66236 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 403, 405, 410, 411, 414, 

418, 424, 484, and 486 

[CMS–1429–FC] 

RIN 0938–AM90 

Medicare Program; Revisions to 

Payment Policies Under the Physician 

Fee Schedule for Calendar Year 2005

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS.

ACTION: Final rule with comment period.

SUMMARY: This final rule refines the 

resource-based practice expense relative 

value units (RVUs) and makes other 

changes to Medicare Part B payment 

policy. These policy changes concern: 

supplemental survey data for practice 

expense; updated geographic practice 

cost indices for physician work and 

practice expense; updated malpractice 

RVUs; revised requirements for 

supervision of therapy assistants; 

revised payment rules for low osmolar 

contrast media; changes to payment 

policies for physicians and practitioners 

managing dialysis patients; clarification 

of care plan oversight requirements; 

revised requirements for supervision of 

diagnostic psychological testing 

services; clarifications to the policies 

affecting therapy services; revised 

requirements for assignment of 

Medicare claims; addition to the list of 

telehealth services; and, several coding 

issues. We are making these changes to 

ensure that our payment systems are 

updated to reflect changes in medical 

practice and the relative value of 

services. 

This final rule also addresses the 

following provisions of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (Pub. L. 108–

17) (MMA): coverage of an initial 

preventive physical examination; 

coverage of cardiovascular (CV) 

screening blood tests; coverage of 

diabetes screening tests; incentive 

payment improvements for physicians 

in shortage areas; payment for covered 

outpatient drugs and biologicals; 

payment for renal dialysis services; 

coverage of routine costs associated 

with certain clinical trials of category A 

devices as defined by the Food and Drug 

Administration; hospice consultation 

service; indexing the Part B deductible 

to inflation; extension of coverage of 

intravenous immune globulin (IVIG) for 

the treatment in the home of primary 

immune deficiency diseases; revisions 

to reassignment provisions; and, 

payment for diagnostic mammograms, 

physicians’ services associated with 

drug administration services and 

coverage of religious nonmedical health 

care institution items and services to the 

beneficiary’s home. 

In addition, this rule updates the 

codes subject to the physician selfreferral prohibition, discusses payment 

for set-up of portable x-ray equipment, 

discusses the third five-year refinement 

of work RVUs, and solicits comments on 

potentially misvalued work RVUs. 

We are also finalizing the calendar 

year (CY) 2004 interim RVUs and are 

issuing interim RVUs for new and 

revised procedure codes for CY 2005. 

As required by the statute, we are 

announcing that the physician fee 

schedule update for CY 2005 is 1.5 

percent, the initial estimate for the 

sustainable growth rate for CY 2005 is 

4.3, and the conversion factor for CY 

2005 is $37.8975.

DATES: Effective Date: These regulations 

are effective on January 1, 2005. 

Applicability Date: Section 623 of the 

MMA, that is, the case-mix portion of 

the revised composite payment 

methodology and the budget neutrality 

adjustment required by the MMA, is 

applicable on April 1, 2005. 

Comment Date: To be assured 

consideration, comments must be 

received at one of the addresses 

provided below, no later than 5 p.m. on 

January 3, 2005.

ADDRESSES: In commenting, please refer 

to file code CMS–1429–FC. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

three ways (no duplicates, please): 

1. Electronically. You may submit 

electronic comments on specific issues 

in this regulation to http://

www.cms.hhs.gov/regulations/

ecomments. (Attachments should be in 

Microsoft Word, WordPerfect, or Excel; 

however, we prefer Microsoft Word.) 

2. By mail. You may mail written 

comments (one original and two copies) 

to the following address ONLY: Centers 

for Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1429–FC, P.O. 

Box 8012, Baltimore, MD 21244–8012. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments (one original 

and two copies) before the close of the 

comment period to one of the following 

addresses. If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number 800–743–

3951 in advance to schedule your 

arrival with one of our staff members. 

Room 445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201; or 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

(Because access to the interior of the 

HHH 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.) 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by mailing 

your comments to the addresses 

provided at the end of the ‘‘Collection 

of Information Requirements’’ section in 

this document. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 

Pam West (410) 786–2302 (for issues 

related to Practice Expense, Respiratory 

Therapy Coding, and Therapy 

Supervision). 

Rick Ensor (410) 786–5617 (for issues 

related to Geographic Practice Cost 

Index (GPCI) and malpractice RVUs). 

Craig Dobyski (410) 786–4584 (for 

issues related to list of telehealth 

services or payments for physicians and 

practitioners managing dialysis 

patients). 

Bill Larson or Tiffany Sanders (410) 

786–7176 (for issues related to coverage 

of an initial preventive physical 

examination). 

Cathleen Scally (410) 786–5714 (for 

issues related to payment of an initial 

preventive physical examination). 

Joyce Eng (410) 786–7176 (for issues 

related to coverage of cardiovascular 

screening tests). 

Betty Shaw (410) 786–7176 (for issues 

related to coverage of diabetes screening 

tests). 

Anita Greenberg (410) 786–0548 (for 

issues related to payment of 

cardiovascular and diabetes screening 

tests). 

David Worgo (410) 786–5919, (for 

issues related to incentive payment 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66237

improvements for physicians practicing 

in shortage areas). 

Angela Mason or Jennifer Fan (410) 

786–0548 (for issues related to payment 

for covered outpatient drugs and 

biologicals). 

David Walczak (410) 786–4475 (for 

issues related to reassignment 

provisions). 

Henry Richter (410) 786–4562 (for 

issues related to payments for ESRD 

facilities). 

Steve Berkowitz (410) 786–7176 (for 

issues related to coverage of routine 

costs associated with certain clinical 

trials of category A devices). 

Terri Deutsch (410) 786–9462 (for 

issues related to hospice consultation 

services). 

Karen Daily (410) 786–7176 (for 

issues related to clinical conditions for 

payment of covered items of durable 

medical equipment). 

Dorothy Shannon (410) 786–3396 (for 

issues related to outpatient therapy 

services performed ‘‘incident to’’

physicians’ services). 

Roberta Epps (410) 786–5919 (for 

issues related to low osmolar contrast 

media or supervision of diagnostic 

psychological testing services).

Gail Addis (410) 786–4522 (for issues 

related to care plan oversight). 

Jean-Marie Moore (410) 786–3508 (for 

issues related to religious nonmedical 

health care institution services). 

Diane Milstead (410) 786–3355 or 

Gaysha Brooks (410) 786–9649 (for all 

other issues).

SUPPLEMENTARY INFORMATION: 

Submitting Comments: We welcome 

comments from the public on the 

following issues: interim RVUs for 

selected procedure codes identified in 

Addendum C; zip code areas for Health 

Professional Shortage Areas (HPSAs); 

the coverage of religious nonmedical 

health care institution items and 

services to the beneficiary’s home; the 

physician self referral designated health 

services listed in tables 20 and 21; the 

third five-year refinement of work RVUs 

for services furnished beginning January 

1, 2007; and, potentially misvalued 

work RVUs for all services in the CY 

2005 physician fee schedule. You can 

assist us by referencing the file code 

CMS–1429–FC and the specific ‘‘issue 

identifier’’ that precedes the section on 

which you choose to comment. 

Inspection of Public Comments:

Comments received timely will be 

available for public inspection as they 

are processed, 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, 

call 800–743–3951. 

Copies: To order copies of the Federal 

Register containing this document, send 

your request to: New Orders, 

Superintendent of Documents, P.O. Box 

371954, Pittsburgh, PA 15250–7954. 

Specify the date of the issue requested 

and enclose a check or money order 

payable to the Superintendent of 

Documents, or enclose your Visa or 

Master Card number and expiration 

date. Credit card orders can also be 

placed by calling the order desk at (202) 

512–1800 (or toll-free at 1–888–293–

6498) or by faxing to (202) 512–2250. 

The cost for each copy is $10. As an 

alternative, you can view and 

photocopy the Federal Register

document at most libraries designated 

as Federal Depository Libraries and at 

many other public and academic 

libraries throughout the country that 

receive the Federal Register. 

This Federal Register document is 

also available from the Federal Register

online database through GPO Access, a 

service of the U.S. Government Printing 

Office. The web site address is: http://

www.access.gpo.gov/nara/index.html.

Information on the physician fee 

schedule can be found on the CMS 

homepage. You can access this data by 

using the following directions: 

1. Go to the CMS homepage (http://

www.cms.hhs.gov). 

2. Place your cursor over the word 

‘‘Professionals’’ in the blue area near the 

top of the page. Select ‘‘physicians’’

from the drop-down menu. 

3. Under ‘‘Policies/Regulations’’ select 

‘‘Physician Fee Schedule.’’

To assist readers in referencing 

sections contained in this preamble, we 

are providing the following 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. Information on the 

regulation’s impact appears throughout 

the preamble and is not exclusively in 

section VII.

Table of Contents 

I. Background 

A. Legislative History 

B. Published Changes to the Fee Schedule 

C. Components of the Fee Schedule 

Payment Amounts 

D. Development of the Relative Value 

System 

II. Provisions of the Proposed Regulation 

Related to the Physician Fee Schedule 

A. Resource-Based Practice Expense 

Relative Value Units 

1. Resource-Based Practice Expense 

Legislation 

2. Current Methodology 

3. Practice Expense Proposals for Calendar 

Year 2005 

B. Geographic Practice Cost Indices (GPCIs) 

C. Malpractice RVUs 

D. Coding Issues 

III. Provisions Related to the Medicare 

Modernization Act of 2003 

A. Section 611—Preventive Physical 

Examination 

B. Section 613—Diabetes Screening 

C. Section 612—Cardiovascular Screening 

D. Section 413—Incentive Payment for 

Physician Scarcity 

E. Section 303—Payment for Covered 

Outpatient Drugs and Biologicals 

F. Section 952—Revision to Reassignment 

Provisions 

G. Section 642—Extension of Coverage of 

IVIG for the Treatment in the Home of 

Primary Immune Deficiency Diseases 

H. Section 623—Payment for Renal 

Dialysis Services

I. Section 731—Coverage of Routine Costs 

for Category A Clinical Trials 

J. Section 629—Part B Deductible 

K. Section 512—Hospice Consultation 

Service 

L. Section 302—Clinical Conditions for 

Coverage of Durable Medical Equipment 

(DME) 

M. Section 614—Payment for Certain 

Mammography Services 

N. Section 305—Payment for Inhalation 

Drugs 

O. Section 706 Coverage of Religious 

Nonmedical Health Care Institution 

Services Furnished in the Home 

IV. Other Issues 

A. Provisions Related to Therapy Services 

1. Outpatient Therapy Services Performed 

‘‘Incident to’’ Physicians’ Services 

2. Qualification Standards and Supervision 

Requirements in Therapy Private 

Practice Settings 

3. Other Technical Revisions 

B. Low Osmolar Contrast Media 

C. Payments for Physicians and 

Practitioners Managing Patients on 

Dialysis 

D. Technical Revision—§ 411.404 

E. Diagnostic Psychological Tests 

F. Care Plan Oversight 

G. Assignment of Medicare ClaimsPayment to the Supplier 

H. Additional Issues Raised by 

Commenters 

V. Refinement of Relative Value Units for 

Calendar Year 2004 and Response to 

Public Comments on Interim Relative 

Value Units for 2003 

VI. Five-Year Refinement of Relative Value 

Units VII. Update to the Codes for 

Physician Self-Referral Prohibition 

VIII. Physician Fee Schedule Update for 

Calendar Year 2005 

IX. Allowed Expenditures for Physicians’

Services and the Sustainable Growth 

Rate 

X. Anesthesia and Physician Fee Schedule 

Conversion Factors for CY 2005 

XI. Telehealth Originating Site Facility Fee 

Payment Amount Update 

XII. Provisions of the Final Rule 

XIII. Waiver of Proposed Rulemaking 

XIV. Collection of Information Requirements 

66238 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

XV. Response to Comments 

XVI. Regulatory Impact Analysis 

Addendum A—Explanation and Use of 

Addendum B. 

Addendum B—2005 Relative Value Units 

and Related Information Used in 

Determining Medicare Payments for 

2005. 

Addendum C—Codes With Interim RVUs 

Addendum D—2005 Geographic Practice 

Cost Indices by Medicare Carrier and 

Locality 

Addendum E—2006 Geographic Practice 

Cost Indices by Medicare Carrier and 

Locality 

Addendum F—Comparison of 2004 GAFs to 

2005 GAFs 

Addendum G—Comparison of 2004 GAFs to 

2006 GAFs 

Addendum H—Specialty Care PSA Zip 

Codes 

Addendum I—2005 Primary Care HSPA Zip 

Codes 

Addendum J—Primary Care PSA Zip Codes 

Addendum K—Mental Health HPSA Zip 

Codes 

Addendum L—Updated List of CPT/HCPCS 

Codes Used To Describe Certain 

Designated Health Services Under the 

Physician Self-Referral Provision

In addition, because of the many 

organizations and terms to which we 

refer by acronym in this final rule, we 

are listing these acronyms and their 

corresponding terms in alphabetical 

order below:

AAA Abdominal aortic aneurysm 

AAFP American Academy of Family 

Physicians 

AAKP American Association of Kidney 

Patients 

AANA American Association of Nurse 

Anesthetists 

ABI Ankle brachial index 

ABN Advanced beneficiary notice 

ACC American College of Cardiology 

ACLA American Clinical Laboratory 

Association 

ACP American College of Physicians 

ACPM American College of Preventative 

Medicine 

ACR American College of Radiology 

ADLs Activities of daily living 

AFROC Association of Freestanding 

Radiation Oncology Centers 

AGS American Geriatric Society 

AHA American Heart Association 

AMA American Medical Association 

AOA American Osteopathic Association 

APA Administrative Procedures Act 

APTA American Physical Therapy 

Association 

ASA American Society of Anesthesiologists 

ASCP American Society for Clinical 

Pathology 

ASN American Society of Nephrology 

ASP Average sales price 

ASTRO American Society for Therapeutic 

Radiation Oncology 

ATA American Telemedicine Association 

AWP Average wholesale price

BBA Balanced Budget Act of 1997

BBRA Balanced Budget Refinement Act of 

1999

BIPA Benefits Improvement and Protection 

Act of 2000

BLS Bureau of Labor Statistics 

BMI Body mass index 

BSA Body surface area 

CAH Critical access hospital 

CAP College of American Pathologists 

CAPD Continuous ambulatory peritoneal 

dialysis 

CCPD Continuous cycling peritoneal 

dialysis 

CDC Centers for Disease Control and 

Prevention 

CF Conversion factor 

CFR Code of Federal Regulations 

CLIA Clinical Laboratory Improvement 

Amendment 

CMA California Medical Association 

CMS Centers for Medicare & Medicaid 

Services 

CNMs Certified nurse midwives 

CNS Clinical nurse specialist 

COPD Chronic obstructive pulmonary 

disease 

CORF Comprehensive outpatient 

rehabilitation facilities 

CPEP Clinical Practice Expert Panel 

CPI Consumer Price Index 

CPO Care Plan Oversight 

CPT [Physicians’] Current Procedural 

Terminology [4th Edition, 2002, 

copyrighted by the American Medical 

Association] 

CRNAs Certified Registered Nurse 

Anesthetists 

CT Computed tomography 

CV Cardiovascular 

CY Calendar year 

DEXA Dual energy x-ray absorptiometry 

DHS Designated health services 

DME Durable medical equipment 

DMEPOS Durable medical equipment, 

prosthetics, orthotics, and supplies 

DMERC Durable medical equipment 

regional carrier 

DOI Departments of Insurance 

DRE Digital rectal exam 

DRG Diagnosis-related groups 

DVT Deep venous thrombosis 

EKG Electrocardiogram 

E/M Evaluation and management 

EPO Erythropoeitin 

ESRD End-stage renal disease 

FAX Facsimile 

FMR Fair market rental 

FQHC Federally qualified healthcare center 

FR Federal Register 

FY Fiscal year 

GAF Geographic adjustment factor 

GPCI Geographic practice cost index 

GTT Glucose tolerance test 

HBO Hyperbaric oxygen 

HCPAC Health Care Professional Advisory 

Committee 

HCPCS Healthcare Common Procedure 

Coding System 

HHA Home health agency 

HHS [Department of] Health and Human 

Services 

HIPAA Health Insurance Portability and 

Accountability Act of 1996

HOCM High osmolar contrast media 

HPSA Health professional shortage area 

HRSA Health Resources and Services 

Administration 

HsCRP high sensitivity C-reactive protein 

HUD Housing and Urban Development 

IDTFs Independent diagnostic testing 

facilities 

IMRT Intensity modulated radiation 

therapy 

IOM Internet Only Manual 

IPD Intermittent peritoneal dialysis 

IPPE Initial preventive physical 

examination 

IPPS Inpatient prospective payment system 

ISO Insurance Services Office 

IVIG Intravenous immune globulin 

JUAs Joint underwriting associations 

KCP Kidney Care Partners 

KECC Kidney Epidemiology and Cost 

Center 

LCD Local coverage determination 

LMRP Local medical review policies 

LOCM Low osmolar contrast media 

LUPA Low utilization payment adjustment 

MCM Medicare Carrier Manual 

MCP Monthly capitation payment 

MedPAC Medicare Payment Advisory 

Commission 

MEI Medicare Economic Index 

MGMA Medical Group Management 

Association 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003

MPFS Medicare physician fee schedule 

MSA Metropolitan statistical area 

NAMCS National Ambulatory Medical Care 

Survey 

NCD National coverage determination 

NCIPC National Center for Injury 

Prevention and Control 

NDC National drug code 

NIH National Institutes of Health 

NP Nurse practitioner 

NPP Nonphysician practitioners

OASIS Outcome and Assessment 

Information Set 

OBRA Omnibus Budget Reconciliation Act 

OIG Office of Inspector General 

OMB Office of Management and Budget 

OPPS Outpatient prospective payment 

system 

OT Occupational therapy 

OTA Occupational therapist assistant 

OTPP Occupational therapists in private 

practice 

PA Physician assistant 

PAD Peripheral arterial disease 

PC Professional component 

PCF Patient compensation fund 

PD Peritoneal dialysis 

PEAC Practice Expense Advisory 

Committee 

PET Positron emission tomography 

PFS Physician Fee Schedule 

PHSA Public Health Services Act 

PIAA Physician Insurers Association of 

America 

PIN Provider identification number 

PLI Professional liability insurance 

POS Prosthetics, orthotics and supplies 

PPI Producer price index 

PPS Prospective payment system 

PRA Paperwork Reduction Act 

PSA Physician scarcity area 

PT Physical therapy 

PTA Physical therapist assistant 

PTPP Physical therapists in private practice 

PVD Peripheral vascular disease 

RFA Regulatory Flexibility Act 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66239

RHC Rural health clinic 

RHHI Regional home health intermediary 

RIA Regulatory impact analysis 

RN Registered nurse 

RNHCI Religious nonmedical health care 

institution 

RPA Renal Physicians Association 

RT Respiratory therapy 

RTs Respiratory therapists 

RUC [AMA’s Specialty Society] Relative 

[Value] Update Committee 

RUCA Rural-Urban commuting area 

RVU Relative value unit 

SAF Standard analytic file 

SCHIP State Child Health Insurance 

Program 

SGR Sustainable growth rate 

SHIPs State Health Insurance Assistance 

Programs 

SIR Society for Interventional Radiology 

SLP Speech language pathology 

SMR Standardized mortality ratio 

SMS [AMA’s] Socioeconomic Monitoring 

System 

SNF Skilled nursing facility 

TC Technical component 

UAF Update adjustment factor 

URR Urea reduction ratios 

USPSTF U.S. Preventive Services Task 

Force

I. Background 

A. Legislative History 

Medicare has paid for physicians’

services under section 1848 of the 

Social Security Act (the Act), ‘‘Payment 

for Physicians’ Services’’ since January 

1, 1992. The Act requires that payments 

under the fee schedule be based on 

national uniform relative value units 

(RVUs) reflecting the resources used in 

furnishing a service. Section 1848(c) of 

the Act requires that national RVUs be 

established for physician work, practice 

expense, and malpractice expense. 

Section 1848(c)(2)(B)(ii)(II) of the Act 

provides that adjustments in RVUs may 

not cause total physician fee schedule 

payments to differ by more than $20 

million from what they would have 

been had the adjustments not been 

made. If adjustments to RVUs cause 

expenditures to change by more than 

$20 million, we must make adjustments 

to ensure that they do not increase or 

decrease by more than $20 million. 

B. Published Changes to the Fee 

Schedule 

The July 2000 and August 2003 

proposed rules ((65 FR 44177) and (68 

FR 49030), respectively), include a 

summary of the final physician fee 

schedule rules published through 

February 2003. 

In the November 7, 2003 final rule, we 

refined the resource-based practice 

expense RVUs and made other changes 

to Medicare Part B payment policy. The 

specific policy changes concerned: the 

Medicare Economic Index; practice 

expense for professional component 

services; definition of diabetes for 

diabetes self-management training; 

supplemental survey data for practice 

expense; geographic practice cost 

indices; and several coding issues. In 

addition, this rule updated the codes 

subject to the physician self-referral 

prohibition. We also made revisions to 

the sustainable growth rate and the 

anesthesia conversion factor. 

Additionally, we finalized the CY 2003 

interim RVUs and issued interim RVUs 

for new and revised procedure codes for 

CY 2004. 

As required by the statute, we 

announced that the physician fee 

schedule update for CY 2004 was ¥4.5 

percent; that the initial estimate of the 

sustainable growth rate for CY 2004 was 

7.4 percent; and that the conversion 

factor for CY 2004 was $35.1339.

Subsequent to the November 7, 2003 

final rule, the Congress enacted the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (Pub. L. 108–17) (MMA). On 

January 7, 2004, an interim final rule 

was published to implement provisions 

of the MMA applicable in 2004 to 

Medicare payment for covered drugs 

and physician fee schedule services. 

These provisions included—

• Revising the current payment 

methodology for Medicare Part B 

covered drugs and biologicals that are 

not paid on a cost or prospective 

payment basis; 

• Making changes to Medicare 

payment for furnishing or administering 

drugs and biologicals; 

• Revising the geographic practice 

cost indices; 

• Changing the physician fee 

schedule conversion factor. (Note: The 

2004 physician fee schedule conversion 

factor is $37.3374); and 

• Extending the ‘‘opt-out’’ provisions 

of section 1802(b)(5)(3) of the Act to 

dentists, podiatrists, and optometrists. 

The information contained in the 

January 7, 2004 interim final rule 

concerning payment under the 

physician fee schedule superceded 

information contained in the November 

7, 2003 final rule to the extent that the 

two are inconsistent. 

C. Components of the Fee Schedule 

Payment Amounts 

Under the formula set forth in section 

1848(b)(1) of the Act, the payment 

amount for each service paid under the 

physician fee schedule is the product of 

three factors: (1) A nationally uniform 

relative value unit (RVU) for the service; 

(2) a geographic adjustment factor (GAF) 

for each physician fee schedule area; 

and (3) a nationally uniform conversion 

factor (CF) for the service. The CF 

converts the relative values into 

payment amounts. 

For each physician fee schedule 

service, there are three relative values: 

(1) An RVU for physician work; (2) an 

RVU for practice expense; and (3) an 

RVU for malpractice expense. For each 

of these components of the fee schedule, 

there is a geographic practice cost index 

(GPCI) for each fee schedule area. The 

GPCIs reflect the relative costs of 

practice expenses, malpractice 

insurance, and physician work in an 

area compared to the national average 

for each component. 

The general formula for calculating 

the Medicare fee schedule amount for a 

given service in a given fee schedule 

area can be expressed as:

Payment = [(RVU work × GPCI work) + 

(RVU practice expense × GPCI 

practice expense) + (RVU 

malpractice x GPCI malpractice)] ×

CF

The CF for calendar year (CY) 2005 

appears in section X. The RVUs for CY 

2005 are in Addendum B. The GPCIs for 

CY 2005 can be found in Addendum D. 

Section 1848(e) of the Act requires us 

to develop GAFs for all physician fee 

schedule areas. The total GAF for a fee 

schedule area is equal to a weighted 

average of the individual GPCIs for each 

of the three components of the service. 

In accordance with the statute, however, 

the GAF for the physician’s work 

reflects one-quarter of the relative cost 

of physician’s work compared to the 

national average. 

D. Development of the Relative Value 

System 

1. Work Relative Value Units 

Approximately 7,500 codes represent 

services included in the physician fee 

schedule. The 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 work 

RVUs for most codes in a cooperative 

agreement with us. In constructing the 

vignettes for the original RVUs, Harvard 

worked with expert panels of physicians 

and obtained input from physicians 

from numerous specialties. 

The RVUs for radiology services were 

based on the American College of 

Radiology (ACR) relative value scale, 

which we integrated into the overall 

physician fee schedule. The RVUs for 

anesthesia services were based on RVUs 

from a uniform relative value guide. We 

established a separate CF for anesthesia 

services, and we continue to recognize 

66240 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

time as a factor in determining payment 

for these services. As a result, there is 

a separate payment system for 

anesthesia services. 

2. Practice Expense and Malpractice 

Expense Relative Value Units 

Section 1848(c)(2)(C) of the Act 

requires that the practice expense and 

malpractice expense RVUs equal the 

product of the base allowed charges and 

the practice expense and malpractice 

percentages for the service. Base 

allowed charges are defined as the 

national average allowed charges for the 

service furnished during 1991, as 

estimated using the most recent data 

available. For most services, we used 

1989 charge data aged to reflect the 1991 

payment rules, because those were the 

most recent data available for the 1992 

fee schedule.

Section 121 of the Social Security Act 

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 

practice expense RVUs for each 

physician’s service. As amended by the 

Balanced Budget Act of 1997 (BBA) 

(Pub. L. 105–33), enacted on August 5, 

1997, section 1848(c) required the new 

payment methodology to be phased in 

over 4 years, effective for services 

furnished in 1999, with resource-based 

practice expense RVUs becoming fully 

effective in 2002. The BBA also required 

us to implement resource-based 

malpractice RVUs for services furnished 

beginning in 2000. 

II. Provisions of the Proposed Rule 

Related to the Physician Fee Schedule 

In response to the publication of the 

August 5, 2004 proposed rule (69 FR 

47488), we received approximately 

9,302 comments. We received 

comments from individual physicians, 

health care workers, professional 

associations and societies, and 

beneficiaries. The majority of the 

comments addressed the proposals 

related to ‘‘incident to’’ therapy 

services, GPCI, diagnostic psychological 

testing, and drug issues including 

average sales price (ASP). 

The proposed rule discussed policies 

that affected the number of RVUs on 

which payment for certain services 

would be based. The proposed rule also 

discussed policies related to 

implementation of the MMA. RVU 

changes implemented through this final 

rule are subject to the $20 million 

limitation on annual adjustments 

contained in section 1848(c)(2)(B)(ii)(II) 

of the Act. 

After reviewing the comments and 

determining the policies we would 

implement, we have estimated the costs 

and savings of these policies and 

discuss in detail the effects of these 

changes in the Regulatory Impact 

Analysis in section XIV. 

For the convenience of the reader, the 

headings for the policy issues 

correspond to the headings used in the 

August 5, 2004 proposed rule. More 

detailed background information for 

each issue can be found in the August 

5, 2004 proposed rule. 

A. Resource-Based Practice Expense 

Relative Value Units 

1. Resource-Based Practice Expense 

Legislation 

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 Social 

Security Act (the Act) and required us 

to develop a methodology for a 

resource-based system for determining 

practice expense RVUs for each 

physician’s service beginning in 1998. 

Until that time, physicians’ practice 

expenses were established based on 

historical allowed charges. 

In developing the methodology, we 

were to consider the staff, equipment, 

and supplies used in providing medical 

and surgical services in various settings. 

The legislation specifically required 

that, in implementing the new system of 

practice expense RVUs, we apply the 

same budget-neutrality provisions that 

we apply to other adjustments under the 

physician fee schedule. 

Section 4505(a) of the Balanced 

Budget Act of 1997 (BBA) (Pub. L. 105–

33), enacted on August 5, 1997, 

amended section 1848(c)(2)(C)(ii) of the 

Act and delayed the effective date of the 

resource-based practice expense RVU 

system until January 1, 1999. In 

addition, section 4505(b) of the BBA 

provided for a 4-year transition period 

from charge-based practice expense 

RVUs to resource-based RVUs. 

Further legislation affecting resourcebased practice expense RVUs was 

included in the Medicare, Medicaid and 

State Child Health Insurance Program 

(SCHIP) Balanced Budget Refinement 

Act of 1999 (BBRA) (Pub. L. 106–113) 

enacted on November 29, 1999. Section 

212 of the BBRA amended section 

1848(c)(2)(C)(ii) of the Act by directing 

us 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. 

These data would supplement the data 

we normally collect in determining the 

practice expense component of the 

physician fee schedule for payments in 

CY 2001 and CY 2002. (The 1999 and 

2003 final rules (64 FR 59380 and 68 FR 

63196, respectively, extended the period 

during which we would accept 

supplemental data.) 

2. Current Methodology for Computing 

the Practice Expense Relative Value 

Unit System 

In the November 2, 1998 final rule (63 

FR 58910), effective with services 

furnished on or after January 1, 1999, 

we established at 42 CFR 414.22(b)(5) a 

new methodology for computing 

resource-based practice expense RVUs 

that used the two significant sources of 

actual practice expense data we have 

available—the Clinical Practice Expert 

Panel (CPEP) data and the American 

Medical Association’s (AMA) 

Socioeconomic Monitoring System 

(SMS) data. The CPEP data were 

collected from panels of physicians, 

practice administrators, and 

nonphysicians (for example registered 

nurses) nominated by physician 

specialty societies and other groups. 

The CPEP panels identified the direct 

inputs required for each physicians 

service in both the office setting and 

out-of-office setting. The AMA’s SMS 

data provided aggregate specialtyspecific information on hours worked 

and practice expenses. The 

methodology was based on an 

assumption that current aggregate 

specialty practice costs are a reasonable 

way to establish initial estimates of 

relative resource costs for physicians’

services across specialties. The 

methodology allocated these aggregate 

specialty practice costs to specific 

procedures and, thus, can be seen as a 

‘‘top-down’’ approach. 

Also in the November 2, 1998 final 

rule, in response to comments, we 

discussed the establishment of the 

Practice Expense Advisory Committee 

(PEAC) of the AMA’s Specialty Society 

Relative Value Update Committee 

(RUC), which would review 

code’specific CPEP data during the 

refinement period. This committee 

would include representatives from all 

major specialty societies and would 

make recommendations to us on 

suggested changes to the CPEP data. 

As directed by the BBRA, we also 

established a process (see 65 FR 65380) 

under which we would accept and use, 

to the maximum extent practicable and 

consistent with sound data practices, 

data collected by entities and 

organizations to supplement the data we 

normally collect in determining the 

practice expense component of the 

physician fee schedule. 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66241

a. Major Steps

A brief discussion of the major steps 

involved in the determination of the 

practice expense RVUs follows. (Please 

see the November 1, 2001 final rule (66 

FR 55249) for a more detailed 

explanation of the top-down 

methodology.) 

• Step 1—Determine the specialty 

specific practice expense per hour of 

physician direct patient care. We used 

the AMA’s SMS survey of actual 

aggregate cost data by specialty to 

determine the practice expenses per 

hour for each specialty. We calculated 

the practice expenses per hour for the 

specialty by dividing the aggregate 

practice expenses for the specialty by 

the total number of hours spent in 

patient care activities. 

• Step 2—Create a specialty-specific 

practice expense pool of practice 

expense costs for treating Medicare 

patients. To calculate the total number 

of hours spent treating Medicare 

patients for each specialty, we used the 

physician time assigned to each 

procedure code and the Medicare 

utilization data. The primary sources for 

the physician time data were surveys 

submitted to the AMA’s RUC and 

surveys done by Harvard for the 

establishment of the work RVUs. We 

then multiplied the physician time 

assigned per procedure code by the 

number of times that code was billed by 

each specialty, and summed the 

products for each code, by specialty, to 

get the total physician hours spent 

treating Medicare patients for that 

specialty. We then calculated the 

specialty-specific practice expense 

pools by multiplying the specialty 

practice expenses per hour (from step 1) 

by the total Medicare physician hours 

for the specialty. 

• Step 3—Allocate the specialtyspecific practice expense pool to the 

specific services (procedure codes) 

performed by each specialty. For each 

specialty, we divided the practice 

expense pool into two groups based on 

whether direct or indirect costs were 

involved and used a different allocation 

basis for each group. 

(i) Direct costs—For direct costs 

(which include clinical labor, medical 

supplies, and medical equipment), we 

used the procedure-specific CPEP data 

on the staff time, supplies, and 

equipment as the allocation basis. For 

the separate practice expense pool for 

services without physician work RVUs, 

we have used, on an interim basis, 1998 

practice expense RVUs to allocate the 

direct cost pools. 

(ii) Indirect costs—To allocate the cost 

pools for indirect costs, including 

administrative labor, office expenses, 

and all other expenses, we used the total 

direct costs, or the 1998 practice 

expense RVUs, in combination with the 

physician fee schedule work RVUs. We 

converted the work RVUs to dollars 

using the Medicare CF (expressed in 

1995 dollars for consistency with the 

SMS survey years). 

• Step 4—The direct and indirect 

costs are then added together to attain 

the practice expense for each procedure, 

by specialty. For procedures performed 

by more than one specialty, the final 

practice expense allocation was a 

weighted average of practice expense 

allocations for the specialties that 

perform the procedure, based on the 

frequency with which each specialty 

performs the procedure on Medicare 

patients. 

b. Other Methodological Issues 

i. Nonphysician Work Pool 

As an interim measure, until we could 

further analyze the effect of the topdown methodology on the Medicare 

payment for services with physician 

work RVUs equal to zero (including the 

technical components of radiology 

services and other diagnostic tests), we 

created a separate practice expense 

pool. We first used the average clinical 

staff time from the CPEP data and the 

‘‘all physicians’’ practice expense per 

hour to create the pool. In the December 

2002 final rule, we changed this policy 

and now use the total clinical staff time 

and the weighted average specialtyspecific practice expense per hour for 

specialties with services in this pool. In 

the next step, we used the adjusted 1998 

practice expense RVUs to allocate this 

pool to each service. Also, for all 

radiology services that are assigned 

physician work RVUs, we used the 

adjusted 1998 practice expense RVUs 

for radiology services as an interim 

measure to allocate the direct practice 

expense cost pool for radiology. 

A specialty society may request that 

its services be removed from the 

nonphysician work pool. We have 

removed services from the nonphysician 

work pool if the requesting specialty 

predominates utilization of the service. 

ii. Crosswalks for Specialties Without 

Practice Expense Survey Data 

Since many specialties identified in 

our claims data did not correspond 

exactly to the specialties included in the 

SMS survey data, it was necessary to 

crosswalk these specialties to the most 

appropriate SMS specialty. 

iii. Physical Therapy Services 

Because we believe that most physical 

therapy services furnished in 

physicians’ offices are performed by 

physical therapists, we crosswalked all 

utilization for therapy services in the 

CPT 97000 series to the physical and 

occupational therapy practice expense 

pool.

3. Practice Expense Proposals for 

Calendar Year 2005

a. Supplemental Practice Expense 

Surveys 

i. Survey Criteria and Submission Dates 

As required by the BBRA, we 

established criteria to evaluate survey 

data collected by organizations to 

supplement the SMS survey data used 

in the calculation of the practice 

expense component of the physician fee 

schedule. The deadline for submission 

of supplemental data to be considered 

in CY 2006 is March 1, 2005. 

ii. Survey by the College of American 

Pathologists (CAP) 

In the August 5, 2004 rule, we 

proposed to incorporate the CAP survey 

data into the practice expense 

methodology and to implement a 

change to the practice expense 

methodology to calculate the technical 

component RVUs for pathology services 

as the difference between the global and 

professional component RVUs. (This 

technical change was proposed in the 

June 28, 2002 Federal Register (67 FR 

43849), but, at the specialty’s request, 

we delayed implementation of this 

change for pathology services to permit 

evaluation of the combined effects of the 

use of the new survey data along with 

this technical change to the 

methodology.) We proposed to use the 

following practice expense per hour 

figures for specialty 69—Independent 

Laboratory.

66242 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

Comment: Specialty organizations 

representing clinical laboratories and 

pathologists expressed support for the 

use of the CAP supplemental survey 

data and urged us to finalize this 

proposal. 

Response: We will incorporate the 

CAP survey data into the practice 

expense methodology and implement 

the proposed change to the practice 

expense methodology to calculate the 

technical component RVUs for 

pathology services as the difference 

between the global and professional 

component RVUs. 

iii. Submission of Supplemental 

Surveys 

We received surveys from the 

American College of Cardiology (ACC), 

the American College of Radiology 

(ACR), and the American Society for 

Therapeutic Radiation Oncology 

(ASTRO). Our contractor, The Lewin 

Group, evaluated the data and 

recommended that we accept the data 

from the ACC and the ACR, but 

indicated that the survey from ASTRO 

did not meet the precision criteria 

established for supplemental surveys 

and, thus, did not recommend using the 

ASTRO survey results at this time. We 

agreed with these recommendations. 

