Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2011, 40040-40709 [2010-15900]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 75, Number 133 (Tuesday, July 13, 2010)]
[Proposed Rules]
[Pages 40040-40709]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-15900]



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Part II

Book 2 of 2 Books

Pages 40039-40718





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 405, 409, et al.



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

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

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

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

[CMS-1503-P]
RIN 0938-AP79


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

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule addresses proposed changes to the physician 
fee schedule and other Medicare Part B payment policies to ensure that 
our payment systems are updated to reflect changes in medical practice 
and the relative value of services. It also addresses, implements or 
discusses certain provisions of both the Affordable Care Act and the 
Medicare Improvements for Patients and Providers Act of 2008. In 
addition, this proposed rule discusses payments under the Ambulance Fee 
Schedule, Clinical Laboratory Fee Schedule, payments to ESRD 
facilities, and payments for Part B drugs. Finally, the proposed rule 
includes a discussion regarding the Chiropractic Services Demonstration 
program, the Competitive Bidding Program for Durable Medical Equipment 
and Provider and Supplier Enrollment Issues associated with Air 
Ambulances. (See the Table of Contents for a listing of the specific 
issues addressed in this proposed rule.)

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

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

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

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Table of Contents

    To assist readers in referencing sections contained in this 
preamble, we are providing a table of contents. Some of the issues 
discussed in this preamble affect the payment policies, but do not 
require changes to the regulations in the Code of Federal Regulations 
(CFR). Information on the regulation's impact appears throughout the 
preamble, and therefore, is not discussed exclusively in section V. of 
this proposed rule.

I. Background
    A. Development of the Relative Value System

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

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

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

[[Page 40044]]

