all four codes to the CPT Editorial Panel for creation of 
CPT codes for new comprehensive services and for reorganization of the 
coding structure to reflect the typical procedures performed. As a 
result, CPT codes 51772 and 51795 were deleted, CPT code 51797 was 
revised, and CPT codes 51727 (Complex cystometrogram (ie, calibrated 
electronic equipment); with urethral pressure profile studies (ie, 
urethral closure pressure profile), any technique); 51728 (Complex 
cystometrogram (ie, calibrated electronic equipment); with voiding 
pressure studies (i.e., bladder voiding pressure), any technique); and 
51729 (Complex cystometrogram (i.e., calibrated electronic equipment); 
with voiding pressure studies (ie, bladder voiding pressure) and 
urethral pressure profile studies (i.e., urethral closure pressure 
profile), any technique) were created for CY 2010. Accordingly, the AMA 
RUC reviewed the clinical labor inputs for the typical patient and made 
minor edits regarding the intra-service time for these services. In 
addition, the AMA RUC made adjustments to the medical supplies and 
equipment. As noted in the CY 2010 PFS final rule with comment period 
(74 FR 61955), we accepted these recommendations for the direct PE 
inputs on an interim final basis.
    Comment: Several commenters asserted that CPT codes 51728 and 51729 
should have additional clinical labor inputs, including a greater 
number of minutes during the intra-service period and minutes during 
the pre-service period. These commenters also requested revisions to 
the PE supply inputs for the codes.
    Response: We discuss our CY 2011 proposal and the final CY 2011 
policy with respect to the direct PE inputs for CPT codes 51728 and 
51729 in section II.A.3.c.(5) of this final rule with comment period. 
As we state there, we reviewed the direct PE inputs for these two CPT 
codes and three related CPT codes following revised AMA RUC 
recommendations for CY 2011. We agreed with the AMA RUC recommendations 
regarding changes for CY 2011. Specifically, we believe the pre-service 
nonfacility clinical labor time for the 0-day global period CPT codes 
51725 (simple cystometrogram (CMG) (eg, spinal manometer)) and 51726 
should be removed and the intra-service clinical labor time for CPT 
code 51726 should also be reduced, consistent with the usual treatment 
of other 0-day global codes. We believe the AMA RUC provided 
recommendations to us regarding the direct PE inputs for these 
cystometrogram services that accurately reflect the costs of the 
resources (that is, the clinical labor, equipment, and supplies) 
typically required to furnish these services to Medicare beneficiaries.
    Comment: Several additional commenters alerted CMS to incorrect 
supply inputs for CPT codes 51728 and 51729. The commenters noted that 
the AMA RUC direct PE recommendations for CPT code 51728 included an 
additional beaker. In the case of CPT code 51729, the commenters stated 
that CMS did not include the recommended beaker and tubing in the 
direct PE database for the CY 2010 final rule with comment period.
    Response: We appreciate the commenters' assistance, and we made 
these corrections in the May 11, 2010 correction notice to the CY 2010 
PFS final rule with comment period (75 FR 26356 and 26478). We are 
finalizing these direct PE inputs, as corrected, for CPT codes 51728 
and 51239 for CY 2011.
i. Coronary Computed Tomographic Angiography (CPT Codes 75571, 75572, 
75573, and 75574)
    In October 2008, the CPT Editorial Panel deleted eight Category III 
CPT codes (0144T through 0151T) and created four new codes for CY 2010, 
specifically CPT codes 75571 (Computed tomography, heart, without 
contrast material, with quantitative evaluation of coronary calcium); 
75572 (Computed tomography, heart, with contrast material, for 
evaluation of cardiac structure and morphology (including 3D image 
postprocessing, assessment of cardiac function, and evaluation of 
venous structures, if performed)); 75573 (Computed tomography, heart, 
with contrast material, for evaluation of cardiac structure and 
morphology in the setting of congenital heart disease (including 3D 
image postprocessing, assessment of LV cardiac function, RV structure 
and function and evaluation of venous structures, if performed)); and 
75574 (Computed tomographic angiography, heart, coronary arteries and 
bypass grafts (when present), with contrast material, including 3D 
image postprocessing (including evaluation of cardiac structure and 
morphology, assessment of cardiac function, and evaluation of venous 
structures, if performed)) to describe the evolution of the performance 
of cardiac and coronary computed tomography for specific clinical 
scenarios. We accepted the AMA RUC recommendations for direct PE inputs 
for these codes on an interim final basis for CY 2010 (74 FR 61955).
    Comment: Several commenters stated that the final CY 2010 PFS 
direct PE database included incomplete direct PE inputs for CPT codes 
75572 and 75573. The commenters also submitted updated pricing 
information for the 64-slice CT scanner.
