Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2012, 42772-42947 [2011-16972]

Agencies

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

[Federal Register Volume 76, Number 138 (Tuesday, July 19, 2011)]
[Proposed Rules]
[Pages 42772-42947]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-16972]



[[Page 42771]]

Vol. 76

Tuesday,

No. 138

July 19, 2011

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 410, 414, 415 et al.





 Medicare Program; Payment Policies Under the Physician Fee Schedule 
and Other Revisions to Part B for CY 2012; Proposed Rule

Federal Register / Vol. 76, No. 138 / Tuesday, July 19, 2011 / 
Proposed Rules

[[Page 42772]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 414, 415, and 495

[CMS-1524-P]
RIN 0938-AQ25


Medicare Program; Payment Policies Under the Physician Fee 
Schedule and Other Revisions to Part B for CY 2012

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule addresses changes to the physician fee 
schedule and other Medicare Part B payment policies to ensure that our 
payment systems are updated to reflect changes in medical practice and 
the relative value of services. It also addresses, implements or 
discusses certain provisions of the Patient Protection and Affordable 
Care Act, as amended by the Health Care and Education Reconciliation 
Act of 2010 (collectively known as the Affordable Care Act) and the 
Medicare Improvements for Patients and Providers Act of 2008. In 
addition, this proposed rule discusses payments for Part B drugs; 
Physician Quality Reporting System; the Electronic Prescribing (eRx) 
Incentive Program; the Physician Resource-Use Feedback Program and the 
value modifier; productivity adjustment for ambulatory surgical center 
payment system and the ambulance, clinical laboratory, and durable 
medical equipment prosthetics orthotics and supplies (DMEPOS) fee 
schedules; and other Part B related issues. (See the Table of Contents 
for a listing of the specific issues addressed in this proposed rule.)

DATES: Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on August 30, 2011.

ADDRESSES: In commenting, please refer to file code CMS-1524-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-1524-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-1524-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) 786-1066 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:
    Ryan Howe, (410) 786-3355, for issues related to the physician fee 
schedule practice expense methodology, direct practice expense inputs, 
and telehealth services.
    Elizabeth Truong, (410) 786-6005, or Sara Vitolo, (410) 786-5714, 
for issues related to potentially misvalued services.
    Ken Marsalek, (410) 786-4502, for issues related the multiple 
procedure payment reduction and pathology services.
    Sara Vitolo, (410) 786-5714, for issues related to malpractice 
RVUs.
    Michael Moore, (410) 786-6830, for issues related to geographic 
practice cost indices.
    Elizabeth Truong, (410) 786-6005, for issues related to the 
sustainable growth rate, or the anesthesia or physician fee schedule 
conversion factors.
    Bonny Dahm, (410) 786-4006, for issues related to payment for 
covered outpatient drugs and biologicals.
    Claudia Lamm, (410) 786-3421, for issues related to the 
chiropractic services demonstration budget neutrality issue.
    Jamie Hermansen, (410) 786-2064, or Stephanie Frilling, (410) 786-
4507 for issues related to the annual wellness visit.
    Christine Estella, (410) 786-0485, for issues related to the 
physician quality reporting system, incentives for Electronic 
Prescribing (eRx) and Physician Compare.
    Gift Tee, (410) 786-9316, for issues related to the Physician 
Resource Use Feedback Program and physician value modifier.
    Stephanie Frilling, (410) 786-4507 for issues related to the 3-day 
Payment Window.
    Pam West, (410) 786-2302, for issues related to the technical 
corrections.
    Rebecca Cole or Erin Smith, (410) 786-4497, for issues related to 
physician payment not previously identified.

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 regulations.gov 
Web site (https://www.regulations.gov) as soon as possible after they 
have been received: 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.

[[Page 42773]]

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 VII. 
of this proposed rule.