However, as explained in the August 5, 

2004 proposed rule, the ACR and the 

ACC requested that we not use the data 

until we have a stable and global 

solution that is workable for all 

specialties that are currently paid using 

the nonphysician work pool. We agreed 

with these requests and proposed 

delaying use of these supplemental 

surveys until issues related to the 

nonphysician work pool can be 

addressed. 

Comment: The ACR expressed 

appreciation for our acceptance of the 

supplemental data and for our proposal 

to delay implementation until next year, 

as they had requested, to allow further 

time to examine the issue of the 

nonphysician work pool. The Society 

for Interventional Radiology (SIR) also 

expressed support for the use of the 

ACR data and the delay in 

implementation. 

Response: We look forward to 

working with these and other specialties 

as we seek a permanent solution to 

practice expense issues associated with 

the nonphysician work pool. 

Comment: ASTRO stated that they 

appreciate the opportunity to submit 

data and, that they understand we will 

not be using the data in 2005. ASTRO 

further commented that, due to the 

specific practice patterns and practice 

environment of radiation oncology, new 

data, regardless of the response rate, 

may not meet the criteria. ASTRO 

further stated that they will continue to 

work with CMS and with the Lewin 

Group as this issue is analyzed. The 

Association of Freestanding Radiation 

Oncology Centers (AFROC) expressed 

concern that freestanding centers that 

have higher costs than hospital-based 

centers were underrepresented by the 

ASTRO survey. They also expressed 

concern about the reference in the 

Lewin Group report to crosswalking 

radiation oncology costs from another 

specialty. In addition, AFROC argued 

that we should not average costs 

associated with freestanding centers 

with those that are hospital-based, 

because the costs would be understated. 

They urged us to ensure that any 

assumption regarding 

representativeness of any survey data is 

justified. 

Response: We will take these 

comments into consideration as we 

continue to work with these groups 

concerning the supplemental survey 

data. We currently have no plans to 

propose a practice expense crosswalk 

for radiation oncology. 

Comment: The ACC expressed 

appreciation that we are not eliminating 

the nonphysician workpool until 

methodologic issues are addressed. 

While they support the delay in 

implementing their supplemental 

survey data, they believe that the 

contractor’s suggestion that the ACC 

survey data could be blended with the 

existing SMS survey data is invalid for 

two reasons: (1) The suggestion that 

similar changes to physician practice 

(for example, increased use of 

technology) may have occurred 

throughout all physician services is an 

unfounded speculation because few 

other specialties are as technologically 

driven as cardiology; and (2) other 

supplemental data has not been blended 

and all specialties must be treated 

consistently. 

Response: We will take these 

comments into consideration as part of 

the evaluation and discussion of the 

cardiology survey data in next year’s 

proposed rule.

Comment: The American Urological 

Association requested that, as we 

explore alternate sources of data and 

consider how to incorporate new 

practice expense data into the 

methodology, we find a way to 

incorporate recently collected specialty 

supplemental data into the new efforts. 

They also requested that we clarify 

whether we would apply the budget 

neutrality exemption to any increases in 

drug administration PE RVUs that result 

from the use of urology survey data that 

will be submitted under the 

supplemental survey process. 

Response: We anticipate that we 

would incorporate all accepted 

supplemental survey data into any 

comprehensive changes to the 

nonphysician work pool. 

As we explained in the January 7, 

2004 Federal Register (69 FR 1093 

through 1094), section 303(a)(1) of the 

MMA modifies section 1848(c)(2)(B) of 

the Act to provide an exemption from 

the budget neutrality requirements in 

2006 for further increases in the practice 

expense RVUs for drug administration 

that may result from using survey data 

from specialties meeting certain criteria. 

The survey must include expenses for 

the administration of drugs and 

biologicals and be submitted by a 

specialty that receives more than 40 

percent of its 2002 Medicare revenues 

from drugs. Urology received more than 

40 percent of its 2002 Medicare 

revenues from drugs. Therefore, if we 

were to receive a practice expense 

survey of urologists by March 1, 2005 


ER15NO04.487</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66243

that included expenses for the 

administration of drugs and biologicals 

and the survey met the criteria we have 

established (and those of section 

1848(c)(2)(I)(ii) of the Act), we would 

exempt the change in the practice 

expense RVUs for drug administration 

services from the budget neutrality 

requirements of section 1848(c)(2)(B) of 

the Act. 

b. Practice Expense Advisory Committee 

(PEAC) 

Recommendations on CPEP Inputs for 

2005 

• CPEP Refinement Process. 

In the August 5, 2004 proposed rule, 

we included the PEAC 

recommendations from meetings held in 

March and August 2003 and January 

and March 2004, which accounted for 

over 2,200 codes from many specialties. 

We also stated that future practice 

expense issues, including the 

refinement of the remaining codes not 

addressed by the PEAC, would be 

handled by the RUC. 

Comment: We received comments 

from the AMA that future practice 

expense issues, including the 

refinement of the remaining codes not 

addressed by the PEAC, would be 

handled by the RUC with the help of a 

new ad hoc committee, now termed the 

Practice Expense Review Committee 

(PERC), comprised of former PEAC 

members. The RUC also noted that their 

Practice Expense Subcommittee remains 

committed to reviewing improvements 

to the practice expense methodology. 

The AMA and the RUC, as well as the 

specialty society representing 

neurological surgeons, noted their 

appreciation of our continued efforts to 

improve the direct practice expense data 

and to establish a reasonable 

methodology for determining practice 

expense relative values. 

Response: We look forward to our 

continuing work with the AMA, the 

RUC and all the specialty societies on 

the refinement of the remaining codes 

and with ongoing practice expense 

issues. 

Comment: The National Association 

for the Support of Long Term Care 

expressed concern about the dissolution 

of the PEAC and requested that we 

require the RUC to expand its 

membership to include a broad array of 

providers who are reimbursed under the 

physician fee schedule. 

Response: Because the RUC is an 

independent committee, we are not in a 

position to set the requirements for RUC 

membership. However, we are confident 

that the RUC and the Health Care 

Professional Advisory Committee, 

which also sends practice expense 

recommendations directly to us, 

together represent two broad ranges of 

practitioners, both physician and 

nonphysician. 

Comment: A specialty society 

suggested that there should be a process 

for fixing minor errors that are 

identified outside of the refinement 

process. The commenter also suggested 

that there should be a system to address 

individual exceptions to PEAC standard 

packages. 

Response: If we have made errors, 

major or minor, in any part of our 

calculation of practice expense RVUs in 

this final rule, inform us as soon as 

possible so that we are able to correct 

them in the physician fee schedule 

correction notice. Any other revisions 

would have to be made in the next 

physician fee schedule rule. If a 

specialty society believes that a RUC 

decision is not appropriate, the society 

can always request that the decision be 

revisited or can discuss the issue with 

us at any time. For the concern with the 

standard packages adopted by the 

PEAC, it is our understanding that all 

presenters at the RUC have the 

opportunity to demonstrate that 

something other than the standard 

would be more appropriate. 

• PEAC Recommendations.

We proposed to adopt nearly all of the 

PEAC recommendations. However, we 

disagreed with the PEAC 

recommendation for clinical labor time 

for CPT code 99183, Physician 

attendance and supervision of 

hyperbaric oxygen therapy, per session, 

and proposed a total clinical labor time 

of 112 minutes for this service. 

Comment: Specialty societies 

representing interventional radiology 

and neurological surgeons, as well as 

the AMA, expressed appreciation for 

our acceptance of well over 2,000 PEAC 

refinements in this rule. However, the 

specialty society representing 

orthopaedic surgeons commented that 

some of our proposals appeared to be 

circumventing the PEAC process, in that 

we changed the PEAC recommendation 

for hyperbaric oxygen (HBO) therapy 

and proposed in-office inputs for two 

services rather than referring these to 

the RUC. 

Response: We appreciate the hard 

work and perseverance on the part of 

the PEAC and the specialty societies 

that produced the recommended 

refinements for so many services. In 

addition, we do not believe that we 

circumvented the PEAC process in any 

way. We have the greatest respect for 

the PEAC and RUC recommendations 

that we received. However, we do have 

the final responsibility for all payments 

made under the physician fee schedule, 

and this can lead to disagreement with 

a specific recommendation. The RUC 

itself has always demonstrated its 

understanding and respect for our 

responsibility in this regard. With 

regard to the two services that we priced 

in the office, we stated explicitly in the 

proposed rule that we were requesting 

that the RUC review the practice 

expense inputs. 

Comment: The specialty society 

representing family physicians 

disagreed with our proposed changes to 

the PEAC recommendations for the 

clinical labor time for CPT code 99183, 

Physician attendance and supervision of 

hyperbaric oxygen therapy, per session.

The commenter contended that a 

physician providing this service would 

probably have multiple hyperbaric 

oxygen chambers; therefore, staff would 

not be in constant attendance. However, 

the specialty society representing 

podiatrists supported this change in 

clinical staff time. 

Response: Based on our concern that 

the PEAC recommendation of 20 

minutes of clinical staff time during the 

intra-service period undervalued the 

clinical staff time, we proposed 

increasing this time to 90 minutes in the 

proposed rule. This was, of course, 

subject to comment. We believe there is 

some merit to the claim that the clinical 

staff may be monitoring more than one 

chamber at a time. Therefore, we are 

adjusting the time for the intra-service 

period from the proposed 90 minutes to 

60 minutes in recognition of this point. 

We will continue our examination of 

this issue and entertain ongoing dialog 

with all interested organizations and 

individuals familiar with this service to 

assure the accuracy of the intra-service 

time. 

Comment: The Cardiac Event 

Monitoring Provider Group Coalition 

expressed concern about the PEAC 

recommendations that would 

substantially reduce the clinical staff 

time associated with cardiac monitoring 

services. Of particular concern to the 

Coalition was the 70 percent reduction 

in time for CPT code 93271, the code for 

cardiac event monitoring, receipt of 

transmissions, and analysis. Although 

all these services are currently priced in 

the nonphysician work pool and this 

decrease in the staff times has no 

immediate impact, the commenter was 

concerned that, when the nonphysician 

work pool is eliminated, these services 

will be undervalued. The commenter 

also believed that the PEAC 

recommendations may not have 

reflected all the supplies and equipment 

utilized in these services and included 

a complete list of necessary supplies 

66244 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

and equipment. The American College 

of Cardiology (ACC) presented these 

services at the PEAC meeting and 

commented they had been unable to 

collect sufficient data so that the PEAC 

could make an appropriate 

recommendation.

Response: It is clear from the 

Coalition and ACC comments that more 

information is needed in order to ensure 

that the appropriate practice expense 

inputs are assigned to these services in 

the event that they are removed from the 

nonphysician work pool. We would be 

glad to work with the Coalition and the 

specialty society so that they can make 

a new presentation to the RUC this 

coming year. 

• Adjustments To Conform With 

PEAC Standards 

We also reviewed those codes that are 

currently unrefined or that were refined 

early in the PEAC process to apply some 

of the major PEAC-agreed standards. For 

the unrefined 10-day global services, we 

proposed to substitute for the original 

CPEP times the PEAC-agreed standard 

post-service office visit clinical staff 

times used for all 90-day and refined 10-

day global services. We also proposed to 

eliminate the discharge day 

management clinical staff time from all 

but the 10 and 90-day global codes, 

substituting one post-service phone call 

if not already in the earlier data. Lastly, 

we proposed to delete any extra clinical 

staff time for post-visit phone calls for 

10 and 90-day global service because 

that time is already included in the time 

allotted for the visits. 

Comment: A specialty society 

representing family physicians 

supported the elimination of the 

discharge day management time 

assigned in the facility setting for all 0-

day global services, as well as all the 

other adjustments we made to apply 

PEAC standards. However, several 

specialty societies representing 

gastroenterology and orthopaedics, as 

well as the American College of 

Physicians, did not agree with the 

deletion of the discharge day 

management time. These groups 

requested restoration of the six minutes 

allocated to the discharge day 

management for 0-day global services 

and argued that most 0-day services 

require as much staff time as do many 

10-day global services performed in the 

outpatient setting. One of these 

commenters did not believe a rationale 

was provided for this change. Another 

commenter, although recommending 

that any future refinements take into 

account all of the PEAC standards, 

expressed concern regarding all of the 

above changes, suggesting that this 

could lead to additional anomalies and 

recommending that the revisions should 

be reviewed by the RUC. 

Response: The PEAC recommended 

that the discharge day management time 

apply only to 10-day and 90-day global 

services and we were complying with 

this recommendation. We also believe 

that this PEAC recommendation is 

reasonable; it is hard to imagine what 

tasks a physician’s clinical staff back in 

the office is performing for a patient 

during the period that the patient is 

undergoing a same-day procedure in the 

hospital outpatient department. 

However, the point made about 10-day 

global procedures is pertinent. We 

would suggest that the RUC reconsider 

whether the discharge day management 

clinical staff time should apply only to 

services that are typically performed in 

the inpatient setting. We also believe 

that it was appropriate to apply the 

PEAC standards to codes that were not 

refined or that were refined before the 

standards were developed. The 

application of these standards is not 

only fair, but can also help to avoid the 

possible rank order anomalies cited by 

the commenter. 

Methacholine Chloride 

The PEAC recommendations for CPT 

codes 91011 and 91052 included a 

supply input for methacholine chloride 

as the injected stimulant for these two 

services. In discussions with 

representatives from the 

gastroenterology specialty society 

subsequent to receipt of the PEAC 

recommendations, we learned this is 

incorrect. For the esophageal motility 

study, CPT code 91011, we proposed to 

include edrophonium as the drug 

typically used in this procedure. For the 

gastric analysis study, CPT code 91052, 

we were unable to identify the single 

drug that is most typically used with 

this procedure. We requested that 

commenters provide us with 

information on the drug that is most 

typically used for CPT code 91052, 

including drug dosage and price, so that 

it could be included in the practice 

expense database.

Comment: Several specialty societies 

representing allergists, pulmonologists 

and chest physicians, as well as the 

AMA, requested that the additional cost 

of methacholine be reflected in the 

RVUS for the bronchial challenge test, 

CPT code 95070. As an alternative, the 

specialty society representing allergists 

suggested that a HCPCS code could be 

created so that methacholine could be 

billed separately. 

In response to our request for 

information about the supply inputs for 

CPT codes 91011 and 91052, the 

American Gastroenterological 

Association (AGA) indicated that 

edrophonium may be an appropriate 

supply proxy for CPT code 91011, but, 

in practice, other agents are more 

commonly used. However, they 

provided no additional information 

regarding these other agents. AGA also 

stated that the most commonly used 

drug for CPT code 91052 is pentagastrin, 

but betazole or histamine may also be 

used. Again, they did not provide 

further specific information. 

Response: Because CPT code 95070 is 

valued in the nonphysician work pool, 

the PEAC’s addition of methacholine to 

this procedure could not be captured by 

the practice expense RVUs. However, a 

J-code was established, J7674, 

Methacholine chloride administered as 

inhalation solution through nebulizer, 

per 1mg, so that this drug can be billed 

separately. Accordingly, we have 

deleted methacholine from the practice 

expense database. 

For CPT code 91011, we have retained 

the drug edrophonium, and our 

proposed price of $4.67 per ml, as a 

supply in the practice expense database. 

However, we were not able to include 

a price for pentagastrin in the supply 

practice expense database for CPT code 

91052. We will be happy to work with 

the specialty societies involved with 

both of these procedures to obtain 

accurate drug pricing for the 2006 fee 

schedule. 

• Nursing Facility and Home Visits. 

We proposed to adopt the direct 

practice expense input 

recommendations from the March 2003 

PEAC meeting for CPT codes 99348 and 

99350, two E/M codes for home visits, 

as well as the March 2004 PEAC 

recommendations for E/M codes for 

nursing home services (CPT codes 

99301 through 99316). 

Comment: A specialty group 

representing family physicians 

supported the acceptance of the PEAC 

recommendations for nursing facility 

visits, even though this resulted in a 

decrease for these services. The 

commenter stated that the decrease 

occurred because the original CPEP data 

was flawed and the clinical staff times 

were too high. The commenter also 

stated that the payments in the facility 

setting will increase for these services 

and that setting has the higher volume 

of visits. Other commenters representing 

long term care physicians, geriatricians 

and podiatrists expressed 

disappointment in these PEAC 

recommendations and stated that, while 

the PEAC did consider the views of long 

term care physicians, the PEAC failed to 

accept these views even though they 

were supported by data. These 

commenters believe the PEAC did not 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66245

recommend an appropriate increase 

based on a false assumption that the 

nursing home provides the staff. 

Another commenter contended that the 

new values do not adequately account 

for work performed by the physician’s 

clinical staff. The commenter stated that 

the pre- and post-times for these codes 

are less than for the comparable office 

visit codes, even though it is clear that 

more clinical staff time is required for 

the nursing facility resident. One 

commenter suggested that these 

concerns would need to be addressed 

within the framework of the 5-year 

review. The specialty society 

representing homecare physicians also 

commented that, rather than challenging 

a flawed system, they will use the 5-year 

review process to have work and 

practice expense re-valuated for the 

home visit codes. 

Response: While sympathetic to the 

concerns expressed by the long-term 

care physicians regarding the overall 

decrease in clinical staff time in the 

nursing facility E/M procedures, we 

believe the PEAC recommendations for 

these services to be reasonable. We also 

agree with commenters regarding the 

upcoming 5-year review process as a 

means to address the physician work 

component of these codes. To the extent 

that there is overlap between the 

physician time and the clinical labor 

practice expenses involved in a 

particular procedure, the 5-year review 

process can be utilized to address these 

issues. We encourage the home care 

physicians and the long-term care 

physicians to consider using the 5-year 

review process for these codes. 

• Suggested Corrections to the CPEP 

Data. 

Comment: The RUC and American 

Podiatric Medical Association identified 

a number of PEAC refinements from the 

August 2003 meeting that were not 

reflected in the practice expense 

database and asked that these be 

implemented. The RUC also asked us to 

correct the equipment times for all of 

the 90-day global services to correspond 

with the PEAC-refined clinical staff 

times for these codes. 

Response: We have made the 

recommended corrections to our 

practice expense database.

Comment: The specialty society 

representing hematology noted the 

supply items missing from the practice 

expense database for CPT codes 36514 

through 36516 that had been included 

in the CMS-accepted PEAC refinements. 

Response: We regret the error. These 

items are incorporated into the practice 

expense database. 

Comment: The specialty society 

representing pediatrics as well as the 

RUC commented that the PEAC 

recommendations also included a 

recommendation for a change in the 

global period for CPT code 54150, 

Circumcision, using clamp or other 

device; newborn, from a 10-day global to 

an ‘‘xxx’’ designation, which would 

mean the global period does not apply. 

This issue was not discussed in the 

proposed rule and the commenters 

requested that this change be reflected 

in the final rule. 

Response: As stated by the 

commenters, this request was included 

in the PEAC recommendations but was 

inadvertently omitted from the 

proposed rule. We agree that the 10-day 

global period currently assigned to this 

procedure may not be appropriate 

because the physician performing the 

procedure most likely does not see the 

infant for a post-procedure visit. 

However, we believe that a 0-day global 

period rather than ‘‘xxx’’ should be 

assigned to this procedure. We generally 

use the ‘‘xxx’’ designation for diagnostic 

tests and no surgical procedure 

currently is designated as an ‘‘xxx’’

global service. We believe this will 

accomplish the same end because most 

any other service performed at the same 

time as the circumcision could be billed 

with the appropriate modifier. We are 

adjusting the practice expense database 

to delete any staff time, supplies and 

equipment associated with the postprocedure office visit. 

Comment: Specialty societies 

representing dermatology stated that 

there was an error in the nonfacility 

practice expense RVUS for the Mohs 

micrographic surgery service, CPT code 

17307, due to the omission of clinical 

staff time from the practice expense 

database. 

Response: We have corrected the 

practice expense database to reflect the 

appropriate clinical staff time. 

Comment: We received comments 

from the American College of Radiology 

(ACR) and Society of Nuclear Medicine 

noting that some of the codes used by 

their specialty were omitted from the 

listing of PEAC-refined codes that 

appeared in Addendum C in our 

proposed rule. They submitted a 

complete list of the codes that had gone 

through PEAC refinement, beginning at 

the first PEAC meeting in April 1999, 

and asked that we include these codes 

on the Addendum. 

Response: We appreciate the specialty 

societies bringing to our attention that 

some of their codes were omitted from 

Addendum C and we have reviewed the 

codes on their submitted list. 

Addendum C was meant to list only 

those codes that were refined in this 

year’s rule, and thus, only listed those 

refined by the PEAC from March and 

August 2003 and January and March 

2004. However, it does appear that there 

is some confusion regarding what codes 

were refined during this period, 

particularly from the March 2004 

meeting. We will work with all medical 

societies and the RUC to clarify the 

status of all the codes in question. 

• Other Issues. 

Comment: The RUC requested that we 

publish practice expense RVUs for all 

Medicare noncovered services for which 

the RUC has recommended direct 

inputs. We also received a request from 

the American Academy of Pediatrics to 

publish work and practice expense 

RVUs for the noncovered nasal or oral 

immunization services (CPT codes 

90473 and 90474) and the visual acuity 

test (CPT code 99173). 

Response: In the past, we have 

published the practice expense RVUs 

for only a small number of noncovered 

codes which are listed in our national 

payment files that can be accessed via 

our physician web page under 

‘‘Medicare Payment Systems’’ as part of 

the public use files at www.cms.hhs.gov/

physicians/. Because we have not yet 

established a consistent policy regarding 

the publication of RVUs for noncovered 

services, we will need to examine this 

issue further to carefully weigh the pros 

and cons of publishing these RVUs for 

noncovered services. 

Comment: The American SpeechLanguage Hearing Association (ASHA) 

and the American Academy of 

Audiology (AAA), expressed concern 

about the reduction of practice expense 

RVUs for CPT code 92547, Use of 

vertical electrodes (List separately in 

addition to code for primary procedure),

which resulted after the PEAC 

refinement. The commenters asked for 

our assistance to clarify a CPT 

instruction regarding this procedure 

because they believe it prevents the 

multiple billings of CPT 92547 in a 

given patient encounter. 

Response: While we are sympathetic 

to the concerns expressed by ASHA and 

AAA, we also want to note that CPT 

code descriptors and accompanying 

coding instructions are proprietary to 

CPT. We would encourage these 

organizations to discuss this issue 

directly with the CPT editorial 

committee. 

Comment: A specialty society 

representing vascular surgery expressed 

concern about the wide variations in 

practice expense RVUs that are 

sometimes derived under the current 

methodology. The commenter suggested 

that some outliers require additional 

focus to determine whether these are 

errors in the direct inputs or if they 

66246 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

reflect problems inherent in the 

methodology. According to the 

commenter, it would appear that some 

of the extreme variation is due to the 

high costs of certain disposable supplies 

in the office setting as well as high 

scaling factors. A few examples of 

outlier codes were provided. The 

commenter suggested that we consider 

an alternative methodology for payment 

of high-priced single-use items in the 

nonfacility setting. 

Response: We agree with the 

commenter that the issue raised is one 

worth study and analysis. 

Unfortunately, this is not a task that can 

be accomplished in time for discussion 

in this final rule. We will be very 

willing to work with the specialty 

society and with the Practice Expense 

Subcommittee of the RUC, as well as 

any other interested parties, to work 

further on this issue that will only be 

magnified as more complex procedures 

are moved into the office setting. 

Comment: A provider of radiology 

services questioned the reductions in 

practice expense for CPT code 77370, 

Special medical radiation physics 

consultation.

Response: The practice expense RVUs 

for CPT code 77370 decreased by 0.02 

RVUs between last year’s final rule and 

this year’s proposed rule. This small 

decrease is due to the normal 

fluctuations resulting from updating our 

practice expense data. 

c. Repricing of Clinical Practice Expense 

Inputs—Equipment 

We use the practice expense inputs 

(the clinical staff, supplies, and 

equipment assigned to each procedure) 

to allocate the specialty-specific practice 

expense cost pools to the procedures 

performed by each specialty. The costs 

of the original equipment inputs 

assigned by the CPEP panels were 

determined in 1997 by our contractor, 

Abt Associates, based primarily on list 

prices from equipment suppliers. 

Subsequent to the CPEP panels, 

equipment has also been added to the 

CPEP data, with the costs of the inputs 

provided by the relevant specialty 

society. We only include equipment 

with costs equal to or exceeding $500 in 

our practice expense database because 

the cost per use for equipment costing 

less than $500 would be negligible. We 

also consider the useful life of the 

equipment in establishing an equipment 

cost per minute of use. 

We contracted with a consultant to 

assist in obtaining the current price for 

each equipment item in our CPEP 

database. The consultant was able to 

determine the current prices for most of 

the equipment inputs and clarified the 

specific composition of each of the 

various packaged and standardized 

rooms or ophthalmology ‘‘lanes’’

currently identified in the equipment 

practice expense database (for example, 

mammography room or exam lane). We 

proposed to delete the current ‘‘room’’

designation for the radiopharmaceutical 

receiving area and, in its place, list 

separately the equipment necessary for 

each procedure as individual line items. 

Also, we proposed to replace all 

surgical packs and trays in the practice 

expense database with the appropriate 

standardized packs that were 

recommended by the PEAC, either the 

basic instrument pack or the medium 

pack. 

The useful life for each equipment 

item was also updated as necessary, 

primarily based on the AHA’s 

‘‘Estimated Useful Lives of Depreciable 

Hospital Assets’’ (1998 edition). We 

noted in the August 5, 2004 proposed 

rule that AHA would be publishing 

updated guidelines this summer and 

that we would reflect any updates in our 

final rule. 

In addition, we proposed the 

following database revisions: 

Assignment of Equipment Categories 

We proposed that equipment be 

assigned to one of the following six 

categories: documentation, laboratory, 

scopes, radiology, furniture, roomslanes, and other equipment. These 

categories would also be used to 

establish a new numbering system for 

equipment that would more clearly 

identify them for practice expense 

purposes. 

Consolidation and Standardization of 

Item Descriptions 

We proposed combining items that 

appeared to be duplicative. For 

example, for two cervical endoscopy 

procedures, our contractor identified 

that the price of the LEEP system 

includes a smoke evacuation system but 

that system is also listed separately. We 

proposed to merge these two line items 

and reflect both prices in the price of 

the LEEP system. 

These changes were reflected in 

Addendum D of the proposed rule. 

Additionally, there were specific 

equipment items for which a source was 

not identified or for which pricing 

information was not found that were 

included in Table 2 of the August 5 

proposed rule. Items that we proposed 

to delete from the database were also 

identified in this table. We requested 

that commenters, particularly the 

relevant specialty groups, provide us 

with the needed pricing information, 

including appropriate documentation. 

Also, we stated that if we were not able 

to obtain any verified pricing 

information for an item, we might 

eliminate it from the database. 

Comment: The Society of Nuclear 

Medicine agreed with the deletion of the 

current room designation for 

radiopharmaceutical area and 

designation of categories for equipment. 

However, the society recommended that 

the category designation of ‘‘radiology’’

be changed to ‘‘imaging equipment’’ and 

‘‘other equipment’’ be changed to ‘‘nonimaging equipment’’ to be inclusive of 

these modalities. The American College 

of Radiology also concurred with the 

elimination of the current room 

designation for radiopharmaceutical 

area. 

Response: We agree that the term 

‘‘imaging equipment’’ rather than the 

term ‘‘radiology’’ more accurately 

reflects current practice and have 

changed the practice expense database 

accordingly. However, it would be 

inappropriate to change the ‘‘other 

equipment’’ category to ‘‘non-imaging 

equipment’’ because there are items in 

other categories that would not be 

encompassed in the proposed title 

change. 

Comment: The Society of Nuclear 

Medicine supplied information on the 

equipment item E51076 with the 

requested documentation.

Response: We have revised the 

practice expense database to reflect the 

information provided. 

Comment: The American Society for 

Therapeutic Radiology and Oncology 

(ASTRO) submitted information and the 

requested documentation for fifteen 

items, often supplying two or more 

pricing sources. 

Response: We greatly appreciate the 

information and have revised the 

practice expense database to reflect the 

information provided. 

Comment: Commenters representing 

manufacturers and providers expressed 

concern about the reduction in payment 

(9 percent) for external counterpulsation 

(ECP), G0166. The commenters 

questioned the proposed change made 

to the life of the ECP equipment, from 

seven to five years, used for this service. 

Commenters did not believe this was 

supported by the AHA information 

(which indicated that similar diagnostic 

cardiovascular equipment has an 

equipment life of five years) and 

requested that this timeframe be applied 

to the ECP equipment for this service. 

The American College of Cardiology 

also questioned the change to the ECP 

equipment life. The commenters also 

questioned the allocation for 

maintenance and indirect costs applied 

under the practice expense methodology 

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as well as the time allocated for this 

service. As a final point, some of the 

commenters requested that we adjust 

the work RVUs assigned to this G-code 

to that of an echocardiogram (CPT code 

93307) and include it in the 

nonphysician work pool. 

Response: Based upon review of the 

information provided we have revised 

the equipment life to five years. The 

methodology used for the allocation for 

maintenance and indirect costs is 

consistent with our methodology. For 

the request to adjust the work RVUs for 

this service, we refer the commenters to 

section VI of this final rule where we are 

soliciting comments on services where 

the physician work may be misvalued. 

Comment: The College of American 

Pathologists provided information on 

items listed in table 2: the DNA image 

analyzer (ACIS), and image analyzer 

(CAS system) code E13652. They noted 

that the CAS system is no longer 

marketed and that the ACIS system 

would be used in its place. Thus, they 

provided documentation on the price 

for the ACIS system. 

Response: We appreciate the 

information and have made the 

necessary changes to the database. 

Comment: The American College of 

Cardiology (ACC) agreed with the 

pricing for the ambulatory blood 

pressure monitor, provided prices for 

the ECG signal averaging system 

(E55035), but provided no 

documentation for these prices. They 

stated that the echocardiography digital 

acquisition ultrasound referenced in 

table 2 was no longer in the marketplace 

and that a digital workstation was now 

typically used. They requested that an 

appropriate equipment code be 

available for this item and provided a 

price range for this item (although 

without the supporting documentation). 

ACC also recommended that the 

pacemaker programmer (E55013) be 

removed from the equipment list 

because it is provided at no cost to the 

physician. Removal of this item from 

the PE database was also supported by 

a manufacturer that commented on the 

rule. 

Response: We have removed the 

pacemaker programmer from the 

practice expense database. We will 

temporarily retain other items and 

prices for the 2005 physician fee 

schedule and request that ACC forward 

the documentation as soon as possible. 

Comment: The American College of 

Radiology (ACR) provided partial 

information for the CAD processor unit 

and software. ACR also submitted 

information regarding the computer 

workstation for MRA and the 

mammography reporting software, but 

with insufficient documentation. For 

the various equipment items ACR listed 

for the mammography room, updated 

information was provided for a few of 

the items. ACR noted that they would 

submit documentation for all 

outstanding pieces of equipment when 

it is available. ACR did not agree with 

the room price for MRI and CT that was 

referenced in Addendum D and 

requested an extension so that they can 

work with us to accurately price these 

items. 

Response: We will maintain current 

pricing for all equipment items and the 

mammography room on an interim 

basis, until sufficient documentation is 

provided. 

Comment: The American 

Ophthalmology Association (AOA) and 

American Optometric Association both 

supplied pricing information along with 

the requested documentation for the 

computer, VDT, and software (E71013) 

listed in table 2. AOA also provided 

pricing information for the 

ophthalmology drill listed in this table, 

indicating a cost of $57. They expressed 

their appreciation for the 

recategorization and standardization of 

descriptions for equipment and 

supplies. 

Response: We appreciate the 

documentation forwarded by these two 

organizations and have incorporated 

into the practice expense database the 

pricing information provided for the 

computer, VDT, and software. Because 

the ophthalmology drill is less than 

$500 (the standard established for 

equipment), we are removing it from the 

equipment list for the practice expense 

database.

Comment: The American 

Gastroenterological Association (AGA) 

expressed concern about the reduction 

in RVUs for CPT code 91065, a breath 

hydrogen test. They believe that the 

newer equipment listed in the practice 

expense database does not reflect the 

analyzer that is typically used, which is 

more expensive, and noted that the 

costs for the reagents have also 

increased. 

Response: We are sympathetic to the 

concerns of the AGA regarding the 

typical equipment used for CPT code 

91065 and would like to work with 

them to ascertain updated pricing 

information about the equipment most 

physicians utilize for this service. 

However, the majority of the decrease 

(76 percent) in practice expense RVUs 

for this procedure is due to the PEAC 

refinement for the clinical labor time 

that was reduced by nearly 50 percent. 

Comment: The American Academy of 

Sleep Medicine indicated that most 

typical CPAP/BiPAP remote unit is a 

bilevel positive airway pressure unit 

and provided documentation for the 

price of this item. 

Response: This price is reflected in 

the practice expense database. 

Comment: The Society for Vascular 

Surgery (SVS), Society for Vascular 

Ultrasound and Society of Diagnostic 

Medical Sonography all expressed 

appreciation for the refinement to the 

inputs that apply to vascular ultrasound 

services. However, the commenters 

requested that we incorporate the 

requested refinements for the other 

ancillary equipment present in a 

vascular ultrasound room into other 

similar procedures. SVS specifically 

listed the following CPT codes: 93875–

9 and 93990. 

Response: In addition to the three 

new CPT codes for cerebrovascular 

arterial studies CPT 93890, 93892 and 

93893, we have added the vascular 

ultrasound room to the codes indicated 

in the SVS comment noted above. 

Comment: The American Psychiatric 

Association provided documentation for 

the cost of the ECT machine and the 

American Psychological Association 

provided information on the 

neurobehavioral status exam and 

testing, as well as the biofeedback 

equipment listed in table 2, along with 

the requested documentation. 

Response: We appreciate this 

information. The practice expense 

database was revised to reflect this cost 

information. 

Comment: The American Society of 

Clinical Oncology requested that the 

biohazard hood be substituted for the 

ventilator and hood blower as a practice 

expense input for the chemotherapy 

codes. 

Response: We revised the database to 

reflect this change. 

Comment: American Academy of 

Neurology supplied information and the 

necessary documentation on several 

equipment items listed in table 2 

associated with neurology services. 

Response: We have made the 

revisions to the prices for the 

ambulatory EEG recorder (E54008), 

ambulatory review station (E54009), and 

portable digital EEG monitor based on 

the documentation provided. Based on 

the documentation provided, we note 

that the price for the ambulatory review 

station was substantially reduced 

($44,950 to $7,950). 

Comment: The American Clinical 

Neurophysiology Society (ACNS) stated 

that the payment for CPT code 95819, 

an EEG service, was substantially 

reduced. The Society believes it is due 

to a price reduction for the EEG 

equipment (E54006) used in this service 

that was listed in Addendum D of the 

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proposed rule. The commenter 

indicated that the proposed price does 

not include the review station and 

software which is needed for this 

service and provided documentation for 

appropriately pricing this item. 

Response: Based on the 

documentation provided, we have 

changed, on an interim basis for the 

2005 fee schedule, the price for this 

item and note that this equipment price 

is associated only with CPT code 95819. 

We would be happy to work with ACNS 

in order to resolve any issues 

surrounding the RVUs for CPT code 

95819. Reviewing the direct inputs for 

this code, we note that the largest 

contributor to the reduction of practice 

expense RVUs is the PEAC’s refinement 

of this code’s supply items. 

Comment: The National Association 

for Medical Direction of Respiratory 

Care and the American College of Chest 

Physicians were in agreement with the 

proposed prices for equipment except 

for the pulse oximeter (including 

printer), E55003. The commenters 

referenced a price that is $83 more than 

that listed in the table, but provided no 

documentation. 

Response: We appreciate the 

comments from these organizations 

regarding the repricing of the equipment 

items in the practice expense database. 

We have retained our price of $1,207 for 

the pulse oximeter and note that it is an 

average from two different available 

sources. 

Comment: We received a comment 

from a consumer regarding the price of 

the electromagnetic therapy machine for 

HCPCS code G0329 with concerns about 

the low payment for this modality. 

While no documentation was submitted, 

the commenter noted that the cost for 

this equipment ranged from $25,000 to 

$35,000.

Response: We appreciate the 

commenter’s remarks about the price of 

the electromagnetic therapy equipment, 

Diapulse. We have retained our price of 

$25,000 in the practice expense 

database because we do not have 

documentation that any higher-priced 

equipment is typically used. Similar to 

other modalities used in rehabilitation, 

including those used in wound care, we 

note that this procedure reflects 

comparable practice expense values. 

Comment: Several specialty 

organizations questioned our 

substitution of the two standardized 

packs for previously PEAC-approved 

packs and trays, as discussed in our 

proposed rule. One specialty society 

suggested we consult with the AMA 

before proceeding on this point. 

Response: We uniformly applied the 

PEAC-approved values for the packs 

and trays to all packs and trays, 

regardless of whether the codes had 

previously been refined by the PEAC. 