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

Acronyms

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

AA Anesthesiologist assistant
AACVPR American Association of Cardiovascular and Pulmonary 
Rehabilitation
AANA American Association of Nurse Anesthetists
ABMS American Board of Medical Specialties
ABN Advanced Beneficiary Notice
ACA ``Affordable Care Act''
ACC American College of Cardiology
ACGME Accreditation Council on Graduate Medical Education
ACLS Advanced cardiac life support
ACR American College of Radiology
AED Automated external defibrillator
AFROC Association of Freestanding Radiation Oncology Centers
AHA American Heart Association
AHFS-DI American Hospital Formulary Service--Drug Information
AHRQ [HHS'] Agency for Healthcare Research and Quality
AMA American Medical Association
AMA-DE American Medical Association Drug Evaluations
AMP Average manufacturer price
AO Accreditation organization
AOA American Osteopathic Association
APA American Psychological Association
APTA American Physical Therapy Association
ARRA American Recovery and Reinvestment Act (Pub. L. 111-5)
ASC Ambulatory surgical center
ASP Average sales price
ASRT American Society of Radiologic Technologists
ASTRO American Society for Therapeutic Radiology and Oncology
ATA American Telemedicine Association
AWP Average wholesale price
BBA Balanced Budget Act of 1997 (Pub. L. 105-33)
BBRA [Medicare, Medicaid and State Child Health Insurance Program] 
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection 
Act of 2000 (Pub. L. 106-554)
BLS Basic Life support
BN Budget neutrality
BPM Benefit Policy Manual
CABG Coronary artery bypass graft
CAD Coronary artery disease
CAH Critical access hospital
CAHEA Committee on Allied Health Education and Accreditation
CAP Competitive acquisition program
CBIC Competitive Bidding Implementation Contractor
CBP Competitive Bidding Program
CBSA Core-Based Statistical Area
CF Conversion factor
CfC Conditions for Coverage
CFR Code of Federal Regulations
CKD Chronic kidney disease
CLFS Clinical laboratory fee schedule
CMA California Medical Association
CMHC Community mental health center
CMP Civil money penalty
CMS Centers for Medicare & Medicaid Services
CNS Clinical nurse specialist
CoP Condition of participation
COPD Chronic obstructive pulmonary disease
CORF Comprehensive Outpatient Rehabilitation Facility
COS Cost of service
CPEP Clinical Practice Expert Panel
CPI Consumer Price Index
CPI-U Consumer price index for urban customers
CPR Cardiopulmonary resuscitation
CPT [Physicians'] Current Procedural Terminology (4th Edition, 2002, 
copyrighted by the American Medical Association)
CR Cardiac rehabilitation
CRNA Certified registered nurse anesthetist
CRP Canalith repositioning
CRT Certified respiratory therapist
CSW Clinical social worker
CY Calendar year
DEA Drug Enforcement Agency
DHS Designated health services
DME Durable medical equipment
DMEPOS Durable medical equipment, prosthetics, orthotics, and 
supplies
DOQ Doctor's Office Quality
DOS Date of service
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
DSMT Diabetes self-management training
E/M Evaluation and management
EDI Electronic data interchange
EEG Electroencephalogram
EHR Electronic health record
EKG Electrocardiogram
EMG Electromyogram
EMTALA Emergency Medical Treatment and Active Labor Act
EOG Electro-oculogram
EPO Erythopoeitin
ESRD End-stage renal disease
FAX Facsimile
FDA Food and Drug Administration (HHS)
FFS Fee-for-service
FR Federal Register
GAF Geographic adjustment factor
GAO General Accounting Office
GEM Generating Medicare [Physician Quality Performance Measurement 
Results]
GFR Glomerular filtration rate
GPO Group purchasing organization
GPCI Geographic practice cost index
HAC Hospital-acquired conditions
HBAI Health and behavior assessment and intervention
HCPAC Health Care Professional Advisory Committee
HCPCS Healthcare Common Procedure Coding System
HCRIS Healthcare Cost Report Information System
HDRT High dose radiation therapy
HH PPS Home Health Prospective Payment System
HHA Home health agency
HHRG Home health resource group
HHS [Department of] Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191)
HIT Health information technology
HITECH Health Information Technology for Economic and Clinical 
Health Act (Title IV of Division B of the Recovery Act, together 
with Title XIII of Division A of the Recovery Act)
HITSP Healthcare Information Technology Standards Panel
HIV Human immunodeficiency virus
HOPD Hospital outpatient department
HPSA Health Professional Shortage Area
HRSA Health Resources Services Administration (HHS)
IACS Individuals Access to CMS Systems
ICD International Classification of Diseases

[[Page 40045]]