I. Background
    A. Development of the Relative Value System
    1. Work RVUs
    2. Practice Expense Relative Value Units (PE RVUs)
    3. Resource-Based Malpractice RVUs
    4. Refinements to the RVUs
    5. Application of Budget Neutrality to Adjustments of RVUs
    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
    (1) Direct Costs
    (2) Indirect Costs
    d. Facility and Nonfacility Costs
    e. Services With Technical Components (TCs) and Professional 
Components (PCs)
    f. 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. Changes to Direct PE Inputs
    a. Inverted Equipment Minutes
    b. Labor and Supply Input Duplication
    c. AMA RUC Recommendations for Moderation Sedation Direct PE 
Inputs
    d. Updates to Price and Useful Life for Existing Direct Inputs
    4. Development of Code-Specific PE RVUs
    5. Physician Time for Select Services
    B. 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. Consolidating Reviews of Potentially Misvalued Codes
    4. Proposed Public Nomination Process
    5. CY 2012 Identification and Review of Potentially Misvalued 
Services
    a. Code Lists
    b. Specific Codes
    (1) Codes Potentially Requiring Updates to Direct PE Inputs
    (2) Codes Without Direct Practice Expense Inputs in the Non-
Facility Setting
    (3) Codes Potentially Requiring Updates to Physician Work
    6. Code-Specific Issues
    a. CY 2012 Codes With Site-of-Service Anomalies
    (1) Background
    (2) Revised Work RVUs for Codes With Site-of-Service Anomalies
    (A) Foot Arthrodesis
    (B) Submandibular Gland Excision
    (C) Urological Procedures
    (D) Epidural Lysis
    (E) Intrathecal Epidural Catheters and Pumps
    (F) Neurostimulators
    (G) Repair of Eye Wound
    b. Payment for Bone Density Tests
    C. Expanding the Multiple Procedure Payment Reduction (MPPR) 
Policy
    1. Background
    2. CY 2012 Expansion of the MPPR Policy to the Professional 
Component of Advance Imaging Services
    3. Further Expansion of the MPPR Under Consideration for Future 
Year
    D. Malpractice RVUs
    1. Overview of the Methodology for Calculation of Malpractice 
RVUs
    2. Proposed Revisions to Malpractice RVUs for Certain 
Cardiothoracic Surgery Services
    E. Geographic Practice Cost Indices (GPCIs)
    1. Background
    2. Proposed GPCI Revisions for CY 2012
    a. Physician Work GPCIs
    b. Practice Expense GPCIs
    (1) Affordable Care Act Analysis and Revisions for PE GPCIs
    (A) General Analysis for the CY 2012 PE GPCIs
    (B) Analysis of ACS Rental Data
    (C) Employee Wage Analysis
    (D) Purchased Services Analysis
    (E) Determining the PE GPCI Cost Share Weights
    (i) Practice Expense
    (ii) Employee Compensation
    (iii) Office Rent
    (iv) Purchased Services
    (v) Equipment, Supplies, and Other Misc Expenses
    (vi) Physician Work and Malpractice GPCIs
    (F) PE GPCI Floor for Frontier States
    (2) Summary of CY 2012 PE Proposal
    c. Malpractice GPCIs
    3. Payment Localities
    4. Report From the Institute of Medicine
III. 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 2012
    1. Smoking Cessation Services
    2. Critical Care Services
    3. Domiciliary or Rest Home Evaluation and Management Services
    4. Genetic Counseling Services
    5. Online Evaluation and Management Services
    6. Data Collection Services
    7. Audiology Services
    D. The Process for Adding HCPCS Codes as Medicare Telehealth 
Services
    E. Telehealth Consultations in Emergency Departments
IV. Other Provisions of the Proposed Regulation
    A. Part B Drug Payment: Average Sales Price (ASP) Issues
    1. Widely Available Market Price (WAMP)/Average Manufacturer 
Price (AMP)
    2. AMP Threshold and Price Substitutions
    a. AMP Threshold
    b. AMP Price Substitution
    (1) Inspector General Studies
    (2) Proposal
    (3) Timeframe for and Duration of Price Substitutions
    3. ASP Reporting Update
    a. ASP Reporting Template Update
    b. Reporting of ASP Units and Sales Volume for Certain Products
    B. Discussion of Budget Neutrality for the Chiropractic Services 
Demonstration
    C. Proposed Productivity Adjustment for the Ambulatory Surgical 
Center Payment System, and the Ambulance, Clinical Laboratory and 
DMEPOS Fee Schedules
    D. Section 105: Extension of Payment for Technical Component of 
Certain Physician Pathology Services
    1. Background and Statutory Authority
    2. Proposed Revisions to Payment for TC of Certain Physician 
Pathology Services
    E. Section 4103 of the Affordable Care Act: Medicare Coverage 
and Payment of the Annual Wellness Visit Providing aPersonalized 
Prevention Plan Covered Under Medicare Part B
    1. Incorporation of a Health Risk Assessment as Part of the 
Annual Wellness Visit
    a. Background and Statutory Authority--Medicare Part B Coverage 
of an Annual Wellness Visit Providing Personalized Prevention Plan 
Services
    b. Implementation
    (1) Definition of a ``Health Risk Assessment''
    (2) Proposed Changes to the Definitions of First Annual Wellness 
Visit and Subsequent Annual Wellness Visit
    2. The Addition of a Health Risk Assessment as a Required 
Element for the Annual Wellness Visit Beginning in 2012
    a. Payment for AWV Services With the Inclusion of an HRA Element
    F. Quality Reporting Initiatives
    1. Physician Payment, Efficiency, and Quality Improvements--
Physician Quality Reporting System
    a. Program Background and Statutory Authority
    b. Methods of Participation
    (1) Individual Eligible Professionals
    (2) Group Practices
    (A) Background and Authority
    (B) Proposed Definition of Group Practice
    (C) Proposed Process for Physician Group Practices to 
Participate as Group Practices