To the extent that a specialty society 

feels that it was disadvantaged by this 

policy, we would encourage them to 

bring the specific codes that should be 

excluded from this policy to the newly 

formed PERC (formerly PEAC) at the 

next RUC meeting in February 2005. 

Comment: Several specialty 

organizations indicated that they were 

in the process of obtaining pricing 

information on equipment items and 

would provide it as soon as possible. 

One commenter also asked that we 

retain the items proposed for deletion as 

they are necessary in providing their 

services, but provided no 

documentation. 

Response: In the proposed rule, we 

noted that we might eliminate those 

items from the database for which 

documented pricing information was 

not received. Due to the number of 

outstanding equipment prices, and the 

number of societies that are underway 

in their search for this data, we have 

decided to extend the submission 

deadline. We would encourage specialty 

societies to submit price information 

soon to help ensure that it can be used 

to establish practice expense RVUs in 

next year’s proposed rule. 

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BILLING CODE 4120–01–C

d. Miscellaneous Practice Expense 

Issues 

• Pricing for Seldinger Needle. 

We proposed to average two prices of 

this supply item to reflect a cost of 

$5.175. We requested that, if 

commenters disagreed with this change 

in price, the comment should provide 

documentation to support the 

recommended price, as well as the 

specific type of needle that is most 

commonly used. 

Comment: Commenters were in 

agreement with the proposed pricing of 

the seldinger needle. 

Response: We will use the proposed 

price of $5.175 for this supply item in 

the practice expense database. 


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• Hysteroscopic Endometrial 

Ablation. 

We proposed to assign, on an interim 

basis, the following direct practice 

expense inputs in the nonfacility setting 

for CPT code 58563, Hysteroscopy, 

surgical; with endometrial ablation.

(Note: In the August 5, 2004 proposed 

rule this code was erroneously 

identified as 56853, which does not 

exist.) We also stated we would request 

that the RUC review these inputs as part 

of the practice expense refinement 

process. 

+ Clinical Staff: RN/LPN/MTA—72 

minutes (18 pre-service and 54 service) 

+ Supplies: PEAC multispecialty visit 

supply package, pelvic exam package, 

irrigation tubing, sterile impervious 

gown, surgical cap, shoe cover, surgical 

mask with face shield, 3x3 sterile gauze 

(20), cotton tip applicator, cotton balls 

(4), irrigation 0.9 percent sodium 

chloride 500–1000 ml (3), maxi-pad, 

mini-pad, 3-pack betadine swab (4), 

Monsel’s solution (10 ml), lidocaine 

jelly (1000 ml), disposable speculum, 

spinal needle, 18–24 g needle, 20 ml 

syringe, bupivicaine 0.25 percent (10 

ml), 1 percent xylocaine (20 ml), cidex 

(10 ml), Polaroid film-type 667 (2), 

endosheath, and hysteroscopic ablation 

device kit. 

+ Equipment: power table, fiberoptic 

exam light, endoscopic-rigid 

hysteroscope, endoscopy video system, 

and hysteroscopic ablation system. 

Comment: Commenters, including 

many individual practitioners, were 

supportive of this proposed change. The 

specialty society also stated that they 

plan to present the inputs for this 

service at the RUC meeting in February 

2005 

Response: With the exception of the 

post incision care kit that we deleted 

because this procedure does not require 

an incision, we will finalize these 

inputs as proposed. 

• Photopheresis. 

We proposed to assign, on an interim 

basis, the following nonfacility practice 

expense inputs for the photopheresis 

service, CPT code 36522: 

+ Clinical Staff: RN—223 minutes 

(treatment is for approximately 4 hours) 

+ Supplies: multispecialty visit 

supply package, photopheresis 

procedural kit, blood filter (filter iv set), 

IV blood administration set, 0.9 percent 

irrigation sodium chloride 500–1000 ml 

(2), heparin 1,000 units-ml (10), 

povidone solution-betadine, 

methoxsalen (UVADEX) sterile solution10 ml vial, 1 percent-2 percent 

lidocaine-xylocaine, paper surgical tape 

(12), 2x3 underpad (chux), nonsterile 

drapesheet 40 inches x 60 inches, 

nonsterile Kling bandage, bandage strip, 

3x3 sterile gauze, 4x4 sterile gauze, 

alcohol swab pad (3), impervious staff 

gown, 19–25 g butterfly needle, 14–24g 

angiocatheter, 18–27 g needle, 20 ml 

syringe, 10–12 ml syringe, 1 ml syringe, 

22–26 g syringe needle-3 ml. 

+ Equipment: plasma pheresis 

machine with ultraviolet light source, 

medical recliner. 

We also stated we would request that 

the RUC review these inputs.

Comment: One commenter supplied 

information on practice expense inputs 

for this code and indicated that an 

oncology nurse should be used, instead 

of an RN, to perform the procedure. A 

specialty society also stated that they 

would be providing information on this 

service at the September RUC meeting. 

Response: We appreciate the 

information submitted by the 

commenters. This code was discussed at 

the September RUC meeting and 

recommended practice expense inputs 

for this service were provided to us. We 

do not agree with the RUC 

recommended clinical staff procedure 

(intra) time of 90 minutes. We believe 

that this time, which is half of the 

proposed intra time, does not accurately 

reflect the total time involved in 

performing this procedure. Our 

understanding is that the filtration rate 

and the procedures performed by the 

nurse for photopheresis are similar to 

those that are reflected in the selective 

apheresis services, CPT code 36516, 

with a PEAC-approved intra time of 240 

minutes. Based on this, and the absence 

of specialty representation at the RUC 

familiar with the process, we are 

assigning 180 minutes for the intra time, 

as proposed. We are also assigning the 

RN/LPN staff type to this procedure, 

because we believe it is similar to other 

apheresis procedures. We will continue 

our examination of this issue and 

entertain ongoing dialog with all 

interested organizations and 

individuals, including the AMA and the 

RUC, the industry, and those physicians 

and individuals familiar with the 

photopheresis procedure in order to 

assure the accuracy of the intra time. 

• Pricing of New Supply Items. 

As part of last year’s rulemaking 

process, we reviewed and updated the 

prices for supply items in our practice 

expense database. During subsequent 

meetings of both the PEAC and the RUC, 

supply items were added that were not 

included in the supply pricing update. 

The August 5, 2004 proposed rule 

included Table 3 Proposed Practice 

Expense Supply Item Additions for 

2005, which listed supply items added 

as a result of PEAC or RUC 

recommendations subsequent to last 

year’s update of the supply items and 

the proposed associated prices that we 

will use in the practice expense 

calculation. 

We also identified certain supply 

items for which we were unable to 

verify the pricing information (see Table 

4, Supply Items Needing Specialty Input 

for Pricing, in the August 5, 2004 

proposed rule). We requested that 

commenters provide pricing 

information on these items along with 

documentation to support the 

recommended price. In addition, we 

also requested information on the 

specific contents of the listed kits, so 

that we do not duplicate any supply 

items. 

Comment: Several commenters 

representing providers of these services 

stated that table 3 incorrectly associated 

‘‘gold markers’’ with the brachtherapy 

intracavity codes. They were all in 

agreement that these markers are 

typically used in external beam 

treatments and payment is associated 

with unlisted procedure codes and 

should be paid for at cost. 

Response: We have deleted the gold 

markers from CPT codes 77761–77763 

and removed this supply from the 

practice expense database. 

Comment: The American Urology 

Association noted that we should 

exclude the vasotomy kit from CPT 

codes 55200 and 55250. 

Response: We have deleted the 

vasotomy kit from CPT codes 55200 and 

55250. 

Comment: The American College of 

Chest Physicians agreed with pricing of 

items used in their practices in table 3 

and stated that the bronchogram tray 

does not need to be included in the 

practice expense database, as the 

procedure is seldom performed and, 

when it is, the procedure is performed 

in a facility. 

Response: We have deleted the 

bronchogram tray from the practice 

expense database and corrected the 

direct inputs for CPT code 31708 

accordingly. 

Comment: We received comments 

from the American College of 

Cardiology (ACC) that included price 

quotes and names of sources for supply 

items listed on table 3. 

Response: Unfortunately, ACC did not 

include the requested sufficient 

documentation, such as invoices or 

catalog web page links. We have asked 

ACC to forward this pricing 

documentation to us as soon as possible 

because it will be required for supplies 

to remain valued in the practice expense 

database. In the interim, for the 2005 fee 

schedule, we will maintain the prices 

currently in the practice expense 

database for the following supplies: 

66256 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

blood pressure recording form at $0.31, 

pressure bag (infuser) 500cc or 1000cc at 

$8.925, sterile, non-vented, tubing at 

$1.99. 

Comment: Noting that a $15 supply 

item, needle-wire for localization of 

lesions in the breast (used 

preoperatively in CPT codes 19290 and 

19291) was no longer used, a 

manufacturer requested that we replace 

this supply with an anchor-guide device 

valued at $245. The commenters also 

stated that this device is used in over 70 

offices and imaging centers.

Response: We appreciate the 

comments from the manufacturer. 

However, during last year’s rulemaking 

process we repriced all of our supplies, 

and the needle-wire price of $15 was an 

average of prices from two different 

sources ($17 and $13). This price was 

proposed and accepted by the medical 

specialty societies that we depend on to 

verify typical items in our practice 

expense database. We have retained the 

$15 needle-wire for localization because 

we believe it is typically used for this 

procedure. 

The following table lists the items on 

which we requested input, the 

comments received, and the action 

taken. 

BILLING CODE 4120–01–P

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ER15NO04.494</GPH>
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BILLING CODE 4120–01–C

• Addition of Supply Item to CPT 

88365, Tissue In Situ Hybridization. 

We proposed to add, on an interim 

basis, a DNA probe to the CPEP database 

for CPT 88365, tissue in situ 

hybridization, with the understanding 

that the inclusion of the item would be 

subject to forthcoming RUC review. 


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Comment: Commenters were 

supportive of this proposal. The College 

of American Pathologists also 

encouraged us to include updated 

information on practice expense inputs 

from the September RUC meeting, while 

another commenter suggested that we 

run the information by the specialty 

society. 

Response: The direct practice expense 

inputs for this code and two other codes 

in the same family were discussed at the 

September RUC after a presentation 

made by the specialty society. We have 

reviewed and accepted the RUC 

recommendations, and these practice 

expense inputs will be included in the 

practice expense database. 

• Ophthalmology Equipment. 

In cases where both the screening and 

exam lanes are included in the 

equipment list for the same 

ophthalmology service, we proposed to 

include only one lane because the 

patient could only be in one lane at a 

time. We proposed defaulting to the 

exam lane and, thus, we proposed 

deleting the screening lane from the 

practice expense inputs for these 

procedures. For the services where a 

lane change was made, time values were 

assigned to the exam lane in accordance 

with our established standard 

procedure. 

Comment: The American Academy of 

Ophthalmology requested that we 

specifically identify the codes for which 

we deleted the screening lane, so that 

they can ensure that the correct lane 

was deleted. 

Response: This information can be 

obtained by comparing the direct inputs 

in the practice expense database files for 

the 2004 and 2005 fee schedules that are 

posted on our Web site (http://

www.cms.hhs.gov/physicians/pfs). 

However, we would be happy to work 

with the specialty organization to verify 

the accuracy of the information. 

• Parathyroid Imaging, CPT code 

78070. 

Based on comments received from the 

RUC and the specialty society 

representing nuclear medicine, we 

proposed to crosswalk the charge-based 

RVUs from CPT 78306, Bone and/or 

joint imaging; whole body, to CPT 

78070, Parathyroid imaging.

Comment: Several specialty societies 

expressed appreciation for this 

proposed change.

Response: We will finalize our 

proposal and crosswalk the chargebased RVUs from CPT code 78306 to 

CPT code 78070. 

• Additional PE concerns. 

Comment: We received information 

from the American Academy of 

Ophthalmology that two biometry 

devices (a-scan ultrasonic biometry unit 

and an optical coherence biometer) were 

listed as equipment for the ophthalmic 

biometry service, CPT code 92136. Only 

the optical coherence biometer should 

be included for this code. 

Response: As requested by the 

specialty society, we have deleted the ascan biometry unit from the equipment 

list for CPT code 92136. 

Comment: We received comments 

from manufacturers, specialty societies 

representing renal physicians and 

vascular surgeons, and individual 

providers questioning the decrease in 

nonfacility practice expense RVUS for 

CPT code 36870, Percutaneous 

thrombectomy, arteriovenous fistula, 

autogenous or nonautogenous graft 

(includes mechanical thrombus 

extraction and intra-graft thrombolysis. 

Some commenters believe this 

reduction occurred because the supplies 

listed in the database for this service 

reflect only one method of providing 

this service. While commenters 

acknowledged that the database 

includes the supplies used in 

approximately 50 percent of the 

instances this procedure is performed, 

the commenters claimed that other 

supplies may be used in the remaining 

occasions. Commenters requested that 

we add these other specific supplies to 

the database. 

Response: Because there are a variety 

of supplies and equipment that can be 

used in performing a service, under the 

practice expense methodology, the 

supplies and equipment that are used in 

determining payment are those that are 

most typical for the procedure. 

Although there may be alternative 

supplies used, the inputs in the 

database reflect what is typically used 

(which is acknowledged by the 

commenters) and thus we are not 

adding the requested supplies to the 

practice expense database. However, we 

did note that the list of equipment did 

not reflect the cost of the angiography 

room that is used during the procedure, 

and this has been added to our database 

for this code. 

Comment: Societies representing 

dermatologic specialties expressed 

concern about the reduction in practice 

expense RVUs for a photodynamic 

therapy service, CPT code 96567. The 

commenters believe that this reduction 

is due to the application of the 

dermatology scaling factor based on 

updated practice expense utilization 

and requested that this be reconsidered. 

These commenters also expressed 

appreciation that there is now a separate 

HCPCS code to bill for levulan that is 

needed for this procedure, but stated 

that there are two medical supplies that 

need to be included in the practice 

expense database: bacitracin, and a 

topical anesthetic cream. 

Response: The practice expense RVUs 

for photodynamic therapy decreased 

only slightly in this year’s proposed rule 

due to the proposed repricing of 

equipment. The decrease referred to by 

the commenter occurred after the first 

year that the code was established. At 

that time we obtained the utilization 

data that demonstrated that 

dermatologists performed the service 

and we then applied the same scaling 

factors to the code that we do for all 

dermatology services. Therefore, the 

scaling factor we now apply is correct. 

We will add the requested amount of 

bacitracin to the supply list for the code. 

Unfortunately, the topical anesthetic 

requested is not in our database and the 

commenters did not include pricing 

information so we are not able to 

include the item in our practice expense 

calculation. 

Comment: A society representing 

interventional pain physicians 

expressed concern that the practice 

expense RVUs for CPT code 95990, 

Refilling and maintenance of 

implantable pump or reservoir for drug 

delivery, spinal (intrathecal, epidural) 

or brain (intraventricular), are 

understated when compared to the 

RVUs for CPT code 95991, the same 

service administered by a physician. 

According to the commenter, CPT code 

95991 includes a total of 47 minutes of 

nonphysician labor and 37 minutes of 

physician labor or total professional 

time of 84 minutes. This is the total time 

spent with the patient before, during 

and after the refill. The commenter 

requested that the number of minutes of 

direct labor for CPT code 95990 should 

be a minimum of 84 minutes, since the 

nonphysician practitioner would be 

performing all the services associated 

with CPT code 95991 that are performed 

by both the physician and clinical staff. 

In addition, the commenter stated that 

CPT code 95990 should also be assigned 

physician work RVUs because there is 

physician oversight of the service even 

when performed by clinical staff. Two 

other commenters stated that both CPT 

codes 95990 and 95991 should be 

valued the same as the chemotherapy 

implanted pump refill service, CPT code 

96530. The commenters state that this 

was the code originally used to report 

the above services, that CPT codes 

95990 and 95991 originally were 

assigned higher RVUs than CPT code 

96530 and that the MMA adjustments 

that increased the payment for CPT code 

96530 should be applied to CPT codes 

95990 and 95991.

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Response: The commenter is correct 

that the clinical staff times for CPT 

codes 95990 and 95991 are the same (50 

minutes of clinical staff time), although 

the clinical staff is performing the 

procedure in one case and assisting the 

physician in the other. However, the 

assumption underlying these times is 

that, in the cases where it is necessary 

for the physician to personally perform 

the procedure, the nurse is assisting for 

the entire time. If this assumption is not 

correct, then the clinical staff time for 

CPT code 95991 is overstated. Because 

CPT codes 95990 and 95991 are not 

considered drug administration codes 

under section 303 of the MMA, we will 

not apply the adjustments made for CPT 

code 96530 to these services. Therefore, 

we will not be revising the staff time for 

either code at this time, but would 

suggest that the RUC look further at this 

issue. We would also suggest that the 

society bring CPT code 95990 to the 5-

year review, if they wish to make the 

case that work RVUs should be 

assigned. 

Comment: The society representing 

interventional pain physicians 

questioned the ‘‘professional component 

only’’ designation we assigned to the 

codes for the analysis of an implanted 

intrathecal pump, CPT codes 62367 and 

62368, and the subsequent low RVUs for 

these services. The commenter stated 

that if the payment is left as proposed, 

more physicians would stop offering 

intrathecal pumps to patients. 

Response: This was an inadvertent 

error on our part that we have corrected 

for the final rule. These services are 

physicians’ services that do not have 

separate professional and technical 

components. We thank the commenter 

for pointing out this error. 

Comment: The Joint Council of 

Allergy, Asthma and Immunology 

expressed concern about the reduction 

in the proposed rule in practice expense 

RVUs for a number of allergy codes, in 

particular the venom therapy CPT 

codes, 95145 through 95149. The 

commenter stated that Medicare 

reimbursement for these services does 

not cover the physician’s supply 

expense, due to the expensive venom 

antigens that are part of the service, and 

believes this is a result of the scaling 

factor being used. 

Response: We are sympathetic to the 

commenter’s concern about the high 

cost of the venom antigens and the 

specialty’s low scaling factor. We would 

be happy to work with JCAAI further to 

see if a remedy can be identified 

regarding this subset of the allergy 

codes. 

Comment: Two commenters stated 

that the practice expense RVUs for 

HCPCS code G0329, Electromagnetic 

Therapy for ulcers, were too low and 

supplied information on the supplies, 

equipment and clinical staff time for 

this service. 

Response: Based on the information 

provided by the commenters, we added 

diapulse asetips and chux to the 

supplies in the practice expense 

database for this service. We also 

increased the equipment time to 30 

minutes. 

Comment: We received comments 

from the North American Spine Society 

(NASS) stating that the specific needle 

used for CPT codes 22520 and 22522, 

which was originally recommended by 

NASS, is the most expensive needle and 

may not be the most typical. The 

specialty noted that available needles 

range from $26 to $1,295, which 

represent the needle (termed 

vertebroplasty kit) in the practice 

expense database. NASS indicated that 

the specialties involved in performing 

these procedures are conducting a 

survey to determine the most commonly 

used needles and their costs. 

Response: We appreciate the 

comments from NASS and look forward 

to receiving the survey results. In the 

interim, we have averaged the needle 

costs for the range indicated above by 

the specialty and have entered this 

figure, $660.50, as a placeholder for the 

2005 fee schedule. Because of the large 

disparity between the lowest and 

highest needle costs, it is not reasonable 

to consider $660.50 as a true average 

cost for this supply item. We will 

continue to work with the specialty 

organizations in order to ensure that the 

2006 fee schedule practice expense 

database reflects the value for the most 

typical needle used in these procedures. 

Comment: We received comments 

from two medical societies with 

concerns about a decrease in practice 

expense RVUs for CPT code 95819, 

which is part of the EEG sleep study 

series of codes. These two organizations 

noted their willingness to bring this 

code to the February 2005 RUC meeting 

in order to rectify the direct practice 

expense inputs for this procedure. 

Response: We have reviewed the 

family of EEG sleep-study codes and 

believe that a rank order anomaly exists 

relating primarily to the 2004 PEAC 

recommendation to delete the 25 

reusable electrodes from CPT code 

95819. We support and encourage these 

organizations to bring the entire EEG 

family of codes to the February 2005 

RUC to ensure that this rank order 

anomaly can be resolved and the correct 

direct inputs can be identified for these 

procedures.

Comment: The Coalition for 

Advancement of Prosthetic Urology 

expressed concern about the continuing 

decline in practice expense RVUs for 

prosthetic urology procedures. They 

believe that this is due in part to the 

number of post service visits assigned to 

these services. They stated that 

information from a survey they 

conducted shows there are typically 

four to five post service visits rather 

than three as reflected in the database. 

The commenter also provided a copy of 

the survey information. 

Response: The number of post service 

visits for these services was established 

based on recommendations from the 

RUC or by using the Harvard data. If 

they believe that the information 

regarding the number of post service 

visits for specific procedures is 

incorrect, the Coalition must request 

that the codes be examined as part of 

the 5-year refinement of work RVUs. An 

explanation of this process and the 

information that must be provided is 

found in section VI. of this rule. 

B. Geographic Practice Cost Indices 

(GPCIs) 

We are required by section 

1848(e)(1)(A) of the Act to develop 

separate GPCIs to measure resource cost 

differences among localities compared 

to the national average for each of the 

three fee schedule components. While 

requiring that the practice expense and 

malpractice GPCIs reflect the full 

relative cost differences, section 

1848(e)(1)(A)(iii) of the Act requires that 

the physician work GPCIs reflect only 

one-quarter of the relative cost 

differences compared to the national 

average. 

Section 1848(e)(1)(C) of the Act 

requires us to review and, if necessary, 

to adjust the GPCIs at least every 3 

years. This section of the Act also 

requires us to phase-in the adjustment 

over 2 years and to implement only onehalf of any adjustment if more than 1 

year has elapsed since the last GPCI 

revision. The GPCIs were first 

implemented in 1992. The first review 

and revision was implemented in 1995, 

the second review was implemented in 

1998, and the third review was 

implemented in 2001. We reviewed and 

revised the malpractice GPCIs as part of 

the November 7, 2003 (68 FR 63196) 

physician fee schedule final rule. We 

were unable to revise the work and 

practice expense GPCIs at the time of 

the publication of the November 2003 

final rule because the U.S. Census data, 

upon which the work and practice 

expense GPCIs are based, were not yet 

available. 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66261

In addition, section 412 of the MMA 

amended section 1848(e)(1) of the Act 

and established a floor of 1.0 for the 

work GPCI for any locality where the 

GPCI would otherwise fall below 1.0. 

This 1.0 work GPCI floor is used for 

purposes of payment for services 

furnished on or after January 1, 2004 

and before January 1, 2007. Section 602 

of the MMA further amended section 

1848(e)(1) of the Act for purposes of 

payment for services furnished in 

Alaska under the physician fee schedule 

on or after January 1, 2004 and before 

January 1, 2006, and sets the work, 

practice expense, and malpractice 

expense GPCIs at 1.67 if any GPCI 

would otherwise be less than 1.67. 

In the August 5, 2004 proposed rule, 

we proposed to revise the work and 

practice expense GPCIs for 2005 through 

2007 based on updated U.S. Census data 

and Department of Housing and Urban 

Development (HUD) fair market rental 

(FMR) data. The same data sources and 

methodology used for the development 

of the 2001 through 2003 GPCIs were 

used for the proposed 2005 through 

2007 work and practice expense GPCIs. 

The relative respective weights for the 

2004 work, practice expense and 

malpractice GPCIs, as well as the 

proposed 2005 through 2007 GPCI 

revisions, were derived using the same 

weights that were used in the Medicare 

Economic Index (MEI) revision 

discussed in the November 2003 

physician fee schedule final rule (68 FR 

63245). 

1. Work Geographic Practice Cost 

Indices

As explained in the August 5, 2004 

proposed rule, we used data from the 

2000 decennial U.S. Census, by county, 

of seven professional occupations 

(architecture and engineering; 

computer, mathematical, and natural 

sciences; social scientists, social 

workers, lawyers; education, library, 

training; registered nurses; pharmacists; 

writers, artists, editors) in the 

development of the proposed work 

GPCIs. Physicians’ wages are not 

included because Medicare payments 

are determinant of the physicians’

earnings. Including physician wages in 

the physician work GPCI would, in 

effect, make the index dependent upon 

Medicare payments. Based on analysis 

performed by Health Economics 

Research, we believe that, in the 

majority of instances, the earnings of 

physicians will vary among areas to the 

same degree that the earnings of other 

professionals vary. 

The U.S. Census Bureau has very 

specific criteria that tabulations must 

meet in order to be released to the 

public. To maximize the accuracy and 

availability of the data collection, the 

nonphysician professional wage data 

were aggregated by county and a median 

wage by county was calculated for each 

occupational category. These median 

wages were then weighted by the total 

RVUs associated with a given county to 

ultimately arrive at locality-specific 

work GPCIs. This geographic 

aggregation of Census data is the same 

methodology that was used in previous 

updates to the GPCIs. 

The proposed work GPCIs reflected 

one-fourth of the relative cost 

differences, as required by statute, with 

the exception of those areas where 

MMA requires that the GPCI be set at no 

lower than 1.00 and that the Alaska 

GPCIs be set at 1.67. 

2. Practice Expense GPCIs 

As in the past, we proposed that the 

practice expense GPCI would be 

comprised of several factors that 

represent the major expenses incurred 

in operating a physician practice. The 

impact of each individual factor on the 

calculation of the practice expense GPCI 

is based on the relative weight for that 

factor consistent with the calculation of 

the MEI. The specific factors included: 

• Employee Wage Indices—The 

employee wage index is based on 

special tabulations of 2000 Census data 

and is designed to capture the median 

wage by county of the professional labor 

force. The employee wage index uses 

the median wages of four labor 

categories that are most commonly 

present in a physician’s private practice 

(administrative support, registered 

nurses, licensed practical nurses, and 

health technicians). Median wages for 

these occupations were aggregated by 

county in the same manner as the data 

for the work GPCI.

• Office Rent Indices—The HUD FMR 

data for the residential rents were again 

used as the proxy for physician office 

rents as they are in the current practice 

expense GPCIs. The proposed 2005 

through 2007 practice expense GPCIs 

reflect the final fiscal year 2004 HUD 

FMR data. We believe that the FMR data 

remain the best available source for 

constructing the office rent index. The 

FMR data are available for all areas, are 

updated annually, and retain 

consistency from area-to-area and from 

year-to-year. A reduction in an area’s 

rent index does not necessarily mean 

that rents have gone down in that area 

since the last GPCI update. Since the 

GPCIs measure area costs compared to 

the national average, a decrease in an 

area’s rent index means that that area’s 

rental costs are lower relative to the 

national average rental costs. 

Addendum X illustrates the changes in 

the rental index based upon the new 

FMR data. 

• Medical Equipment, Supplies, and 

other Miscellaneous Expenses—The 

GPCIs assume that items such as 

medical equipment and supplies have a 

national market and that input prices do 

not vary among geographic areas. We 

were again unable to find any data 

sources that demonstrated price 

differences by geographic areas. As 

mentioned in previous updates, some 

price differences may exist, but these 

differences are more likely to be based 

on volume discounts rather than on 

geographic areas. The medical 

equipment, supplies, and miscellaneous 

expense portion of the practice expense 

geographic index will continue to be 

1.000 for all areas in the proposed 

GPCIs, except for Alaska which will 

have an overall practice expense GPCI 

set at 1.67 for 2005 and 2006. 

3. Fee Schedule Payments 

All three of the indices for a specific 

fee schedule locality are based on the 

indices for the individual counties 

within the respective fee schedule 

localities. As in the past, fee schedule 

RVUs are again used to weight the 

county indices (to reflect volumes of 

services within counties) when mapping 

to fee schedule areas and in 

constructing the national average 

indices. 

Fee schedule payments are the 

product of the RVUs, the GPCIs, and the 

conversion factor. Updating the GPCIs 

changes the relative position of fee 

schedule areas compared to the national 

average. Because the changes 

represented by the GPCIs could result in 

total payments either greater than or less 

than what would have been paid if the 

GPCIs were not updated, it is necessary 

to apply scaling factors to the proposed 

GPCIs to ensure budget neutrality (prior 

to applying the provisions of MMA that 

change the work GPCIs to a minimum 

of 1.0 and increase the Alaska GPCIs to 

1.67 because these provisions are 

exempted from budget neutrality). We 

determined that the proposed work and 

practice expense GPCIs would have 

resulted in slightly higher total national 

payments. Because the law requires that 

each individual component of the fee 

schedule—work, practice expense, and 

malpractice expense—be separately 

adjusted by its respective GPCI, we 

proposed to scale each of the GPCIs 

separately. To ensure budget neutrality 

prior to applying the MMA provisions, 

we have made the following 

adjustments: 

• Decreased the proposed work GPCI 

by 0.9965; 

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• Decreased the proposed practice 

expense GPCI by 0.9930; and 

• Increased the malpractice GPCIs 

that were published in the November 7, 

2003 final rule by 1.0021. 

Because all geographic payment areas 

will receive the same percentage 

adjustments, the adjustments do not 

change the new relative positions 

among areas indicated by the proposed 

GPCIs. After the appropriate scaling 

factors are applied, the MMA provision 

setting a 1.0 floor has been applied to 

all work GPCIs falling below 1.0. 

Additionally, the GPCIs for Alaska have 

been set to 1.67 in accordance with 

MMA. 

Comment: A specialty society 

representing family physicians 

recommended that we work with the 

Congress to eliminate the GPCIs or set 

them all at 1.00. The society stated that 

they understand the statutory 

requirement to apply the GPCIs, but that 

all geographic adjustment factors should 

be eliminated from the physician fee 

schedule, except for those designed to 

achieve a specific policy good, such as 

adjustment to encourage physicians to 

practice in underserved areas. The 

commenter contended that elimination 

of the GPCIs would have a positive 

effect on the availability of medical care 

to rural beneficiaries. Other commenters 

suggested that we should no longer 

apply the work GPCI to the work RVUs. 

We also received numerous comments 

on the subject of the source of the data 

we use in the development of the GPCIs. 

Commenters suggested that we find data 

sources other than Census Bureau data. 

They believe the census data become 

obsolete very quickly and want us to use 

data that reflect up-to-date prices for 

inputs. This would, they argue, make 

the GPCI values more realistic.

A medical specialty group 

commented that the index is flawed 

because—

• It is based on the tenuous 

assumption that the relative differences 

in the prices of the input proxies 

accurately reflect relative changes in 

prices of corresponding physician 

practice cost components; and, 

• It applies uniform weights to 

practice cost components, despite 

evidence of geographic variation in 

component shares. 

Several commenters had specific 

concerns about the proxies used for the 

work and practice expense GPCIs, for 

example—

• Using data for four employee 

classes to measure relative 

compensation differences for all 

physicians’ office staff which does not 

reflect the changes in medical practice 

that have occurred since the index was 

developed; 

• Using residential real estate prices 

to reflect relative differences in 

physicians’ office costs; and 

• Using nationally uniform prices for 

supplies, equipment, and other 

expenses. 

Another particular concern among 

commenters is the use of HUD 

apartment rental data as the source of 

costs for physicians’ rents. Instead, they 

argue, we should find, or carry out, a 

national study of retail and business 

rents. 

Another commenter asserts that these 

indices have not been verified by peerreviewed published research since they 

were instituted and that we should 

replace the indices with data from 

nationwide studies that validate and 

update actual cost of practice data. 

Response: As noted by a commenter, 

we are required by the Congress to 

adjust for geographic differences in the 

operational cost of physicians’ practices 

by applying geographic price indices to 

each component of the Physician Fee 

Schedule. However, we also believe it 

appropriate in our resource based 

payment system to account for real 

differences in physicians’ costs in 

different geographical areas. We share 

the concern about access to care for our 

rural beneficiaries and, in this rule, we 

are finalizing our proposals on payment 

adjustments to physicians in 

underserved areas through the HPSA 

Incentive Payment Program. For the 

commenters who object to the GPCI 

adjustment to the work RVUs, we would 

note that for 2005 and 2006 the floor for 

the work GPCI will be 1.00. 

With reference to the issue of the 

GPCI data source, we are always open 

to suggestions about possible data 

sources; however, we believe the most 

reliable source of national, comparable 

data at the county level is the Census 

Bureau. Other data sources that we have 

examined either fail to produce the data 

at the county level, cannot be compared 

nationally, or offer no means of 

comparability over time. 

We believe that the proxies, while not 

perfect, are the best tools available for 

the development of the GPCIs. For 

example, if we were to eliminate all 

proxies, we would have to collect actual 

physicians’ office data from a 

sufficiently large sample in each locality 

to calculate the GPCIs. This would place 

a substantial burden on the office staff 

and would be prohibitively expensive. 

Also, the benefits from that approach 

would be uncertain. 

The question of applying uniform 

weights to practice components is an 

area where more research could lead to 

better information about the variation 

attributable to case mix and the 

availability of other health resources, 

input prices, and practice styles. 

However, it is important to note that 

much of the variation associated with 

case and specialty mix is accounted for 

by the varying RVUs for different 

services. However, we are open to 

exploring this issue. 

On the issue of which employee 

categories are included in the employee 

wage index component of the practice 

expense GPCI calculation, we included 

those that have been determined in the 

past to be most commonly present in a 

physician’s private practice. We are 

considering the suggestion that we 

include a broader group of employment 

categories in the future. 

While we recognize that apartment 

rents are not a perfect proxy for 

physician office rents, there are no 

existing national studies that present 

reliable retail and business rentals data. 

We would welcome any nationally 

consistent data that could be used for 

this purpose. 

We noted in the proposed rule that we 

were unable to find any data sources 

that demonstrate price differences by 

geographic areas for medical equipment 

and supplies. Once again, however, we 

welcome any nationally consistent data 

for this purpose. 

We appreciate the concern expressed 

by the commenter who suggested our 

GPCI methodology has not been 

subjected to peer-review validation 

since its inception, but we are not aware 

of any currently available data that 

could replace our methodology. 

Furthermore, we believe the process of 

updating the GPCIs periodically through 

notice and comment rulemaking affords 

an opportunity for a thorough review of 

the GPCI calculation methodology.

Comment: A member of a medical 

society suggested that we make the floor 

of 1.00 permanent for the work GPCI 

and incrementally increase both the 

practice expense GPCI and the 

professional liability insurance GPCI to 

1.00 over the next ten years. 

Response: We have no authority to 

extend the floor of the work GPCI, or to 

create a 1.00 floor for the practice 

expense and professional liability 

insurance GPCIs. Section 1848(c)(1)(A) 

of the Act requires that the index reflect 

resource costs relative to the national 

average, indicating that, aside from the 

MMA provision establishing a floor on 

the work GPCI through 2006, localities 

with costs below the national average 

have GPCIs below 1.00. 

Comment: A specialty organization 

representing the long term care industry 

suggested that we phase in the new 

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GPCI values over a three-year period to 

minimize the impact of the changes. 

Response: We are required by section 

1848(e)(1)(C) of the Act to review and 

adjust the GPCIs every 3 years. This 

section of the Act also requires us to 

phase in the adjustment over 2 years 

and implement only one-half of any 

adjustment if more than 1 year has 

elapsed since the last GPCI revision. We 

believe this phase-in appropriately 

balances any negative impacts of the 

changes with the positive impacts on 

those localities where the GPCIs 

increase. 

4. Payment Localities 

As discussed in the August 5, 2004 

proposed rule, we have considered, and 

are continuing to examine, alternatives 

to the composition of the current 89 

Medicare physician payment localities 

to which the GPCIs are applied. 

While we have considered 

alternatives, we have been unable to 

establish a policy and criteria that 

would satisfactorily apply to all 

situations. Any policy that we would 

propose would have to apply to all 

States and payment localities. If, for 

example, we were to establish a policy 

that when adjacent county geographic 

indices exceeded a threshold amount 

the lower county could be moved to the 

higher county or that a separate locality 

could be created, redistributions would 

be caused within a State. 

Because there will be both winners 

and losers in any locality 

reconfiguration, the State medical 

associations should be the impetus 

behind these changes. The support of 

State medical associations has been the 

basis for previous changes to statewide 

areas, and continues to be equally 

important in our consideration of other 

future locality changes. 

Comment: We received numerous 

comments from physicians and 

individuals, including members of the 

Congress, living in and around Santa 

Cruz County, California. Their 

comments uniformly expressed the 

opinion that Santa Cruz be taken out of 

the ‘‘Rest of California’’ payment 

locality and placed in a separate 

payment locality. 

Additionally, the California Medical 

Association (CMA) submitted a 

‘‘placeholder’’ proposal to move any 

county with a county-specific 

geographic adjustment factor (GAF) that 

is 5 percent greater than its locality GAF 

to its own individual county payment 

locality. Under their proposal, any 

reductions in payments to maintain 

budget neutrality in light of the higher 

payments to physicians in the counties 

that are moved into the new 

independent county localities would be 

divided equally among all payment 

localities within the State of California. 

Additionally, for 2005 and 2006, the 

GAFs in localities from which the highcost counties are removed would not be 

reduced as a result of removing the 

counties. 

Response: We greatly appreciate the 

efforts of the CMA and many others 

toward addressing this difficult issue. 