ICF Intermediate care facilities
ICR Intensive cardiac rehabilitation
ICR Information collection requirement
IDTF Independent diagnostic testing facility
IFC Interim final rule with comment period
IMRT Intensity-Modulated Radiation Therapy
IPPE Initial preventive physical examination
IPPS Inpatient prospective payment system
IRS Internal Revenue Service
ISO Insurance services office
IVD Ischemic Vascular Disease
IVIG Intravenous immune globulin
IWPUT Intra-service work per unit of time
JRCERT Joint Review Committee on Education in Radiologic Technology
KDE Kidney disease education
LCD Local coverage determination
MA Medicare Advantage
MA-PD Medicare Advantage--Prescription Drug Plans
MAV Measure Applicability Validation
MCMP Medicare Care Management Performance
MDRD Modification of Diet in Renal Disease
MedCAC Medicare Evidence Development and Coverage Advisory Committee 
(formerly the Medicare Coverage Advisory Committee (MCAC))
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MIEA-TRHCA Medicare Improvements and Extension Act of 2006 (that is, 
Division B of the Tax Relief and Health Care Act of 2006 (TRHCA)) 
(Pub. L. 109-432)
MIPPA Medicare Improvements for Patients and Providers Act of 2008 
(Pub. L. 110-275)
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Pub. L. 108-173)
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 
110-173)
MNT Medical nutrition therapy
MOC Maintenance of certification
MP Malpractice
MPPR Multiple procedure payment reduction
MQSA Mammography Quality Standards Act of 1992 (Pub. L. 102-539)
MRA Magnetic resonance angiography
MRI Magnetic resonance imaging
MSA Metropolitan statistical area
NBRC National Board for Respiratory Care
NCD National Coverage Determination
NCQDIS National Coalition of Quality Diagnostic Imaging Services
NDC National drug code
NF Nursing facility
NISTA National Institute of Standards and Technology Act
NP Nurse practitioner
NPI National Provider Identifier
NPP Nonphysician practitioner
NQF National Quality Forum
NRC Nuclear Regulatory Commission
OACT [CMS'] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act
ODF Open door forum
OGPE Oxygen generating portable equipment
OIG Office of Inspector General
OMB Office of Management and Budget
ONC [HHS'] Office of the National Coordinator for Health IT
OPPS Outpatient prospective payment system
OSCAR Online Survey and Certification and Reporting
PA Physician assistant
PAT Performance assessment tool
PC Professional component
PCI Percutaneous coronary intervention
PDP Prescription drug plan
PE Practice expense
PE/HR Practice expense per hour
PEAC Practice Expense Advisory Committee
PERC Practice Expense Review Committee
PFS Physician Fee Schedule
PGP [Medicare] Physician Group Practice
PHI Protected health information
PHP Partial hospitalization program
PIM [Medicare] Program Integrity Manual
PLI Professional liability insurance
POA Present on admission
POC Plan of care
PPI Producer price index
PPIS Physician Practice Information Survey
PPS Prospective payment system
PPTA Plasma Protein Therapeutics Association
PQRI Physician Quality Reporting Initiative
PR Pulmonary rehabilitation
PRA Paperwork Reduction Act
PSA Physician scarcity areas
PT Physical therapy
PTCA Percutaneous transluminal coronary angioplasty
PVBP Physician and Other Health Professional Value-Based Purchasing 
Workgroup
RA Radiology assistant
RBMA Radiology Business Management Association
RFA Regulatory Flexibility Act
RHC Rural health clinic
RIA Regulatory impact analysis
RN Registered nurse
RNAC Reasonable net acquisition cost
RPA Radiology practitioner assistant
RRT Registered respiratory therapist
RUC [AMA's Specialty Society] Relative (Value) Update Committee
RVU Relative value unit
SBA Small Business Administration
SGR Sustainable growth rate
SLP Speech-language pathology
SMS [AMA's] Socioeconomic Monitoring System
SNF Skilled nursing facility
SOR System of record
SRS Stereotactic radiosurgery
STARS Services Tracking and Reporting System
TC Technical Component
TIN Tax identification number
TRHCA Tax Relief and Health Care Act of 2006 (Pub. L. 109-432)
TTO Transtracheal oxygen
UPMC University of Pittsburgh Medical Center
USDE United States Department of Education
USP-DI United States Pharmacopoeia-Drug Information
VBP Value-based purchasing
WAMP Widely available market price

I. Background

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

A. Development of the Relative Value System

1. Work RVUs
    The concepts and methodology underlying the PFS were enacted as 
part of the Omnibus Budget Reconciliation Act (OBRA) of 1989 (Pub. L. 
101-239), and OBRA 1990, (Pub. L. 101-508). The final rule, published 
on November 25, 1991 (56 FR 59502), set forth the fee schedule for 
payment for physicians' services beginning January 1, 1992. Initially, 
only the physician work RVUs were resource-based, and the PE and 
malpractice RVUs were based on average allowable charges.
    The physician work RVUs established for the implementation of the 
fee schedule in January 1992 were developed with extensive input from 
the physician community. A research team at the Harvard School of 
Public Health developed the original physician work RVUs for most codes 
in a cooperative agreement with the Department of Health and Human 
Services (DHHS). In constructing the code-specific vignettes for the 
original physician work RVUs, Harvard worked with panels of experts, 
both inside and outside the Federal government, and obtained input from 
numerous physician specialty groups.
    Section 1848(b)(2)(B) of the Act specifies that the RVUs for 
anesthesia services are based on RVUs from a uniform relative value 
guide, with appropriate adjustment of the