    Response: We appreciate the commenters' assistance, and we 
corrected these errors in the May 11, 2010 correction notice to the CY 
2010 PFS final rule with comment period (75 FR 26356 and 26543). We are 
finalizing the direct PE inputs for CPT codes 75571, 75572, 75573, and 
75574, as corrected, for CY 2011. Additionally, we proposed an updated 
price for the 64-slice CT scanner and its accompanying software in the 
CY 2011 PFS proposed rule (75 FR 40062). We address that proposal and 
our final CY 2011 policy in section II.A.3.c.(2) of this final rule 
with comment period.

[[Page 73326]]

j. Adjacent Tissue Transfer or Rearrangement (CPT Codes 14301 and 
14302)
    CPT code 14300 (Adjacent tissue transfer or rearrangement, more 
than 30 sq cm, unusual or complicated, any area) was identified by the 
Five-Year Review Identification Workgroup through its ``Site-of-Service 
Anomalies'' screen for potentially misvalued codes and subsequently 
identified through the ``CMS Fastest Growing'' screen. The service was 
referred to the CPT Editorial Panel to clarify the coding for tissue 
transfers involving different size areas. As a result, CPT code 14300 
was deleted and two new codes, CPT codes 14301 (Adjacent tissue 
transfer or rearrangement, any area; defect 30.1 sq cm to 60.0 sq cm) 
and 14302 (Adjacent tissue transfer or rearrangement, any area; each 
additional 30.0 sq cm, or part thereof (List separately in addition to 
code for primary procedure)) were created. We accepted the AMA RUC 
recommendations for direct PE inputs on an interim final basis for CY 
2010 (74 FR 61955).
    Comment: One commenter stated that there were discrepancies between 
the AMA RUC recommendations and the direct PE inputs for CPT codes 
14301 and 14302.
    Response: We appreciate the commenters' assistance, and we 
corrected these errors in the May 11, 2010 correction notice to the CY 
2010 PFS final rule with comment period (75 FR 26356 and 26368). Upon 
additional review of the direct PE inputs for consistency with the CY 
2010 AMA RUC recommendations for this CY 2011 final rule with comment 
period, we also found that the instrument pack for CPT code 14301 
should be EQ138 (instrument pack, medium ($1500 and up)) instead of 
EQ137 (instrument pack, basic ($500-$1499)). Furthermore, CPT code 
14301 should have one SA054 (pack, post-op incision care (suture)) as a 
supply input in both the nonfacility and facility settings. The final 
CY 2011 PFS direct PE database reflects these additional corrections. 
We are finalizing the direct PE inputs for CPT codes 14301 and 14302 
for CY 2011.
k. Insertion of a Temporary Prostatic Urethral Stent (CPT code 53855)
    CPT code 53855 (Insertion of a temporary prostatic urethral stent, 
including urethral measurement) was created for CY 2010 to describe the 
service previously reported under the Category III CPT code 0084T. We 
accepted the AMA RUC recommendations for direct PE inputs on an interim 
final basis for CY 2010 (74 FR 61955).
    Comment: One commenter stated that CPT code 53855 was incorrectly 
missing supply codes SD074 and SH050 as inputs in the final CY 2010 PFS 
direct PE database. The commenter also noted that SJ038 was incorrectly 
substituted for SJ032.
    Response: We appreciate the commenter bringing these items to our 
attention and agree with the commenter's assessment. The supply items 
for CPT code 53588 (filiform and one unit of lidocaine) have been 
included in the direct PE inputs and we have replaced petroleum jelly 
with lubricating jelly. These changes are reflected in the final CY 
2011 PFS direct PE database. We are finalizing the revised direct PE 
inputs for CPT code 53855 for CY 2011.
l. High Dose Rate Brachytherapy (CPT codes 77785, 77786, and 77787)
    CPT codes 77785 (Remote afterloading high dose rate radionuclide 
brachytherapy; 1 channel); 77786 (Remote afterloading high dose rate 
radionuclide brachytherapy; 2-12 channels); and 77787 (Remote 
afterloading high dose rate radionuclide brachytherapy; over 12 
channels) were identified by the Five-Year Review Identification 
Workgroup through the ``CMS Fastest Growing'' and ``High Volume 
Growth'' potentially misvalued codes screens and later revised by the 
CPT Editorial Panel for CY 2009. As a result, the AMA RUC made 
recommendations for physician work and direct PE inputs for these 
revised services for CY 2009, which we accepted in the CY 2009 PFS 
final rule with comment period (73 FR 69892). Upon acceptance of the 
AMA RUC recommendations, we received several comments concerning the 
direct PE direct inputs (for example, supply costs and the useful life 
of the renewable sources) related to several high dose radiation 
therapy and placement CPT codes. In the CY 2010 PFS proposed rule (74 
FR 33532), we requested that the AMA RUC revisit the direct PE inputs 
for these services. In response to our request, the AMA RUC reviewed 
the direct PE inputs for these services and made adjustments to the 
clinical labor staff type, changed the time for some activities, and 
edited the medical supplies and equipment for the typical patient 
scenario. In addition, the AMA RUC also recommended further discussion 
between the specialty and CMS regarding appropriate resolution of the 
PE input price for the Iridium-192 brachytherapy source typically used 
in CPT codes 77785, 77786, and 77787. We accepted these direct PE 
recommendations for CY 2010 on an interim final basis (74 FR 61782).