We also recognize the concerns 

expressed by the residents of Santa Cruz 

County about the impact of the current 

payment disparities upon physicians in 

their community. Our consistent 

position has been that we will be 

responsive to requests for locality 

changes when there is a demonstrated 

consensus within the State medical 

association for the change. Due to the redistributive impacts of these types of 

changes, we believe this approach helps 

ensure the appropriateness of any such 

change. 

We are required, however, to publish 

the final 2005 GPCIs and GAFs in this 

rule, and we have applied the current 

definitions for all California localities. 

On October 21, 2004, the CMA Board 

of Trustees voted without objection to 

support the placeholder proposal 

submitted in the CMA’s comment with 

the amendment to limit the time period 

to the years 2005 through 2006. 

However, we have determined that we 

do not have the authority under section 

1848(e) of the Act to reduce the GPCIs 

of some localities in a State to offset 

higher payments to other localities. 

Nonetheless, we are eager to work with 

CMA and its Congressional 

Representatives to resolve this difficult 

problem as quickly and fairly as 

possible.

Comment: We received comments 

from physicians, individuals and the 

Texas Medical Association regarding 

locality payments. These commenters 

request that we regard all counties in a 

metropolitan statistical area (MSA) as 

being in a single payment locality. This 

would, they argue, equalize payments in 

those areas where growth has expanded 

city boundaries across county lines. 

Response: As noted above, we will be 

responsive to requests for locality 

changes when there is a demonstrated 

consensus within the State medical 

association for the change. 

Result of Evaluation of Comments 

We will finalize the GPCIs as 

proposed. 

C. Malpractice Relative Value Units 

(RVUs) 

1. Proposed Methodology for the 

Revision of Resource-based Malpractice 

RVUs 

The methodology used in calculating 

the proposed resource-based 

malpractice RVUs is the same 

methodology that was used in the initial 

development of resource-based RVUs, 

the only difference being the use of 

more current data. The proposed 

resource-based malpractice expense 

RVUs are based upon: 

• Actual 2001 and 2002 malpractice 

premium data; 

• Projected 2003 premium data; and 

• 2003 Medicare payment data on 

allowed services and charges. 

As in the initial development of 

resource-based malpractice expense 

RVUs in the November 2, 1999 final 

rule, we proposed to revise resourcebased malpractice expense RVUs using 

specialty-specific malpractice premium 

data because they represent the actual 

malpractice expense to the physician. In 

addition, malpractice premium data are 

widely available. We proposed using 

actual 2001 and 2002 malpractice 

premium data and projected 2003 

malpractice premium data for three 

reasons: 

• These are the most current national 

claims-made premium data available. 

• These data capture the highly 

publicized and most recent trends in the 

specialty-specific costs of professional 

liability insurance. 

• These are the same malpractice 

premium data that were used in the 

development of revised malpractice 

GPCIs in the November 7, 2003 final 

rule. 

We were unable to obtain a nationally 

representative sample of 2003 

malpractice premium data for the 

following two reasons: 

• The premium data that we collected 

from the private insurance companies 

had to ‘‘match’’ the market share data 

that were provided by the respective 

State Departments of Insurance (DOI). 

Because none of the State DOI had 2003 

market share information at the time of 

this data collection, 2003 premium data 

were not usable; and 

• The majority of private insurers 

were not amenable to releasing 

premium data to us. In the majority of 

instances, the private insurance 

companies would release their premium 

data only to the State Department of 

Insurance. 

Discussions with the industry led us 

to conclude that the primary 

determinants of malpractice liability 

costs remain physician specialty, level 

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of surgical involvement, and the 

physician’s malpractice history. 

Malpractice premium data were 

collected for the top 20 Medicare 

physician specialties measured by total 

payments. Premiums were for a $1 

million/$3 million mature claims-made 

policy (a policy covering claims made, 

rather than services provided during the 

policy term). We attempted to collect 

premium data from all 50 States, 

Washington, DC, and Puerto Rico. Data 

were collected from commercial and 

physician-owned insurers and from 

joint underwriting associations (JUAs). 

A JUA is a State governmentadministered risk pooling insurance 

arrangement in areas where commercial 

insurers have left the market. 

Adjustments were made to reflect 

mandatory patient compensation funds 

(PCFs) (funds to pay for any claim 

beyond the statutory amount, thereby 

limiting an individual physician’s 

liability in cases of a large suit) 

surcharges in States where PCF 

participation is mandatory. The 

premium data collected represent at 

least 50 percent of physician 

malpractice premiums paid in each 

State. 

For 2001, we collected premium data 

from 48 States (for purposes of this 

discussion, State counts include 

Washington, DC and Puerto Rico). We 

were unable to obtain premium data 

from Kentucky, New Hampshire, New 

Mexico, and Washington, DC. To 

calculate a proxy for the malpractice 

premium data for these four areas in 

2001, we began with the most current 

malpractice premium data collected for 

these areas, 1996 through 1998 (the last 

premium data collection that was 

undertaken). We calculated an average 

premium price (using 1996 through 

1998 data) for all States except 

Kentucky, New Hampshire, New 

Mexico, and Washington, DC. Similarly, 

we calculated an average premium price 

for the 1999 through 2001 period for all 

States except Kentucky, New 

Hampshire, New Mexico, and 

Washington, DC. We calculated the 

percentage change in these premium 

prices as the percent difference between 

the 1999 to 2001 calculated average 

premium price and the 1996 to 1998 

calculated average premium price. We 

then applied this percentage change to 

the weighted average 1996 to 1998 

malpractice premium price for these 

four areas to arrive at a comparable 1999 

to 2001 average premium price.

For 2002, we were able to obtain 

malpractice premium data from 33 

States. Many State Departments of 

Insurance had not yet obtained 

premium data from the primary insurers 

within their States at the time of this 

data collection. For those States for 

which we were unable to obtain 

malpractice premium data, we 

calculated a national average rate of 

growth for 2002 and applied this 

national rate of growth to the weighted 

average premium for 2001 to obtain an 

average premium for 2002 for each 

county for which we were unable to 

obtain malpractice premium data for 

2002. 

We projected premium values for 

2003 based on the average of historical 

year-to-year changes for each locality 

(when locality level data were available) 

or by State (when only statewide 

premium data projections were 

available). First, we calculated the 

percentage changes in the premiums 

from the 1999 through 2000, 2000 

through 2001, and 2001 through 2002 

periods for each payment locality. Next, 

we calculated the geometric mean of 

these three percentages and applied the 

mean to the 2002 premium to obtain the 

forecasted 2003 malpractice premium. 

We used the geometric mean to 

calculate the forecasted 2003 premium 

data because the geometric mean is 

commonly used to derive the mean of a 

series of values that represent rates of 

change. Because the geometric mean is 

based on the logarithmic scale, it is less 

impacted by outlying data. Alternative 

methods, such as linear extrapolation 

tended to yield more extreme values 

that were the result of outlying data. 

Malpractice insurers generally use 

five-digit codes developed by the 

Insurance Services Office (ISO), an 

advisory body serving property and 

casualty insurers, to classify physician 

specialties into different risk classes for 

premium rating purposes. ISO codes 

classify physicians not only by 

specialty, but in many cases also by 

whether or not the specialty performs 

surgical procedures. A given specialty 

could thus have two ISO codes, one for 

use in rating a member of that specialty 

who performs surgical procedures and 

another for rating a member who does 

not perform surgery. We use our own 

system of specialty classification for 

payment and data purposes. It was 

therefore necessary to map Medicare 

specialties to ISO codes and insurer risk 

classes. Different insurers, while using 

ISO codes, have their own risk class 

categories. To ensure consistency, we 

used the risk classes of St. Paul 

Companies, one of the oldest and largest 

malpractice insurers. Although St. Paul 

Companies have recently terminated 

writing professional liability insurance 

policies at the time of this data 

collection they were still the largest and 

most nationally representative writer of 

professional liability insurance policies 

in the nation. The crosswalks for 

Medicare specialties to ISO codes and to 

the St. Paul risk classes used are 

reflected in Table 4. 

Some physician specialties, 

nonphysician practitioners, and other 

entities (for example, independent 

diagnostic testing facilities) paid under 

the physician fee schedule could not be 

assigned an ISO code. We crosswalked 

these specialties to similar physician 

specialties and assigned an ISO code 

and a risk class. These crosswalks are 

reflected in Table 5. 

In the development of the proposed 

resource-based malpractice RVU 

methodology, we considered two 

malpractice premium-based alternatives 

for resource-based malpractice RVUs: 

the dominant specialty approach and 

the specialty-weighted approach. 

Dominant Specialty Approach 

The dominant specialty approach 

bases the malpractice RVUs upon the 

risk factor of only the dominant 

specialty performing a given service as 

long as the dominant specialty 

accounted for at least 51 percent of the 

total utilization for a given service. 

When 51 percent of the total utilization 

does not comprise the dominant 

specialty, this approach uses a modified 

specialty-weighted approach. In this 

modified specialty-weighted approach, 

two or more specialties are collectively 

defined as the dominant specialty. 

Starting with the specialty with the 

largest percentage of allowed services, 

the modified specialty-weighted 

approach successively adds the next 

highest specialty in terms of percentage 

of allowed services until a 50 percent 

threshold is achieved. The next step is 

to sum the risk factors of those 

specialties (weighted by utilization) in 

order to achieve at least 50 percent of 

the total utilization of a given service 

and then to use the factors in the 

calculation of the final malpractice 

RVU. 

The dominant specialty approach 

produces modest increases for some 

specialties and modest decreases for 

other specialties. The largest increase 

for any given specialty, over the 

specialty-weighted approach, is less 

than 1.5 percent of total RVUs, while 

the largest decrease for any given 

specialty is less than 0.5 percent of total 

RVUs. The dominant specialty approach 

also fails to account for as much as 49 

percent of the utilization associated 

with a given procedure.

Specialty-Weighted Approach 

The approach that we adopted in the 

November 1999 final rule and proposed 

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to use for 2005 bases the final 

malpractice RVUs upon a weighted 

average of the risk factors of all 

specialties performing a given service. 

The specialty-weighted approach 

ensures that all specialties performing a 

given service are accounted for in the 

calculation of the final malpractice 

RVU. Under the proposed methodology, 

we—

• Compute a national average 

premium for each specialty. Insurance 

rating area malpractice premiums for 

each specialty are mapped to the county 

level. The specialty premium for each 

county is then multiplied by the total 

county RVUs (as defined by Medicare 

claims data), which were divided by the 

malpractice GPCI applicable to each 

county to standardize the relative values 

for geographic variations. If the 

malpractice RVUs were not normalized 

for geographic variation, the locality 

cost differences (as reflected by the 

GPCIs) would be counted twice. The 

product of the malpractice premiums 

and standardized RVUs is then summed 

across specialties for each county. This 

calculation is then divided by the total 

RVUs for all counties, for each specialty, 

to yield a national average premium for 

each specialty. As stated previously, we 

used an average of the 3 most current 

years, 2001 to projected 2003 

malpractice premiums, in our 

calculation of the proposed malpractice 

RVUs. See Table 6 for a display of the 

average premiums for the top 20 

Medicare specialties; 

• Calculate a risk factor for each 

specialty. Differences among specialties 

in malpractice premiums are a direct 

reflection of the malpractice risk 

associated with the services performed 

by a given specialty. The relative 

differences in national average 

premiums between various specialties 

can be expressed as a specialty risk 

factor. These risk factors are an index 

calculated by dividing the national 

average premium for each specialty by 

the national average premium for the 

specialty with the lowest average 

premium, nephrology. The risk factors 

used in the development of the 

resource-based malpractice RVUs are 

displayed in Table 7; 

• Calculate malpractice RVUs for 

each code. Resource-based malpractice 

RVUs were calculated for each 

procedure. In order to calculate 

malpractice RVUs for each code, we 

identified the percentage of services 

performed by each specialty for each 

respective procedure code. This 

percentage was then multiplied by each 

respective specialty’s risk factor as 

calculated in Step 2. The products for 

all specialties for the procedure were 

then summed, yielding a specialtyweighted malpractice RVU reflecting the 

weighted malpractice costs across all 

specialties for that procedure. This 

number was then multiplied by the 

procedure’s work RVUs to account for 

differences in risk-of-service. Since we 

were unable to find an acceptable 

source of data to be used in determining 

risk-of-service, work RVUs were used. 

We welcome any suggestions at any 

time for alternative data sources to be 

used in determining risk-of-service. 

Certain specialties may have more 

than one ISO rating class and risk factor. 

The surgical risk factor for a specialty 

was used for surgical services and the 

nonsurgical risk factor for evaluation 

and management services. Also, for 

obstetrics/gynecology, the lower 

gynecology risk factor was used for all 

codes except those obviously surgical 

services, in which case the higher, 

surgical risk factor was used. 

Certain codes have no physician work 

RVUs. The overwhelming majority of 

these codes are the technical 

components (TCs) of diagnostic tests, 

such as x-rays and cardiac 

catheterization, which have a distinctly 

separate technical component (the 

taking of an x-ray by a technician) and 

professional component (the 

interpretation of the x-ray by a 

physician). Examples of other codes 

with no work RVUs are audiology tests 

and injections. Nonphysicians, in this 

example, audiologists and nurses, 

respectively, usually furnish these 

services. In many cases, the 

nonphysician or entity furnishing the 

TC is distinct and separate from the 

physician ordering and interpreting the 

test. We believe it is appropriate for the 

malpractice RVUs assigned to TCs to be 

based on the malpractice costs of the 

nonphysician or entity, not the 

professional liability of the physician. 

Our proposed methodology, however, 

would result in zero malpractice RVUs 

for codes with no physician work, since 

we proposed the use of physician work 

RVUs to adjust for risk-of-service. We 

believe that zero malpractice RVUs 

would be inappropriate because 

nonphysician health practitioners and 

entities such as independent diagnostic 

testing facilities (IDTFs) also have 

malpractice liability and carry 

malpractice insurance. Therefore, we 

proposed to retain the current chargebased malpractice RVUs for all services 

with zero work RVUs. We also solicited 

comments and suggestions for 

constructing resource-based malpractice 

RVUs for codes with no physician work. 

• Rescale for budget neutrality. The 

law requires that changes to fee 

schedule RVUs be budget neutral. The 

current resource-based malpractice 

RVUs and the proposed resource-based 

malpractice RVUs were constructed 

using entirely different malpractice 

premium data. Thus, the last step in this 

process is to adjust for budget neutrality 

by rescaling the proposed malpractice 

RVUs so that the total proposed 

resource-based malpractice RVUs equal 

the total current resource-based 

malpractice RVUs. The proposed 

resource-based malpractice RVUs for 

each procedure were then multiplied by 

the frequency count for that procedure 

to determine the total resource-based 

malpractice RVUs for each procedure. 

The total resource-based malpractice 

RVUs for each procedure were summed 

for all procedures to determine the total 

fee schedule proposed resource-based 

malpractice RVUs. The total fee 

schedule proposed resource-based 

malpractice RVUs were compared to the 

total current resource-based malpractice 

RVUs. The total current and proposed 

malpractice RVUs were equal and, 

therefore, budget neutral. Thus, no 

adjustments were needed to ensure that 

expenditures remained constant for the 

malpractice RVU portion of the 

physician fee schedule payment.

The proposed resource-based 

malpractice RVUs were shown in 

Addendum B of the August 5, 2004 

proposed rule. The values did not 

reflect any final budget-neutrality 

adjustment, which we stated would be 

made in the final rule based upon the 

more current Medicare claims data. The 

malpractice RVUs identified in this final 

rule did not require the application of 

a scaling factor to retain budget 

neutrality. 

Because of the differences in the sizes 

of the three fee schedule components, 

the implementation of the updated 

resource-based malpractice RVUs has a 

smaller payment effect than the 

previous implementation of resourcebased practice expense RVUs. On 

average, work represents about 52.5 

percent of the total payment for a 

procedure, practice expense about 43.6 

percent of the total payment, and 

malpractice expense about 3.9 percent 

of the total payment. Thus, a 20 percent 

change in practice expense or work 

RVUs would yield a change in payment 

of about 8 to 11 percent. In contrast, a 

corresponding 20 percent change in 

malpractice values would yield a 

change in payment of only about 0.6 

percent. 

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Comments and Responses 

We received public comments on 

several malpractice issues. The 

comments and our responses are stated 

below. 

Comment: Several comments were 

received that requested revisions to the 

data sources utilized in the 

development of resource-based 

malpractice RVUs. Specifically, 

commenters requested that we remove 

utilization for assistant-at-surgery 

claims from the calculation of resourcebased malpractice RVUs because the 

utilization of assistant-at-surgery 

services artificially lowers the average 

risk associated with surgical services. 

Additionally, we also received 

comments that raised questions related 

to the ISO crosswalks and resulting risk 

factors that we used. 

Response: We agree that assistants at 

surgery should not be reflected in the 

malpractice RVUs because they are not 

primarily responsible for performing the 

surgical procedures, and we are 

removing the assistant-at-surgery 

utilization, and associated risk factors, 

from the data that are used to calculate 

the resource-based malpractice RVUs. 

The inclusion of the lower assistant-atsurgery risk factors into the overall 

determination of some complex surgical 

services artificially lowers the average 

risk factor and resulting resource-based 

malpractice RVUs of these services. 

Regarding the ISO Classifications and 

resulting risk factors that were applied 

to specialties, the majority of comments 

received did not offer substantive 

reasons or alternative methodologies for 

the proposed ISO crosswalks. We 

derived the ISO crosswalks, and 

resulting risk factors, based upon the 

review by both our contractor and CMS 

medical officers. Due to the lack of 

substantive alternatives in the 

comments received, we will retain the 

crosswalks that were proposed in the 

August 4, 2004 proposed rule (see Table 

7) with the exception of orthopedic 

surgery and dermatology. 

Comment: Several commenters 

believed that the August 2004 proposed 

rule that established risk factors of 7.46 

for orthopedic surgery with spinal and 

8.06 for orthopedic surgery without 

spinal were counterintuitive and needed 

revision. 

Response: We agree with these 

comments and have revised the 

orthopedic surgery with spinal risk 

factor to reflect the risk factor identified 

in the rating manuals (8.89). In the 

proposed rule, the risk factors for 

orthopedic surgery with spinal and 

without spinal were taken from two 

separate sources (premium data and 

rating manuals, respectively) thus 

causing the anomalous result. See Table 

7 for the revised orthopedic surgery risk 

factors. 

Comment: Two commenters, 

including the American College of 

Dermatology believe that the use of the 

higher risk class of major surgery is 

inappropriate for dermatological 

services as the typical dermatological 

practice does not encompass major 

surgery but instead focuses on minor 

surgery in the office setting. 

Response: We agree with these 

comments and will use the minor 

surgery and no-surgery risk 

classifications for dermatological 

services. See Table 7 for the revised 

dermatology risk factors. The impact of 

removing the assistant at surgery claims 

and revising the risk factor associated 

with orthopedic surgery with spinal is 

a 0.9 percent increase for neurosurgery 

and a 0.4 percent increase for 

orthopedic surgery over the malpractice 

RVUs shown in proposed rule. The 

effect of replacing the major surgery risk 

factor with the minor surgery risk factor 

for dermatology is a 0.9 percent 

decrease in total payments relative to 

the proposed rule. 

Comment: One commenter states that 

the resource-based malpractice RVU 

methodology underestimates the cost of 

PLI for physicians who perform 

obstetric and gynecologic services. 

According to the commenter, eighty 

percent of OB/GYNs perform both 

obstetric and gynecologic services yet 

the risk factor for most services these 

physicians provide to Medicare 

beneficiaries is based on the much 

lower premiums paid by physicians 

who offer only gynecologic services. 

Response: Although obstetricians and 

gynecologists’ malpractice premiums 

can be appreciably different, most 

Medicare OB/GYN services are 

gynecological. Therefore, all Medicare 

OB/GYN procedures will be assigned a 

gynecology risk factor except in those 

instances where the service provided is 

clearly obstetrical in nature. CPT codes 

in the range of 59000–59899 are clearly 

obstetrical services and use the 

obstetrics risk factor (11.30). 

Comment: One commenter felt that it 

was inappropriate to assign 0.00 

malpractice RVUs to services that have 

physician work and have historically 

had a small amount of malpractice 

RVUs associated with them. 

Response: We agree with this 

comment and will adjust these services 

in the final rule. All payable fee 

schedule services have some amount of 

PLI associated with their performance. 

Comment: One commenter requested 

that we consider the implementation of 

the resource-based malpractice expense 

RVUs interim until the agency has 

worked with the medical community to 

ensure that the data and methodology 

utilized to calculate the malpractice 

RVUs are appropriate.

Response: We are continuing to work 

with the medical community to ensure 

that the methodology and data used to 

calculate the malpractice RVUs 

appropriately reflect the actual resource 

costs associated with professional 

liability insurance for physicians. 

Section 1848(c)(2)(B)(i) of the Act states 

that the Secretary is required to review 

the relative values not less often than 

every 5 years. If substantive information 

becomes available subsequent to the 

publication of the final malpractice 

RVUs, the statute allows us flexibility to 

review that information for possible 

inclusion in future malpractice RVU 

updates. 

Comment: Several commenters 

requested that we use a methodology 

that would only account for the 

dominant specialty in the calculation of 

the service-specific resource-based 

malpractice RVUs. Commenters stated 

that a dominant specialty approach 

would be consistent with the ‘‘typical’’

service approach that we use throughout 

the resource-based physician payment 

system. Commenters also feel that a 

dominant specialty approach would 

more appropriately reflect the actual 

premium resource costs associated with 

the performance of individual services. 

Response: We continue to believe that 

accounting for all specialties that 

perform a given service is the more 

appropriate and equitable methodology 

in establishing resource-based 

malpractice RVUs. Basing payment 

upon all specialties that perform a given 

service ensures that the actual 

professional liability insurance resource 

costs of all specialties are included in 

the calculation of the final malpractice 

RVUs. Using only the dominant 

specialty does not capture the true 

resource costs associated with a given 

service and under a relative value based 

system, results in the redistribution of 

RVUs based upon only partial data. 

The dominant specialty approach is 

particularly vulnerable for calculating 

resource-based malpractice RVUs in 

services that are multi-disciplinary in 

nature. An example that illustrates the 

potentially distorting effect of the 

dominant specialty approach on multidisciplinary services is the specialty 

utilization associated with a level III 

established office visit. Although over 

35 different specialties perform a 

significant number of these services, a 

dominant specialty approach would 

base the malpractice RVUs on 

66274 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

approximately 2 specialties. High risk 

specialties such as neurosurgery, 

thoracic surgery, general surgery, and 

obstetrics and gynecology, which 

account for a small percentage of the 

total utilization but a large amount of 

total dollars, would no longer factor into 

the calculation of the malpractice RVU 

for this service. These four specialties 

alone account for nearly $300 million of 

the total dollars associated with a level 

III established office visit. The effect of 

removing these four high-cost, high-risk 

specialties from the calculation of the 

malpractice RVUs for this service would 

be an overall decrease in the 

malpractice RVUs, because the 

calculation would be based upon lowercost, lower-risk specialties. 

We disagree that a dominant specialty 

approach is consistent with the typical 

service approach used in the RUC 

survey process. Irrespective of the 

specialty performing a given service, we 

require that the typical service be the 

measurement tool for the calculation of 

final payments. The typical service 

approach utilized in the RUC survey 

process has never referred to the typical 

specialty performing a service, but 

instead to the typical type of service 

furnished. This typical service would 

encompass such things as the condition 

of the patient, the extent of the work, 

the staff needed to accomplish the 

service, and the respective resource 

inputs associated with the typical 

service. 

We will continue to work with the 

RUC PLI Workgroup to identify 

alternatives to the dominant specialty 

approach. One alternative that we are 

currently exploring with the RUC PLI 

Workgroup is removing aberrant data 

from low utilization services. 

Comment: One commenter suggested 

that we determine the exponential rate 

of growth in the PLI premium data from 

2001 through 2003 to predict the 2004 

premium data. This commenter believes 

that we should use only this predicted 

2004 premium data in the calculation of 

resource-based malpractice RVUs. 

Response: We disagree with the 

commenter’s recommendation that 

predicted 2004 professional liability 

insurance premium data be utilized in 

the calculation of resource-based 

malpractice RVUs. The data sources that 

are currently used in the calculation of 

the 2005 resource-based malpractice 

RVUs consist of actual 2001 and 2002 

premium data (when available) and 

projected 2003 premium data. 

Professional liability insurance has 

proven to be the most volatile data 

source that is used in the calculation of 

resource-based physician fee schedule 

RVUs. For this reason, we believe that 

it is inappropriate to use only one year 

of projected premium data.

Comment: Various specialty 

organizations request that we work with 

the RUC’s Professional Liability 

Insurance (PLI) Workgroup to ensure 

that the medical community has input 

into the refinement of the malpractice 

RVUs. 

Response: Over the course of the past 

year, we have been working with the 

RUC PLI Workgroup to solicit input on 

the methodology and data sources 

utilized to calculate resource-based 

malpractice RVUs. We continue to 

actively participate in the PLI 

Workgroup to keep both the workgroup 

and the various specialty organizations 

aware of our progress in the 

development and refinement of 

resource-based malpractice RVUs. We 

have forwarded all requested contractor 

reports, which outline both our 

methodology and data sources, to the 

RUC for review and comment. We agree 

with these comments and plan to 

continue our cooperative relationship 

with the RUC PLI Workgroup and 

various specialty organizations to 

ensure that the necessary specialty 

organizations are involved with both the 

premium collection efforts and the 

development and refinement of 

resource-based malpractice RVUs. 

Comment: Tail coverage is designed 

to cover any claims that may be made 

against a new employee for services 

furnished on behalf of his or her old 

employer during the time that he or she 

is employed by the new employer. 

Several commenters suggested that we 

incorporate the cost of tail coverage in 

the determination of PLI annual 

premium data. 

Response: Although we agree with the 

commenters that it might be desirable to 

use tail coverage premium data in 

addition to the annual premium data 

that are currently used in the revisions 

to resource-based malpractice RVUs, we 

have been unable to identify a 

nationally representative source of tail 

coverage premium data. We are 

continuing to work with the RUC PLI 

Workgroup, the AMA, and the various 

specialty organizations to identify a 

nationally representative source of tail 

coverage premium data for future 

rulemaking. 

Comment: One commenter 

recommended that professional liability 

insurance data for all specialties should 

be used rather than the data from the 

top 20 Medicare specialties. 

Response: Although it might be 

desirable to obtain premium data from 

every conceivable specialty in the 

practice of medicine, it is not possible 

to obtain this scope of data under the 

time constraints associated with 

collecting the most current premium 

data. In order to conduct surveys that 

collect the maximum amount of 

premium data from all geographic areas 

without being too intrusive to the State 

Departments of Insurance and private 

insurance companies, we chose to limit 

the scope of the data collection to the 

top 20 Medicare specialties. Further, 

utilizing PLI data from the top 20 

Medicare specialties encompasses 80 

percent of fee schedule services. 

Comment: Several commenters 

requested that we use data from the 

Physician Insurers Association of 

America (PIAA) in the development of 

resource-based malpractice RVUs. This 

commenter further requested that we 

provide concise requirements for those 

data collection efforts. 

Response: We did explore the use of 

data from PIAA in the development of 

resource-based malpractice RVUs. 

Unfortunately, the PIAA does not 

include actual physician claims-made 

premium data by insurer and specialty 

classification. The information that was 

available from PIAA ranged from 

insured demographics information to 

medical malpractice claims trends. 

Regarding our criteria for premium 

data collection efforts, we have shared 

the criteria for those premium data 

collection efforts with the RUC PLI 

Workgroup. 

Comment: Several commenters 

recommended that the malpractice 

RVUs should remain stable. 

Commenters suggested that any budget 

neutrality adjustments, positive or 

negative, that might occur due to the 5-

year review of malpractice RVUs should 

be made to the conversion factor and 

not to the malpractice RVUs. 

Response: We acknowledge the 

comments that suggest that any 

adjustments for budget neutrality not be 

performed on the RVUs, but we note 

that any budget neutrality adjustments 

to the RVUs do not change the relative 

relationship among the values for the 

services but instead uniformly change 

all relative values. Regarding 

malpractice RVUs specifically, 

malpractice RVUs are by nature not 

‘‘stable.’’ When the malpractice RVUs 

are reviewed and updated, the 

malpractice RVUs associated with all 

services could potentially change. 

Additionally, for 2005, we are mandated 

by statute to apply at least a 1.5 percent 

increase to the conversion factor. Thus, 

if the budget neutrality associated with 

updated malpractice RVUs were 

negative, it would not be possible to 

ensure budget neutrality and comply 

with the statutory 1.5 percent update. 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66275

Comment: One commenter 

recommended that the exceptions to the 

surgical risk factor be modified to 

include coding changes since the 

initiation of the resource-based 

malpractice RVUs in 2000. The previous 

update to the malpractice RVUs made 

service-specific exceptions, whereby 

certain codes were assigned the higher 

surgical risk factor in the calculation of 

their final malpractice RVU. The 

commenter specifically requested that 

due to CPT coding modifications, the 

following codes should also receive this 

same coding modification and receive 

the greater of their actual average risk 

factor or the risk factor for cardiac 

catheterization: 92973–92974, 93501–

93533, 93580–93581, 93600–93613, and 

93650–93652. 

Response: In order to retain the 

exceptions that were identified in the 

previous malpractice RVU update for 

this new series of services, we will 

assign the greater of the actual average 

risk factors or the risk factor for cardiac 

catheterization services. 

Comment: Several commenters agreed 

with our use of the work RVUs as the 

best available data source for adjusting 

the malpractice RVUs for risk of service. 

These commenters noted, as we did, 

that the work RVUs are not a perfect 

proxy for risk of service, but are the best 

available source at this time. 

Commenters requested that we continue 

our use of work RVUs as the adjuster to 

malpractice RVUs for risk of service, but 

also requested that we be responsive to 

potential anomalies that may be 

identified.

Response: We agree with these 

comments and look forward to 

continuing our work with the various 

organizations to identify all potential 

anomalies in the malpractice RVUs. 

Comment: One commenter expressed 

concern that, although malpractice 

premiums have increased for all 

specialty practices, some specialty 

practices will experience a decline in 

payments as a result of the 5-Year 

Review of malpractice RVUs. This 

commenter suggested that additional 

dollars need to be added to the system 

to account for rising PLI costs. 

Response: The impact of the 

malpractice RVU revisions on an 

individual specialty organization is not 

a direct reflection of the increases or 

decreases in their malpractice premiums 

but instead reflects increases or 

decreases in a specific state’s premiums 

as compared to the national average. In 

some instances, specialty organizations 

might have experienced slight increases 

in their respective malpractice 

premiums since the last malpractice 

RVU update, but these increases have 

occurred at a slower rate than the 

national average increase for all 

specialty organizations. The result is a 

negative impact on these specialties. 

Specialty organizations that have 

increased at a rate higher than the 

national average will experience 

positive impacts. 

Comment: One commenter believes 

that additional dollars should be added 

to the Medicare physician fee schedule 

to account for escalating professional 

liability insurance premiums. 

Response: The Medicare Economic 

Index (MEI) is the device by which 

additional dollars are added to the 

physician fee schedule. For 2005, the 

cost category associated with 

professional liability insurance has 

increased by 23.9 percent. However, for 

2004 and 2005, section 601 of the MMA 

established an update of 1.5 percent. 

Comment: The American College of 

Radiology (ACR) commented that there 

is an imbalance between the 

distribution of malpractice RVUs to the 

professional component and technical 

component of a service. The ACR 

requested that we work with ACR staff 

to identify alternative methodologies for 

the more appropriate valuation of 

technical component services. 

Response: Physician work RVUs are 

used to adjust for risk of service. 

Because technical component services 

do not have physician work RVUs, they 

are still valued using charge-based 

RVUs instead of the resource-based 

malpractice RVU methodology. We look 

forward to working with the ACR and 

other interested specialty organizations 

to examine alternative methodologies 

that would allow technical component 

services to also reflect resource-based 

malpractice RVUs. 

Final Decision 

We are implementing the revised 

2005 malpractice RVUs as proposed 

with the modifications noted in the 

discussions above. Additionally, we are 

continuing to work with the AMA’s 

RUC to—

• Consider the appropriateness of a 

dominant specialty approach; 

• Identify the most current nationally 

representative professional liability 

insurance premium data; 

• Review the current ISO crosswalks; 

and 

• Review aberrant data patterns in 

low-utilization services for possible 

inclusion in a future rulemaking cycle. 

D. Coding Issues 

1. Change in Global Period for CPT Code 

77427, Radiation Treatment 

Management, Five Treatments

This code was included in the 

November 2, 1999 physician fee 

schedule final rule (64 FR 59380) and 

was effective for services beginning 

January 1, 2000. In that rule, and 

subsequent rules, we have applied a 

global indicator of ‘‘xxx’’ to this code, 

meaning that the global concept does 

not apply. It was brought to our 

attention that this global indicator is 

incorrect and that the code should be 

assigned a 90-day global period because 

the RUC valuation of this service 

reflected a global period of 90 days 

which we had accepted. Therefore, we 

proposed to correct the global indicator 

for this service to reflect a global period 

of 90 days (090). 

Comment: Specialty organizations 

representing radiation oncology and 

radiology as well as individual 

physicians and providers, and the AMA, 

all expressed concern about this 

proposal to change the global period for 

CPT code 77427. The commenters stated 

that this code is universally recognized 

as a recurring service that can be 

provided multiple times during a course 

of radiation. This code is usually 

submitted once for each group of five 

treatments (or fractions) and represents 

substantial services furnished during 

that group (typically 1 week) of five 

treatments. Commenters believe this 

proposed change would—

• Contradict the current CPT 

definitions; 

• Not reflect the process of care for 

radiation; 

• Countervene the essence of the RUC 

valuations; and

• Negate the guidelines that we 

previously issued. 

Because a change in the global period 

could have a significant impact on the 

process of care for radiation oncology, 

commenters urged us to withdraw this 

proposal or to delay implementation 

until there is further discussion with the 

specialty organizations and the RUC, 

and clarification of billing matters 

related to this proposed change are 

provided. 

Response: Based on the concerns 

raised by the commenters, we are not 

changing the global period for this 

service as proposed. 

Result of Evaluation of Comments 

We are retaining the global period of 

‘‘xxx’’ for CPT code 77427. 

66276 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

2. Requests for Adding Services to the 

List of Medicare Telehealth Services 

As discussed in the proposed rule (69 

FR 47510), section 1834(m) of the Act 

defines telehealth services as 

professional consultations, office and 

other outpatient visits, and office 

psychiatry services defined as of July 1, 

2000 by CPT codes 99241 through 

99275, 99201 through 99215, 90804 

through 90809, and 90862. In addition, 

the statute requires us to establish a 

process for adding services to, or 

deleting services from, the list of 

telehealth services on an annual basis. 

In the CY 2003 final rule, we established 

a process for adding to or deleting 

services from the list of Medicare 

telehealth services (67 FR 79988). This 

process provides the public an 

opportunity on an ongoing basis to 

submit requests for adding a service. We 

assign any request to add a service to 

the list of Medicare telehealth services 

to one of the following categories: 

• Category 1: Services that are similar 

to office and other outpatient visits, 

consultation, and office psychiatry 

services. In reviewing these requests, we 

look for similarities between the 

proposed and existing telehealth 

services in terms of the roles of, and 

interactions among, the beneficiary, the 

physician (or other practitioner) at the 

distant site and, if necessary, the 

telepresenter. We also look for 

similarities in the telecommunications 

system used to deliver the proposed 

service, for example, the use of 

interactive audio and video equipment. 

• Category 2: Services that are not 

similar to the current list of telehealth 

services. Our review of these requests 

includes an assessment of whether the 

use of a telecommunications system to 

deliver the service produces similar 

diagnostic findings or therapeutic 

interventions as compared with the 

face-to-face ‘‘hands on’’ delivery of the 

same service. Requestors should submit 

evidence showing that the use of a 

telecommunications system does not 

affect the diagnosis or treatment plan as 

compared to a face-to-face delivery of 

the requested service. 

Requests for adding services to the list 

of Medicare telehealth services must be 

submitted and received no later than 

December 31st of each calendar year to 

be considered for the next proposed 

rule. For example, requests submitted in 

CY 2003 are considered for the CY 2005 

proposed rule. For more information on 

submitting a request for addition to the 

list of Medicare telehealth services, visit 

our Web site at http://www.cms.hhs.gov/

physicians/telehealth. 

We received the following public 

requests for addition in CY 2003: 

• Inpatient hospital care (as 

represented by CPT codes 99221 

through 99223 and 99231 through 

99233). 

• Emergency department visits (as 

defined by CPT codes 99281 through 

99285). 

• Hospital observation services (as 

represented by CPT codes 99217, 99218 

through 99220).

• Inpatient psychotherapy (as defined 

by CPT codes 90816 through 90822). 

• Monthly management of patients 

with end-stage renal disease (ESRD), (as 

represented by HCPCS codes G0308 

through G0319). 

• Speech and audiologist services (as 

defined by CPT code range 92541 

through 92596). 

• Case management (as identified by 

CPT codes 99361 and 99362) 

• Care plan oversight services (as 

represented by CPT codes 99374 and 

99375). 