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    c. Proposed Reporting Period
    d. Proposed Reporting Mechanisms--Individual Eligible 
Professionals
    (1) Claims-Based Reporting
    (2) Registry-Based Reporting
    (A) Proposed Requirements for the Registry-Based Reporting 
Mechanism--Individual Eligible Professionals
    (B) 2012 Proposed Qualification Requirements for Registries
    (3) EHR-Based Reporting
    (A) Direct EHRs
    (i) Proposed Requirements for the Direct EHR-Based Reporting 
Mechanism--Individual Eligible Professionals
    (ii) 2012 Proposed Qualification Requirements for Direct EHRs
    (B) EHR Data Submission Vendors
    (i) 2012 Proposed Qualification Requirements for EHR Data 
Submission Vendors
    (C) Proposed Qualification Requirements for EHR Direct and Data 
Submission Vendors and Their Products for the 2013 Physician Quality 
Reporting System
    e. Incentive Payments for the 2012 Physician Quality Reporting 
System
    (1) Proposed Criteria for Satisfactory Reporting of Individual 
Quality Measures for Individual Eligible Professionals via Claims
    (2) Proposed 2012 Criteria for Satisfactory Reporting of 
Individual Quality Measures for Individual Eligible Professionals 
via Registry
    (3) Proposed Criteria for Satisfactory Reporting of Individual 
Quality Measures for Individual Eligible Professionals via EHR
    (4) Proposed Criteria for Satisfactory Reporting of Measures 
Groups via Claims--Individual Eligible Professionals
    (5) Proposed 2012 Criteria for Satisfactory Reporting of 
Measures Groups via Registry--Individual Eligible Professionals
    (6) Proposed 2012 Criteria for Satisfactory Reporting on 
Physician Quality Reporting System Measures by Group Practices Under 
the GPRO
    f. 2012 Physician Quality Reporting System Measures
    (1) Statutory Requirements for the Selection of Proposed 2012 
Physician Quality Reporting System Measures
    (2) Other Considerations for the Selection of Proposed 2012 
Physician Quality Reporting System Measures
    (3) Proposed 2012 Physician Quality Reporting System Individual 
Measures
    (A) Proposed 2012 Physician Quality Reporting System Core 
Measures Available for Claims, Registry, and/or EHR-Based Reporting
    (B) Proposed 2012 Physician Quality Reporting System Individual 
Measures for Claims and Registry Reporting
    (C) Proposed 2012 Measures Available for EHR-Based Reporting
    (4) 2012 Physician Quality Reporting System Measures Groups
    (5) Proposed 2012 Physician Quality Reporting System Quality 
Measures for Group Practices Selected To Participate in the GPRO 
(GPRO)
    g. Maintenance of Certification Program Incentive
    h. Feedback Reports
    i. Informal Review
    j. Future Payment Adjustments for the Physician Quality 
Reporting System
    2. Incentives and Payment Adjustments for Electronic Prescribing 
(eRx)--The Electronic Prescribing Incentive Program
    a. Program Background and Statutory Authority
    b. Eligibility
    (1) Individual Eligible Professionals
    (A) Definition of Eligible Professional
    (2) Group practices
    (A) Proposed Definition of ``Group Practice''
    (B) Proposed Process To Participate in the eRx Incentive 
Program--eRx GPRO
    c. Proposed Reporting Periods
    (1) Proposed Reporting Periods for the 2012 and 2013 eRx 
Incentives
    (2) Proposed Reporting Periods for the 2013 and 2014 eRx Payment 
Adjustments
    d. Proposed Criteria for Determining Successful Electronic 
Prescribers
    (1) Reporting the Electronic Prescribing Quality Measure
    (2) The Reporting Denominator for the Electronic Prescribing 
Measure
    (3) The Numerator for the Electronic Prescribing Measure
    e. Required Functionalities and Part D Electronic Prescribing 
Standards
    (1) ``Qualified'' Electronic Prescribing System
    (2) Part D Electronic Prescribing Standards
    f. Proposed Reporting Mechanisms for the 2012 and 2013 Reporting 
Periods
    (1) Claims-Based Reporting
    (2) Registry-Based Reporting
    (3) EHR-Based Reporting
    g. The 2012 and 2013 eRx Incentives
    (1) Applicability of 2012 and 2013 eRx Incentives for Eligible 
Professionals and eRx GPROs
    (2) Proposed Reporting Criteria for Being a Successful 
Electronic for the 2012 and 2013 eRx Incentives--Individual Eligible 
Professionals
    (3) Proposed Criteria for Being a Successful Electronic 
Prescriber 2012 and 2013 eRx Incentives--Group Practices
    (4) No Double Payments
    h. The 2013 and 2014 Electronic Prescribing Payment Adjustments
    (1) Proposed Limitations to the 2013 and 2014 eRx Payment 
Adjustments--Individual Eligible Professionals
    (2) Proposed Requirements for the 2013 and 2014 eRx Payment 
Adjustments--Individual Eligible Professionals
    (3) Proposed Requirements for the 2013 and 2014 eRx Payment 
Adjustments--Group Practices
    (4) Significant Hardship Exemptions
    (A) Proposed Significant Hardship Exemptions
    (i) Inability to Electronically Prescribe Due to Local, State, 
or Federal Law or Regulation
    (ii) Eligible Professionals Who Prescribe Fewer Than 100 
Prescriptions During a 6-Month, Payment Adjustment Reporting Period
    (B) Process for Submitting Significant Hardship Exemptions--
Individual Eligible Professionals
    G. Physician Compare Web Site
    1. Background and Statutory Authority
    2. Proposed Plans
    H. Medicare EHR Incentive Program for Eligible Professionals for 
the 2012 Payment Year
    1. Background
    2. The Proposed Physician Quality Reporting System-Medicare EHR 
Incentive Pilot
    a. EHR Data Submission Vendor-Based Reporting Option
    b. EHR-Based Reporting Option
    3. Method for EPs To Indicate Election To Participate in the 
Physician Quality Reporting System-Medicare EHR Incentive Pilot for 
Payment Year 2012
    I. Improvements to the Physician Feedback Program and 
Establishment of the Value-Based Payment Modifier (Effect of 
Sections 3003 and 3007 of the Affordable Care Act on the Program)
    1. Overview
    2. Background
    3. Future Considerations for Phase III Physician Feedback 
Program
    a. Phase III Physician Feedback Reports (Fall 2011) Feedback 
Program
    (1) Physician Group Reports
    (2) Reports to Individual Physicians
    b. Refinement of the Physician Feedback Program in 2011: 
Individual Physicians/Medical Group Practices/Specialties
    c. Beyond 2011: Future Scale Up and Dissemination for Increased 
Physician Feedback Reporting
    4. The Value-Based Payment Modifier: Section 3007 of the 
Affordable Care Act
    a. Measures of Quality of Care and Costs
    (1) Quality of Care Measures
    (A) Proposed Quality of Care Measures for the Value-Modifier
    (B) Potential Quality of Care Measures for Additional Dimensions 
of Care in the Value Modifier
    (i) Outcome Measures
    (ii) Care Coordination/Transition Measures
    (iii) Patient Safety, Patient Experience and Functional Status
    (2) Cost Measures
    (A) Proposed Cost Measures for the Value Modifier
    (B) Potential Cost Measures for Future Use in the Value Modifier
    b. Assessing Physician Performance and Applying the Value 
Modifier
    c. Dates for Implementation of the Value Modifier
    d. Initial Performance Period
    e. Other Issues
    (1) Systems-Based Care
    (2) Special Circumstances for Physicians in Rural Areas and 
Other Underserved Communities
    J. Bundling of Payments for Services Provided to Outpatients Who 
Later Are Admitted as Inpatients: 3-Day Payment Window Policy and 
the Impact on Wholly Owned or Wholly Operated Physician Practices
    1. Introduction
    2. Background