    Comment: One commenter informed CMS of two concerns regarding CPT 
codes 77785, 77786, and 77787. The commenter stated that the AMA RUC 
summary direct PE output table included incorrectly doubled PE inputs 
for each of the codes. The commenter also pointed out that the medical 
physicist clinical labor time for CPT code 77786 should be 54 minutes 
instead of 29 minutes.
    Response: We appreciate the commenters' assistance, and we 
corrected these errors in the May 11, 2010 correction notice to the CY 
2010 PFS final rule with comment period (75 FR 26356 and 26564). We are 
finalizing the direct PE inputs for CPT codes 77785, 77786, and 77787, 
as corrected, for CY 2011.
m. Injection of Facet Joint (CPT Codes 64490, 64491, 64492, 64493, 
64494, and 64495)
    Facet joint injection services were identified by the Five-Year 
Review Identification Workgroup ``High Volume Growth'' potentially 
misvalued codes screen and referred to the CPT Editorial Panel to 
create an appropriate coding structure to report primary and additional 
injections. As a result, the four existing codes describing these 
services were deleted and CPT codes 66490 (Injection(s), diagnostic or 
therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves 
innervating that joint) with image guidance (fluoroscopy or CT), 
cervical or thoracic; single level); 64491 (Injection(s), diagnostic or 
therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves 
innervating that joint) with image guidance (fluoroscopy or CT), 
cervical or thoracic; second level (List separately in addition to code 
for primary procedure)); 64492 (Injection(s), diagnostic or therapeutic 
agent, paravertebral facet (zygapophyseal) joint (or nerves innervating 
that joint) with image guidance (fluoroscopy or CT), cervical or 
thoracic; third and any additional level(s) (List separately in 
addition to code for primary procedure)); 64493 (Injection(s), 
diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) 
joint (or nerves innervating that joint) with image guidance 
(fluoroscopy or CT), lumbar or sacral; single level); 64494 
(Injection(s), diagnostic or therapeutic agent, paravertebral facet 
(zygapophyseal) joint (or nerves innervating that joint) with image 
guidance (fluoroscopy or CT), lumbar or

[[Page 73327]]

sacral; second level (List separately in addition to code for primary 
procedure)); and 64495 (Injection(s), diagnostic or therapeutic agent, 
paravertebral facet (zygapophyseal) joint (or nerves innervating that 
joint) with image guidance (fluoroscopy or CT), lumbar or sacral; third 
and any additional level(s) (List separately in addition to code for 
primary procedure)) were created for CY 2010. Accordingly, the AMA RUC 
reviewed the direct PE inputs as recommended by the specialty and made 
some minor edits to the clinical labor and medical supplies to reflect 
the typical patient service, which we accepted in the CY 2010 PFS final 
rule with comment on an interim final basis (74 FR 61955).
    Comment: Several commenters stated that the equipment and supplies 
listed in the final CY 2010 PFS direct PE database for CPT codes 64490, 
64491, 64492, 64493, 64494, and 64495 were incorrect and not consistent 
with the AMA RUC's recommendations.
    Response: We verified that the equipment and supplies listed as 
direct inputs for these codes in the final CY 2011 direct PE database 
match the CY 2010 recommendations provided to us by the AMA RUC. We 
encourage stakeholders who believe a change is required in the direct 
PE inputs associated with a particular service in the typical case that 
is furnished in the facility or nonfacility setting to address these 
concerns with the AMA RUC. We are finalizing these direct PE inputs for 
CPT codes 64490, 64491, 64492, 64493, 64494, and 64495 for CY 2011.
n. Knee Arthroscopy (CPT Code 29870)
    In the CY 2008 PFS final rule (72 FR 66238), we deferred the 
establishment of nonfacility direct PE inputs for CPT code 29870 
(Arthroscopy, knee, diagnostic, with or without synovial biopsy 
(separate procedure)) and stated that the physicians performing 
arthroscopic services in the nonfacility setting should be given the 
opportunity to have a multispecialty review by the AMA RUC. We accepted 
the AMA RUC recommendations for nonfacility direct PE inputs in the CY 
2010 PFS final rule with comment period on an interim final basis (74 
FR 61955).
    Comment: One commenter indicated that the wrong arthroscopic system 
was approved by the AMA RUC for CPT code 29870.
    Response: We verified that the equipment input for this code in the 
final CY 2011 PFS direct PE database matches the recommendation 
provided to us by the AMA RUC. We encourage stakeholders who believe a 
change is required in the direct PE inputs associated with a particular 
service in the typical case that is furnished in the facility or 
nonfacility setting to address these concerns with the AMA RUC. We are 
finalizing the direct PE inputs for CPT code 298770 for CY 2011.