After reviewing the public requests 

for addition, we proposed to add ESRD–

related services as described by G0308, 

G0309, G0311, G0312, G0314, G0315, 

G0317, and G0318 to the list of 

Medicare telehealth services. However, 

we specified that the required clinical 

examination of the vascular access site 

must be furnished face-to-face ‘‘hands 

on’’ (without the use of an interactive 

telecommunications system) by a 

physician, certified nurse specialist 

(CNS), nurse practitioner (NP), or 

physician’s assistant (PA). An 

interactive telecommunications system 

may be used for providing additional 

visits required under the 2 to 3 visit 

Monthly Capitation Payment (MCP) 

code and the 4 or more visit MCP code. 

Moreover, we proposed to add the 

term ‘‘ESRD–related visits’’ to the 

definition of Medicare telehealth 

services at § 410.78 and § 414.65 as 

appropriate. 

We did not propose to add any 

additional services to the list of 

Medicare telehealth services for CY 

2005. 

For further information on the 

addition to the list of telehealth 

services, see the Federal Register dated 

August 5, 2004 (69 FR 47510). 

Inpatient Hospital Care, Hospital 

Observation Services, Inpatient 

Psychotherapy, and Emergency 

Department Services 

Comment: We received conflicting 

comments on our proposal not to add 

inpatient hospital care, hospital 

observation services, inpatient 

psychotherapy, and emergency 

department services to the list of 

approved telehealth services. For 

example, one professional society 

supported our proposal not to add 

inpatient hospital care, hospital 

observation services, inpatient 

psychotherapy, and emergency 

department services to the list. That 

commenter believes conclusive efficacy 

data is necessary before adding the 

aforementioned services. Likewise, an 

association representing emergency 

department management agreed that 

emergency department visits should not 

be added to the list of Medicare 

telehealth services. That commenter 

believes that hospitals in rural areas 

have physicians with sufficient 

experience to handle the complexities of 

emergent care. 

An association representing family 

physicians agreed with our proposal not 

to add inpatient hospital care and 

hospital observation services. However, 

they disagreed with our proposal not to 

add emergency department visits to the 

list of Medicare telehealth services. The 

commenter stated that emergency 

department visits should not be 

assigned to category 2 based on the 

acuity of the patient. The commenter 

believes that the range of potential 

acuity is the same in the emergency 

room as it is in the office setting and 

noted that office and other outpatient 

visits are currently on the list of 

Medicare telehealth services. A 

professional society encouraged us to 

reexamine the request to add inpatient 

hospital care, observation services, and 

inpatient psychotherapy to the list of 

Medicare telehealth services in the 

future. 

Response: We agree that the acuity for 

some patients may be the same in the 

emergency department as in a 

physician’s office. However, we also 

believe that more acutely ill patients are 

more likely to be seen in the emergency 

department. Although telehealth is an 

acceptable alternative to face-to-face 

‘‘hands on’’ patient care in certain 

settings, the potential for misdiagnosis 

and/or mismanagement, with more 

serious consequences, exists in high 

acuity environments like the emergency 

department when telehealth is used as 

a replacement for an onsite physician or 

practitioner. The practice of emergency 

medicine often requires frequent patient 

reassessments, rapid physician 

interventions, and sometimes the 

continuous physician interaction with 

ancillary staff and consultants. We do 

not have evidence suggesting the use of 

telehealth could be a reasonable 

surrogate service for this type of care. In 

the absence of sufficient evidence that 

illustrates that the use of a 

telecommunications system produces 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66277

similar diagnoses or therapeutic 

interventions as would the face-to-face 

delivery of inpatient hospital care, 

emergency department visits, hospital 

observation services, and inpatient 

psychotherapy, we do not plan to add 

these services to the list of approved 

telehealth services. As discussed in the 

proposed rule, we believe that the 

current list of Medicare telehealth 

services is appropriate for hospital 

inpatients, emergency room cases, and 

patients designated as observation 

status. If guidance or advice is needed 

in these settings, a consultation may be 

requested from an appropriate source.

Comment: A telehealth association 

and a telehealth network requested that 

we clarify what consultation codes 

could be used for hospital inpatients, 

emergency room cases, and patients 

designated as observation status. 

Response: The appropriate 

consultation code depends on the 

admission status of the beneficiary. 

When the beneficiary is an inpatient of 

a hospital, the physician or practitioner 

at the distant site bills an initial or 

follow-up inpatient consultation as 

described by CPT codes 99251 through 

99263. For the hospital observation 

setting and emergency department, the 

appropriate office or other outpatient 

consultation code is CPT codes 99241 

through 99245. 

Comment: Some commenters believe 

that hospital inpatient care, inpatient 

psychotherapy, observation services, 

and emergency department visits should 

all be assigned to category 1 because 

they are clinically the same as a 

consultation. Moreover, the commenters 

expressed their opinion that a 

telecommunications system would not 

substitute for an in-person practitioner 

for the requested hospital services. 

Response: We agree that the key 

components of a consultation are 

similar to inpatient hospital care, 

observation services, and emergency 

department visits. However, a 

consultation service is distinguished 

from the requested hospital services 

because it is provided by a physician or 

practitioner whose opinion or advice 

regarding evaluation and management 

of a specific problem is requested by 

another physician or appropriate source. 

The ongoing management of the 

patient’s condition remains the 

responsibility of the practitioner who 

requested the consultation. As 

discussed in our response to another 

comment, a consultation may be 

provided as a Medicare telehealth 

service for hospital inpatients, 

emergency room cases, and patients 

designated in observation status. 

In furnishing a consultation as a 

telehealth service, the physician at the 

distant site provides additional 

expertise, to ensure optimal patient 

outcomes. For consultation services, a 

practitioner is available to manage the 

patient at the originating site. However, 

adding the requested hospital services 

would permit a telecommunications 

system to be used as a substitute for an 

onsite practitioner because the 

physician or practitioner at the distant 

site assumes responsibility for the 

ongoing management of the patient’s 

condition. 

End Stage Renal Disease—Monthly 

Management of Patients on Dialysis 

Comment: Many commenters, 

including a telehealth association, a 

nephrology nurses association, a renal 

physicians association, a health system, 

a community hospital, a telemedicine 

law group, and others applauded our 

proposal to add the ESRD-related 

services with 2 or 3 visits per month 

and ESRD-related services with 4 or 

more visits per month to the list of 

Medicare telehealth services. For 

example, two commenters believe that 

adding these services will help provide 

dialysis patients living in rural areas 

sufficient access to nephrology 

specialists and will save both patients 

and practitioners a significant amount of 

travel time. Additionally, many 

commenters expressed strong support 

for not permitting the visit that includes 

a clinical examination of the vascular 

access site to be added to the list of 

Medicare telehealth services and agreed 

that this exam should be furnished in 

person. 

Response: We agree with the 

comments. 

Comment: With regard to furnishing 

ESRD-related visits under the MCP, a 

nephrology association suggested that 

we permit the use of e-mail and 

telephone conferencing for one year. 

The commenter believes this grace 

period would enable physicians and 

originating sites to acquire the necessary 

technology and execute their 

implementation plans. Additionally, an 

association of kidney patients 

questioned whether telehealth services 

would be available to ESRD patients in 

non-rural areas.

Response: Services added to the list of 

Medicare telehealth services are subject 

to the requirements and conditions of 

payment in the law and regulations. 

Under the Medicare telehealth 

provision, the use of an interactive 

audio and video telecommunications 

system that permits real-time interaction 

between the patient, physician or 

practitioner at the distant site, and 

telepresenter (if necessary) is a 

substitution for the face-to-face 

requirements under Medicare. 

Electronic mail systems and telephone 

calls are specifically excluded from the 

definition of an interactive 

telecommunications system. Moreover, 

we do not have the legislative authority 

to expand the geographic areas where 

telehealth services may be furnished. 

Telehealth services may only be 

furnished in non-Metropolitan 

Statistical Area counties or rural health 

professional shortage areas. 

Comment: An association 

representing kidney patients questioned 

whether we plan to evaluate the 

provision of telehealth services to ESRD 

patients to determine best practices. 

Response: We believe that most 

physicians and practitioners will use 

telehealth services for providing 

additional visits required under the 

MCP as appropriate to manage their 

patients on dialysis. However, we 

would welcome specific data on best 

practice methods for furnishing ESRDrelated services as telehealth services. 

Comment: Some commenters 

indicated a belief that the ESRD-related 

services were assigned to category 2 for 

review. For example, one telehealth 

group believed that a discrepancy exists 

between the rationale we used to add 

ESRD-related services to the list of 

telehealth services and our decision not 

to add inpatient hospital care, 

observation services, inpatient 

psychotherapy, and emergency 

department visits. The commenter 

stated that ESRD-related services were 

added in the absence of randomized 

clinical trials or comparison studies and 

mentioned that the same level of 

evidence was submitted for ESRDrelated services as for other requests (for 

example, inpatient hospital services). 

The commenter requested clarification 

on the method used to assign services to 

category 1 or category 2. 

Response: As discussed in the 

proposed rule, the MCP represents a 

range of services provided during the 

month, including various physician and 

practitioner services, such as the 

establishment of a dialyzing cycle, 

outpatient evaluation and management 

of the dialysis visit(s), telephone calls, 

and patient management as well as 

clinically appropriate physician or 

practitioner visit(s) during the month. 

At least one of the visits must include 

a clinical examination of the vascular 

access site furnished face-to-face, 

‘‘hands-on’’ by a physician, CNS, NP, or 

PA. 

We considered the outpatient 

evaluation and management of the 

dialysis visits to be similar to an office 

66278 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

visit and other outpatient visits 

currently on the list of Medicare 

telehealth services. However, we believe 

that the clinical examination of the 

vascular access site is not similar to the 

existing telehealth services, and, 

therefore, it meets the criteria for a 

category 2 request. We did not propose 

to add a comprehensive visit including 

a clinical examination of the vascular 

access site, to the list of Medicare 

telehealth services because the requestor 

did not provide comparative analyses 

illustrating that the use of a 

telecommunications system is an 

adequate substitute for a face-to-face 

clinical examination of the vascular 

access site. However, as discussed in the 

proposed rule, we do believe that the 

subsequent visits to monitor the 

patient’s condition met our criteria for 

approving a category 1 request. For 

category 1 services, we look for 

similarities between the proposed and 

existing telehealth services in terms of 

the roles of, and interactions among, the 

beneficiary, the physician or 

practitioner at the distant site, and, if 

necessary, the telepresenter. 

Therefore, we proposed that the MCP 

physician, that is, the physician or 

practitioner responsible for the 

evaluation and management of the 

patient’s ESRD, and other practitioners 

within the same group practice or 

employed by the same employer or 

entity, may furnish additional ESRDrelated visits as telehealth services using 

an interactive audio and video 

telecommunications system. However, 

for purposes of billing the MCP, at least 

one visit must include a clinical 

examination of the vascular access site, 

and must be furnished face-to-face, 

‘‘hands on’’ by a physician, CNS, NP, or 

PA each month. 

Comment: One commenter requested 

that we allow a physician or surgeon 

located at the originating site (who is 

not the MCP physician) to furnish 

ESRD-related visits involving the 

clinical examination of the vascular 

access site. The commenter stated that 

having a physician or surgeon skilled in 

vascular access management available to 

work in coordination with the MCP 

physician is necessary for 

geographically remote areas such as 

Alaska and in severe weather 

conditions. The commenter believes 

that this type of arrangement is well 

suited for telehealth.

Response: The MCP physician may 

use another physician to provide some 

of the visits during the month however, 

the non-MCP physician must have a 

relationship with the billing physician 

such as a partner, employees of the 

same group practice or an employee of 

the MCP physician, for example, the 

physician at the originating site is either 

a W–2 employee or 1099 independent 

contractor. 

Case Management and Care Plan 

Oversight (Team Conferences and 

Physician Supervision) 

A telehealth association and a 

network of clinics requested 

clarification on—

• The scope of authority relating to 

the addition of services that do not 

require a face-to-face encounter with the 

patient; and 

• Whether our policy for care plan 

oversight is similar to the interpretation 

of an x-ray and other services that do 

not require a face-to-face encounter. 

Additionally, a neurological society 

urged us to reconsider our decision not 

to add medical team conferences to the 

list of telehealth services. The 

commenter argued that adding medical 

team conferences as a telehealth service 

would improve the quality of the care 

plan and save time for all physicians 

involved in the patient’s care. 

Response: We add services to the list 

of Medicare telehealth services that 

traditionally require a face-to-face 

physician or practitioner encounter. The 

use of an interactive audio and video 

telecommunications system, permitting 

real time interaction between the 

beneficiary, physician or practitioner at 

the distant site, and telepresenter (if 

necessary) is a substitute for face-to-face 

requirements under Medicare. Services 

not requiring a face-to-face encounter 

with the patient that may be furnished 

through the use of a 

telecommunications system are already 

covered under Medicare. As discussed 

in chapter 15, section 30 of the 

Medicare Benefit Policy Manual, 

payment may be made for physicians’

services delivered via a 

telecommunications system for services 

that do not require a face-to-face patient 

encounter. The interpretation of an xray, electrocardiogram, 

electroencephalogram and tissue 

samples are listed as examples of these 

services. The Medicare Benefit Policy 

Manual may be found on our Web site 

at http://www.cms.hhs.gov/manuals/ by 

selecting the internet-only manuals link. 

Medical team conferences and 

monthly physician supervision do not 

require a face-to-face encounter with the 

patient, and, thus, a 

telecommunications system may be 

used to accomplish them. However, 

Medicare payment for CPT codes 99361, 

99362, and 99374 are bundled; no 

separate payment is made under the 

Medicare program for these services, 

and CPT code 99375 (physician 

supervision; 30 minutes or more) is 

invalid for Medicare payment purposes. 

We pay for monthly physician 

supervision as described by HCPCS 

codes G0181 and G0182. 

Process for Adding Services to the List 

of Medicare Telehealth Services 

Comment: We received conflicting 

comments on our process for adding 

services to the list of Medicare 

telehealth services. For example, a 

surgeons’ association supported the 

evidence-based approach for adding 

category 2 services. However, a school 

of medicine and a telemedicine and 

electronic health group believe that we 

should consider changing our 

categorical system for adding a service 

to the list of Medicare telehealth 

services, specifically, in relation to the 

requested hospital services for hospital 

inpatients, emergency room cases, and 

patients designated as observation 

status. 

One of the commenters believes that 

the decision to use a telehealth system 

should be up to the physician or 

practitioner at the distant site. The 

commenter argues that, if the physician 

or practitioner at the distant site is not 

comfortable in making a clinical 

judgment, the patient may be asked to 

travel to the physician’s office for 

further examination.

Moreover, the commenter contends 

that the nature of telehealth services is 

not well suited for clinical trials and 

that the evidence that we require under 

category 2 may never be obtained 

because of the lack of reimbursement. 

As an alternative, the commenters 

recommended a method of review that 

considers—

• Clinical utilization of the requested 

telehealth service; 

• The opinions of physicians and 

practitioners furnishing the telehealth 

service; and 

• The opportunity for the physicians 

and practitioners to prove the service is 

being delivered appropriately via 

telecommunications system. 

Response: We believe that the current 

method for reviewing requests for 

addition already considers the criteria 

mentioned by the commenter. The 

process for adding services to the list of 

Medicare telehealth services provides 

the public an ongoing opportunity to 

propose services that they believe are 

appropriate for Medicare payment. 

Requestors may submit data showing 

that patients who receive the requested 

service via telecommunications system 

are satisfied with the service delivered 

and that the use of a 

telecommunications system does not 

change the diagnosis or therapeutic 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66279

interventions for the requested service. 

Additionally, we believe that having 

different categories of review allows us 

to add requested services that are most 

like the current telehealth services (for 

example, office visits, consultation, and 

office psychiatry) without subjecting 

these requests to a comparative analysis. 

Since establishing the process to add 

services to the list of Medicare 

telehealth services, we have added the 

psychiatric diagnostic interview 

examination and have proposed specific 

ESRD-related services for the CY 2005 

rule. 

Comment: One commenter 

recommended that we replace the term 

face-to-face with ‘‘in-person’’. The 

commenter believes that the term ‘‘inperson’’ is a better description of an 

encounter where the practitioner is in 

the same physical location as the 

beneficiary. 

Response: The commenter’s 

suggestion to use the term ‘‘in-person’’

to describe an encounter where the 

physician or practitioner and the 

beneficiary are physically in the same 

room has been noted. We will consider 

the commenter’s suggestion as we 

discuss Medicare telehealth payment 

policy in the future. 

Report to Congress 

Comment: An audiology society and a 

language and hearing association 

strongly believe that most audiology 

services and speech therapy can be 

furnished remotely as telehealth 

services. To that end, many commenting 

groups and associations requested that 

we complete the report to Congress (as 

required by section 223(d) of the BIPA) 

and urged us to recommend adding 

speech language pathologists and 

audiologists as medical professionals 

that may provide and receive payment 

for Medicare telehealth services. 

Moreover, in light of the proposed 

addition of ESRD-related services to the 

list of telehealth services, many of these 

same commenters along with a 

nephrology society requested that we 

recommend adding dialysis facilities to 

the list of originating sites. One 

commenter requested that we add the 

patient’s home to the definition of an 

originating site. 

Response: The report to Congress on 

additional sites and settings, 

practitioners, and geographic areas that 

may be appropriate for Medicare 

telehealth payment is under 

development. We are considering the 

suggestions raised by the commenters as 

we formulate our recommendations to 

the Congress. 

Result of Evaluation of Comments 

We are adding ESRD-related services 

as described by G0308, G0309, G0311, 

G0312, G0314, G0315, G0317, and 

G0318 to the list of Medicare telehealth 

services. However, we will require that 

the complete assessment must include a 

face-to-face clinical examination of the 

vascular access site furnished ‘‘hands 

on’’ (without the use of an interactive 

telecommunications system) by a 

physician, clinical nurse specialist, 

nurse practitioner, or physician’s 

assistant. An interactive 

telecommunications system may be 

used for providing additional visits 

required under the 2 to 3 visit MCP code 

and the 4 or more visit MCP code. 

Additionally, we are adding the term 

‘‘ESRD–related visits’’ to the definition 

of Medicare telehealth services at 

§ 410.78 and § 414.65, as appropriate. 

3. National Pricing of G0238 and G0239 

Respiratory Therapy Service Codes. 

In the 2001 final rule, we created the 

following three G codes for respiratory 

therapy services: 

• G0237 Therapeutic procedures to 

increase strength or endurance of 

respiratory muscles, face-to-face, oneon-one, each 15 minutes (includes 

monitoring).

• G0238 Therapeutic procedures to 

improve respiratory function, other than 

ones described by G0237, one-on-one, 

face-to-face, per 15 minutes (includes 

monitoring). 

• G0239 Therapeutic procedures to 

improve respiratory function or increase 

strength or endurance of respiratory 

muscles, two or more individuals 

(includes monitoring). 

We assigned RVUs to one of the codes 

(G0237), and indicated that the other 

two codes (G0238 and G0239) would be 

carrier-priced. Since the services 

represented by these codes are 

frequently being performed in 

comprehensive outpatient rehabilitation 

facilities (CORFs), paid under the 

physician fee schedule through fiscal 

intermediaries, there has been some 

uncertainty surrounding the payment 

for the carrier-priced services. We 

believe assigning RVUs to G0238 and 

G0239 will provide needed clarity. 

Since these services are typically 

performed by respiratory therapists, we 

did not assign physician work to G0237, 

and we did not propose work RVUs for 

either G0238 or G0239. 

Therefore, we proposed to value 

nationally the practice expense for these 

services using the nonphysician work 

pool. We proposed to crosswalk practice 

expense RVUs for G0238 to those for 

G0237 based on our belief that the 

practice expense for the activities 

involved is substantially the same for 

both services. 

For G0239, we believe a typical group 

session to be 30 minutes in length and 

to consist of 3 patients. Therefore, for 

the practice expense RVUs for G0239, 

we proposed using the practice expense 

RVUs of G0237 reduced by one-third to 

account for the fact that the service is 

being provided to more than one patient 

simultaneously and each patient in a 

group can be billed for the services of 

G0329. 

We also proposed a malpractice RVU 

of 0.02, the malpractice RVU assigned to 

G0237, for these two G–codes. 

Comment: Commenters supported the 

national pricing for these 2 G–codes, 

G0238 and G0239. However, these 

organizations disagree with our RVU 

assignment. Specifically, most 

commenters disagreed with the lack of 

physician work RVUs and also believed 

that the malpractice RVU is inadequate 

to reflect the costs associated with the 

delivery of the services. These 

organizations contend that pulmonary 

rehabilitation services ‘‘include a 

physician-directed individualized plan 

of care using multidisciplinary qualified 

health professionals to enhance the 

effective management of pulmonary 

diseases and resultant functional 

deficits.’’ They believe that beneficiaries 

may receive pulmonary rehabilitation 

services at physician offices, outpatient 

departments of acute care hospitals, 

CORFs and rehabilitation clinics. The 

commenters noted that physicians and 

qualified nurse practitioners (NPs) and 

PAs order, supervise, and approve the 

plans of care for patients receiving 

respiratory therapy services, irrespective 

of the delivery setting. 

Because respiratory rehabilitation is 

often furnished in a physician office, 

these organizations believe the 

malpractice RVU assigned is inadequate 

to account for the physician 

involvement and requested that a more 

appropriate risk factor be used. 

Response: Because we believe that 

respiratory therapists (RTs) typically 

deliver these services, it would be 

inappropriate to assign a physician 

work RVU to these services. The 

malpractice RVU of 0.02 is similar to 

RVUs of therapeutic procedures 

delivered by physical and occupational 

therapists for similar services, including 

procedures performed one-on-one and 

in groups. We believe that the 0.02 

malpractice RVU fairly represents the 

risk value inherent in the provision of 

these procedures. However, because the 

commenters expressed concerns about 

work and malpractice RVUs, we are 

assigning these RVUs on an interim 

66280 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

basis, and we are requesting that the 

RUC or HCPAC consider this series of 

three G–codes at an upcoming meeting.

Because RTs cannot directly bill 

Medicare for their services, these Gcodes can only be billed as incident to 

services in physician offices and 

outpatient hospital departments or as 

CORF services. When performed in the 

CORF setting, these services must be 

delivered by qualified personnel, that is, 

RTs and respiratory therapy technicians, 

as defined at § 485.70. The CORF benefit 

requires the physician to establish the 

respiratory therapy plan of care and 

mandates a 60-day recertification for 

therapy plans of care, including 

physical therapy (PT), occupational 

therapy (OT), speech language 

pathology (SLP), and respiratory 

therapy. As we stated in the December 

31, 2002 final rule, we believe that 

specially trained professionals (that is, 

registered nurses, physical therapists 

and occupational therapists) can also 

provide these services. 

These respiratory therapy G-codes 

were designed to provide more specific 

information about the medically 

necessary services being provided to 

improve respiratory function and to 

substitute for the physical medicine 

series of CPT codes 97000 through 

97799, except when services are 

furnished and meet all the requirements 

for physical and occupational therapy 

services. 

Comment: While three commenters 

voiced concerns about the significant 

undervaluing of these codes, one 

commenter noted that the practice 

expense RVUs fail to recognize the 

intensity of services and the cost of 

monitoring and other equipment 

associated with providing these 

services. 

Response: We agree that the practice 

expenses, particularly the equipment, 

for G0237 and G0238 are not equivalent 

and that there are more resources 

required to provide the medically 

necessary services of G0238. The 

necessary monitoring equipment 

referenced by commenters were 

considered at the time G0327 was 

originally valued. The appropriate 

direct inputs will be added to the 

practice expense database. However, we 

identified the omission of therapeutic 

exercise equipment for G0238 and 

G0239 and we will also add this to the 

practice expense database. 

Result of Evaluation of Comments 

We are assigning practice expense and 

malpractice RVUs to G0238 and G0239 

and will add the additional items to the 

practice expense database. These codes 

are being valued in the nonphysician 

work pool as proposed. We will also ask 

the RUC or HCPAC to consider these 

codes. 

4. Bone Marrow Aspiration and Biopsy 

through the Same Incision on the Same 

Date of Service. 

In the August 5, 2004 rule, we 

proposed a new add-on G-code, G0364 

(proposed as G0XX1): Bone marrow 

aspiration performed with bone marrow 

biopsy through same incision on same 

date of service. The physician would 

use the CPT code for bone marrow 

biopsy (38221) and G0364 for the 

second procedure (bone marrow 

aspiration). 

We believe that there is minimal 

incremental work associated with 

performing the second procedure 

through the same incision during a 

single encounter. We estimated that the 

time associated with this G-code is 

approximately 5 minutes based on a 

comparison to CPT code 38220 bone 

marrow aspiration which has 34 

minutes of intraservice time and a work 

RVU of 1.08 work when performed on 

its own. We proposed 0.16 work RVUs 

for this new add-on G-code and 

malpractice RVUs of 0.04 (current 

malpractice RVUs assigned to CPT code 

38220). For practice expense, we 

proposed the following practice expense 

inputs:

— Clinical staff time: Registered 

nurse—5 minutes Lab technician—2 

minutes 

— Equipment: Exam table

We also proposed a ZZZ global period 

(code related to another service and is 

always in the global period of the other 

service) for this add-on code since this 

code is related to another service and is 

included in the global period of the 

other service. 

In the August 5, 2004 proposed rule, 

we also stated that if the two 

procedures, aspiration and biopsy, are 

performed at different sites (for 

example, contralateral iliac crests, 

sternum/iliac crest or two separate 

incisions on the same iliac crest), the 

¥59 modifier, which denotes a distinct 

procedural service, is appropriate to use 

and Medicare’s multiple procedure rule 

will apply. In this instance, the CPT 

codes for aspiration and biopsy are each 

being used. 

Comment: Many commenters 

supported creation of this G-code; 

however, all commenters stated that the 

time for this procedure (5 minutes) was 

substantially underestimated. 

Commenters recommended increasing 

the added incremental time associated 

with the aspiration to 15 minutes. One 

commenter noted that this time is 

needed for the actual aspiration 

procedure, approving the quality of the 

aspiration, collecting flow cytometry 

and chromosome studies, preparing 

additional slides, ordering appropriate 

lab tests on the slides, and performing 

the added recordkeeping and 

documentation. Another commenter 

provided a detailed description of the 

activities involved in this procedure. 

Commenters also recommended that the 

practice expense input for the nurse 

assisting with the procedure should be 

increased to 15 minutes.

Response: We continue to believe that 

the proposed 5 minutes of physician 

time, 5 minutes of registered nurse time, 

and 2 minutes of lab technician time 

reflect the additional effort involved 

when a bone marrow aspiration is 

performed in conjunction with a bone 

marrow biopsy through the same 

incision during a single encounter. It is 

our understanding that some of the 

activities attributed to the additional 15 

minutes of physician work generally are 

performed by ancillary staff, for 

example, preparing slides. While we 

appreciate the information provided, we 

believe that the majority of the effort 

and specific tasks discussed are 

accounted for in the CPT code for bone 

marrow biopsy (38221) which is the 

primary code being billed. 

Comment: Two physician specialty 

societies, representing radiologists and 

interventional radiologists, questioned 

the need for the proposed code, because 

the multiple surgical discount rule that 

reduces payment for a subsequent lower 

valued service applies, thereby taking 

into account any savings in physician 

work. If we choose to proceed with the 

proposal, the commenter recommended 

the RVUs be consistent with those 

determined using the current values for 

CPT codes 38220 and 38221 and the 

multiple surgical discount rule. 

Response: One of the primary reasons 

for our proposal for this G-code was that 

we believe that, even with the 

application of the multiple procedure 

reduction, we would be overpaying for 

these services when they are performed 

on the same day, at the same encounter 

and using the same incision. 

Result Of Evaluation of Comments 

We are finalizing our proposal and 

using new G-code G0364, Bone marrow 

aspiration performed with bone marrow 

biopsy through the same incision on the 

same date of service. Payment is based 

on the work and malpractice RVUs and 

practice expense inputs proposed and 

the global period for this service is 

‘‘ZZZ’’. 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66281

5. Q-Code for the Set-Up of Portable XRay Equipment 

The Q-code for the set-up of portable 

x-ray equipment, Q0092, is currently 

paid under the physician fee schedule 

and is assigned an RVU of 0.33. In 2004, 

this produces a national payment of 

$12.32. This set-up code encompasses 

only a portion of the resources required 

to provide a portable x-ray service to 

patients. In 2003, portable x-ray 

suppliers received total Medicare 

payments of approximately $208 

million. More than half of these 

payments (approximately $116 million) 

were for portable x-ray transportation 

(codes R0070 and R0075). The portable 

x-ray set-up code (Q0092) generated 

approximately $19 million in payments. 

The remainder of the Medicare 

payments for portable x-ray services 

(approximately $73 million) were for 

the actual x-ray services themselves. 

As discussed in the August 5, 2004 

proposed rule, the Conference Report 

accompanying the Consolidated 

Appropriations Bill, H.R. 2673, (Pub. L. 

108–199, enacted January 23, 2004) 

urged the Secretary to review payment 

for this code, and the portable x-ray 

industry has also requested that we 

reexamine payments for this code. 

Q0092 is currently priced in the 

nonphysician work pool. At the time we 

modeled this change for the proposed 

rule, removing this code from the 

nonphysician work pool had an overall 

negative impact on payments to portable 

x-ray suppliers (as a result of decreases 

to radiology codes that remain in the 

nonphysician work pool) and a negative 

impact on many of the codes remaining 

in the nonphysician work pool. An 

alternative to national pricing of 

portable x-ray set-up would be to 

require Medicare carriers to develop 

local pricing as they do currently for 

portable x-ray transportation. We 

requested comments on whether we 

should pursue national pricing for 

portable x-ray set-up outside of the 

nonphysician work pool or local carrier 

pricing for 2005, or whether we should 

continue to price the service in the 

nonphysician work pool.

Comment: Most commenters 

recommended removing portable x-ray 

from the nonphysician work pool, using 

the ‘‘existing data’’ from the American 

College of Radiology (ACR) 

supplemental practice expense survey 

as the practice expense per hour proxy. 

However, the National Association of 

Portable X-Ray Suppliers (NAPXP) 

requested additional time to review 

information they received from us just 

3 days before the close of the comment 

period. This association requested that 

they be allowed to submit supplemental 

comments. 

Response: ACR requested that we 

delay incorporating their survey data for 

1 year. Using the data for one code, as 

proposed by commenters, would be 

inconsistent with that request. We 

believe it is inappropriate to use the 

new survey data for this code but no 

other code. Even if we removed the setup code from the nonphysician work 

pool and calculated its practice expense 

RVU using the ACR data, the increase in 

payment for the portable x-ray set-up 

code would be largely offset by lower 

payment for x-ray services. Payments for 

other services in the nonphysician work 

pool would also decline affecting other 

specialties, such as radiology, radiation 

oncology, cardiology, allergy, audiology 

and others. Further, the portable x-ray 

set-up code is yet to be refined, and we 

believe that the 45 minutes of staff time 

that is used to determine its value is 

likely overstated. We believe it is 

preferable to address refinement of the 

code and pricing the service outside of 

the nonphysician work pool together. 

Therefore, in 2005, we are continuing to 

price this service within the 

nonphysician work pool. 

The NAPXP requested more time to 

review the data we supplied them. 

NAPXP’s comment implying that we 

withheld ‘‘data’’ from them is simply 

wrong. In an effort to explain the 

theoretical reasons for our statements 

that removing this service from the 

nonphysician work pool could lower 

overall payments to portable x-ray 

suppliers, we prepared an illustration 

for another association as a follow-up 

request after a meeting, where we were 

asked to explain our proposed rule 

analysis. The explanation contained no 

new data. Moreover, we provided the 

explanatory information to NAPXP as 

soon as they requested it. Since the 

information NAPXP complains about 

was illustrative only, we do not believe 

NAPXP has been prejudiced in any way. 

Moreover, we are willing to explain the 

information to NAPXP and to consider 

any comments they may have as we 

consider changes to the practice 

expense methodology for 2006. 

6. Venous Mapping for Hemodialysis 

In the August 5, 2004 rule, we 

proposed a new G-code (G0XX3: Venous 

mapping for hemodialysis access 

placement (Service to be performed by 

operating surgeon for preoperative 

venous mapping prior to creation of a 

hemodialysis access conduit using an 

autogenous graft). Autogenous grafts 

have longer patency rates, a lower 

incidence of infection and greater 

durability than prosthetic grafts. Use of 

autogenous grafts can also result in a 

decrease in hospitalizations and 

morbidity related to vascular access 

complications. We stated that creation 

of this G-code will enable us to 

distinguish between CPT code 93971 

(Duplex scan of extremity veins 

including responses to compression and 

other maneuvers; unilateral or limited 

study) and G0XX3 in order to allow us 

to track use of venous mapping for 

quality improvement purposes. 

We also proposed that this G-code be 

billed only by the operating surgeon in 

conjunction with CPT codes 36819, 

36821, 36825, and 36832 and that we 

would not permit payment for CPT code 

93971 when this G-code is billed, unless 

code CPT 93971 was being performed 

for a separately identifiable clinical 

indication in a different anatomic 

region.

We proposed to crosswalk the RVUs 

for the new G-code from those of CPT 

code 93971 and also assigned this new 

G-code a global period of ‘‘XXX,’’ which 

means that the global concept does not 

apply. 

Comment: Commenters representing 

specialty societies and individual 

providers were generally supportive of 

the proposal for this new code, but 

expressed the following three primary 

concerns: 

• Commenters did not agree with 

restricting this code to the operating 

surgeon, stating that such a restriction 

could limit access and serve as a barrier 

in providing this service. They also 

stated that this proposed restriction is 

not reflective of current practice, since 

nonsurgeons often perform this 

procedure. 

• Commenters did not agree with the 

proposed descriptor. They indicated 

that the proposed descriptor did not 

reflect the procedure as it is now 

performed and suggested (a) alternate 

wording, such as ‘‘vascular mapping,’’

‘‘autogenous AV fistula,’’ and 

‘‘prosthetic graft,’’ ‘‘vessel mapping;’’ (b) 

that two G-codes should be created to 

distinguish between a complete bilateral 

and unilateral or limited studies. Other 

commenters noted that the proposal did 

not distinguish between mapping by 

venography or ultrasound (duplex), and 

some commenters suggested creating an 

additional G-code to distinguish 

between these procedures. 

• Commenters stated that the 

comparison to CPT code 93971 in the 

proposed rule undervalues the service. 

While there are differences, the closer 

analogue in terms of time and resources 

required is CPT code 93990, Duplex 

scans of hemodialysis access. 

Response: We proposed the G-code to 

create the opportunity for us to analyze 

66282 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

the relationship between venous 

mapping utilization and fistula 

formation. 

Based on the comments we received, 

we are revising the code descriptor to 

enable clinicians, other than the 

operating surgeon, who provide care to 

ESRD patients the opportunity to bill for 

this service. 

We believe that vessel mapping 

requires the assessment of the arterial 

and venous vessels in order to provide 

the information necessary for the 

creation of an autogenous conduit. 

Therefore, we are also revising payment 

for this code and will crosswalk it to 

CPT code 93990 for work, malpractice, 

and practice expense RVUs because 

these RVUs more appropriately reflect 

the work and resources of this new Gcode. The G-code and descriptor for this 

service will be G0365, Vessel mapping 

of vessels for hemodialysis access 

(Services for preoperative vessel 

mapping prior to creation of 

hemodialysis access using an 

autogenous hemodialysis conduit, 

including arterial inflow and venous 

outflow). This code can only be used in 

patients who have not had a prior 

hemodialysis access prosthetic graft or 

autogenous fistula and is limited to two 

times per year. 

We will not permit separate payment 

for CPT code 93971 when this G-code is 

billed, unless CPT code 93971 is being 

performed for a separately identifiable 

indication in a different anatomic 

region. We also note that other imaging 

studies may not be billed for the same 

site on the same date of service unless 

an appropriate ‘‘KO’’ modifier 

indicating the reason or need for the 

second imaging study is provided on the 

claim form. 

We will follow the utilization closely 

this year to better understand whether 

this code is used as intended. 

III. Provisions Related to the Medicare 

Modernization Act of 2003 

A. Section 611—Preventive Physical 

Examination 

Section 611 of the MMA provides for 

coverage under Part B of an initial 

preventive physical examination (IPPE) 

for new beneficiaries, effective for 

services furnished on or after January 1, 

2005, subject to certain eligibility and 

other limitations.

In the August 5, 2004 proposed rule, 

we described a new § 410.16 (Initial 

preventive physical examination: 

conditions for and limitations on 

coverage) that would provide for 

coverage of the various IPPE services 

specified in the statute. As provided in 

the statute, this new coverage allows 

payment for one IPPE within the first 6 

months after the effective date of the 

beneficiary’s first Part B coverage 

period, but only if that coverage period 

begins on or after January 1, 2005. To 

implement the statutory provisions, we 

proposed definitions of the following 

terms: 

• Eligible beneficiary; 

• An initial preventive physical 

examination; 

• Medical history; 

• Physician; 

• Qualified NPP; 

• Social History, and 

• Review of the individual’s 

functional ability and level of safety. 