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    3. Applicability of the 3-Day Payment Window Policy for Services 
Furnished in Physician Practices
    a. Payment Methodology
    b. Identification of Wholly Owned or Wholly Operated Physician 
Practices
    K. Hospital Discharge Care Coordination
    L. Technical Corrections
    1. Outpatient Speech-Language Pathology Services: Conditions and 
Exclusions
    2. Outpatient Diabetes Self-Management Training and Diabetes 
Outcome Measurements
    a. Proposed Changes to the Definition of Deemed Entity
    b. Proposed Changes to the Condition of Coverage Regarding 
Training Orders
    3. Practice Expense Relative Value Units (RVUs)
V. Collection of Information Requirements
    A. Part B Drug Payment
    B. The Physician Quality Reporting System (formerly the 
Physician Quality Reporting Initiative (PQRI))
    C. Electronic Prescribing (eRx) Incentive Program
    D. Proposed Changes to the Medicare Electronic Health Record 
(EHR) Incentive Program for Eligible Professionals for the 2012 
Payment Year
VI. Response to Comments
    VII. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. RVU Impacts
    1. Resource-Based Work, PE, and Malpractice RVUs
    2. CY 2012 PFS Impact Discussion
    a. Changes in RVUs
    b. Combined Impact
    D. Effects of Proposal To Review Potentially Misvalued Codes on 
an Annual Basis Under the PFS
    E. Effect of Proposed Revisions to Malpractice RUVs
    F. Effect of Proposed Changes to Geographic Practice Cost 
Indices (GPCIs)
    G. Effects of Proposed Changes to Medicare Telehealth Services 
Under the Physician Fee Schedule
    H. Effects of Impact of Other Provisions of the Proposed Rule
    1. Part B Drug Payment: ASP Issues
    2. Discussion of Budget Neutrality for the Chiropractic Services 
Demonstration
    3. Extension of Payment for Technical Component of Certain 
Physician Pathology Services
    4. Section 4103: Medicare Coverage of Annual Wellness Visit 
Providing a Personalized Prevention Plan: Incorporation of a Health 
Risk Assessment as Part of the Annual Wellness Visit.
    5. Physician Payment, Efficiency, and Quality Improvements--
Physician Quality Reporting System
    6. Incentives for Electronic Prescribing (eRx)--The Electronic 
Prescribing Incentive Program
    7. Physician Compare Web Site
    8. Medicare EHR Incentive Program
    9. Physician Feedback Program/Value Modifier Payment
    10. Bundling of Payments for Services Provided to Outpatients 
Who Later Are Admitted as Inpatients: 3-Day Payment Window Policy 
and the Impact on Wholly Owned or Wholly Operated Physician Offices
    I. Alternatives Considered
    J. Impact on Beneficiaries
    K. Accounting Statement
    L. Conclusion
VIII. Addenda Referenced in This Proposed Rule and Available Only 
Through the Internet on the CMS Web Site
    Regulations Text