3. Status of Interim Final Work RVUs for Potentially Misvalued Site-of-
Service Anomaly Codes From CY 2009 and CY 2010
    In previous years, we have requested that the AMA RUC review codes 
that, according to Medicare claims data, have experienced a change in 
the typical site-of-service since the original valuation of the code. 
The AMA RUC reviewed and recommended to CMS revised work RVUs for 29 
codes for CY 2009 and 11 codes for CY 2010 that were identified as 
having site-of-service anomalies. In the CYs 2009 and 2010 PFS final 
rules with comment period (73 FR 69883 and 74 FR 61776 through 61778, 
respectively), we indicated that although we would accept the AMA RUC 
valuations for these site-of-service anomaly codes on an interim final 
basis through CY 2010, we had ongoing concerns about the methodologies 
used by the AMA RUC to review these services. We requested that the AMA 
RUC reexamine the site-of-service anomaly codes and use the building 
block methodology to revalue the services (74 FR 61777).
    For CY 2011, as discussed in more detail in section II.C.3.d. of 
this final rule with comment period, we are requesting that the AMA RUC 
reconsider its previously recommended values, which have been applied 
on an interim final basis in CYs 2009 and 2010, and revise the work 
RVUs to better reflect the intensity of the services and the revised 
physician times and post-procedure visits included in the valuation of 
these codes. Until we receive the revised values from the AMA RUC for 
CY 2012 and can make a determination regarding them, we are continuing 
to accept the existing AMA RUC-recommended work RVUs listed in Tables 
14 and 15 in section II.C.3.d. of this final rule with comment period 
on an interim final basis for CY 2011.
4. Other New, Revised, or Potentially Misvalued Codes With CY 2010 
Interim Final RVUs Not Specifically Discussed in the CY 2011 Final Rule 
With Comment Period
    For all other CY 2010 new, revised, or potentially misvalued codes 
with CY 2010 interim final RVUs that are not specifically discussed in 
this final rule with comment period, we are finalizing, without 
modification, the interim final work and malpractice RVUs and direct PE 
inputs that we initially adopted for CY 2010.

C. Establishment of Interim Final RVUs for CY 2011

    In this section, we discuss the establishment of work, PE, and 
malpractice interim final RVUs for CY 2011 and issues related to the 
processes for establishing these values. These CY 2011 work, PE, and 
malpractice interim final RVUs, and the associated direct PE inputs, 
are open to comment on this CY 2011 final rule with comment period. In 
general, the work, PE, and malpractice RVUs and the associated direct 
PE inputs for the CY 2011 new and revised codes will be finalized in 
the CY 2012 PFS final rule with comment period, where we will also 
respond to the public comments received on the values and direct PE 
inputs that are adopted on an interim final basis in this CY 2011 final 
rule with comment period. The final CY 2011 PFS direct PE database and 
the crosswalks for the malpractice RVUs for new and revised codes are 
posted on the CMS Web site under the downloads for the CY 2011 PFS 
final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
    For CY 2011, we received AMA RUC recommendations for 325 new, 
revised, and potentially misvalued CPT codes and 93 recommended 
deletions. Of the 325 codes, 84 were identified as potentially 
misvalued, 125 as new, and 116 as revised. After subtracting out CPT 
codes for which no work RVU recommendation were given--including codes 
listed on the Clinical Lab Fee Schedule (CLFS), vaccine codes, and 
technical component only codes--there were 291 codes for which the AMA 
RUC provided work RVU recommendations for CY 2011: 82 CPT codes 
classified by the AMA RUC as potentially misvalued, 108 as new, and 101 
as revised. Of note, as displayed in Table 53, we consider 204 of the 
AMA RUC work recommendations for CY 2011 new and established CPT codes 
to be for codes identified through, created as a result of, or valued 
in association with service(s) identified through a potentially 
misvalued code screen. Additionally, we received direct PE input 
recommendations from the AMA RUC for 325 CPT codes for CY 2011.
    For CY 2011, we note that the CPT Editorial Panel deleted CPT codes 
0160T (Therapeutic repetitive transcranial magnetic stimulation 
treatment planning) and 0161T (Therapeutic repetitive transcranial 
magnetic stimulation treatment delivery and management, per session) 
and created two new CPT codes, 90867

[[Page 73328]]

(Therapeutic repetitive transcranial magnetic stimulation treatment; 
planning) and 90868 (Therapeutic repetitive transcranial magnetic 
stimulation treatment; delivery and management, per session). Due to 
the timing of the creation of these codes, the AMA RUC was unable to 
provide work and PE recommendations for CY 2011. As a result, these 
codes will be contractor-priced for CY 2011.
1. Establishment of Interim Final Work RVUs for CY 2011
a. Background
    As we previously explained in section V.A. of this final rule with 
comment period, on an annual basis, the AMA RUC provides CMS with 
recommendations regarding physician work values for new, revised, and 
potentially misvalued codes. We review the AMA RUC-recommended work 
RVUs on a code-by-code basis. We determine whether we agree with the 
AMA RUC's recommended work RVUs for a service (that is, we agree the 
valuation is accurate), or, if we disagree, we determine an alternative 
value that better reflects our estimate of the physician work for the 
service.