In keeping with the language of 

section 611 of the MMA, we defined the 

term ‘‘eligible beneficiary’’ to mean 

individuals who receive their IPPEs 

within 6 months after the date of their 

first Medicare Part B coverage period, 

but only if their first Part B coverage 

period begins on or after January 1, 

2005. This section also defines the term 

‘‘Initial Preventive Physical 

Examination’’ to mean services 

provided by a physician or a qualified 

NPP consisting of: (1) A physical 

examination (including measurement of 

height, weight, blood pressure, and an 

electrocardiogram, but excluding 

clinical laboratory tests) with the goal of 

health promotion and disease detection; 

and (2) education, counseling, and 

referral for screening and other covered 

preventive benefits separately 

authorized under Medicare Part B. 

Specifically, section 611(b) of the 

MMA provides that the education, 

counseling, and referral of the 

individual by the physician or other 

qualified NPP are for the following 

statutory screening and other preventive 

services authorized under Medicare Part 

B: 

• Pneumococcal, influenza, and 

hepatitis B vaccine and their 

administration; 

• Screening mammography; 

• Screening pap smear and screening 

pelvic exam services; 

• Prostate cancer screening services; 

• Colorectal cancer screening tests; 

• Diabetes outpatient selfmanagement training services; 

• Bone mass measurements; 

• Screening for glaucoma; 

• Medical nutrition therapy services 

for individuals with diabetes or renal 

disease; 

• Cardiovascular screening blood 

tests; and 

• Diabetes screening tests. 

Based on the language of the statute, 

our review of the medical literature, 

current clinical practice guidelines, and 

United States Preventive Services Task 

Force (USPSTF) recommendations, we 

interpreted the term ‘‘initial preventive 

physical examination’’ for purposes of 

this benefit to include all of the 

following service elements: 

1. Review of the individual’s 

comprehensive medical and social 

history, as those terms are defined in 

proposed § 410.16(a); 

2. Review of the individual’s potential 

(risk factors) for depression (including 

past experiences with depression or 

other mood disorders) based on the use 

of an appropriate screening instrument, 

which the physician or other qualified 

NPP may select from various available 

standardized screening tests for this 

purpose, unless the appropriate 

screening instrument is defined through 

the national coverage determination 

(NCD) process; 

3. Review of the individual’s 

functional ability and level of safety, as 

described in proposed § 410.16(a), (that 

is, at a minimum, a review of the 

following areas: Hearing impairment, 

activities of daily living, falls risk, and 

home safety), based on the use of an 

appropriate screening instrument, 

which the physician or other qualified 

NPP may select from various available 

standardized screening tests for this 

purpose, unless the appropriate 

screening instrument is further defined 

through the NCD process; 

4. An examination to include 

measurement of the individual’s height, 

weight, blood pressure, a visual acuity 

screen, and other factors as deemed 

appropriate by the physician or 

qualified NPP, based on the individual’s 

comprehensive medical and social 

history and current clinical standards; 

5. Performance and interpretation of 

an electrocardiogram;

6. Education, counseling, and referral, 

as appropriate, based on the results of 

the first five elements of the initial 

preventive physical examination; and 

7. Education, counseling, and referral, 

including a written plan provided to the 

individual for obtaining the appropriate 

screening and other preventive services, 

which are separately covered under 

Medicare Part B benefits; that is, 

pneumococcal, influenza, and hepatitis 

B vaccines and their administration, 

screening mammography, screening pap 

smear and screening pelvic 

examinations, prostate cancer screening 

tests, colorectal cancer screening tests, 

diabetes outpatient self-management 

training services, bone mass 

measurements, screening for glaucoma, 

medical nutrition therapy services, 

cardiovascular (CV) screening blood 

tests, and diabetes screening tests. 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66283

The proposed ‘‘medical history’’

definition includes the following 

elements: 

• Past medical history and surgical 

history, including experience with 

illnesses, hospital stays, operations, 

allergies, injuries, and treatment. 

• Current medications and 

supplements, including calcium and 

vitamins. 

• Family history, including a review 

of medical events in the patient’s 

family, including diseases that may be 

hereditary or place the individual at 

risk. 

The proposed ‘‘physician’’ definition 

means for purposes of this provision a 

doctor of medicine or osteopathy (as 

defined in section 1861(r)(1) of the Act). 

The proposed ‘‘qualified 

nonphysician practitioner’’ for purposes 

of this provision means a PA, NP, or 

clinical nurse specialist (CNS) (as 

authorized under sections 

1861(s)(2)(K)(i) and 1861(s)(2)(K)(ii) of 

the Act and defined in section 

1861(aa)(5) of the Act, or in regulations 

at § 410.74, § 410.75, and § 410.76). 

The proposed ‘‘social history’’

definition includes, at a minimum, the 

following elements: 

• History of alcohol, tobacco, and 

illicit drug use. 

• Work and travel history. 

• Diet. 

• Social activities. 

• Physical activities.

The proposed definition of ‘‘Review 

of the individual’s functional ability and 

level of safety’’ includes, at a minimum, 

a review of the following areas: 

• Hearing impairment. 

• Activities of daily living. 

• Falls risk. 

• Home safety. 

We also proposed conforming changes 

to specify an exception to the list of 

examples of routine physical 

examinations excluded from coverage in 

§ 411.15(a)(1) and § 411.15(k)(11) for 

IPPEs that meet the eligibility limitation 

and the conditions for coverage that we 

are specifying under § 410.16, Initial 

preventive physical examinations. 

With regards to the issue of payment 

for the IPPE, in the August 5, 2004 

proposed rule we stated that there is no 

current CPT code that contains the 

specific elements included in the IPPE 

and proposed to establish a new HCPCS 

code to be used for billing for the initial 

preventive examination. As required by 

the statute, we indicated that this code 

includes an electrocardiogram, but does 

not include the other previously 

mentioned preventive services that are 

currently separately covered and paid 

under the Medicare Part B screening 

benefits. When these other preventive 

services are performed, they must be 

identified using the existing appropriate 

codes. 

Proposed payment for this code was 

based on the following: 

• Work RVUs: We proposed a work 

value of 1.51 RVUs for G0344 (G0XX2 

in proposed rule) based on our 

determination that this new service has 

equivalent resources and work intensity 

to those contained in CPT E/M code 

99203, new patient, office or other 

outpatient visit (1.34 RVUs), and CPT 

code 93000 electrocardiogram, complete

(0.17 RVUs), which is for a routine ECG 

with the interpretation and report. 

• Malpractice RVUs: For the 

malpractice component of G0344, we 

proposed malpractice RVUs of 0.13 in 

the nonfacility setting based on the 

malpractice RVUs currently assigned to 

CPT code 99203 (0.10) and CPT code 

93000 (0.03). In the facility setting, we 

proposed malpractice RVUs of 0.11 

based on the current malpractice RVUs 

assigned to CPT code 99203 (0.10) and 

93010 (an EKG interpretation with a 

value of 0.01). 

• Practice Expense RVUs: For the 

practice expense component of G0344, 

we proposed practice expense RVUs of 

1.65 in the nonfacility setting based on 

the practice RVUs assigned to CPT code 

99203 (1.14) and CPT code 93000 (0.51). 

In the facility setting, we proposed 

practice expense RVUs of 0.54 based on 

the practice expense RVUs assigned to 

CPT code 99203 (0.48) and 93010 (0.06). 

Because some of the components for 

a medically necessary Evaluation and 

Management (E/M) visit are reflected in 

this new G code, we also proposed, 

when it is appropriate, to allow a 

medically necessary E/M service no 

greater than a level 2 to be reported at 

the same visit as the IPPE. That portion 

of the visit must be medically necessary 

to treat the patient’s illness or injury or 

to improve the function of a malformed 

body member and should be reported 

with modifier—25. We also stated the 

physician or qualified NPP could also 

bill for the screening and other 

preventive services currently covered 

and paid by Medicare Part B under 

separate provisions of section 1861 of 

the Act, if provided during this IPPE. 

The MMA did not make any provision 

for the waiver of the Medicare 

coinsurance and Part B deductible for 

the IPPE. Payment for this service 

would be applied to the required 

deductible, which is $110 for CY 2005, 

if the deductible is not met, and the 

usual coinsurance provisions would 

apply. 

Analysis of and Response to Comments 

We specifically solicited public 

comments on the definition of the term 

‘‘initial preventive physical 

examination,’’ with supporting 

documentation. For example, we 

indicated that we chose not to define 

the term, ‘‘appropriate screening 

instrument,’’ for screening individuals 

for depression, functional ability, and 

level of safety, as specified in the rule, 

because we anticipated that the 

examining physician or qualified NPP 

may want to use the test of his or her 

choice, based on current clinical 

practice guidelines. We believe that any 

standardized screening test for 

depression, functional ability, and level 

of safety recognized by the American 

Academy of Family Physicians, the 

American College of PhysiciansAmerican Society of Internal Medicine, 

the American College of Preventive 

Medicine, the American Geriatrics 

Society, the American Psychiatric 

Association, or the USPSTF, or other 

recognized medical professional group, 

would be acceptable for purposes of 

meeting the ‘‘appropriate screening 

instrument’’ provision. We asked that 

commenters making specific 

recommendations on this or any related 

issue provide documentation from the 

medical literature, current clinical 

practice guidelines, or the USPSTF 

recommendations.

We received 71 public comments on 

the proposed rule regarding IPPE. 

Commenters included national and 

State professional associations, medical 

societies and medical advocacy groups, 

hospital associations, hospitals, 

managed care plans, physicians, senior 

advocacy groups, health care 

manufacturers, and others. Although a 

number of commenters expressed 

concern that the proposed rule was too 

prescriptive and not sufficiently 

targeted to prevention, a large majority 

of the commenters enthusiastically 

supported most of the coverage 

provisions of the proposed rule. Many 

of the commenters, however, suggested 

clarification and revision of the rule in 

a number of different areas, including 

the proposed definitions of ‘‘initial 

preventive physical examination,’’

‘‘physician,’’ and ‘‘qualified 

nonphysician practitioner.’’

Commenters also raised questions 

regarding other issues, such as those 

relating to the need for us to educate 

Medicare beneficiaries and providers 

with respect to the new benefit, and to 

monitor the implementation of the new 

benefit. Finally, commenters offered 

suggestions and questions with regards 

to payment issues, evaluation and 

66284 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

management services (E/M) and 

coinsurance and Part B deductible 

issues. 

A summary of the comments and our 

responses are presented below. 

Comment: A number of commenters 

expressed concern that in the proposed 

rule, we had gone beyond the coverage 

criteria that were specified in the statute 

for the new benefit. They noted that the 

additional criteria was too prescriptive 

and would only add confusion and an 

additional burden for physicians in 

determining what medical services are 

necessary for each beneficiary they 

evaluate. Several commenters indicated 

that while the proposed definition for 

the scope of the benefit was wellintentioned, the beneficiary’s physician 

or other provider was the best person to 

determine what medical services are 

necessary in providing a thorough 

physical and to be responsive to the 

individual’s age, gender, and particular 

health risks. In general, they suggested 

that we not interfere in a physician’s 

judgment by attempting to standardize 

by Federal regulations the specific 

medical services to be included under 

the new benefit. 

Response: Section 611 of the MMA 

defines the scope of the IPPE benefit as 

physicians’ services consisting of a 

physical examination (including 

measurement of height, weight, and 

blood pressure and an 

electrocardiogram) with the goal of 

health promotion and disease detection, 

as well as certain education, counseling, 

and referral services with respect to 

other statutory screening and preventive 

services also covered under the 

Medicare statute. We believe that the 

statutory parenthetical language, 

(including measurement of height, 

weight, and blood pressure and an 

electrocardiogram) recognizes that other 

services could be contained within the 

IPPE benefit. We are using the authority 

under section 1871(a) of the Act through 

the rulemaking process to provide 

clarity as to the specific services that are 

to be included under the new benefit. 

We believe that adding these 

additional services will help to ensure 

that a full and complete IPPE is 

provided to each beneficiary who 

chooses to take advantage of the service 

and that all beneficiaries who decide to 

do this are treated in a relatively 

uniform manner throughout the 

country. With an estimated 200,000 

individuals expected to enroll in 

Medicare Part B each month starting in 

January 2005, who will be eligible to 

receive the IPPE benefit, we believe that 

it is paramount that we promulgate a 

minimum list of required services 

important to the goals of health 

promotion and disease detection that 

must be included in the new benefit, 

and we are specifying those service 

elements in the final rule.

The ‘‘Initial Preventive Physical 

Examination’’ Definition (IPPE) 

(§ 410.16(a)) 

Comment: Three commenters 

indicated that this new benefit presents 

a unique opportunity to offer Medicare 

beneficiaries with a visit focused on 

prevention at the start of their Part B 

enrollment. They suggested, that we 

shift our focus in service element 1 of 

the definition of the new IPPE from a 

comprehensive to a more targeted 

priority list of modifiable risk factors, 

screening tests, and immunizations that 

are supported by the strongest evidence 

of effectiveness, and have been proven 

to improve the health of beneficiaries. 

Response: We agree that the intent of 

the new benefit is to deliver clinical 

preventive services that are accepted 

and effective in helping to keep people 

healthy and reduce the burden of 

disease whenever possible. Therefore, 

we agree to revise the language in 

service element 1 to read as follows: 

‘‘Review of the individual’s medical and 

social history with particular attention 

to modifiable risk factors for disease.’’

Comment: Three commenters 

indicated that the collection of 

information on a beneficiary’s social 

history such as social activities, work 

and travel history, is a distraction and 

is not needed by the physician or other 

qualified NPP who is performing the 

preventive physical examination. The 

commenters suggest that we eliminate 

the proposed definition and not require 

the collection of this information. 

Response: We agree that information 

on work and travel history, and social 

activities may not be necessary for 

purposes of the new preventive physical 

examination and thus we are removing 

those elements from the minimum 

requirements for the ‘‘social history’’

definition. However, we believe it is 

important to retain three elements of the 

Social history definition in the final rule 

and they will be reflected in that 

document as follows: 

• History of alcohol, tobacco, and 

illicit drug use. 

• Diet. 

• Physical activities. 

Comment: Several commenters 

requested that we add language to 

service element 1 to allow practitioners 

to ascertain information from 

individuals about additional disease or 

other diagnoses such as including 

questions regarding past diagnoses or 

treatment of cancer, diabetes, elevated 

blood sugar, height loss, previous 

fractures, and medical conditions that 

may increase a person’s risk of 

coagulopathic disorders such as deep 

venous thrombosis (DVT). 

Response: In applying our definition 

of ‘‘past medical history’’ we expect that 

physicians and qualified NPPs 

performing the IPPE will be able to ask 

about an array of medical illnesses, 

including prior diagnoses and treatment 

of conditions such as cancer, diabetes, 

risk factors for osteoporosis such as 

height loss or previous fractures, and 

history of coagulopathic disorders such 

as DVT. Therefore, we do not see a need 

to expand the proposed definition as the 

commenters have suggested, and we 

have decided to leave it unchanged in 

the final rule. 

Comment: Three commenters asked 

us to add language to either service 

element 1 or 3 to allow practitioners to 

screen individuals for memory 

impairment. 

Response: Currently, the USPSTF has 

found insufficient evidence to 

recommend for or against routine 

screening for dementia with 

standardized instruments in 

asymptomatic persons. However, the 

USPSTF notes that patients with 

problems in performing daily activities 

should have their mental status 

evaluated and clinicians should remain 

alert for possible signs of declining 

cognitive function. We included as part 

of the definition for service element 3, 

‘‘Review of the individual’s functional 

ability and level of safety,’’ a review of 

the patient’s activities of daily living. 

While not exhaustive, this review will 

primarily aid physicians in identifying 

a patient’s problems with regard to 

performing these activities and the role 

cognitive impairment may play in these 

deficits. 

Comment: One commenter proposed 

that we not use the NCD process to 

revise the content of the IPPE in the 

future. The NCD process would be too 

slow or cumbersome to allow us to keep 

the content of the examination 

consistent with current clinical practice. 

Response: For service elements 2 and 

3, which discuss the future use of the 

NCD process in determining appropriate 

screening instruments we will delete the 

following: ‘‘unless the appropriate 

instrument is defined through the NCD 

process.’’ We will add language that 

states available standardized screening 

tests must be recognized by national 

medical professional organizations. 

Comment: Several commenters 

requested that we clarify our intent as 

to whether the depression screening 

assessment in service element 2 will 

include consideration of the potential 

for depression as well as an assessment 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66285

of an individual’s current depression 

status. Another commenter asked us to 

clarify our intent with respect to the use 

of a screening instrument for persons 

with a current diagnosis of depression.

Response: We agree with the 

commenters that the regulation language 

on depression screening needs to be 

clarified. We are revising service 

element 2 to read ‘‘review of the 

individual’s potential (risk factors) for 

depression, including current or past 

experience with depression or other 

mood disorders, based on the use of an 

appropriate screening instrument for 

persons without a current diagnosis of 

depression, which the physician or 

other qualified NPP may select from 

various available standardized screening 

tests designed for this purpose and 

recognized by national medical 

professional organizations.’’

Comment: Three commenters 

expressed the view that the proposed 

screening tests for falls risk and home 

safety in service element 3 were not 

supported by direct scientific evidence, 

and should be dropped from the IPPE 

benefit in the final rule. 

Response: Falls are among the most 

common and serious problems facing 

elderly persons. They are associated 

with considerable morbidity such as hip 

fractures and overall reduced level of 

functioning. The USPSTF also notes 

that falls are the second leading cause 

of unintentional injury deaths in the 

United States. The death rate due to 

falls increases as a person ages. 

According to the National Center for 

Injury Prevention and Control, 

approximately one-half to two-thirds of 

all falls occur in and around a person’s 

home. Therefore, discussing with 

patients home safety tips may reduce 

some home hazards. In addition, the 

USPSTF recommends counseling 

patients on specific measures to reduce 

the risk of falling, although direct 

evidence of effectiveness has not yet 

been established. Therefore, we believe 

that questioning and counseling patients 

to determine their risk of falling and 

home safety is warranted as part of the 

IPPE benefit. 

Comment: Several commenters from 

the audiology community have asked us 

to clarify the meaning of the proposed 

requirement in service element 3, which 

includes (among other things) a review 

of any hearing impairment. In addition, 

several commenters have requested that 

we clarify whether a hearing assessment 

is required as part of service element 3, 

or whether questions (or a 

questionnaire) advanced to an 

individual about any possible hearing 

problems would suffice for purposes of 

this part of the new benefit. The 

commenters ask for provider flexibility 

in meeting this requirement. 

Response: The regulatory intent of 

service element 3 is that we expect that 

the physician or qualified NPP will 

engage in a dialogue with patients 

concerning these issues by asking the 

individual appropriate questions or 

using a written questionnaire to address 

hearing impairment, activities of daily 

living, falls risk, and home safety. We 

do not intend for actual screening 

instruments such as audiometric 

screening tests to be used. After 

questioning the individual, if 

abnormalities are identified, additional 

follow-up services may be warranted 

and may include education, counseling, 

and referral (if appropriate.) 

Therefore, we are revising the 

language of service element 3 to read 

‘‘review of the individual’s functional 

ability and level of safety, based on the 

use of appropriate screening questions 

or a screening questionnaire which the 

physician or qualified NPP may select 

from various available screening 

questions or standardized 

questionnaires designed for this purpose 

and recognized by national medical 

professional organizations.’’

Medically necessary diagnostic 

hearing tests, including hearing and 

balance assessment services, performed 

by a qualified audiologist are covered as 

other diagnostic tests under section 

1861(s)(3) of the Act and would be 

separate from the new IPPE benefit. 

These services may be appropriate when 

a physician or other qualified NPP 

orders a diagnostic hearing test for the 

purpose of obtaining information 

necessary for the physician’s diagnostic 

evaluation or to determine the 

appropriate medical or surgical 

treatment of a hearing deficit or related 

medical problem. However, coverage of 

this testing is excluded by virtue of 

section 1862 (a)(7) of the Act when the 

diagnostic information required to 

determine the appropriate medical or 

surgical arrangement is already known 

to the physician, or the diagnostic 

services are performed only to 

determine the need for the appropriate 

type of hearing aid. For further 

information about the application of the 

hearing test exclusion to diagnostic 

hearing tests and payment for these 

services, we suggest review of section 

80.3 to 80.3.1 of the Medicare Benefit 

Policy Manual. 

Comment: Several commenters 

suggested that we expand the services to 

be included as part of service element 

4 that was proposed for coverage under 

the IPPE benefit to include: (1) 

Palpitation/auscultation of carotid 

arteries; (2) palpitation/auscultation of 

abdominal aorta; and (3) the anklebrachial index (ABI) test for peripheral 

arterial disease (PAD). 

Response: Currently, routine 

screening of asymptomatic persons for 

carotid artery stenosis via palpation/

auscultation of the carotid arteries or 

carotid ultrasound is not recommended 

by organizations such as the USPSTF, 

which provides guidelines on this issue. 

Therefore, we are not adding routine 

screening of asymptomatic individuals 

for carotid artery stenosis to service 

element 4 in the absence of evidence of 

the effectiveness of the screening. In 

addition, the USPSTF has determined 

that there is insufficient evidence to 

recommend for or against routine 

screening of asymptomatic adults for 

abdominal aortic aneurysm (AAA) by 

palpation/auscultation or ultrasound of 

the abdominal aorta so we are not 

adding that type of screening to service 

element 4. 

Finally, the USPSTF does not 

recommend routine screening for PAD 

in asymptomatic persons. However, 

they also state that clinicians, should be 

aware of symptoms and risk factors for 

PAD and evaluate patients accordingly. 

Therefore, routine screening for PAD 

with the use of the ABI will not be 

required as part of the initial preventive 

physical examination. 

Comment: One commenter asked for 

clarification on whether the proposed 

regulatory language ‘‘and other factors 

deemed appropriate by the physician or 

qualified nonphysician practitioner,’’ as 

specified in service element 4, would 

permit inclusion of coverage of a 

screening for chronic obstructive 

pulmonary disease (COPD) through 

spirometric testing under the IPPE 

benefit.

Response: The intent of this language 

for the actual physical examination 

portion of the IPPE benefit is to leave to 

the discretion of the physician or other 

qualified NPP whether to perform 

commonly utilized physical 

examination measures such as 

auscultation of the heart or lungs on a 

particular patient, if needed. Spirometry 

as a screening test for COPD, however, 

would not be considered to fall within 

the scope of the physical examination 

element of the IPPE benefit. 

Comment: A number of commenters 

suggested that we add an assessment of 

abdominal obesity or alternatively the 

calculation of the body mass index 

(BMI) to the vital signs part of service 

element 4 to help in determining if an 

individual is at risk for a heart attack, 

diabetes, or other medical problems. 

Response: By requiring measurement 

of height and weight as part of the IPPE 

in element 4 (an examination to include 

66286 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

measurement of an individual’s height, 

weight, blood pressure), we believe that 

the physician or other qualified NPP 

performing the IPPE will use that 

information to determine an 

individual’s BMI if necessary. 

Comment: Three commenters 

expressed concern about the wide 

latitude given to physicians and other 

qualified NPPs providing the IPPE 

benefit to select whichever screening 

test they prefer to use in connection 

with the assessment of visual acuity. 

The commenters believe that setting 

vague boundaries around what 

constitutes an appropriate screening 

instrument could open the door for 

inappropriate use of preventive services. 

To avoid this, the commenters 

recommend narrowly defining the 

appropriate screening instrument for 

visual acuity in service element 4 by 

specifying the use of the Snellen test for 

that purpose. 

Response: We agree that the Snellen 

test is a widely available test used to 

assess a person’s visual acuity. Other 

similarly available tests for visual acuity 

also exist, however, and may convey 

similar results for individual physicians 

and other clinicians. While we expect 

that many physicians will utilize the 

Snellen test in assessing a beneficiary’s 

visual acuity for the purpose of this new 

benefit, we are not mandating the use of 

the Snellen test or any other specific 

visual acuity test in order to meet the 

requirements of element 4 in the final 

rule. 

Comment: One commenter noted that 

the proposed rule allows for coverage of 

the assessment in service element 4 of 

‘‘other factors as deemed appropriate 

based on the individual’s 

comprehensive medical and social 

history.’’ The commenter expressed the 

view that the quoted language might 

result in the possibility that virtually 

any patient’s abnormality identified 

during the preventive physical 

examination might lead to further 

evaluation of the patient and a cascade 

of diagnostic workup of questionable 

health benefit to the patient and 

potentially of great cost to the Medicare 

program. In view of these concerns, the 

commenter recommended using more 

restrictive language that would allow for 

additional assessment of other factors 

only when they are supported by 

evidence-based clinical practice 

guidelines. 

Response: Our purpose in proposing 

the specific quoted language referenced 

in service element 4 was to allow for the 

physician or other qualified NPP to 

perform a limited physical examination 

of those key elements such as height, 

weight, blood pressure, and a visual 

acuity screen that may be important in 

detecting disease. However, we have 

specified that additional physical 

examination measures may be 

performed if deemed appropriate based 

on the issues identified by the physician 

or other clinician in the review of 

service elements 1 to 3. While we will 

not specify in the final rule that these 

additional measures must be supported 

by evidence-based practice guidelines, 

we will state that the practitioner 

performing the preventive examination 

follow current clinical standards and 

those guidelines, of course, may include 

the evidence-based guidelines 

referenced by the commenter. 

Comment: One commenter 

recommends that we include in our 

guidelines for the IPPE benefit 

information that informs the physician 

or other qualified NPP of: (1) The need 

to refer patients to occupational 

therapists when a more extensive 

evaluation of activities of daily living, 

falls risk, and home safety is warranted; 

and, (2) when, such referrals would be 

medically appropriate. 

Response: As part of the final rule, 

service element 6 of the IPPE benefit 

will require, education, counseling, and 

referral, as appropriate, based on the 

individual’s results of the previous 5 

elements of the IPPE benefit. However, 

appropriate referral of a patient to an 

occupational therapist is left to the 

discretion of the physician or other 

qualified NPP who is treating the 

patient for the medical problem that is 

identified, subject to contractors’

medical necessity review. We do not 

believe there is a need for us to issue 

guidelines to our contractors on this 

point. 

Comment: Several commenters 

indicated that they were concerned 

about use of the term ‘‘counseling’’ in 

service elements 6 and 7 of the 

definition of the IPPE because it lacked 

sufficient clarity. The commenters 

indicated that counseling may include 

varying amounts of time depending 

upon the intensity of the type of service 

provided, the ability of the individual 

receiving the counseling to understand 

the information that is being 

communicated, etc. The commenters 

suggested that either we not use the 

term counseling or clarify its meaning in 

the final rule. 

Response: Use of the term counseling 

in connection with service element 7 is 

mandated by section 611 of the MMA, 

and thus, it is appropriate to use the 

term in the final rule. However, we 

would like to clarify this issue in 

connection with both service elements 6 

and 7 of the new benefit. In most cases, 

we do not expect that the physician or 

other qualified NPP performing the 

service should need to spend more than 

a few minutes of brief education and 

counseling with a new beneficiary on 

appropriate topics as required by 

element 7. Nonetheless, it is possible 

that it may be necessary to spend more 

than a few minutes on the education 

and counseling required by element 6. 

As the commenters have indicated, the 

education and counseling required may 

involve varying amounts of time 

depending upon the medical problem or 

problems that are being considered, 

based on the results of elements 1 to 5, 

and the intensity of the service that is 

believed to be medically necessary at 

that time.

Comment: Three commenters 

indicated that they support proposed 

service element 6 on ‘‘education, 

referral, and counseling deemed 

appropriate based on the results of the 

review and evaluation of services,’’ in 

service elements 1 to 5 because it offers 

an unprecedented opportunity to 

counsel beneficiaries about health 

behaviors (for example, stopping 

smoking, losing weight). Nonetheless, 

they were concerned about possible 

over-utilization of services that might 

result from that provision, and suggest 

that we clarify that these education, 

counseling and referral efforts be 

concordant with evidence-based 

practice guidelines. 

Response: We will not specify in the 

final rule that education, counseling, 

and referral efforts must be consistent 

with evidence-based practice 

guidelines. We expect that physicians 

and other qualified NPPs will provide 

appropriate education, counseling, and 

referral that utilizes evidence-based 

practice guidelines and current clinical 

standards. In addition, follow-up care 

obtained outside of the IPPE Benefit 

must be reasonable and necessary based 

on Section 1862(a)(1)(A) of the Act. 

Comment: A number of commenters 

requested that we clarify the written 

plan provision of service element 7 that 

was included in the proposed rule. 

Several commenters indicated that two 

problems they see with this requirement 

are: (1) It is not clearly defined and thus 

could impose a significant burden on 

physicians and other clinicians, if it is 

not more carefully written; and, (2) it 

does not acknowledge that alternative 

mechanisms may already be in place 

that could better facilitate coordination 

of care for these beneficiaries than the 

proposed written plan requirement. For 

example, one commenter suggests that 

some physicians and other clinicians 

may currently be using electronic 

technology to track the delivery of 

preventive services and should not be 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66287

required to file written plans. Instead, 

the commenter recommends that we 

craft language to require physicians to 

demonstrate a system for ensuring that 

beneficiaries receive recommended 

screening and preventive services and 

allow physicians flexibility to determine 

the design and medium that such a 

system would employ. 

Response: We agree that the term 

written plan may not offer a sufficiently 

clear description of our intentions in 

requiring the physician or other 

qualified NPP who also performs the 

IPPE to carry out the statutory mandate 

that eligible beneficiaries be provided 

with education, counseling, and referral 

for screening and other preventive 

services described in section 

1861(ww)(2) of the Act. Our intent in 

the proposed rule was that each 

physician or other qualified NPP 

provide their eligible beneficiaries at the 

time of the examination with 

appropriate education, counseling, and 

referral(s), including a brief written plan 

such as a checklist, which is provided 

to the beneficiary for obtaining the 

appropriate screening and/or other 

preventive services that are covered as 

separate Medicare Part B benefits to 

which he or she is entitled. We 

acknowledge that physicians or 

qualified NPPs may have an alternative 

mechanism in place to ensure that 

beneficiaries receive recommended 

screening and other preventive services 

that does not provide for a written plan 

to be provided to the beneficiary. 

However, the intent of the written plan 

requirement is to promote and 

encourage beneficiary participation in 

the health care process by making them 

aware, briefly in writing of the screening 

and prevention services for which they 

are entitled under the Medicare Part B 

program. 

In conclusion, we will revise service 

element 7 to read ‘‘education, 

counseling, and referral, including a 

brief written plan such as a checklist, be 

provided to the individual for obtaining 

appropriate screening and other 

preventive services, which are 

separately covered under Medicare Part 

B benefits.’’

The ‘‘Physician’’ Definition (§ 410.16(a)) 

Comment: One commenter expressed 

concerns regarding the definition of a 

physician. The commenter expressed 

concern that the proposed rule limits 

the type of practitioner who is 

considered qualified to perform the new 

preventive physical examination. The 

commenter states that this restriction 

was not specified by the Congress in 

section 611 of the MMA or its 

accompanying conference committee 

report, and suggests that it should be 

revised to allow all practitioners, 

including doctors of podiatric medicine, 

who are defined as a physician under 

section 1861(r) of the Act, to be 

considered qualified to perform the 

preventive physical examination. 

Response: Section 611 of the MMA 

amended the statute to provide that 

payment for the IPPE must be made 

under the Medicare physician fee 

schedule, as provided in section 

1848(j)(3) of the Act, but it did not 

specifically define what type of 

physician is eligible for performing this 

examination. In developing the 

proposed rule on which physicians are 

considered qualified to perform the 

IPPE, we considered the various types of 

physicians that are identified in section 

1861(r)(2), (r)(3), (r)(4), and (r)(5) of the 

Act. These include doctors of dental 

surgery, doctors of podiatric medicine, 

doctors of optometry, and chiropractors, 

whose scope of medical practice is 

generally limited by State law to a 

particular part (or parts) of the human 

anatomy. 

These state licensing restrictions 

would likely make it difficult for those 

practitioners to perform all of the 

services required. Based on this 

information, we are leaving the 

definition of a physician unchanged in 

the final rule. 

The ‘‘Qualified Nonphysician 

Practitioner’’ Definition (§ 410.16(a)) 

Comment: One commenter indicated 

concern that in the proposed rule 

certified nurse-midwives (CNMs) are 

not eligible to furnish the new 

preventive physical examinations, but 

physicians and certain other NPPs are 

eligible to provide those services to 

Medicare beneficiaries. The commenter 

indicates that CNMs are fully qualified 

to provide physical examination and 

checkups covered by the statute and 

that they do so on a daily basis as a 

basic component of the care they 

provide their clients. The commenter 

states that we may be constrained by the 

statute as enacted by Congress on this 

subject, but suggests that we should 

review the issue and if possible revise 

the proposed rule to include CNMs 

among those who are considered to be 

eligible to provide the new service in 

the final rule. 

Response: Section 611 of the MMA 

amended the statute to provide that in 

addition to physicians certain NPPs, 

that is, PAs, NPs, and CNS (as 

authorized under section 

1861(s)(2)(K)(i) and (ii) of the Act, and 

defined in section 1861(aa)(5) of the 

Act, or in regulations at § 410.74, 

§ 410.75, and § 410.76) will be able to 

furnish the new preventive physical 

examination to eligible beneficiaries 

effective January 1, 2005. Thus, 

Congress did not specifically authorize 

CNMs to perform the IPPE. Unless 

CNMs are able to qualify as one of these 

other types of NPPs designated by the 

statute for purposes of the new IPPE 

benefit, they will not be eligible to 

provide this service to beneficiaries for 

Medicare Part B coverage purposes. 

Other Issues 

Comment: One commenter requested 

that we clarify application of the 

proposed IPPE definition to managed 

care plans where preventive physical 

examinations are available to Medicare 

enrollees on an annual basis and they 

are not limited to a one-time benefit. 

Generally in the case of managed care 

plans, it is indicated that the extent of 

their typical annual preventive 

examination is determined by the 

enrollee’s physician or other treating 

physician, depending upon the patient’s 

history and clinical indications. The 

commenter asks that we allow managed 

care plans greater flexibility in 

providing their Medicare enrollees with 

the various service elements described 

in the proposed rule. Alternatively, the 

commenter requests that we clarify in 

the final rule that managed care plans 

will need to provide their Medicare 

enrollees with all elements of the new 

benefit only if requested to do so by a 

particular Medicare enrollee. 

Response: Section 611 of the MMA 

requires that IPPEs be made available to 

all Medicare beneficiaries who first 

enroll in Medicare Part B on or after 

January 1, 2005, and who receive that 

benefit within 6 months of the effective 

date of their initial Part B coverage 

period. The new statute does not allow 

for any exceptions to be made to the 

coverage of IPPEs for beneficiaries who 

are members of managed care plans. In 

fact, section 1852(a) of the Act provides 

that generally each managed care plan 

must, at a minimum, provide to its 

Medicare members all of those items 

and services (other than hospice care) 

for which benefits are available under 

Parts A and B for individuals residing 

in the area served by the plan. 

Nonetheless, if a particular Part B 

member of the plan chooses not to take 

advantage of the IPPE benefit, for 

example, because it would duplicate an 

annual preventive physical exam that 

has already been provided to that 

member, the plan would not be 

obligated to provide the IPPE to that 

member. 

Comment: One commenter noted that 

while the screening benefits listed in 

paragraph (A)(1) on Federal Register

66288 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

page 47514 (vol. 69, No. 150) includes 

‘‘(5) colorectal cancer screening test,’’

the list of screening benefits described 

in the same section, paragraph (7) on 

page 47515 does not include that type 

of cancer screening test. The commenter 

requests that we include colorectal 

cancer screening in the list of screening 

services described on page 47515 of the 

Physician Fee Schedule Proposed Rule 

and any other sections of any proposed 

rule in which covered screening benefits 

are listed to ensure there is no confusion 

regarding what services should 

discussed with patients during the IPPE. 

Response: We agree with the 

commenter that there was an error of 

omission relative to colorectal cancer 

screening in the language in the 

preamble to the proposed rule in the list 

of screening benefits described on page 

47515 of the Physicians Fee Schedule, 

and we have corrected that oversight in 

this final rule.

Comment: One commenter requests 

that we clarify the part of the definition 

of the IPPE (service element 7) that 

refers to the provision of education, 

counseling, and referral of the 

individual for coverage of bone mass 

measurements by adding the term ‘‘Dual 

Energy X–Ray Absorptiometry’’ (DEXA) 

to that provision. The commenter states 

that DEXA testing is the most accurate 

method available for diagnosis of 

osteoporosis and that early detection of 

this condition paramount for preventing 

further bone loss and eventual fractures. 

The commenter is concerned that unless 

this is clarified in the final rule, local 

Medicare contractors may exclude 

coverage for the DEXA test as part of the 

IPPE benefit. 