[[Page 40046]]

conversion factor (CF), in a manner to assure that fee schedule amounts 
for anesthesia services are consistent with those for other services of 
comparable value. We established a separate CF for anesthesia services, 
and we continue to utilize time units as a factor in determining 
payment for these services. As a result, there is a separate payment 
methodology for anesthesia services.
    We establish physician work RVUs for new and revised codes based on 
our review of recommendations received from the American Medical 
Association's (AMA) Specialty Society Relative Value Update Committee 
(RUC).
2. Practice Expense Relative Value Units (PE RVUs)
    Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 
103-432), enacted on October 31, 1994, amended section 
1848(c)(2)(C)(ii) of the Act and required us to develop resource-based 
PE RVUs for each physician's service beginning in 1998. We were to 
consider general categories of expenses (such as office rent and wages 
of personnel, but excluding malpractice expenses) comprising PEs.
    Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 
105-33), amended section 1848(c)(2)(C)(ii) of the Act to delay 
implementation of the resource-based PE RVU system until January 1, 
1999. In addition, section 4505(b) of the BBA provided for a 4-year 
transition period from charge-based PE RVUs to resource-based RVUs.
    We established the resource-based PE RVUs for each physicians' 
service in a final rule, published November 2, 1998 (63 FR 58814), 
effective for services furnished in 1999. Based on the requirement to 
transition to a resource-based system for PE over a 4-year period, 
resource-based PE RVUs did not become fully effective until 2002.
    This resource-based system was based on two significant sources of 
actual PE data: the Clinical Practice Expert Panel (CPEP) data; and the 
AMA's Socioeconomic Monitoring System (SMS) data. The CPEP data were 
collected from panels of physicians, practice administrators, and 
nonphysicians (for example, registered nurses (RNs)) nominated by 
physician specialty societies and other groups. The CPEP panels 
identified the direct inputs required for each physician's service in 
both the office setting and out-of-office setting. We have since 
refined and revised these inputs based on recommendations from the RUC. 
The AMA's SMS data provided aggregate specialty-specific information on 
hours worked and PEs.
    Separate PE RVUs are established for procedures that can be 
performed in both a nonfacility setting, such as a physician's office, 
and a facility setting, such as a hospital outpatient department. The 
difference between the facility and nonfacility RVUs reflects the fact 
that a facility typically receives separate payment from Medicare for 
its costs of providing the service, apart from payment under the PFS. 
The nonfacility RVUs reflect all of the direct and indirect PEs of 
providing a particular service.
    Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113) directed the Secretary of Health and Human Services 
(the Secretary) to establish a process under which we accept and use, 
to the maximum extent practicable and consistent with sound data 
practices, data collected or developed by entities and organizations to 
supplement the data we normally collect in determining the PE 
component. On May 3, 2000, we published the interim final rule (65 FR 
25664) that set forth the criteria for the submission of these 
supplemental PE survey data. The criteria were modified in response to 
comments received, and published in the Federal Register (65 FR 65376) 
as part of a November 1, 2000 final rule. The PFS final rules published 
in 2001 and 2003, respectively, (66 FR 55246 and 68 FR 63196) extended 
the period during which we would accept these supplemental data through 
March 1, 2005.
    In the calendar year (CY) 2007 PFS final rule with comment period 
(71 FR 69624), we revised the methodology for calculating direct PE 
RVUs from the top-down to the bottom-up methodology beginning in CY 
2007 and provided for a 4-year transition for the new PE RVUs under 
this new methodology. This transition ended in CY 2010 and direct PE 
RVUs are calculated in CY 2011 using this methodology, unless otherwise 
noted.
    In the CY 2010 PFS final rule with comment period, we updated the 
PE/hour (HR) data that are used in the calculation of PE RVUs for most 
specialties (74 FR 61749). For this update, we used the Physician 
Practice Information Survey (PPIS) conducted by the AMA. The PPIS is a 
multispecialty, nationally representative, PE survey of both physicians 
and nonphysician practitioners (NPPs) using a survey instrument and 
methods highly consistent with those of the SMS and the supplemental 
surveys used prior to CY 2010. We note that in CY 2010, for oncology, 
clinical laboratories, and independent diagnostic testing facilities 
(IDTFs), we continued to use the supplemental survey data to determine 
PE/HR values (74 FR 61752).
3. Resource-Based Malpractice (MP) RVUs
    Section 4505(f) of the BBA amended section 1848(c) of the Act 
requiring us to implement resource-based malpractice (MP) RVUs for 
services furnished on or after 2000. The resource-based MP RVUs were 
implemented in the PFS final rule published November 2, 1999 (64 FR 
59380). The MP RVUs were based on malpractice insurance premium data 
collected from commercial and physician-owned insurers from all the 
States, the District of Columbia, and Puerto Rico.
4. Refinements to the RVUs
    Section 1848(c)(2)(B)(i) of the Act requires that we review all 
RVUs no less often than every 5 years. The first Five-Year Review of 
the physician work RVUs was published on November 22, 1996 (61 FR 
59489) and was effective in 1997. The second Five-Year Review was 
published in the CY 2002 PFS final rule with comment period (66 FR 
55246) and was effective in 2002. The third Five-Year Review of 
physician work RVUs was published in the CY 2007 PFS final rule with 
comment period (71 FR 69624) and was effective on January 1, 2007. 
(Note: Additional codes relating to the third Five-Year Review of 
physician work RVUs were addressed in the CY 2008 PFS final rule with 
comment period (72 FR 66360).) The fourth Five-Year Review of physician 
work RVUs was initiated in the CY 2010 PFS final rule with comment 
period where we solicited candidate codes from the public for this 
review (74 FR 61941). Changes due to the fourth Five-Year Review of 
physician work RVUs will be effective January 1, 2012.
    In 1999, the AMA's RUC established the Practice Expense Advisory 
Committee (PEAC) for the purpose of refining the direct PE inputs. 
Through March 2004, the PEAC provided recommendations to CMS for over 
7,600 codes (all but a few hundred of the codes currently listed in the 
AMA's Current Procedural Terminology (CPT) codes). As part of the CY 
2007 PFS final rule with comment period (71 FR 69624), we implemented a 
new bottom-up methodology for determining resource-based PE RVUs and 
transitioned the new methodology over a 4-year period. A comprehensive 
review of PE was undertaken prior to the 4-year transition period for 
the new PE methodology from the top-down to the bottom-up methodology, 
and this transition was completed in CY 2010. In