    As stated earlier, the AMA RUC provided work RVU recommendations 
for 291 CPT codes. Of the 291, we are accepting 207 (71 percent) of the 
AMA RUC-recommended values and providing alternative values for the 
remaining 84 (29 percent). Over the last several years our rate of 
acceptance of the AMA RUC recommendations has been higher, at 90 
percent or greater. However, in response to concerns expressed by 
MedPAC, the Congress, and other stakeholders regarding the accurate 
valuation of services under the PFS, we have intensified our scrutiny 
of the work valuations of new, revised, and potentially misvalued 
codes. We note that most recently, the law was amended (section 
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA)) to add 
a new requirement 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. 
Furthermore, the Secretary is directed to validate a sampling of the 
work RVUs of codes identified through any of the seven categories of 
potentially misvalued codes specified by section 1848(c)(2)(K)(ii) of 
the Act (as added by section 3134 of the ACA). While we are currently 
in the planning stage of developing a formal validation process, we 
believe we should be incorporating, where appropriate, the validation 
principles specified in the law. That is, in reviewing the CY 2011 AMA 
RUC recommendations for valuing the work of new, revised, and 
potentially misvalued services, we have expended significant effort in 
evaluating whether the recommended values reflect the work elements, 
such as time, mental effort, and professional judgment, technical skill 
and physical effort, and stress due to risk, involved with furnishing 
the service. We subjected each of the CY 2011 codes to a rigorous 
clinical review, examining the pre-, post-, and intra-service 
components of the work. If we concluded that the AMA RUC's recommended 
value for a code was not accurate, we looked for comparisons with other 
established reference codes with clinical similarity or analogous pre-, 
post-, and intra-service times, and, where applicable, employed the 
building block approach to inform our interim final decision to 
establish an alternative value that we believe is more appropriate.
    The AMA RUC has emphasized the need to value services ``relative'' 
to other services, explaining in its public comment on the CY 2011 PFS 
proposed rule that it will ``continue to employ magnitude estimation in 
developing relative value recommendations as it is the cornerstone of 
the RBRVS (resource-based relative value scale).'' We agree that 
services paid under the PFS should be reviewed and valued in manner 
consistent with Medicare payment policy to maintain appropriate 
relativity between services and promote accurate pricing. In our review 
of the 291 CY 2011 AMA RUC recommendations for work values, we noted 
that the AMA RUC used a variety of approaches and methodologies to 
arrive at the recommended work values. For some codes, the AMA RUC used 
magnitude estimation in conjunction with survey data from physician 
surveys conducted by the specialty societies to support the values. For 
other codes, the AMA RUC used magnitude estimation to override the 
results of the survey data, recommending to CMS a value that was not 
based on survey data but rather, justified in terms of its appropriate 
relativity within the system to other similar services. The AMA RUC may 
also elect to use a crosswalk approach in valuing a code by applying a 
work value from a currently valued code to the code under review based 
on the clinical similarity of the procedures or explicit considerations 
of pre-, intra-, and post-service times. In some instances, the AMA RUC 
asserted that it used the building block methodology to value the code, 
a methodology CMS has historically supported (74 FR 61776).
    We understand that the AMA RUC believes that it must approach 
valuation on a code-by-code basis, and depending on the context of the 
particular code, some methodologies may be better suited than others 
for valuation purposes. However, we remain concerned over the 
variations and some applications of the AMA RUC's methodologies which, 
if we continue to accept them, could contribute to inaccuracy in the 
relativity of physician work valued under the PFS for different 
services. Our concerns at this time include the following 
methodological issues which we observed during our review of the CY 
2011 AMA RUC work recommendations:
     AMA RUC-recommended values without benefit of a survey: 
For a number of codes, the AMA RUC justified the work RVUs by 
crosswalking the codes to existing codes deemed comparable by the AMA 
RUC. Since the specialty society did not conduct a survey for these 
codes, there are no survey data to back up the recommended work RVUs.
     Surveys conducted on existing codes produced predictable 
results: In providing recommendations for existing potentially 
misvalued codes, the AMA RUC often recommended maintaining the current 
work RVUs and supported this valuation by citing the survey results. 
Upon clinical review of a number of these cases, we are concerned over 
the validity of the survey results since the survey values often are 
very close to the current code values. Increasingly, rather than 
recommending the median survey value that has historically been most 
commonly used, the AMA RUC is choosing to recommend the 25th percentile 
value, potentially responding to the same concern we have identified.
     AMA RUC deviated significantly or disregarded survey 
results completely: For the majority of codes, the AMA RUC cited the 
survey results in support of the work RVU recommendations and in many 
instances adopted either the survey median or 25th percentile value as 
the AMA RUC-recommended value. However, in some instances, the AMA RUC 
recommended work RVUs which deviated significantly from the survey 
results. Rather than using the survey data, the AMA RUC appears to have 
relied on another methodology to value the code, such as ``magnitude

[[Page 73329]]

estimation'' or crosswalk to a comparable code.