Response: Our existing regulations 

governing bone mass measurements are 

published in § 410.31. While we agree 

that the DEXA scan is a very commonly 

used method for the initial diagnosis of 

osteoporosis, we do not believe that it 

would be appropriate to add any 

specific reference to the DEXA test in 

the IPPE definition because it may be 

perceived as endorsing one test over 

another. We do not believe this would 

be appropriate. Physicians and other 

qualified NPPs who perform IPPE 

services may provide appropriate 

education, counseling, and referral of 

their Medicare patients for the bone 

density tests. The counseling and 

referral may include choosing the 

appropriateness of the diagnostic 

modalities for the particular patient. 

Comment: A number of commenters 

have asked us to provide information to 

Medicare physicians and qualified NPPs 

performing the IPPE for appropriate 

referral of their patients when treatment 

or a more extensive evaluation of 

patients is needed as part of service 

element 6. 

Response: As part of the final rule, 

under service element 6, providers are 

required to furnish their patients with 

education, counseling, and referral, as 

appropriate, based on the individual’s 

results of service elements 1–5 of the 

IPPE service. However, appropriate 

referral of a patient, of course, is left to 

the discretion of the physician or other 

qualified NPP who is treating the 

patient for the medical problem that is 

identified. 

Comment: One commenter asked us 

how we plan to monitor the 

effectiveness of the IPPE benefit over the 

next several years. 

Response: As indicated in the final 

rule, we have established unique billing 

codes for the IPPE service which 

physicians and other qualified NPPs 

must use in billing Medicare Part B for 

the new service. Establishing those 

codes will allow us to monitor over time 

the extent to which the eligible 

Medicare Part B population is utilizing 

the new service, which will be of 

interest to our program administrators, 

members of the Congress, and the 

general public. 

Comment: One commenter asked how 

providers of IPPE services will know if 

a particular beneficiary is eligible to 

receive the new benefit due to the 

statutory time and coverage frequency 

(one-time benefit) limitations. 

Response: The statute provides for 

coverage of a one-time IPPE benefit that 

must be performed for new beneficiaries 

by qualified physicians or certain 

specified NPPs within the first 6 months 

period following the effective date of the 

beneficiary’s first Part B coverage. Since 

physicians or other qualified NPPs may 

not have the complete medical history 

for a particular new beneficiary, 

including information on possible use of 

the one-time benefit, these clinicians are 

largely relying on their own medical 

records and the information the 

beneficiary provides to them in 

establishing whether or not the IPPE 

benefit is still available to a particular 

individual and was not performed by 

another qualified practitioner. Since a 

second IPPE will always fall outside the 

definition of the new Medicare benefit, 

an advance beneficiary notice (ABN) 

need not be issued in those instances 

where there is doubt regarding whether 

the beneficiary has previously received 

an IPPE. The beneficiary will always be 

liable for a second IPPE no matter when 

it is conducted. However, for those 

instances where there is sufficient doubt 

as to whether the statutory 6-month 

period has lapsed, the physician or 

other qualified NPP should issue an 

ABN indicating that Medicare may not 

cover and pay for the service. If the 

physician or other qualified NPP does 

not issue an ABN and Medicare denies 

payment because the statutory time 

limitation for conducting the initial 

IPPE has expired, then the physician or 

other qualified NPP may be held 

financially liable. 

Comment: Several commenters asked 

that we provide explicit instructions 

and guidelines, respectively, to 

providers and beneficiaries regarding 

the details of what will be included in 

the new benefit, the eligibility 

requirements, and how providers must 

bill Medicare for the new service. 

Response: Medicare will release 

appropriate manual and transmittal 

instructions and information from our 

educational components for the medical 

community, including a MedLearn 

Matters article and fact sheets like the 

‘‘2005 Payment Changes for Physicians 

and Other Providers: Key News From 

Medicare for 2005’’. The medical 

community can join this effort in 

educating physicians, qualified NPPs, 

and beneficiaries by distributing their 

own communications, bulletins or other 

publications.

In addition, we have specifically 

included information on the new IPPE 

benefit in the 2005 version of the 

Medicare and You Handbook and the 

revised booklet, Medicare’s Preventive 

Services. A new 2-page fact sheet on all 

of the new preventive services, 

including the IPPE benefit, is currently 

under development, and a bilingual 

brochure for Hispanic beneficiaries will 

also be available in the new future. This 

information will be disseminated by our 

regional offices, State Health Insurance 

Assistance Programs (SHIPs), and 

various partners at the national, State, 

and local levels. Information on the new 

benefit will also be made available to 

the public through medicare.gov, the 

cms.gov partner Web site, 1–800–

MEDICARE, numerous forums hosted 

by CMS, and conference exhibits and 

presentations. 

Comment: Many of the major 

physician specialty societies believe the 

payment, as proposed, is undervalued 

for what is believed to be a laborintensive IPPE. They request that we use 

the existing CPT preventive medicine 

services code series rather than creating 

a new G-code. These codes have higher 

RVUs than the office or other outpatient 

visit code 99203. For example, 

preventive medicine services visit code 

99387 has total nonfacility RVUs of 4.00 

while the corresponding value for 99203 

is 2.58. 

Response: The existing CPT 

preventive medicine services codes 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66289

(99381–99397) are not covered by 

Medicare. In accordance with section 

1862(a)(1)(A) of the Act that requires us 

to pay only for services that are 

reasonable and necessary for the 

treatment of an illness or injury or to 

improve the function of a malformed 

body member, we have not covered E/

M visits for screening purposes. 

The IPPE is intended to target selected 

modifiable risk factors and secondary 

prevention opportunities shown by 

evidence to improve the health and 

welfare of the beneficiary, and is less 

focused on a comprehensive physical 

examination compared to the typical 

service provided in accordance with 

CPT code 99397. We equated the 

resources anticipated with this service 

to the existing new office or other 

outpatient visit. For CPT code 99203 the 

RUC survey data shows 53 physician 

minutes (including pre-service time, 

intra-service time and post-service time) 

with 51 minutes of staff time. We 

believe the IPPE will reflect these time 

approximations. We will be looking at 

the data and consulting with the 

medical community after initial 

experience with this new benefit to 

determine if this payment has been 

valued appropriately. 

Comment: Two commenters suggested 

that we allow the IPPE either on a yearly 

basis or every decade after the initial 

evaluation. 

Response: The IPPE was specifically 

legislated as a one time only benefit for 

the beneficiary newly enrolled in the 

Medicare program. This visit 

familiarizes the beneficiary with a 

physician or qualified NPP who will 

highlight the assessments available to 

help prevent and detect disease and also 

make available the educational, 

counseling and referral opportunities to 

the new Medicare recipient. Our policy 

anticipates physicians will make 

appropriate and individualized referrals 

for the beneficiary. Expanding the 

number of routine physicals would 

require additional legislation (See 

section 1862(a)(7) of the Act). 

Comment: Many commenters asked if 

the IPPE may be provided without 

performing the EKG at the same visit. 

They asked to have the EKG component 

unbundled from the evaluation and 

management component that had been 

specified in the proposed rule for the 

IPPE service since a physician may not 

have the equipment and capability of 

providing EKG services to their patients 

in the office suite or clinic. 

Additionally, others asked if a physician 

would be denied payment for the IPPE 

if the screening EKG was not performed 

because a diagnostic EKG was 

performed in a recent visit or if a 

diagnostic EKG was warranted at the 

IPPE visit. 

Response: Section 611 of the MMA 

does require a screening EKG to be 

performed as part of the IPPE visit. We 

recognize that there are a number of 

primary care physicians or other 

clinicians furnishing the service who 

may want to refer their beneficiaries to 

outside practitioners or entities for 

performance and interpretation of the 

EKG service rather than performing it 

themselves. Therefore, if an individual 

physician or other qualified NPP does 

not have the capacity to perform the 

EKG in the office suite, then alternative 

arrangements will need to be made with 

an outside physician or other entity in 

order to make certain that the EKG is 

performed. In circumstances where the 

primary care physician or qualified NPP 

refers the beneficiary to an outside 

physician or entity for the EKG service, 

we expect that the primary care 

physician or qualified NPP will 

incorporate the results of the EKG into 

the beneficiary’s medical record to 

complete the IPPE. Both components of 

the IPPE, the examination portion and 

the EKG, must be performed for either 

of the components to be paid. Billing 

instructions for physicians, qualified 

NPPs and providers will be issued. In 

order to address these potentially 

occurring scenarios to complete the 

IPPE and EKG we have created the 

following HCPCS codes:

• G0344: Initial preventive physical 

examination; face-to-face visit services 

limited to new beneficiary during the 

first six months of Medicare enrollment

• G0366: Electrocardiogram, routine 

ECG with at least 12 leads with 

interpretation and report, performed as 

a component of the initial preventive 

physical examination

A physician or qualified NPP 

performing the complete service would 

report both G0344 and G0366. 

• G0367: tracing only, without 

interpretation and report, performed as 

a component of the initial preventive 

physical examination

• G0368: interpretation and report 

only, performed as a component of the 

IPPE

RVUs for payment for these new 

HCPCS codes will be crosswalked from 

the following CPT codes: 

• G0344 will crosswalk from CPT 

code 99203 (Office or other outpatient 

visit)

• G0366 will crosswalk from CPT 

code 93000 (Electrocardiogram, routine 

ECG with at least 12 leads; with 

interpretation and report)

• G0367 will crosswalk from CPT 

code 93005 (Electrocardiogram, routine 

ECG with at least 12 leads; tracing only, 

without interpretation and report)

• G0368 will crosswalk from CPT 

code 93010 (Electrocardiogram, routine 

ECG with at least 12 leads; 

interpretation and report only)

Note that HCPCS codes G0366 and 

G0367 are not payable under the 

physician fee schedule in the facility 

setting. 

To comply with MMA the IPPE must 

include the EKG regardless of whether 

a diagnostic EKG was recently 

performed. An EKG performed by the 

physician or qualified NPP during the 

IPPE visit must be reported with HCPCS 

code G0366. Medicare does not cover a 

screening EKG alone. 

Comment: One commenter asked if 

physicians and qualified NPP who see 

patients in Federally Qualified 

Healthcare Centers (FQHCs) will be able 

to provide and bill under the FQHC allinclusive rate. 

Response: Physicians and other 

qualified NPPs in RHCs and FQHCs may 

provide this new benefit and follow 

normal procedures for billing for RHCs 

and FQHC services. Payment for the 

professional services will be made 

under the all-inclusive rate. 

Comment: Many physician specialty 

societies did not agree with our 

proposal to limit the level of a medically 

necessary E/M visit when performed 

and billed with the IPPE. They contend 

that most Medicare patients, even if 

known to their physician, come to the 

IPPE visit with multiple chronic 

problems often necessitating immediate 

evaluation and treatment at a level of 

care equal to a level 4/5 E/M visit code. 

They also state that current Medicare 

policy does permit a medically 

necessary E/M visit at whatever level is 

appropriate when the noncovered 

preventive medicine services (CPT 

codes 99381–99397) are performed. 

They ask that we eliminate the 

restriction for the level of service for a 

medically necessary E/M visit 

performed at the same visit as the IPPE 

visit. 

Response: The physician will need to 

schedule time with the beneficiary 

identifying the available preventive and 

educational opportunities. A level 2 

new or established patient office or 

other outpatient visit code was 

proposed because we believe there is a 

substantial overlap of practice expense, 

malpractice expense and physician 

work in both history taking and 

examination of the patient with the IPPE 

and another E/M service. We do not 

want to prohibit the use of an 

appropriate level of service when it is 

necessary to evaluate and treat the 

beneficiary for acute and chronic 

66290 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

conditions. At the same time, we believe 

the physician is better able to discuss 

health promotion, disease prevention 

and the educational opportunities 

available with the beneficiary when the 

health status is stabilized and the 

beneficiary is physically receptive. 

We will remove the restriction 

limiting the medically necessary E/M 

service to a level 2 visit code. CPT codes 

99201 through 99215 may be used 

depending on the circumstances and 

appended with CPT modifier ‘‘25 

identifying the E/M visit as a separately 

identifiable service from the IPPE code 

G0344 reported. 

We do not believe this scenario will 

be the typical occurrence and, therefore, 

we will monitor utilization patterns for 

the level 4/5 new or established office 

or other outpatient visit codes being 

reported with the IPPE. If there are 

consistent data that demonstrate high 

usage of level 4/5 E/M codes we may 

need to revise the policy. 

Comment: Two commenters asked if 

we would permit separate payment for 

a digital rectal exam (DRE) when 

performed on the same day as the initial 

preventive physical examination.

Response: Currently Medicare does 

not make separate payment for DRE 

(code G0102) when performed on the 

same day as an E/M service. We will 

maintain the current policy and not pay 

separately for a DRE performed during 

the IPPE visit. A DRE is usually 

furnished as part of an E/M service and 

is bundled into the payment for an E/

M service when a covered E/M service 

is furnished on the same day as a DRE. 

It is a relatively quick and simple 

procedure and if it is the only service 

furnished or is provided as part of an 

otherwise noncovered service it would 

be payable if coverage requirements are 

met. 

Comment: Several commenters 

requested guidance on documentation. 

Response: It is expected that the 

physician will use the appropriate 

screening tools. As for all E/M services, 

the 1995 and 1997 E/M documentation 

guidelines must be followed for 

recording information in the patient’s 

medical record. The screening tools 

used, EKG documentation, referrals and 

a written plan for the patient also must 

be included in the patient’s medical 

record. These forms and methods of 

documentation mirror those that would 

be used in typical physician practice 

with patient visits and do not add an 

additional burden to the physician. 

Comment: Several commenters 

expressed concern that the non-waived 

deductible and coinsurance will be a 

disincentive to the beneficiary having 

the IPPE. They are concerned that some 

beneficiaries will not avail themselves 

of the opportunity of the IPPE visit 

because of the beneficiary’s cost share. 

Response: The MMA did not waive 

the deductible and coinsurance, 

therefore, we must implement the 

provision as written. 

Result of Evaluation of Comments 

In view of the comments, we have 

decided to make several revisions in 

§ 410.16(a) relative to service elements 

1, 2, and 3. We are revising 

§ 410.16(a)(1)(i) language in service 

element 1 to read as follows: ‘‘Review of 

the individual’s medical and social 

history with particular attention to 

modifiable risk factors for disease.’’

We are clarifying the regulation 

language on depression screening 

(service element 2) by revising 

§ 410.16(a)(1)(ii) to specify that review 

of the individual’s potential (risk 

factors) for depression, including 

current or past experience with 

depression or other mood disorders, 

based on the use of an appropriate 

screening instrument for persons 

without a current diagnosis of 

depression, which the physician or 

other qualified NPP may select from 

various available standardized screening 

tests designed for this purpose and 

recognized by national medical 

professional organizations. To allow for 

a certain amount of provider flexibility 

in meeting the requirements of the 

regulatory intent of service component 3 

we are revising § 410.16(a)(1)(iii) to 

specify that review of the individual’s 

functional ability and level of safety, 

based on the use of appropriate 

screening questions or a screening 

questionnaire, which the physician or 

qualified NPP may select from various 

available screening questions or 

standardized questionnaires designed 

for this purpose and recognized by 

national medical professional 

organizations. 

To clarify the requirements of the 

regulatory intent of service component 7 

we are revising § 410.16(a)(1)(vii) to 

specify that education, counseling, and 

referral, including a brief written plan 

such as a checklist be provided to the 

individual for obtaining the screening 

and other preventive services for the 

individual that are covered as separate 

Medicare Part B benefits. 

The ‘‘social history’’ definition in the 

final rule will be revised to include 3 

elements: 

• History of alcohol, tobacco, and 

illicit drug use. 

• Diet. 

• Physical activities. 

With regard to payment of the IPPE, 

we will use the new HCPCS codes and 

payment will be based on the RVUs of 

the CPT codes crosswalked as stated 

above. We will not finalize our proposal 

to allow a medically necessary E/M 

service no greater than a level 2 to be 

reported at the same visit as the IPPE. 

B. Section 613—Diabetes Screening 

Section 613 of the MMA adds section 

1861(yy) to the Act and mandates 

coverage of diabetes screening tests. 

The term ‘‘diabetes screening tests’’ is 

defined in section 613 of the MMA as 

testing furnished to an individual at risk 

for diabetes and includes a fasting blood 

glucose test and other tests. The 

Secretary may modify these tests, when 

appropriate, as the result of 

consultations with the appropriate 

organizations. In compliance with this 

directive, we consulted with the 

American Diabetes Association, the 

American Association of Clinical 

Endocrinologists, and the National 

Institute for Diabetes and Digestive and 

Kidney Diseases.

1. Coverage 

We proposed in § 410.18 that 

Medicare cover—

• A fasting blood glucose test; and 

• Post-glucose challenge tests; either 

an oral glucose tolerance test with a 

glucose challenge of 75 grams of glucose 

for non-pregnant adults, or a 2-hour 

post-glucose challenge test alone. 

We would not include a random 

serum or plasma glucose for persons 

with symptoms of uncontrolled diabetes 

such as excessive thirst or frequent 

urination in this benefit because it is 

already covered as a diagnostic service. 

This language is not intended to exclude 

other post-glucose challenge tests that 

may be developed in the future, 

including panels that may be created to 

include new diabetes and lipid 

screening tests. We also would include 

language that would allow Medicare to 

cover other diabetes screening tests, 

subject to a NCD process. 

The statutory provision describes an 

‘‘individual at risk for diabetes’’ as 

having any of the following risk factors: 

• Hypertension. 

• Dyslipidemia. 

• Obesity, defined as a body mass 

index greater than or equal to 30 kg/m2. 

• Previous identification of an 

elevated impaired fasting glucose. 

• Previous identification of impaired 

glucose tolerance. 

• A risk factor consisting of at least 

two of the following characteristics: 

+ Overweight, defined as a body mass 

index greater than 25 kg/m2, but less 

than 30. 

+ A family history of diabetes. 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66291

+ A history of gestational diabetes 

mellitus or delivery of a baby weighing 

greater than 9 pounds. 

+ 65 years of age or older. 

For individuals previously diagnosed 

as diabetic, there is no coverage under 

this statute. 

The statutory language directs the 

Secretary to establish standards 

regarding the frequency of diabetes 

screening tests that will be covered and 

limits the frequency to no more than 

twice within the 12-month period 

following the date of the most recent 

diabetes screening test of that 

individual. 

We proposed that Medicare 

beneficiaries diagnosed with prediabetes be eligible for the maximum 

frequency allowed by the statute, that is, 

2 screening tests per 12 month period. 

We defined ‘‘pre-diabetes’’ as a previous 

fasting glucose level of 100–125 mg/dL, 

or a 2-hour post-glucose challenge of 

140–199 mg/dL. This definition of prediabetes was developed with the 

assistance of the American Association 

of Clinical Endocrinologists, concurs 

with the Centers for Disease Control and 

Prevention (CDC) definition, and 

complements the definition of diabetes 

that we published November 7, 2003 (68 

FR 63195). 

2. Payment 

We proposed to pay for diabetes 

screening tests at the same amounts 

paid for these tests when performed to 

diagnose an individual with signs and 

symptoms of diabetes. We would pay 

for these tests under the clinical 

laboratory fee schedule. We proposed to 

pay for these tests under CPT code 

82947 Glucose; quantitative, blood 

(except reagent strip), CPT code 82950, 

post glucose dose (includes glucose), 

and CPT code 82951 Glucose; tolerance 

test (GTT), three specimens (includes 

glucose). To indicate that the purpose of 

the test is for diabetes screening, we 

would require that the laboratory 

include a screening diagnosis code in 

the diagnosis section of the claim. We 

proposed V77.1 special screening for 

diabetes mellitus as the applicable ICD–

9–CM code for this purpose. Because 

laboratories are required and 

accustomed to submitting diagnosis 

codes when requesting payment for 

testing, we believe including a screening 

diagnosis code is appropriate for this 

benefit. 

Comment: One commenter questioned 

whether there is statutory authority to 

expand eligibility for individuals. 

Adding that, section 613 of the MMA 

gives authority for additional test and 

frequency, not additional individuals. 

Response: There is no statutory 

authority to expand eligibility for 

individuals. Section 613 of the MMA 

establishes coverage for beneficiaries 

who are at risk for developing diabetes. 

Beneficiaries who are pre-diabetic fall 

within 1861(yy)(2)(D) or (E) and are at 

an increased risk for developing 

diabetes. This increased risk separates 

them from the general at-risk population 

and requires the course of their care to 

be managed closer and more frequently. 

For individuals not meeting the ‘‘prediabetes’’ criteria, we proposed that one 

diabetes screening test be covered per 

individual per year. 

Comment: Several comments were 

received that recommended we provide 

physicians with clear guidance about 

Medicare’s covered services to help 

patients control their diabetes. The 

commenters also asked that we inform 

providers about other covered services, 

such as Hgb1AC tests, that will help 

patients avoid painful diabetes-related 

complications.

Response: We will be releasing two 

publications. The Dear Doctor Package

publication, which includes the ‘‘2005 

FACT SHEET’’, will be sent to the 

contractors on a CD on or about October 

15, 2005 and distributed to the 

providers by November 15, 2005. The 

Medicare Coverage of Diabetes Services 

and Supplies publication was originally 

written in 2002. It was revised in 2003 

to update the Part B premium amount 

and is being revised again this year to 

update the premium amount and to 

include any information relevant to the 

MMA. This document will be available 

on the CMS Web site and at 1–800–

MEDICARE. 

Comment: We received several 

comments suggesting that screening 

should not require a physician’s 

prescription or referral in order to be 

covered under Medicare Part B. This 

approach would follow the successful 

precedent established by us with other 

screening tests such as mammograms. 

Response: The legislative history on 

mammography did result in us allowing 

self-referral for mammograms. However, 

Medicare rules have required that 

laboratory tests for screening or other 

diagnoses must be ordered by licensed 

health care practitioners, specifically 

physicians, PAs, NPs, or CNSs. 

Comment: Comments were received 

recommending that the final rule 

include coverage of one annual diabetes 

screening for all Medicare beneficiaries. 

Response: The benefit of screening all 

Medicare beneficiaries is not supported 

by current evidence. We plan risk-based 

frequency limitations of coverage for 

diabetes screening based upon the 

statute requirements. Furthermore, we 

believe beneficiaries with pre-diabetes 

may warrant a more frequent follow-up 

and this is permitted at the professional 

judgment of the health care practitioner. 

Comment: We received a few 

comments suggesting the addition of the 

C-peptide test, as it is sometimes useful 

in Type 1 or Type 2 diabetes. 

Response: We believe that C-peptide 

testing is appropriate for diagnostic 

evaluation, but not for screening. It is 

currently covered under the general lab 

benefit as a diagnostic test when it is 

medically necessary. 

Comment: The American Society for 

Clinical Pathology (ASCP) has urged us 

to add CPT 82950 glucose; post glucose 

dose (includes glucose). This test is 

more frequently used to screen for 

diabetes. GTT is a more definitive test 

usually requested when questionable 

results from random, fasting or 

postprandial glucose levels are 

obtained. As written, the proposed rule 

appears to exclude 82950 as a screening 

test. 

Response: We appreciate attention 

being drawn to the apparent exclusion 

of CPT code 82950, which was not our 

intention and we have corrected that 

omission. 

Comment: A commenter suggested 

that due to increased incidence of 

obesity in recent years that family 

history of diabetes be defined as persons 

with Type 2 Diabetes in one or more 

first or second-degree relatives. 

Response: The comments received did 

not provide a clear consensus on the 

definition of family history of diabetes. 

Thus the definition of family history of 

diabetes will be left to the professional 

judgment of the treating physician or 

qualified non-physician practitioner 

based on the beneficiary’s medical 

history and best practice standards. 

Comment: The American Clinical 

Laboratory Association (ACLA) believes 

that the other codes on the NCD routine 

screening list that currently result in a 

diabetes denial on the basis of routine 

screening should be covered under the 

new diabetes screening benefit.

Response: We believe the majority of 

individuals who will seek care under 

this benefit will conform to the V77.1 

code. We are willing to review a sample 

of claims and determine if other specific 

codes are appropriate code for this 

benefit. Codes that need to be 

considered for this new benefit can be 

brought to our attention through the 

national coverage determination process 

for laboratories. 

Comment: A comment was received 

recommending that the proposed rule be 

clarified to refer to a ‘‘fasting blood 

glucose test’’ rather than a ‘‘fasting 

plasma glucose test’’ since the CPT code 

66292 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

does not differentiate between blood 

and plasma. 

Response: We agree with the 

recommendation to change the term 

‘‘fasting plasma glucose test’’ to ‘‘fasting 

blood glucose test’’. 

Comment: A comment was received 

recommending additional diabetes 

screening tests be added through a less 

formal process of consultation with 

manufacturers, health care providers, 

patients, and other stakeholders, as 

contemplated by Congress. The 

commenter further stated that the NCD 

process is complex and time consuming, 

delaying the coverage of new tests. 

Response: We believe the evidencebased NCD process is an effective 

process to review and analyze items and 

services as potential benefits for 

Medicare beneficiaries. Because the 

NCD process allows for public comment 

before we make any changes, we believe 

this is the appropriate process for any 

future changes. Further, we may not be 

able to accept every stakeholder’s 

recommendation because of 

instructional, coding, or claims issues 

which must be resolved before any 

benefit can be implemented. 

Result of Evaluation of Comments 

Our review of the comments has led 

to the elimination of the word ‘‘plasma’’

from the term ‘‘fasting plasma glucose 

test.’’ The word ‘‘plasma’’ will be 

replaced with the term ‘‘blood’’. We 

have corrected the unintentional 

omission of CPT code 82950, post 

glucose dose (includes glucose) as a 

diabetes screening test. The providers 

and beneficiaries are reassured that 

there will be clear guidance on covered 

services by way of two publications: 

The Dear Doctor Package, which 

includes the ‘‘2005 Fact Sheet’’ and 

Medicare Coverage of Diabetes Services 

and Supplies. We continue to promote 

healthcare practitioner autonomy with 

our policy of risk-based frequency 

limitations on items and services 

provided to our beneficiaries. We 

recognize the differing opinions with 

regard to the usage of the NCD process 

to review potential new items and 

services such as new diabetes screening 

tests for our beneficiaries. To provide 

transparency, timeliness and fairness, a 

formal process is necessary. 

Historically, the NCD process has been 

open to all interested parties and has 

proven to be an effective process. 

Based on reasoning from the 

responses to the comments we received, 

at this time we will not be accepting the 

following suggestions. 

• Reversing policy requiring a 

physician’s or a qualified nonphysician’s prescription or referral for 

diabetes screening tests. 

• Providing coverage of one annual 

diabetes screening test for all Medicare 

beneficiaries. 

• Adding coverage of C-peptide test 

as a screening test. 

• Bypassing the current NCD process 

for a less formal process to add 

additional diabetes screening tests. 

C. Section 612—Cardiovascular 

Screening 

Section 612 of the MMA adds section 

1861(xx) to the Act and provides for 

Medicare coverage of cardiovascular 

(CV) screening blood tests for the early 

detection of CV disease or abnormalities 

associated with an elevated risk for that 

disease effective on or after January 1, 

2005. 

Upon reviewing the USPSTF reports, 

the scientific literature and comments of 

professional societies, trade 

associations, the industry, and the 

public, we proposed in the August 5, 

2004 Federal Register, that the benefit 

for CV screening would include the use 

of three clinical laboratory tests to 

detect early risk for CV disease. Since 

the three tests, a total cholesterol, a 

HDL-cholesterol, and a triglycerides 

test, could be ordered as a lipid panel 

or individually, the frequency was 

limited to one of each individual test or 

combination as a panel every 5 years. 

When we researched the benefit, some 

scientific experts proposed that the use 

of only the total cholesterol test as a 

single test every 2 years was adequate. 

After reviewing the literature and 

comments, we concluded that each test 

in the lipid panel is important since 

each test predicts the risk for CV disease 

independently. It would be prudent, 

therefore, to promote the benefit as three 

separate tests every 5 years. The 

decision to limit the frequency to 5 

years, rather than more frequent testing 

every 2 years was due to information 

found in the Clinical Considerations of 

the USPSTF which indicate that the 

cholesterol values of elderly persons, 

who are the majority of the Medicare 

population, change slowly as they age. 

We also proposed that any changes to 

the list of tests could be made after a 

review of recommendations by the 

USPSTF and the use of the NCD 

process.

We proposed that for the claims 

processing and payment system, the 

coding of the tests would be made using 

the CPT codes available for the lipid 

panel or the three tests individually 

coded with the use of V codes to 

identify the tests were ordered for 

screening purposes. We also stated that 

we would pay for these CV screening 

tests at the same amounts paid for these 

tests to diagnose an individual with 

signs of CV disease and that these 

would be paid under the clinical 

laboratory fee schedule. The proposed 

coverage requirements were set forth in 

new § 410.17. 

In response to the proposed rule, we 

received letters and e-mails from 28 

commenters representing professional 

societies, trade groups, the industry, and 

individuals, who wrote on 26 different 

issues. One commenter represented 14 

medical societies. Each commenter had 

many concerns and the comments were 

grouped into 26 areas of concern. 

Comment: Three commenters 

expressed concern that many 

laboratories perform direct 

measurement LDL reflexively when 

triglycerides exceed certain parameters. 

The commenters are concerned that if 

screening direct measurement LDL is 

statutorily excluded then the Medicare 

beneficiaries would be liable for these 

tests without prior notice. 

Response: Section 410.32 requires 

that tests be ordered by a treating 

physician and used in the management 

of the patient. We have interpreted this 

provision to restrict the furnishing of 

reflex testing to situations where it is 

clear that the physician is ordering 

reflex testing at specific parameters and 

where the physician has an option to 

order the test without the reflex portion. 

Thus, laboratories must offer physicians 

the ability to order a lipid panel without 

the option to perform the direct 

measurement LDL. We strongly 

encourage physicians to order lipid 

panels without the direct measurement 

LDL reflex option to protect Medicare 

beneficiaries from incurring a charge for 

this service without advanced notice. 

If the screening lipid panel results 

indicate a triglyceride level that 

indicates the need for a direct 

measurement LDL, the physician may 

order this test once the results of 

screening lipid panel are reported. The 

NCD for lipid testing includes coverage 

of direct measurement LDL for patients 

with hyperglyceridemia. [http://

www.cms.hhs.gov/ mcd/viewncd.asp 

?ncd_id=190.23&ncd_

version=1&show=all]

We do not require the patient to 

physically return to the treating 

physician for an office visit and 

ordering of subsequent testing. 

Physicians may order such tests based 

on the results of the CV screening. The 

Medicare law and regulations do not 

prohibit the use of the same sample of 

blood to be used for direct measurement 

LDL following a lipid panel with very 

high triglycerides. Laboratories may 

archive the initial specimen and use it 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66293

for subsequently ordered medically 

necessary direct measurement LDL. 

Comment: One commenter suggested 

that if the direct LDL cholesterol is 

included in the CV risk screening 

benefit, we must provide guidance to 

laboratories regarding whether or not 

the direct LDL must be billed with the 

¥59 modifier for the charge to be 

reimbursed. 

Response: Since the direct LDL 

cholesterol is not being added to the CV 

screening benefit, there is no change to 

the billing. 

Comment: One commenter requested 

that the V codes (V81.0, V81.1, and 

V81.2) be added to the Lipid NCD and 

that the NCD Edit Software be modified 

to accept these V codes (V81.0, 81.1, 

and 81.2) on a frequency basis. 

Response: The Laboratory NCD Edit 

Module will be modified to accept the 

V codes for matching the CPT codes 

with the ICD–9–CM code for those tests 

within the lipid NCD that are part of 

this statutory benefit. The entire lipid 

NCD is not open for modification. The 

frequency is determined by the NCD 

process and implemented through 

changes to the claims processing system 

to edit the patient history and coding. 

Comment: One commenter asked that 

Medicare contractors provide explicit 

instructions to physicians to provide the 

necessary V codes (or their 

corresponding narratives) since 

screening is normally non-covered. 

Response: We will release the 

appropriate manual, transmittal 

instructions and information from our 

educational components for the medical 

community including a MedLearn 

Matters article and fact sheets such as 

the ‘‘2005 Payment Changes for 

Physicians and Other Providers: Key 

News From Medicare for 2005.’’

Laboratories can join this effort to 

educate physicians and beneficiaries by 

distributing their own communication, 

bulletins or other publications. Some of 

this information will also be part of the 

‘‘Welcome to Medicare Preventive 

Services Package.’’

Comment: Three commenters 

recommended that high sensitivity Creactive protein (hsCRP) be considered 

as a test for this benefit since the AHA 

and CDC issued a Class IIa 

recommendation stating that hsCRP 

measurements for risk stratification add 

important information to the ‘‘classic’’

cholesterol and HDL measurement. 

They cited that given Congressional 

intent, we should include this measure 

in its list of ‘‘approved’’ screening tests 

and, if not, that we immediately request 

that USPSTF conduct a formal review of 

hsCRP as a screening test. Four 

commenters recommended the addition 

of the ABI test. Another requested the 

inclusion of the 12-lead ECG, the 

echocardiogram, and tests for carotid 

artery disease. Another requested the 

coverage of blood pressure screening. 

Finally, another commenter suggested 

that we allow the broadest access and 

maximize the potential for tests. 

Response: We appreciate the 

commenters’ suggestions to include 

hsCRP and the other tests. In our efforts 

to develop the proposed rule, many tests 

were considered for inclusion in the list 

of screening tests for this benefit. There 

was insufficient evidence to include any 

additional tests beyond the lipid panel 

tests. The information we received in 

the development of the proposed rule 

did not support the inclusion of these 

additional tests but we invite the public 

to submit scientific literature for our 

consideration. Other new types of CV 

screening blood tests may be added 

under this new screening benefit if we 

determine them appropriate through a 

subsequent NCD. 68 FR 55634 (Sept 26, 

2003) or http://www.cms.hhs.gov/

coverage/8a.asp].

Comment: Two commenters 

recommended that we add HCPCS 

codes for the Lipid Panel and 

components as waived tests since they 

are performed in physician offices and 

other sites with Clinical Laboratory 

Improvement Amendments (CLIA) 

Certificates of Waiver. 

Responses: Under CLIA, a facility 

with a CLIA certificate of waiver can 

only perform those tests that are 

approved by the FDA as waived tests. 

We update the list of waived tests and 

their appropriate CPT codes on a 

quarterly basis through our program 

transmittal process. When we program 

the claims system to look for the AMA 

CPT codes for Lipid Panel or any of the 

three tests which make up the panel, the 

system will recognize those waived tests 

performed using the same code plus the 

QW modifier that are medically 

necessary. 

Comment: Two commenters requested 

clarification of the frequency limits for 

the three tests considered for this 

benefit. They asked if we would cover: 

(1) A lipid panel; (2) one or more 

component tests making up the lipid 

panel once every 5 years; or (3) each of 

the 4 HCPCS codes listed every 5 years.

Response: The intent of the benefit is 

to screen for CV disease. Since we 

believe most physicians would order the 

Lipid Panel as a single test, our 

intention was to cover the panel. We 

recognize that physicians may have 

different approaches to reaching their 

decision to treat, and therefore, we have 

to make available the possibility that 

physicians could order the individual 

tests which make up the panel. No 

matter how the physician(s) order the 

tests, our intention is to cover each of 

the 3 component tests (that is, a total 

cholesterol, a triglycerides test, and an 

HDL cholesterol) once every 5 years. 

Comment: Two commenters asked 

that we clarify the reasons for having V 

codes for screening tests added from the 

MMA rather than the past practice of 

developing G codes (unique HCPCS 

codes; temporary codes). This 

commenter believed that the change to 

V codes would cause confusion to the 

databases like the Physician/Supplier 

Procedure Summary Master File. This 

confusion would result in improperly 

filed provider claims and this would 

lead to a different and confusing method 

of processing claims. 

Response: The decision to use ICD–9–

CM codes rather than continue to add G 

codes was made because we try to 

utilize existing coding structures where 

possible and create G codes if there is 

a specific programmatic need. The 

laboratory community has lobbied 

against the use of G codes for a few 

years. Also the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) Standardization 

Requirements are working toward 

phasing out G codes, which are CMS 

only codes. The claims processing and 

editing systems are expected to be 

adjusted to manage this change. 

Comment: Five commenters 

questioned the reasons for establishing 

limits on the frequency of this benefit 

since this places great legal, 

administrative, and financial burden for 

providers to manage this type of 

information. One commenter suggested 

the use of a chit that beneficiaries would 

receive and redeem for testing so 

laboratories would not need to keep 

records. 

Response: The statute requires a 

frequency limit. Since laboratories may 

not have the complete medical history 

for individuals, including their history 

of CV screening tests, they are largely 

relying on the physician’s order in 

establishing whether the test is 

medically necessary and covered by 

Medicare. However, relying on the 

physician’s order does not provide the 

laboratory with proof that the CV 

screening test is medically necessary 

since the beneficiary may be treated by 

multiple physicians who may have 

ordered these tests independently 

within the 5 year coverage window. If 

the laboratory has sufficient doubt, the 

laboratory may issue an Advanced 

Beneficiary Notice (ABN) to the 

beneficiary indicating that Medicare 

may not cover the CV screening test. If 

the laboratory does not issue an ABN to 

66294 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

the beneficiary who has received more 

that one CV screening test during the 

previous five years, the laboratory may 

be financially liable for the cost of the 

test. Laboratories are not required to 

issue an ABN if the physician has 

already issued one. 