Acronyms

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

AA--Anesthesiologist assistant
AACE--American Association of Clinical Endocrinologists
AACVPR--American Association of Cardiovascular and Pulmonary 
Rehabilitation
AADE--American Association of Diabetes Educators
AANA--American Association of Nurse Anesthetists
ABMS--American Board of Medical Specialties
ABN--Advanced Beneficiary Notice
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
ADL--Activities of daily living
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 RUC--[AMA's Specialty Society] Relative (Value) Update Committee
AMA-DE--American Medical Association Drug Evaluations
AMI--Acute Myocardial Infarction
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
ASPE--Assistant Secretary of Planning and Evaluation (ASPE)
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)
BIPA--Medicare, Medicaid, and SCHIP Benefits Improvement Protection 
Act of 2000 (Pub. L. 106-554)
BLS--Bureau of Labor and Statistics
BMD--Bone mineral density
BMI--Body mass index
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
CME--Continuing medical education
CMHC--Community Mental Health Center
CMPs--Civil money penalties
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)
CQM--Clinical quality measures
CR--Cardiac rehabilitation
CRF--Chronic Renal Failure
CRNA--Certified registered nurse anesthetist
CROs--Clinical research organizations
CRP--Canalith repositioning
CRT--Certified respiratory therapist
CSC--Computer Sciences Corporation
CSW--Clinical social worker
CT--Computed Tomography
CTA--Computed Tomography Angography
CWF--Common Working File
CY--Calendar Year
D.O.--Doctor of Osteopathy
DEA--Drug Enforcement Agency
DHHS--Department of Health and Human Services
DHS--Designated health services

[[Page 42776]]