    In reviewing the 291 work RVU recommendations from the AMA RUC for 
CY 2011, we concluded that the strongest support for the valuation of a 
code occurred when the AMA RUC cited multiple germane methodologies 
that all yielded a similar value that was also supported by the survey. 
We tended to accept the AMA RUC-recommended values in these instances. 
However, we found the weakest and least convincing valuations occurred 
in cases where the AMA RUC either deviated significantly or disregarded 
the survey results in favor of tweaking various components of the code 
in order to justify a value which the AMA RUC believed was correct due 
to perceived ``magnitude estimation'' for that code. We are concerned 
that such actions by the AMA RUC may create problems for any systematic 
validation processes that could be implemented in the future as 
required by section 1848(c)(2)(L) of the Act (as added by section 3134 
of the ACA).
    Accordingly, for those CY 2011 codes for which we did not accept 
the AMA RUC recommendations and are instead establishing alternative 
interim final values, we discuss our decisions based on groupings of 
codes in the following sections. Table GG4 at the end of this section 
displays the AMA RUC recommendations and interim final work RVUs for CY 
2011 new, revised, and potentially misvalued codes. b. CY 2011 Interim 
Final Work RVUs for New and Revised Codes (1) CY 2011 New and Revised 
Codes that Do Not Represent Major New Comprehensive Services
    We provide an explanation in the following sections of our 
rationale for not accepting particular AMA RUC-recommended or Health 
Care Professional Advisory Committee (HCPAC)-recommended work RVUs for 
CY 2011 new and revised CPT codes that do not represent major new 
comprehensive services that are listed in Table 51 and discussed in the 
subsequent section. The issues are arranged by type of service in CPT 
code order and address only work RVUs. These codes are listed in Table 
53, which includes a complete list of all new, revised, and potentially 
misvalued CPT codes with CY 2011 AMA RUC work RVU recommendations and 
CMS' interim final decisions for CY 2011.
(A) Excision and Debridement (CPT Codes 11010, 11011, 11012, 11042, 
11043, 10144, 11045, 11046, 11047, and 97598)
    CPT codes 11043 (Debridement; skin, subcutaneous tissue, and 
muscle) and 11044 (Debridement; skin, subcutaneous tissue, muscle, and 
bone) were identified by the AMA RUC's Five-Year Review Identification 
Workgroup through the ``Site-of-Service Anomalies'' potentially 
misvalued codes screen in September 2007. The AMA RUC recommended that 
the entire family of services described by CPT codes 11040 through 
11044 and 97597 and 97598 be referred to the CPT Editorial Panel 
because the current descriptors allowed reporting of the codes for a 
bimodal distribution of patients and also to better define the terms 
excision and debridement. These codes were included with many other 
codes under review by the CPT Excision and Debridement Workgroup. CPT 
codes 11010, 11011, 11012, and 11042 through 11047 were reviewed by the 
AMA RUC and CPT codes 97597 and 97598 were reviewed by the HCPAC.
    The code descriptors for CPT codes 11010 (Debridement including 
removal of foreign material at the site of an open fracture and/or an 
open dislocation (e.g., excisional debridement); skin and subcutaneous 
tissues); 11011 (Debridement including removal of foreign material at 
the site of an open fracture and/or an open dislocation (e.g., 
excisional debridement); skin, subcutaneous tissue, muscle fascia, and 
muscle); and 11012 (Debridement including removal of foreign material 
at the site of an open fracture and/or an open dislocation (e.g., 
excisional debridement); skin, subcutaneous tissue, muscle fascia, 
muscle, and bone) were revised to clarify to payors and providers that 
these codes describe debridement of a single traumatic wound caused by 
an open fracture which creates a single exposure, despite the number of 
fractures or dislocations in the same anatomic site. The AMA RUC and 
the specialty society agreed that the revisions made to these 
descriptors were editorial and the current work RVUs for these services 
correctly related to the typical patient and should be maintained, 
recommendations which we have accepted on an interim final basis for CY 
2011.
    The CPT Editorial Panel revised the descriptor for CPT code 11042 
(Debridement subcutaneous tissue (includes epidermis and dermis, if 
performed); first 20 square centimeters or less). As a result, the AMA 
RUC reviewed the specialty-recommended work RVUs for this service, 1.12 
work RVUs (the previous AMA RUC HCPAC recommendation as valued during 
the CY 2005 Five-Year Review of Work), and noted that they were higher 
than the current PFS value for this service (0.80 work RVUs). The AMA 
RUC determined that there was compelling evidence to consider new work 
RVUs for this service. The AMA RUC also reviewed the survey data for 
CPT code 11042 and made slight changes to the pre-, intra-, and post-
service times. This service was compared to the key reference CPT code 
16020 (Dressings and/or debridement of partial-thickness burns, initial 
or subsequent; small (less than 5% total body surface area)) (work RVUs 
= 0.80) and MPC CPT code 56605 (Biopsy of vulva or perineum (separate 
procedure); 1 lesion) (work RVUs = 1.10). Based on these comparisons, 
the AMA RUC agreed that the previous AMA RUC HCPAC recommendation of 
1.12 work RVUs was an appropriate value as it would maintain relativity 
between the key reference code and the surveyed code. The AMA RUC 
recommended work RVUs of 1.12 for CPT code 11042.