[[Page 40047]]

CY 2010, we also incorporated the new PPIS data to update the 
specialty-specific PE/HR data used to develop PE RVUs. Therefore, the 
next Five-Year Review of PE RVUs will be addressed in CY 2014.
    In the CY 2005 PFS final rule with comment period (69 FR 66236), we 
implemented the first Five-Year Review of the MP RVUs (69 FR 66263). 
Minor modifications to the methodology were addressed in the CY 2006 
PFS final rule with comment period (70 FR 70153). The second Five-Year 
Review and update of resource-based malpractice RVUs was published in 
the CY 2010 PFS final rule with comment period (74 FR 61758) and was 
effective in CY 2010.
5. Adjustments to RVUs Are Budget Neutral
    Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments 
in RVUs for a year may not cause total PFS payments to differ by more 
than $20 million from what they would have been if the adjustments were 
not made. In accordance with section 1848(c)(2)(B)(ii)(II) of the Act, 
if revisions to the RVUs cause expenditures to change by more than $20 
million, we make adjustments to ensure that expenditures do not 
increase or decrease by more than $20 million.
    As explained in the CY 2009 PFS final rule with comment period 
(73FR 69730), as required by section 133(b) of the Medicare 
Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 
110-275), the separate budget neutrality (BN) adjustor resulting from 
the third Five-Year Review of physician work RVUs is being applied to 
the CF beginning in CY 2009 rather than to the work RVUs.
    For CY 2010, we adopted a number of new payment policies for which 
we estimated the potential for a redistributive effect under the PFS, 
including the use of the new PPIS data to develop the specialty-
specific PE/HR used for the PE RVUs (74 FR 61749 through 61752) and the 
elimination of the reporting of all CPT consultation codes in order to 
allow for correct and consistent coding and appropriate payment for 
evaluation and management services under the PFS (74 FR 61767 through 
61775). We recognize that clinical experience with these new PFS 
policies has been growing over the first 6 months of CY 2010 and, as we 
seek to improve future PFS payment accuracy for services, we are 
interested in public comments on the perspectives of physicians and 
nonphysician practitioners caring for Medicare beneficiaries under the 
current PFS coding and payment methodologies for physicians' services.