DME--Durable Medical Equipment
DMEPOS--Durable medical equipment, prosthetics, orthotics, and 
supplies
DOJ--Department of Justice
DOQ--Doctors Office Quality
DOS--Date of service
DOTPA--Development of Outpatient Therapy Alternatives
DRA--Deficit Reduction Act of 2005 (Pub. L. 109-171)
DSMT--Diabetes Self-Management Training Services
DXA CPT--Dual energy X-ray absorptiometry
E/M--Evaluation and Management Medicare Services
ECG--Electrocardiogram
EDI--Electronic data interchange
EEG--Electroencephalogram
EGC--Electrocardiogram
EHR--Electronic health record
EKG--Electrocardiogram
EMG--Electromyogram
EMTALA--Emergency Medical Treatment and Active Labor Act
EOG--Electro-oculogram
EPO--Erythopoeitin
EPs--Eligible Professional
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
FISH--In Situ Hybridization Testing
FOTO--Focus On Therapeutic Outcomes
FQHC--Federally Qualified Health Center
FQHC--Federally Qualified Health Center
FR--Federal Register
FTE--full time equivalent
GAF--Geographic adjustment factor
GAFs--Geographic Adjustment Factors
GAO--Government Accountability Office
GEM--Generating Medicare [Physician Quality Performance Measurement 
Results]
GFR--Glomerular filtration rate
GME--Graduate Medical Education
GPCIs--Geographic Practice Cost Indices
GPO--Group purchasing organization
GPOs--Group purchasing organizations
GPRO--Group Practice Reporting Option
GPS--Geographic Positioning System
GQ--Via asynchronous telecommunications system
GSA--General Services Administration
GT--Growth Target
HAC--Hospital-acquired conditions
HBAI--Health and Behavior Assessment and Intervention
HCC--Hierarchal Condition Category
HCPAC--Health Care Professionals Advisory Committee
HCPCS--Healthcare Common Procedure Coding System
HCRIS--Healthcare Cost Report Information System
HDL/LDL--High-density lipoprotein/Low-density lipoprotein
HDRT--High dose radiation therapy
HEMS--Helicopter Emergency Medical Services
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
HMO--Health Maintenance Organization
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--Department of Housing and Urban Development
HUD--Housing and Urban Development
IACS--Individuals Access to CMS Systems
IADL--Instrumental activities of daily living
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
IDE--Investigational device exemption
IDTF--Independent diagnostic testing facility
IFC--Interim final rule with comment period
IGI--IHS Global Insight, Inc.
IME--Indirect Medical Education
IMRT--Intensity-Modulated Radiation Therapy
INR--International Normalized Ratio
IOM--Institute of Medicine
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
JRCERT--Joint Review Committee on Education in Radiologic Technology
KDE--Kidney Disease Education
LCD--Local coverage determination
LOPS--loss of protective sensation
LUGPA--Large Urology Group Practice Association
M.D.--Doctor of Medicine
MA--Medicare Advantage program
MAC--Medicare Administrative Contractor
MA-PD--Medicare Advantage-Prescription Drug Plans
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
MEI--Medicare Economic Index
MGMA--Medical Group Management Association
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)
MMEA--Medicare and Medicaid Extenders Act of 2010 (Pub. L. 111-309)
MMSEA--Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 
110-173)
MNT--Medical Nutrition Therapy
MOC--Maintenance of certification
MP--Malpractice
MPC--Multispecialty Points of Comparison
MPPR--Multiple Procedure Payment Reduction Policy
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
NAICS--North American Industry Classification System
NBRC--National Board for Respiratory Care
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 Codes
NF--Nursing facility
NISTA--National Institute of Standards and Technology Act
NP--Nurse practitioner
NPI--National Provider Identifier
NPP--Nonphysician practitioner
NPPES--National Plan & Provider Enumeration System
NPPs--Nonphysician Practioners
NQF--National Quality Forum
NRC--Nuclear Regulatory Commission
NSQIP--National Surgical Quality Improvement Program
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 the 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
PACMBPRA--Preservation of Access to Care for Medicare Beneficiaries 
and Pension Relief Act of 2010 (Pub. L. 111-192)
PAT--Performance assessment tool

[[Page 42777]]

PC--Professional Components
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
PODs--Physician owned distributors
PPATRA--Physician Payment and Therapy Relief Act
PPI--Producer price index
PPIS--Physician Practice Expense 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
PTA--Physical therapy assistant
PTCA--Percutaneous transluminal coronary angioplasty
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--[AMA's 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
SLP--Speech-language pathology
SMS--Socioeconomic Monitoring Surveys
SMS--Monitoring Survey
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 Alternatives for Therapy Services
STS--Society for Thoracic Surgeons
TC--Technical Components
TIN--Tax identification number
TJC--Joint Commission
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--Department of Veterans Affairs
VBP--Value-based purchasing
WAC--Wholesale Acquisition Cost
WAMP--Widely available market price
WAMP--Widely Available Market Price
WHO--World Health Organization

Addenda Available Only Through the Internet on the CMS Web Site

    In the past, the Addenda referred to throughout the preamble of our 
annual PFS proposed and final rules with comment period were included 
in the printed Federal Register. However, beginning with the CY 2012 
PFS proposed rule, the PFS Addenda will no longer appear in the Federal 
Register. Instead these Addenda to the annual proposed and final rules 
with comment period will be available only through the Internet. The 
PFS Addenda along with other supporting documents and tables referenced 
in this proposed rule are available through the Internet on the CMS Web 
site at https://www.cms.gov/PhysicianFeeSched/. Click on the link on the 
left side of the screen titled, ``PFS Federal Regulations Notices'' for 
a chronological list of PFS Federal Register and other related 
documents. For the CY 2012 PFS proposed rule, refer to item CMS-1524-P. 
For complete details on the availability of the Addenda referenced in 
this proposed rule, we refer readers to section VIII. of this proposed 
rule. Readers who experience any problems accessing any of the Addenda 
or other documents referenced in this proposed rule and posted on the 
CMS Web site identified above should contact Erin Smith at (410) 786-
4497.