    We disagree with the AMA RUC-recommended value for this service and 
are maintaining the current work RVUs of 0.80. We believe the AMA RUC-
recommended value (1.12 work RVUs) was based on the old surveyed value. 
The reference code, CPT code 16020, has more overall time but is valued 
at 0.80 work RVUs. In addition, the reference code has a size 
limitation that varies by individual body size, but the surveyed CPT 
code 11042 has an add-on code (CPT code 11045) for each additional 20 
square centimeters. Therefore, we are not accepting the AMA RUC 
recommendation and are assigning an alternative value of 0.80 work RVUs 
to CPT code 11042 on an interim final basis for CY 2011.
    For CPT code 11045 (Debridement subcutaneous tissue (includes 
epidermis and dermis, if performed); each additional 20 square 
centimeters, or part thereof (List separately in addition to code for 
primary procedure)), which is the add-on code to CPT code 11042, the 
AMA RUC recommended 0.69 work RVUs. This value was obtained by applying 
a 14 percent reduction to the median work value of 0.80 to maintain the 
relativity between CPT codes 11042 and 11045 of the survey data 
collected. Due to the reduction in work RVUs to CPT code 11042 by CMS, 
we reduced the AMA RUC-recommended work RVUs of 0.69 for CPT code 11045 
and assigned 0.33 work RVUs to this service. This value was obtained by 
removing

[[Page 73330]]

the pre- and post-service time from the interim final RVUs of 0.80 for 
the primary procedure (CPT code 11042). Therefore, we are assigning an 
alternative value of 0.33 work RVUs to CPT code 11045 on an interim 
final basis for CY 2011.
    CPT codes 11043 (Debridement, muscle and/or fascia (includes 
epidermis, dermis, and subcutaneous tissue, if performed); first 20 
square centimeters or less) and 11044 (Debridement, bone (includes 
epidermis, dermis, subcutaneous tissue, muscle and/or fascia, if 
performed); first 20 square centimeters or less) were surveyed as 90-
day global codes. However, due to disagreement with the survey 
vignettes and the new global period (90 days), in addition to broad 
variations in surveyed facility length of stay, the AMA RUC requested 
that CMS change the global period to 0 days. CMS agreed and the codes 
were resurveyed as 0-day global codes.
    For CPT code 11043, the AMA RUC recommended 3.00 work RVUs. The AMA 
RUC reviewed the survey data and compared the surveyed code to the key 
reference CPT code 15002 (Surgical preparation or creation of recipient 
site by excision of open wounds, burn eschar, or scar (including 
subcutaneous tissues), or incisional release of scar contracture, 
trunk, arms, le.g.s; first 100 sq cm or 1% of body area of infants and 
children) (work RVUs = 3.65). The AMA RUC noted that the reference code 
had significantly more total service time as compared to the surveyed 
code and that the surveyed code was less intense to perform in 
comparison to the reference code. Based on this comparison, the AMA RUC 
recommended work RVUs of 3.00, the survey 25th percentile for this 
service.
    The AMA RUC-recommended work inputs for this service include less 
clinical time and fewer follow-up E/M visits than are currently 
attributed to the performance of this service; however, the AMA RUC-
recommended work RVU value decreased by only 0.14 RVUs. We disagree 
with the AMA RUC-recommended RVUs for this service and believe 2.00 
work RVUs, the survey low value, reflects a more appropriate decrease 
in work RVU value given the recommended decrease in clinical time and 
follow-up E/M visits. Therefore, we are assigning an alternative value 
of 2.00 work RVUs to CPT code 11043 on an interim final basis for CY 
2011.
    For CPT code 11046 (Debridement, muscle and/or fascia (includes 
epidermis, dermis, and subcutaneous tissue, if performed); each 
additional 20 square centimeters, or part thereof (List separately in 
addition to code for primary procedure)), which is the add-on code to 
CPT code 11043, the RUC recommended 1.29 work RVUs, the survey 25th 
percentile. To maintain consistency and relativity between this add-on 
code and its primary code (CPT code 11043), for which we are 
recommending the survey low value as discussed above, and given the 
time and intensity the AMA RUC recommended to perform this service, we 
disagree with the AMA RUC-recommended work RVUs for this service and 
believe 0.70 work RVUs, the survey low value, are more appropriate. 
Therefore, we are assigning an alternative value of 0.70 work RVUs to 
CPT code 11046 on an interim final basis for CY 2011.