B. Components of the Fee Schedule Payment Amounts

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

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

C. Most Recent Changes to the Fee Schedule

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

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

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

1. Overview
    Practice expense (PE) is the portion of the resources used in 
furnishing the service that reflects the general categories of 
physician and practitioner expenses, such as office rent and personnel 
wages but excluding malpractice expenses, as specified in section 
1848(c)(1)(B) of the Act. Section 121 of the Social Security Amendments 
of 1994 (Pub. L. 103-432), enacted on October 31, 1994, required CMS to 
develop a methodology for a resource-based system for determining PE 
RVUs for each physician's service. We develop PE RVUs by looking at the 
direct and indirect physician practice resources involved in furnishing 
each service. Direct expense categories include clinical labor, medical 
supplies and medical equipment. Indirect expenses include 
administrative labor, office expense, and all other expenses. The 
sections that follow provide more

[[Page 40048]]

detailed information about the methodology for translating the 
resources involved in furnishing each service into service-specific PE 
RVUs. In addition, we note that section 1848(c)(2)(B)(ii)(II) of the 
Act provides that adjustments in RVUs for a year may not cause total 
PFS payments to differ by more than $20 million from what they would 
have been if the adjustments were not made. Therefore, if revisions to 
the RVUs cause expenditures to change by more than $20 million, we make 
adjustments to ensure that expenditures do not increase or decrease by 
more than $20 million. We refer readers to the CY 2010 PFS final rule 
with comment period (74 FR 61743 through 61748) for a more detailed 
history of the PE methodology.
2. Practice Expense Methodology
a. Direct Practice Expense
    We use a bottom-up approach to determine the direct PE by adding 
the costs of the resources (that is, the clinical staff, equipment, and 
supplies) typically required to provide each service. The costs of the 
resources are calculated using the refined direct PE inputs assigned to 
each CPT code in our PE database, which are based on our review of 
recommendations received from the American Medical Association's 
(AMA's) Relative Value Update Committee (RUC). For a detailed 
explanation of the bottom-up direct PE methodology, including examples, 
we refer readers to the Five-Year Review of Work Relative Value Units 
Under the PFS and Proposed Changes to the Practice Expense Methodology 
proposed notice (71 FR 37242) and the CY 2007 PFS final rule with 
comment period (71 FR 69629).
b. Indirect Practice Expense per Hour Data
    We use survey data on indirect practice expenses incurred per hour 
worked (PE/HR) in developing the indirect portion of the PE RVUs. Prior 
to CY 2010, we primarily used the practice expense per hour (PE/HR) by 
specialty that was obtained from the AMA's Socioeconomic Monitoring 
Surveys (SMS). These surveys were conducted from 1995 through 1999. For 
several specialties that collected additional PE/HR data through 
supplemental surveys, we incorporated these data in developing the PE/
HR values used annually.
    While the SMS was not specifically designed for the purpose of 
establishing PE RVUs, we found these data to be the best available at 
the time. The SMS was a multispecialty survey effort conducted using a 
consistent survey instrument and method across specialties. The survey 
sample was randomly drawn from the AMA Physician Masterfile to ensure 
national representativeness. The AMA discontinued the SMS survey in 
1999. As required by the Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113), we also established a process by which specialty 
groups could submit supplemental PE data. In the May 3, 2000 Federal 
Register, we issued the Medicare Program; Criteria for Submitting 