CPT (Current Procedural Terminology) Copyright Notice

    Throughout this proposed rule, we use CPT codes and descriptions to 
refer to a variety of services. We note that CPT codes and descriptions 
are copyright 2010 American Medical Association. All Rights Reserved. 
CPT is a registered trademark of the American Medical Association 
(AMA). Applicable Federal Acquisition Regulations (FAR) and Defense 
Federal Acquisition Regulations (DFAR) apply.

I. 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 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 their services.

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 was 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

[[Page 42778]]

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, 
in part, on our review of recommendations received from the American 
Medical Association's (AMA's) 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 physician's 
service in a final rule, published November 2, 1998 (63 FR 58814), 
effective for services furnished in 1999. Based on the requirement to 
transition to a resource-based system for PE over a 4-year period, 
resource-based PE RVUs did not become fully effective until 2002.
    This resource-based system was based on two significant sources of 
actual PE data: The Clinical Practice Expert Panel (CPEP) data and the 
AMA's Socioeconomic Monitoring System (SMS) data. The CPEP data were 
collected from panels of physicians, practice administrators, and 
nonphysician health professionals (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 AMA 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 2012 using this methodology, unless otherwise 
noted.
    In the CY 2010 PFS final rule with comment period (74 FR 61749), we 
updated the PE/hour (PE/HR) data that are used in the calculation of PE 
RVUs for most specialties. 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). Beginning in CY 2010, we provided for a 4-
year transition for the new PE RVUs using the updated PE/HR data. In CY 
2012, the third year of the transition, PE RVUs are calculated based on 
a 75/25 blend of the new PE RVUs developed using the PPIS data and the 
previous PE RVUs based on the SMS and supplemental survey data.
3. Resource-Based Malpractice RVUs
    Section 4505(f) of the BBA amended section 1848(c) of the Act to 
require that we implement resource-based malpractice RVUs for services 
furnished on or after CY 2000. The resource-based malpractice 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. In the CY 2010 PFS 
final rule with comment period (74 FR 61758), we implemented the Second 
Five-Year Review and update of the malpractice RVUs. In the CY 2011 PFS 
final rule with comment period, we described our approach for 
determining malpractice RVUs for new or revised codes that become 
effective before the next Five Year Review and update (75 FR 73208). 
Accordingly, to develop the CY 2012 malpractice RVUs for new or revised 
codes we cross-walked the new or revised code to the malpractice RVUs 
of a similar source code and adjusted for differences in work (or, if 
greater, the clinical labor portion of the fully implemented PE RVUs) 
between the source code and the new or revised code.
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 
Work RVUs was published on November 22, 1996 (61 FR 59489) and was 
effective in 1997. The Second Five-Year Review of Work RVUs 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 Work 
RVUs was published in the CY 2007 PFS final rule with comment period 
(71 FR 69624) and was effective on January 1,

[[Page 42779]]

2007. The Fourth Five-Year Review of 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). Proposed revisions 
to work RVUs and corresponding changes to PE and malpractice RVUs 
affecting payment for physicians' services for the Fourth Five-Year 
Review of Work RVUs were published in a separate notice (76 FR 32410). 
We will review public comments, make adjustments to our proposals in 
response to comments, as appropriate, and include final values in the 
CY 2012 PFS final rule with comment period, effective for services 
furnished beginning 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 
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 CY 2010, we also 
incorporated the new PPIS data to update thespecialty specific PE/HR 
data used to develop PE RVUs, adopting a 4-year transition to PE RVUs 
developed using the PPIS data.
    In the CY 2005 PFS final rule with comment period (69 FR 66236), we 
implemented the First Five-Year Review of the malpractice 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.
    In addition to the Five-Year Reviews, beginning for CY 2009, CMS 
and the AMA RUC have identified and reviewed a number of potentially 
misvalued codes on an annual basis based on various identification 
screens. This annual review of work and PE RVUs for potentially 
misvalued codes was supplemented by section 3134 of the Affordable Care 
Act, which requires the agency to periodically identify, review and 
adjust values for potentially misvalued codes with an emphasis on the 
following categories: (1) Codes and families of codes for which there 
has been the fastest growth; (2) codes or families of codes that have 
experienced substantial changes in practice expenses; (3) codes that 
are recently established for new technologies or services; (4) multiple 
codes that are frequently billed in conjunction with furnishing a 
single service; (5) codes with low relative values, particularly those 
that are often billed multiple times for a single treatment; (6) codes 
which have not been subject to review since the implementation of the 
RBRVS (the so-called `Harvard valued codes'); and (7) other codes 
determined to be appropriate by the Secretary.
5. Application of Budget Neutrality to Adjustments of RVUs
    Budget neutrality typically requires that expenditures not increase 
or decrease as a result of changes or revisions to policy. However, 
section 1848(c)(2)(B)(ii)(II) of the Act requires adjustment only if 
the change in expenditures resulting from the annual revisions to the 
PFS exceeds a threshold amount. Specifically, 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.