    For CPT code 11044, the AMA RUC recommended 4.56 work RVUs. The AMA 
RUC reviewed the survey data and compared the surveyed code to the 
reference CPT code 15004 (Surgical preparation or creation of recipient 
site by excision of open wounds, burn eschar, or scar (including 
subcutaneous tissues), or incisional release of scar contracture, face, 
scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/
or multiple digits; first 100 sq cm or 1% of body area of infants and 
children) (work RVUs = 4.58). The AMA RUC noted that the reference code 
had the same intra-service time and that the surveyed code and the 
reference code required similar mental effort and judgment to perform. 
Based on this comparison, the AMA RUC recommended work RVUs of 4.56, 
the survey 25th percentile, and believes this value accurately reflects 
the relative physician work to perform this service and maintains 
proper rank order with CPT codes 11042 and 11043. The AMA RUC-
recommended work inputs for this service include less clinical time and 
fewer follow-up E/M visits than are currently attributed to the 
performance of this service; however, the AMA RUC-recommended work RVUs 
increased. We disagree with the AMA RUC-recommended work RVUs for this 
service and believe 3.60 work RVUs, the survey low value, reflect a 
more appropriate decrease in work RVU value given the recommended 
decrease in clinical time and follow-up E/M visits. Therefore, we are 
assigning an alternative value of 3.60 work RVUs to CPT code 11044 on 
an interim final basis for CY 2011.
    For CPT code 11047 (Debridement, bone (includes epidermis, dermis, 
subcutaneous tissue, muscle and/or fascia, if performed); each 
additional 20 square centimeters, or part thereof) the AMA RUC 
recommended 2.00 work RVUs, the survey median value. To maintain 
consistency and relativity between this add-on code and its primary 
code (CPT code 11044), for which we are recommending the survey low 
value as discussed above, and given the time and intensity the AMA RUC 
recommended to perform this service, we disagree with the AMA RUC-
recommended value and believe 1.20 RUVs, the survey low value, are more 
appropriate for this service. Therefore, we are assigning 1.20 work 
RVUs to CPT code 11047 on an interim final basis for CY 2011.
    For CY 2011, the services previously reported by CPT codes 11040 
(Debridement; skin, partial thickness) and 11041 (Debridement; skin, 
full thickness) will now be reported with revised CPT codes 97597 
(Debridement (eg, high pressure waterjet with/without suction, sharp 
selective debridement with scissors, scalpel and forceps), open wound, 
(eg, fibrin, devitalized epidermis and/or dermis, exudate, debris, 
biofilm), including topical application(s), wound assessment, use of a 
whirlpool, when performed and instruction(s) for ongoing care, per 
session, total wound(s) surface area; first 20 square centimeters or 
less) and 97598 (Debridement (eg, high pressure waterjet with/without 
suction, sharp selective debridement with scissors, scalpel and 
forceps), open wound, (e.g., fibrin, devitalized epidermis and/or 
dermis, exudate, debris, biofilm), including topical application(s), 
wound assessment, use of a whirlpool, when performed and instruction(s) 
for ongoing care, per session, total wound(s) surface area; each 
additional 20 square centimeters, or part thereof (List separately in 
addition to code for primary procedure)). The HCPAC recommended 0.54 
work RVUs for CPT code 97597, which is a value between the CY 2010 
values for CPT code 11040 (0.50 work RVUs) and CPT code 97597 (0.58 
work RVUs), which we have accepted on an interim final basis in this 
final rule with comment period for CY 2011. However, the work RVUs for 
this CPT code were further subject to a work budget neutrality 
adjustment, as discussed in section V.C.1.b.(iii) of this final rule 
with comment period.
    For CPT code 97598, the HCPAC recommended 0.40 work RVUs, the 
survey 25th percentile. We disagree with the HCPAC-recommended value 
for this service and, given the similarity of code descriptors between 
the 11000 series and the 97000 series CPT codes, we believe a more 
appropriate value would be 0.25 RVUs, the survey low value, as it is 
more consistent with the work RVU value associated with new add-on CPT 
code 11045, discussed above. We also believe the post-service

[[Page 73331]]

time for CPT code 97598 should be reduced to 0 minutes to coincide with 
the CPT codes in the 11000 series, which have 0 or 1 minute of post-
service time. Therefore, we are assigning an alternative value of 0.25 
work RVUs to CPT code 97598 and reducing the post-service time to 0 
minutes on an interim final basis for CY 2011. However, the work RVUs 
for this CPT code were subject to a work budget neutrality adjustment, 
as discussed in section V.C.1.b.(iii) of this final rule with comment 
period.
(B) Arthrodesis Including Discectomy (CPT Code 22551)
    As a result of CPT code 22554 (Arthrodesis, anterior interbody, 
including disc space preparation, discectomy, osteophytectomy and 
decompression of spinal cord and/or nerve roots; cervical, below C2) 
being reviewed by the AMA RUC because of its identification by the 
Five-Year Review Identification Workgroup ``Codes Reported Together'' 
potentially misvalued codes screen in February 2008, CPT code 22551 
((Arthrodesis, anterior interbody, including disc space preparation, 
discectomy, osteophytectomy and decompression of spinal cord and/or 
ner