Supplemental Practice Expense Survey Data interim final rule (65 FR 
25664) in which we established criteria for acceptance of supplemental 
data. The criteria were modified in the CY 2001 and CY 2003 PFS final 
rules with comment period (65 FR 65380 and 67 FR 79971, respectively). 
In addition to the SMS, we previously used supplemental survey data for 
the following specialties: Cardiology; dermatology; gastroenterology; 
radiology; cardiothoracic surgery; vascular surgery; physical and 
occupational therapy; independent laboratories; allergy/immunology; 
independent diagnostic testing facilities (IDTFs); radiation oncology; 
medical oncology; and urology.
    Because the SMS data and the supplemental survey data were from 
different time periods, we historically inflated them by the Medicare 
Economic Index (MEI) to put them on as comparable a time basis as we 
could when calculating the PE RVUs. This MEI proxy was necessary in the 
past due to the lack of contemporaneous, consistently collected, and 
comprehensive multispecialty survey data.
    The AMA administered a new survey in CY 2007 and CY 2008, the 
Physician Practice Expense Information Survey (PPIS), which was 
expanded (relative to the SMS) to include nonphysician practitioners 
(NPPs) paid under the PFS. The PPIS was designed to update the 
specialty-specific PE/HR data used to develop PE RVUs. The AMA and the 
CMS contractor, The Lewin Group (Lewin), analyzed the PPIS data and 
calculated the PE/HR for physician and nonphysician specialties, 
respectively. The AMA's summary worksheets and Lewin's final report are 
available on the CMS Web site at https://www.cms.gov/PhysicianFeeSched/PFSFRN/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=4&sortOrder=descending&itemID=CMS1223902&intNumPerPage=10. 
(See downloads labeled AMA PPIS Worksheets 1-3 and Physician Practice 
Expense non MDDO Final Report)
    The PPIS is a multispecialty, nationally representative, PE survey 
of both physicians and NPPs using a consistent survey instrument and 
methods highly consistent with those used for the SMS and the 
supplemental surveys. The PPIS gathered information from 3,656 
respondents across 51 physician specialty and healthcare professional 
groups.
    We believe the PPIS is the most comprehensive source of PE survey 
information available to date. Therefore, we used the PPIS data to 
update the PE/HR data for almost all of the Medicare-recognized 
specialties that participated in the survey for the CY 2010 PFS. When 
we changed over to the PPIS data beginning in CY 2010, we did not 
change the PE RVU methodology itself or the manner in which the PE/HR 
data are used in that methodology. We only updated the PE/HR data based 
on the new survey. Furthermore, as we explained in the CY 2010 PFS 
final rule with comment period (74 FR 61751), because of the magnitude 
of payment reductions for some specialties resulting from the use of 
the PPIS data, we finalized a 4-year transition (75/25 for CY 2010, 50/
50 for CY 2011, 25/75 for CY 2012, and 0/100 for CY 2013) from the 
previous PE RVUs to the PE RVUs developed using the new PPIS data.
    Section 303 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173) added section 
1848(c)(2)(H)(i) of the Act, which requires us to use the medical 
oncology supplemental survey data submitted in 2003 for oncology drug 
administration services. Therefore, the PE/HR for medical oncology, 
hematology, and hematology/oncology reflects the continued use of these 
supplemental survey data.
    We do not use the PPIS data for reproductive endocrinology, sleep 
medicine, and spine surgery since these specialties are not separately 
recognized by Medicare, and we do not know how to blend these data with 
Medicare-recognized specialty data.
    Supplemental survey data on independent labs, from the College of 
American Pathologists, were implemented for payments in CY 2005. 
Supplemental survey data from the National Coalition of Quality 
Diagnostic Imaging Services (NCQDIS), representing IDTFs, were blended 
with supplementary survey data from the American College of Radiology 
(ACR