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 malpractice 
RVUs) are adjusted by a geographic practice cost index (GPCI). The 
GPCIs reflect the relative costs of physician work, PE, and malpractice 
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 2011 PFS final rule with comment period (75 FR 73170) 
implemented changes to the PFS and other Medicare Part B payment 
policies. It also finalized many of the CY 2010 interim RVUs and 
implemented interim RVUs for new and revised codes for CY 2011 to 
ensure that our payment systems are updated to reflect changes in 
medical practice and the relative values of services. The CY 2011 PFS 
final rule with comment period also addressed other policies, as well 
as certain provisions of the Affordable Care Act and the Medicare 
Improvements for Patients and Providers Act of 2008 (MIPPA).
    In the CY 2011 PFS final rule with comment period, we announced the 
following for CY 2011: the total PFS update of -10.1 percent; the 
initial estimate for the sustainable growth rate of -13.4 percent; and 
the CF of $25.5217. These figures were calculated based on the 
statutory provisions in effect on November 2, 2010, when the CY 2011 
PFS final rule was issued.
    On December 30, 2010, we published a correction notice (76 FR 1670) 
to correct several technical and typographical errors that occurred in 
the CY 2011 PFS final rule with comment period. This correction notice 
announced a revised CF for CY 2011 of $25.4999.
    On November 30, 2010, the Physician Payment and Therapy Relief Act 
of 2010 (PPATRA) (Pub. L. 111-286) was signed into law. Section 3 of 
Public Law 111-286 modified the policy finalized in the CY 2011 PFS 
final rule with comment period (75 FR 73241), effective January 1, 
2011, regarding the payment reduction applied to multiple therapy 
services provided to the same patient on the same day in the office 
setting by one provider and paid for under the PFS (hereinafter, the 
therapy multiple procedure payment reduction (MPPR)). The PPATRA 
provision changed the therapy MPPR percentage from 25 to 20 percent of 
the PE component of payment for the second and subsequent ``always'' 
therapy services furnished in the office setting on the same day to the 
same patient by one provider, and excepted the payment reductions 
associated with the therapy MPPR from budget neutrality under the PFS.
    On December 15, 2010, the Medicare and Medicaid Extenders Act of 
2010 (MMEA) (Pub. L. 111-309) was signed into law. Section 101 of 
Public Law 111-309 provided for a 1-year zero percent update for the CY 
2011 PFS. As a result of the MMEA, the CY 2011 PFS

[[Page 42780]]

conversion factor was revised to $33.9764.

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 us to 
develop a methodology for a resource-based system for determining PE 
RVUs for each physician's service. We develop PE RVUs by looking at the 
direct and indirect physician practice resources involved in furnishing 
each service. Direct expense categories include clinical labor, medical 
supplies, and medical equipment. Indirect expenses include 
administrative labor, office expense, and all other expenses. The 
sections that follow provide more detailed information about the 
methodology for translating the resources involved in furnishing each 
service into service-specific PE RVUs. In addition, we note that 
section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments in 
RVUs for a year may not cause total PFS payments to differ by more than 
$20 million from what they would have 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 AMA 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). 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 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 percent old/
25 percent new for CY 2010, 50 percent old/50 percent new for CY 2011, 
25 percent old/75 percent new for CY 2012, and 100 percent new for CY 
2013) from the previous PE RVUs to the PE RVUs developed using the new 
PPIS data.
    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, nor do we have a method 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 independent 
diagnostic testing facilities (IDTFs), were blended with supplementary 
survey data from the American College of Radiology (ACR) and 
implemented for payments in CY 2007. Neither IDTFs nor independent labs 
participated in the PPIS. Therefore, we continue to use the PE/HR that 
was developed from their supplemental survey data.
    Consistent with our past practice, the previous indirect PE/HR 
values from the supplemental surveys for 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.
    Previously, we have 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.
    For registered dietician services, the proposed resource-based PE 
RVUs have been calculated in accordance with the final policy that 
crosswalks the specialty to the ``All Physicians'' PE/HR data, as 
adopted in the CY 2010 PFS final rule with comment period (74 FR 61752) 
and discussed in more detail in the CY 2011 PFS final rule with comment 
period (75 FR 73183).
    There are four specialties whose utilization data will be newly 
incorporated into ratesetting for CY 2012. We are proposing