In addition, section 40.3.6.4(C) titled 

‘‘Frequency Limited Items and 

Services’’ of Chapter 30 of Pub 100–4 of 

the ‘‘Internet Only Manual’’ provides 

additional guidance for those instances 

where Medicare has imposed frequency 

limitations on items or services. This 

section instructs providers that the 

provider may routinely give ABNs to 

beneficiaries and that whenever such a 

routine ABN is provided to a 

beneficiary, the ABN must include the 

frequency limitation as the reason for 

which Medicare will deny coverage. 

Comment: Several commenters, 

including the ACR and the SIR, offered 

their assistance to us when we 

determine whether noninvasive testing 

for CV disease is necessary.

Response: Since the organizations that 

suggested noninvasive tests for 

inclusion in this benefit provided the 

materials for our review, it is not 

necessary for us to seek outside 

assistance. We appreciate the 

commenters’ offer of assistance. 

Comment: Four commenters 

suggested that the CV screening benefit 

stipulate an age for the population to be 

tested. We reviewed the USPSTF 

recommendation that promoted testing 

for men 35 years and older and women 

45 years and older. The commenters 

believe this age range should be lowered 

to include those aged 20 years and older 

and asked us to consider including 

younger people in this benefit. 

Response: The statutory change for 

this benefit did not include an age for 

the person to be tested. While some of 

the USPSTF recommendations included 

an age or an age range, none was 

selected for the proposed rule. Since the 

majority of the individuals in Medicare 

are generally 65 and older, the belief 

was that we are looking at an older 

population rather than concentrating 

our resources on the younger 

beneficiaries who may also be disabled 

and Medicaid eligible or could be 

eligible for other services due to other 

complications of CV disease. While 

there may be individuals younger than 

65 years of age that could benefit from 

this testing, this benefit is intended for 

those entitled to Medicare. Therefore, 

any patient entitled to Medicare would 

be covered for this benefit as specified 

in this rule. 

Comment: One commenter noted that 

if the patient did not fast for the 

screening test (fasting may be difficult 

for some patients), the calculation of 

LDL cholesterol may be inaccurate. This 

commenter recommended that for 

screening purposes, an alternative to 

repeating the full lipoprotein profile in 

the fasting state would be a follow-up 

direct measurement of LDL cholesterol. 

Response: If a patient cannot fast and 

the physician believes the patient’s 

medical history and circumstances 

suggest the beneficiary is at risk of CV 

disease, then any additional testing 

beyond an initial screening would need 

to be done under the diagnostic clinical 

laboratory benefit. Under the screening 

benefit, a repeated full lipoprotein 

profile (fasting) or a second LDL 

cholesterol (fasting) would not be 

covered for anyone who failed to fast 

when they had their first set of tests. 

Comment: Several commenters 

suggested that the tests that the USPSTF 

approves for CV screening blood tests be 

automatically adopted and covered by 

Medicare for the purposes of this 

benefit. We would not need to use the 

NCD process to add tests to this benefit. 

Immediate adoption of USPSTF 

recommendations will remove us from 

our own lengthy review. 

Response: While the USPSTF process 

is well established, we believe it is 

prudent to review any recommendations 

from the USPSTF before implementing 

them. In the proposed rule, we asked 

the public how we should make changes 

for this benefit. Because the national 

coverage determination process allows 

for public comment before we make any 

changes, we believe this is the most 

appropriate basis for any future changes. 

Further, we may not be able to accept 

every USPSTF recommendation because 

of instructional, coding or claims issues 

that must be resolved before any benefit 

can be implemented. 

Comment: Several commenters 

questioned whether the screening 

benefit for CV disease included 

noninvasive tests or whether it was 

limited only to blood tests. Further, they 

recommended that the adoption of 

noninvasive tests be tied to 

recommendations of the USPSTF or to 

an NCD. 

Response: We interpreted this portion 

of the screening benefit to permit 

noninvasive tests for which there was a 

blood test recommended by the USPSTF 

(for example, there is a blood test for 

cholesterol and if a noninvasive test was 

developed that detected characteristics 

of cholesterol, could provide a 

meaningful (comparison) result and 

accurate reading) then the noninvasive 

test could be considered for inclusion in 

the screening benefit. Noninvasive tests 

would not be immediately included but 

would be subject to a review before 

adoption. When it is time to consider 

the addition of tests or changes to the 

list of tests, we will consider any 

changes through an NCD. This benefit is 

not limited only to blood tests. 

Comment: One commenter 

recommended that we include a fasting 

blood glucose test as part of the CV 

screening blood benefit and that we 

cover this test every 2 years for 

beneficiaries over 45 and for younger 

beneficiaries who are obese or have a 

family history of diabetes. Fasting blood 

glucose is inherently a CV screening test 

because diabetes carries increased risk 

of CV disease. 

Response: While some people who 

have diabetes exhibit other factors 

associated with CV disease, we do not 

see the necessity to adjust the CV 

screening benefit to include a fasting 

blood glucose test. The diabetes 

screening benefit should be able to 

identify these individuals. Medicare 

does not plan to duplicate tests when 

they are available through other 

screening programs.

Comment: One commenter requested 

the inclusion of V70.0 for routine 

examination to be added as one of the 

ICD–9-CM codes to be covered for 

screening for CV screening blood tests. 

They asked that the NCD on lipid panel 

be reviewed for any codes that were 

previously denied as routine screening 

in the past, and that these codes be 

considered for inclusion under this new 

benefit. 

Response: We believe the majority of 

individuals who will seek care under 

this benefit will fit the V81.0, V81.1, or 

V 81.2 codes. We are willing to review 

a sample of claims and determine if 

V70.0 is an appropriate code for this 

benefit. At this time, we are unable to 

add V70.0 to the instructions being 

cleared. Codes that are to be considered 

for this new benefit must be brought to 

our attention through the national 

coverage determination process for 

laboratories. 

Comment: One commenter suggested 

that the proposed § 410.17 include 

reference to whether beneficiaries will 

incur out-of-pocket costs for CV 

screening blood tests. 

Response: Section § 410.17 is specific 

to coverage instructions for screening 

tests for the early detection of CV 

disease. We do not believe it is 

necessary to revise § 410.17 to include 

payment instructions. We have 

indicated that Medicare would pay for 

the tests under the clinical laboratory 

fee schedule. Currently under this 

payment system, beneficiaries do not 

incur copayments and deductibles in 

accordance with section 1833(a)(1)(D)(i) 

of the Act, and is included in 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66295

instructions at Medicare Claims 

Processing Manual, Pub. 100–04, 

chapter 16, § 30.2. 

Comment: Two commenters asked us 

to clarify why we chose 5 years as the 

timeframe for the benefit, rather than 

the 2 years allowed by the statute. 

Response: Our primary goal was to 

allow testing for the population that 

needed to be screened. In the preamble 

to the proposed rule, we stipulated that 

the Clinical Considerations of the 

USPSTF indicate, while screening may 

be appropriate in older people, repeated 

screening is less important because lipid 

levels are less likely to increase after age 

65. Screening individuals more often 

than necessary might lead to 

unnecessary expenses and treatment. 

The scientific literature indicates that 

lipid levels in the elderly are fairly 

stable. Therefore, we proposed 

screening once every 5 years and have 

not received sufficient evidence to 

change this position. 

Comment: Two commenters suggested 

that a two-tiered benefit be developed 

that would allow lipid profile screening 

tests at least every 5 years for 

beneficiaries when risk factors are not 

evident and a second group be screened 

at least every 2 years. The second group 

would include individuals who have 

modifiable risk factors (for example, 

tobacco smoking, high blood pressure, 

physical inactivity, obesity, and 

diabetes mellitus) and non-modifiable 

risk factors (such as age, gender, race, 

and family history). 

Response: While the CV screening 

benefit could be expanded to include 

individuals other than those mentioned 

in the proposed rule, preventive benefits 

were added to the Medicare Program on 

a limited basis as science and 

technology permit them. Since some of 

the individuals in the second group 

already would be screened through the 

IPPE and the Diabetes Screening 

Benefit, we are not developing a second 

tier at this time. We believe expanding 

this to a second tier would waste 

precious resources of time and money 

and not contribute to lowering the risk 

factors for individuals with CV disease. 

Comment: One commenter questioned 

why we proposed to use the NCD 

process as the method of making 

changes to the list of tests covered by 

the CV screening blood test benefit. The 

commenter wrote that the MMA does 

not require that the NCD process be 

utilized. They indicated that there is no 

need for us to conduct our own 

assessment since a thorough evaluation 

of the test was to be done by the 

USPSTF in determining that the test is 

one that it recommends. The commenter 

objected to the use of the NCD process 

for consideration of new tests because of 

the significant delays that mark this 

process. The commenter also stated that 

all that would be needed for us to 

approve the coverage of additional CV 

screening tests is the recommendation 

of the USPSTF. 

Response: In establishing the benefit 

for CV screening blood tests, the 

Congress gave the Secretary the 

authority to determine which tests 

would be covered by this benefit. We do 

not believe it would be proper to 

delegate this function to USPSTF or any 

other entity. In the proposed rule, we 

proposed the tests to be covered for the 

new benefit when it becomes effective 

January 1, 2005 and at the same time, 

we offered the NCD process for changes 

to this benefit. We proposed that future 

tests would be added after reviewing the 

recommendations of the USPSTF and 

the use of the NCD process. The NCD 

process actually has several methods for 

evaluating which tests we may 

eventually cover. The NCD process 

includes an application for a new 

coverage issue, a reconsideration of an 

existing policy, or a coding change for 

laboratory tests. We believe the use of 

the NCD process is a worthwhile 

endeavor since it is a public process and 

less time consuming than rulemaking. 

The use of an NCD is authorized by 

Section 1871 of the Act.

Comment: One commenter suggested 

that we include triglycerides as a test for 

the CV screening blood test benefit since 

the 2001 USPSTF recommendations for 

screening for lipid disorders associated 

with CV disease only includes 

measurement of total cholesterol and 

high-density lipoprotein cholesterol 

(HDL–C). 

Response: We have included the 

triglycerides test as one of the tests for 

screening for CV disease. For some 

individuals, triglycerides may detect a 

risk factor for CV disease. That is why 

it was more prudent to select a lipid 

profile that includes the three tests (total 

cholesterol, HDL-C, and the 

triglycerides) rather than to indicate the 

use of individual tests with different test 

intervals and different ordering patterns. 

Comment: One commenter requested 

that the frequency limit for lipid testing 

of 5 years be waived if the patient 

develops a risk factor, such as diabetes, 

a marked weight gain, etc. in the 

interval. 

Response: A patient screened for lipid 

testing could also meet the requirements 

for screening under the diabetes 

screening benefit. If a patient developed 

further risk factors which negate the 

need for continued screening under the 

CV screening blood test benefit, their 

additional signs or symptoms would 

probably cause the person to need to 

seek treatment which would be covered 

under other benefits including 

diagnostic clinical laboratory testing. 

Comment: One commenter questioned 

whether § 410.16 that permits qualified 

nurse practitioners and others to order 

CV screening tests under the physical 

examination (section 611 of the MMA) 

is inconsistent with § 410.17 that 

requires that the laboratory tests be 

ordered by the treating physician 

(§ 410.32(a)). 

Response: Section 410.16 addresses 

services by NPs because of conforming 

changes made in section 611(d) of the 

MMA. Section 410.32(a)(3) permits 

certain NPPs to furnish services that 

would be physicians’ services if 

furnished by a physician and who are 

operating within the scope of their 

authority under State law and within 

the scope of their Medicare statutory 

benefit. We believe that the statute 

permits the use of NPPs to order tests 

described under § 410.17 without a 

change in the statute. The general rule 

for laboratory tests is that the tests must 

be ordered by the treating physician and 

in the instance of screening tests, the 

treating NPP may be regarded as a 

physician for this purpose. 

Comment: One commenter believed 

that screening every 5 years was too 

long a period between tests and that the 

data we collect be used to allow more 

frequent testing. 

Response: We have heard from 

commenters that the frequency 

limitation of keeping records for the 5 

years is difficult because of storage, 

access and retrieval, and orders from 

multiple physicians. Change in the 

frequency (that is, the number of times 

a patient can be tested during a given 

timeframe) will be considered if the 

scientific literature supports it. We do 

not believe we are permitted to change 

the frequency based solely upon the 

logistical difficulties in collecting, 

consolidating, and maintaining 

administrative data. Modifying the 

benefit to permit more frequent testing 

will not resolve these administrative 

difficulties. However, we will take this 

recommendation under advisement as 

we continue to consider the associated 

clinical data, but will not make any 

changes for the final rule. 

Comment: One commenter requested 

that blood be removed from the title of 

this benefit for the final rule. The 

commenter believed the narrow focus 

on blood would restrict the types of 

tests that would be administered for 

detecting CV disease.

Response: In developing the proposed 

rule, we included blood in the title of 

this benefit to be consistent with the 

66296 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

history of this benefit and to distinguish 

the tests in the benefit. We believe that 

noninvasive tests could be covered and 

this benefit is not limited only to blood 

tests. 

Comment: One commenter suggested 

that the CV screening benefit include an 

appropriate screening instrument. As 

with depression, the examining 

physician has a test based on clinical 

practice guidelines to use as a tool for 

assessing the patient. Since the 

American Heart Association (AHA) and 

the ACC Guidelines for PAD are 

expected to be published in 2005, the 

commenter is requesting that we adapt 

the patient assessment and include 

these guidelines under the CV screening 

benefit. 

Response: Since the publication of the 

AHA and ACC Guidelines has not taken 

place, it would be difficult to evaluate 

this document and how physicians 

would use this in the course of 

examining a patient. Physicians may use 

their best judgment for how they assess 

an individual patient and whether 

additional specific tests from the AHA 

and ACC guidelines would be more 

helpful than what is already included in 

the screening benefit for CV disease is 

not something we can conclude at this 

time. The NCD process is available 

when additional tests should be 

considered. 

Result of Evaluation of Comments 

After reviewing all the comments, we 

have plans to include the V codes 

(V81.0, V81.1 and V81.2) in the 

Laboratory Edit Module, and to release 

manual and transmittal instructions and 

information to smooth the transition for 

the new benefit. Providers who 

routinely give ABNs to beneficiaries 

must include in the ABN that the 

frequency limitation is the reason for 

which Medicare will deny coverage. A 

patient who has an ABN and exceeds 

the frequency limitation may incur outof-pocket charges. We will finalize the 

changes to § 410.17 as proposed. 

D. Section 413—Physician Scarcity 

Areas and Health Professional Shortage 

Areas Incentive Payments 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘HPSA Zip Code Areas’’ at the 

beginning of your comments.] 

Section 413(a) of the MMA provides 

a new 5 percent incentive payment to 

physicians furnishing services in 

physician scarcity areas (PSAs). The 

MMA added a new section 1833(u) of 

the Act that provides for paying primary 

care physicians furnishing services in a 

primary care scarcity county and 

specialty physicians furnishing services 

in a specialist care scarcity county an 

additional amount equal to 5 percent of 

the amount paid for these services. 

Section 1833(u) of the Act defines the 

two measures of physician scarcity as 

follows: 

1. Primary care scarcity areas—

determined by the ratio of primary care 

physicians to Medicare beneficiaries. A 

primary care physician is a general 

practitioner, family practice 

practitioner, general internist, 

obstetrician, or gynecologist. 

2. Specialist care scarcity areas—

determined by the ratio of specialty care 

physicians to Medicare beneficiaries. 

The specialist care PSA ratio includes 

all physicians other than primary care 

physicians as defined in the definition 

of primary care scarcity areas. 

To identify eligible primary care and 

specialist care scarcity areas, we ranked 

each county by its ratio of physicians to 

Medicare beneficiaries. In accordance 

with the statute, in the list of primary 

care and specialist care scarcity 

counties, only those counties with the 

lowest ratios that represent 20 percent 

of the total number of Medicare 

beneficiaries residing in the counties 

were considered eligible for the 5 

percent incentive payment. In 

accordance with the section 1833(u) of 

the Act, we also treated a rural census 

tract of a metropolitan statistical area (as 

determined under the most recent 

modification of the Goldsmith 

Modification) as an equivalent area (that 

is, equal to a full county). 

Consistent with section 1833(u)(4)(C) 

of the Act, all PSAs were assigned their 

5-digit zip code area so that we may 

automatically provide the 5 percent 

incentive payment to eligible 

physicians. For zip codes that cross 

county boundaries, we used the 

dominant county of the postal zip code 

(as determined by the U.S. Postal 

Service) to identify areas eligible to 

receive the 5 percent payment. Section 

1833(u)(4)(C) of the Act also requires us 

to publish a list of eligible areas as part 

of the proposed and final physician fee 

schedule rules for the years for which 

PSAs are identified or revised and to 

post a list of PSAs on our Web site. See

Addenda J and H for the zip codes of 

primary care and specialist care PSAs. 

The PSA lists by zip code and county 

are also available on our Web site at 

http://www.cms.hhs.gov/providers/

bonuspayment. Since we are publishing 

these lists for the first time in this final 

rule with comment period, we are 

accepting comments for 60 days after 

the date of publication of this regulation 

on the zip codes and counties qualifying 

as physician scarcity areas and will 

address the comments in next year’s fee 

schedule.

In addition to creating of the 5 percent 

PSA incentive payment, section 413 of 

the MMA amended section 1833(m) of 

the Act to mandate that we pay the 10 

percent health professional shortage 

areas (HPSA) incentive payment to 

eligible physicians in full county HPSAs 

without any requirement that the 

physician identify the HPSA area. We 

can only achieve this result by assigning 

zip codes to eligible areas. See Addenda 

I and K for the lists of eligible primary 

care and mental health HPSAs by zip 

code. Consistent with the Act, we have 

also posted a list of links on our Web 

site at http://www.cms.hhs.gov/

providers/bonuspayment to assist those 

physicians located in eligible areas 

where automation is not feasible, that is, 

the eligible area could not be assigned 

a zip code. 

In the August 5, 2004 proposed rule, 

we proposed conforming changes to our 

regulations to add § 414.66 to provide a 

5 percent incentive payment to eligible 

physicians furnishing covered services 

in eligible PSAs. We also proposed 

conforming changes to our regulations 

to add § 414.67 to codify the 10 percent 

incentive payment to eligible physicians 

furnishing covered services in eligible 

HPSAs, established under the Omnibus 

Budget Reconciliation Act of 1987 

(OBRA) (Pub. L. 100–203), previously 

implemented through manual issuance. 

We received 23 letter comments on 

the bonus payment provisions of section 

413 of the MMA. A summary of those 

comments and our responses follows: 

Comment: One commenter questioned 

the rationale behind using zip codes for 

the purpose of identifying eligible areas 

for physician bonuses. The commenter 

believes that zip codes are less accurate 

than political boundaries (counties, 

census civil divisions, and census 

tracts). 

Response: The statute requires the 

identification of PSAs on a county basis, 

except for rural areas (using the 

Goldsmith Modification). At this time, 

we can only determine physician 

scarcity for Goldsmith areas at the zip 

code level since the Medicare 

beneficiary data is currently unavailable 

at the census tract level. 

Automation of physician bonus 

payments can only be achieved by 

assigning zip codes to eligible areas. 

That is, the zip code place of service is 

the only data element reported on the 

Medicare claim form that would allow 

automation.

Comment: A commenter believes that 

our proposal to identify qualified PSAs 

and HPSAs by zip code for automatic 

payment purposes is problematic 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66297

because zip codes cross county lines. 

The commenter suggested that a more 

user-friendly option would be to add a 

county identifier to the claim form. 

Response: The addition of a county 

code would not resolve the issue of 

identifying the claims that would have 

a bonus because not all designated 

HPSAs and PSAs are full counties. We 

cannot identify, for an automated 

payment, services furnished in counties 

that are only partially designated and 

Goldsmith areas that are not full 

counties. In addition, there currently is 

no place on the standard electronic 

claims form to accommodate the entry 

of a county code. 

Comment: A commenter requested 

clarification regarding circumstances 

when automation of bonus payments is 

not feasible. 

Response: When the boundaries of zip 

code areas precisely overlay with the 

boundaries of eligible HPSAs and PSAs, 

automation of bonus payments is 

feasible. In other words, eligible 

physicians furnishing services to 

Medicare patients within these zip code 

areas will automatically receive their 

bonus payments. We can also automate 

bonus payments within zip code areas 

that cross outside of qualified county 

boundaries as long as the zip code, as 

determined by the U.S. Postal Service, 

is dominant to the qualified scarcity 

county. We cannot automate bonus 

payments when boundaries of zip code 

areas only partially coincide with the 

boundaries of HPSAs and PSAs. 

Comment: One commenter requested 

clarification regarding the application of 

the billing modifier in determining 

physician eligibility. The commenter 

inferred from the proposed rule that, if 

the zip code is not posted as a qualified 

area, an eligible physician could still 

receive a bonus payment if a modifier is 

used. 

Response: Eligible physicians 

furnishing covered services in a portion 

of an eligible PSA, which cannot be 

properly assigned a zip code to permit 

automation of the bonus payment, 

would need to include the new 

physician scarcity modifier on the 

Medicare claim in order to receive the 

bonus payment. Lists of the zip codes 

that are eligible for the automated 

payment, as well as a list of the counties 

that are eligible to receive the PSA 

bonus are available on our Web site at 

http://www.cms.hhs.gov/providers/

bonuspayment. If a service is provided 

in a zip code area that is not listed on 

the automated payment files, but is 

within a designated physician scarcity 

county, the physician must submit the 

‘‘AR’’ billing modifier with the service 

in order to receive the bonus payment. 

Separate lists for the primary care PSAs 

and the specialty care PSAs are 

provided on our Web site for both the 

automated zip codes and the counties. 

Comment: A commenter requested 

clarification on what ratios would be 

used to identify PSAs. The Health 

Resources and Services Administration 

(HRSA) uses a national ratio of 3,500:1, 

or 3,000:1 if high needs are shown. The 

commenter requested information on 

which ratios would be used to 

determine PSAs for specialty providers, 

and whether the ratios would be 

different for different specialty care 

providers. 

Response: Only those counties with 

the lowest primary care ratios that 

represent 20 percent of the total number 

of Medicare beneficiaries residing in the 

counties will be considered eligible for 

the 5 percent incentive payment. In 

other words, we ranked each county by 

its ratio of physicians to beneficiaries 

and then designated counties as scarcity 

areas with the lowest ratios until 20 

percent of the Medicare population was 

reached. A separate specialist physician 

ratio was calculated to identify 

specialist care PSAs using the same 

methods stated. The statutory mandate 

precludes us from adopting a national 

physician-to-patient ratio similar to the 

HPSA designations. By statute, the 20 

percent population threshold must serve 

as the qualifying condition for all 

counties/rural areas. 

For calculating the ratios, section 

1833(u)(6) of the Act, as added by the 

MMA, defines a primary care physician 

as a general practitioner, family practice 

practitioner, general internist, 

obstetrician, or gynecologist. In 

accordance with the statute, all other 

physicians were grouped together as 

specialists for purposes of determining 

the specialist care PSA list. 

Comment: A commenter requested 

clarification regarding the frequency of 

updating the eligible zip code list for 

automatic HPSA bonus payments and 

its impact on otherwise eligible 

physicians. 

Response: Determination of zip codes 

eligible for automatic HPSA bonus 

payment will be made on an annual 

basis, and there will not be any midyear updates. We will effectuate 

revisions made to designations by HRSA 

the following year for purposes of 

automatic bonus payments. 

Consequently, if HRSA changes to the 

HPSA designations remove physicians 

in those areas from receiving automatic 

payment, the zip code areas will remain 

eligible until the next year when we 

remove the zip code from our approved 

list.

Eligible physicians furnishing covered 

services in newly-designated HPSAs are 

permitted to add a modifier to their 

Medicare claims to collect the HPSA 

incentive payment until our next annual 

posting of eligible zip codes for 

automation of bonus payments. In cases 

where a zip code cannot be properly 

assigned to the newly-qualified HPSA, 

physicians furnishing services in the 

area must continue to bill for the 

incentive payments using the 

appropriate modifier. 

Comment: A commenter requested 

that we provide FQHCs with the 5 

percent PSA incentive payment. Since 

the statute does not explicitly exclude 

other physicians’ services (that are 

billed on an all-inclusive basis), such as 

those provided in FQHCs or RHCs, the 

commenter stated that we should extend 

the new 5 percent bonus payment to 

FQHC physicians. 

Response: As defined in section 

1861(aa) of the Act, FQHC and RHC 

services are not physicians’ services, 

even though physicians’ services are 

frequently a component of the services 

furnished in these facilities. The 

services are rather identified as FQHC 

services. Therefore, services furnished 

by these providers are not eligible for 

the incentive payment. 

Comment: A commenter has 

questioned our proposal not to apply 

the new 5 percent physician incentive 

payment to the technical component of 

physicians’ services. The commenter 

stated that extending the new bonus 

payment to both the professional and 

technical component of the physicians’

services is consistent with 

Congressional intent and would 

simplify claims processing. 

Response: Section 1833(u) of the Act 

provides for incentive payments for 

physicians’ services furnished in PSAs. 

We note that the statute contains two 

definitions of physicians’ services. The 

first, which appears at section 1861(q) of 

the Act, defines physicians’ services as 

‘‘professional services performed by 

physicians including surgery, 

consultation, and home, office, and 

institutional calls.’’ The second, which 

refers to services paid under the 

physician fee schedule, is found at 

section 1848(j)(3) of the Act and 

contains a broader definition of 

physician services. However, that 

definition applies only for purposes of 

section 1848 of the Act. 

Since the incentive payment is not 

included in section 1848 of the Act, the 

definition of physicians’ services 

specified in section 1861(q) of the Act 

is the definition that applies. Thus, we 

believe the best reading of the statute is 

that only professional services furnished 

66298 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

by physicians are eligible for incentive 

payments. 

Comment: A commenter 

recommended that we extend the HPSA 

bonus payment to all physicians, 

regardless of their specialty, when their 

services are furnished within a mental 

health HPSA. The commenter believes 

there is no statutory basis to limit 

incentive payments just to psychiatrists 

within mental health HPSAs. 

Response: We provide HPSA bonus 

payments in primary medical care 

HPSAs to all physicians regardless of 

specialty (including psychiatrists) in 

light of the fact that there is significant 

overlap between primary medical care 

HPSAs and mental health HPSAs. 

Furthermore, most primary medical 

HPSAs, especially in rural areas, also 

have shortages of specialists. 

Consequently, there is no apparent need 

to distinguish between physician 

specialties within primary medical care 

HPSAs for determining physician 

eligibility for bonus payment purposes. 

However, in the situation where the 

mental health HPSA does not overlap 

with a primary medical care HPSA, we 

allow only psychiatrists to collect the 

incentive payment. Within these standalone mental health HPSAs, there is an 

adequate supply of physicians for the 

provision of medical services and a 

shortage only of those providing mental 

health services. Therefore, it would be 

inconsistent with the HPSA incentive 

payment provisions, as well as an 

inappropriate use of the Medicare Trust 

Fund, to pay bonuses to physicians who 

furnish medical services in service areas 

without shortages of primary medical 

services. 

Comment: A commenter requested 

that we count only those practicing 

physicians who treat Medicare patients 

when determining the ratio of 

beneficiaries to practicing physicians. 

To count all practicing physicians, 

including those who do not treat 

Medicare patients would undermine the 

intent of the provision. 

Response: The statute does not permit 

us to count only Medicare participating 

physicians to determine PSAs. The 

statute explicitly requires that we 

calculate the primary and specialist care 

ratio by the number of physicians in the 

active practice of medicine or 

osteopathy within the county or rural 

area. Therefore, we must include in the 

physician tally all actively practicing 

physicians when determining PSAs.

Comment: A commenter asked that 

we clarify our methods for determining 

the number of primary care and 

specialty care physicians to calculate 

the physician-to-beneficiary ratio for 

identifying PSAs. The commenter 

suggested that we use only the number 

of practicing physicians when 

determining the beneficiary to physician 

ratio, that is, distinguish between 

licensed physicians and practicing 

physicians when determining ratios of 

primary care and specialty care since 

some physicians continue to be licensed 

after they retire. 

Response: As required by section 413 

of the MMA, the determination of 

eligible PSAs is based on the ratio of 

‘‘active practice’’ physicians to 

Medicare beneficiaries within a county 

or rural area (using the Goldsmith 

Modification). The physician data 

source used in calculating scarcity areas 

is contained in the following: 

• The 2001 Physician Characteristics 

file; and 

• The 2001 Physician Address file. 

These data are a compilation of: 

• The December 2001 AMA Master 

file; 

• The December 2001 American 

Osteopathic Association (AOA) 

Physician file; and 

• The National Health Service Corps 

2001 participant listing. 

These physician data files allow for 

the identification of the physician’s 

active status. Some of the key status 

indicators to identify practicing 

physicians include ‘‘clinically active’’

and ‘‘Federal employment’’ status. 

Clinically active status was determined 

using the type of practice, professional 

employment, and major professional 

activity fields from AMA and AOA. For 

example, determining non-active status 

is based on physicians who—

(1) Are involved in administration, 

medical teaching, research, and other 

non-patient care activities; or 

(2) Have self-identified as fully retired 

or otherwise inactive. 

We believe that the indicator field of 

‘‘fully retired or otherwise inactive’’

addresses the specific issue of a 

physician maintaining his or her license 

after he or she retires. 

Comment: A commenter expressed 

concern about our use of the AMA 

database to determine the number of 

licensed physicians engaged in direct 

patient care in each State. The 

commenter claims that the AMA 

database overstates the number of 

practicing physicians in the State of 

California by at least 10,000 physicians. 

In light of this concern, the commenter 

stated that we should use State medical 

board licensing information rather than 

the AMA database in determining the 

physician counts. 

Response: The physician data source 

used in calculating scarcity areas is 

contained in the 2001 Physician 

Characteristics file and the 2001 

Physician Address file. These data are a 

compilation of the December 2001 AMA 

Master file, the December 2001 AOA 

Physician file, and the National Health 

Service Corps 2001 participant listing. 

We made the decision to use the AMA 

Master file as well as the other files as 

the sources of physician data in scarcity 

calculations because there is no other 

adequate source of national physician 

data. It may be possible to obtain 

physician data from each individual 

State agency, but doing so would entail 

considerable administrative and 

technical difficulties. Furthermore, 

methods of gathering and compiling 

data may be inconsistent in different 

States. State agencies may vary greatly 

in terms of the methods used to update 

physician databases, the frequency of 

updates, how the data are stored, the 

type of information collected, and so 

forth. In addition, States may use their 

own classification systems for physician 

specialties, types of practice, and other 

key information, and these systems may 

change over time. 

Comment: A commenter encouraged 

us to implement similar incentive 

payment programs for non-physician 

practitioners, for example, Certified 

Registered Nurse Anesthetists and 

physician assistants. 

Response: We do not have the 

authority to provide bonus payments to 

non-physicians. Sections 1833(m) and 

1833(u) of the Act authorize bonus 

payments only to physicians. 

Comment: A commenter requested 

that we immediately publish the already 

identified PSAs by zip code and specify 

the specialties in short demand within 

each eligible PSA. 

Response: Lists of the zip codes that 

are eligible for the automated payment, 

as well as a list of the counties that are 

eligible to receive the PSA bonus, are 

now available on our Web site at

http://www.cms.hhs.gov/providers/

bonuspayment. See Addenda J and H for 

the zip code list of PSAs for primary 

care and specialist care. 

We have forwarded to the Health 

Resources and Services Administration 

the request for identification of 

specialties in short supply within PSAs. 

That Agency has responsibility for 

physician manpower issues. 

Comment: A commenter requested 

that the list of scarcity areas should be 

made interim in the final fee schedule 

rule in order to give physicians 

sufficient time to review and comment 

on the proposal.

Response: Although we made these 

lists public on our Web site on October 

1, 2004, we will accept comments for 60 

days after the date of publication of this 

regulation on the zip codes and counties 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66299

qualifying as physician scarcity areas 

and will address the comments in next 

year’s fee schedule. 

Comment: A commenter expressed 

appreciation for our effort to fairly 

implement the incentive payments to 

physicians in scarcity areas. As this new 

incentive payment program is 

implemented, physicians must be 

informed that this bonus is available, 

and it must be simple for them to 

receive the bonus. 

Response: We have already made 

available on our Web site at http://

www.cms.hhs.gov/providers/

bonuspayment the lists of the zip codes 

that are eligible for the automated 

payment, as well as a list of the counties 

that are eligible to receive the PSA 

bonus. We have also issued a Medlearn

article to educate the physician 

community regarding Medicare 

physician incentive payment programs. 

For a copy of this provider education 

article go to: http://www.cms.hhs.gov/

medlearn/matters/mmarticles/2005/

SE0449.pd. Lastly, Medicare’s 

contractors have established their own 

Web site links for the HPSA incentive 

payment program to facilitate the 

payment of these bonuses to eligible 

physicians. 

Comment: A commenter expressed 

support of our proposed changes 

relating to incentive payments for 

services provided in areas designated as 

HPSAs and PSAs. The commenter also 

commended us for our prompt 

implementation of section 413 of the 

MMA. Another commenter expressed 

appreciation that the new 5 percent 

incentive is available to specialists in 

counties with short supply of these 

physicians. 

Response: We appreciate this positive 

feedback from the provider community. 

Comment: A commenter has 

questioned the rationale for our policy 

of imposing, as a condition of eligibility, 

the requirement that the specific 

location at which the service is 

furnished must be considered a HPSA 

or PSA. Since physicians do not always 

reside in the county where they provide 

services, identifying PSAs on one basis 

and paying for them on another basis 

may be problematic. 

Response: According to section 1833 

of the Act, we make bonus payments for 

physicians’ services furnished in an 

eligible HPSA or PSA. Thus, the place 

of service controls the availability of the 

bonus. A physician providing a service 

in his or her office, a patient’s home, or 

in a hospital may receive the incentive 

payment only if the service occurs 

within an eligible shortage or scarcity 

area. 

Comment: One commenter believes 

that podiatric physicians, who are 

considered specialists, should be among 

those eligible to receive the additional 5 

percent incentive payment. 

Response: Section 1833(u) of the Act, 

as added by the MMA, specifically 

defines ‘‘physician’’ as one described in 

section 1861(r)(1) of the Act. Therefore, 

we do not have authority to make bonus 

payments to podiatrists. 

Commenter: A commenter expressed 

concern that our systems had trouble 

implementing the HPSA bonuses under 

Method II for Critical Access Hospital 

(CAH) participation, and some 

providers have waited more than two 

years for increased Medicare payments. 

Response: Although some fiscal 

intermediaries may not have been 

accustomed to processing physician 

claims, these systems were updated and 

the problems resolved as of July 1, 2004. 

Comment: A commenter from 

California requested that physicians 

who provide Medicare services only 

through managed care not be included 

in our calculations. The commenter 

believes that including physicians who 

only treat managed care patients in the 

count to determine physician scarcity 

areas will lead to a gross overstatement 

of the number of physicians available to 

provide care to fee-for-service Medicare 

patients. 

Response: We do not believe that we 

have the legal authority to exclude 

managed care physicians from the ratio 

calculations. Moreover, excluding 

managed care physicians in the countywide physician tally would not change 

PSAs in California based on our 

calculations. In fact, excluding the 

managed care physicians would make 

five eligible areas ineligible. 

Result of Evaluation of Comments 

We are finalizing § 414.66 and 

§ 414.67 as proposed. We are accepting 

public comments on the zip code areas. 

E. Section 303—Payment for Covered 

Outpatient Drugs and Biologicals 

1. Average Sales Price (ASP) Payment 

Methodology 

a. Background 

Medicare Part B covers a limited 

number of prescription drugs and 

biologicals. For the purposes of this 

proposed rule, the term ‘‘drugs’’ will 

hereafter refer to both drugs and 

biologicals. Medicare Part B covered 

drugs generally fall into the following 

three categories: 

• Drugs furnished incident to a 

physician’s service.

• Durable medical equipment (DME) 

drugs. 

• Drugs specifically covered by 

statute (for example, 

immunosuppressive drugs). 

Section 303(c) of the MMA revises the 

payment methodology for Part B 

covered drugs that are not paid on a cost 

or prospective payment basis. In 

particular, section 303(c) of the MMA 

amends Title XVIII of the Act by adding 

section 1847A, which establishes a new 

ASP drug payment system. In 2005, 

almost all Medicare Part B drugs not 

paid on a cost or prospective payment 

basis will be paid under this system. 

The new ASP drug payment system is 

based on data submitted to us quarterly 

by manufacturers. Payment amounts 

will be updated quarterly based on the 

manufacturer’s ASP calculated for the 

most recent calendar quarter for which 

data are available. We intend to 

implement the quarterly pricing changes 

through program instructions or 

otherwise, as permitted under Section 

1847A(c)(5)(C). For calendar quarters 

beginning on or after January 1, 2004, 

the statute requires manufacturers to 

report their ASP data to us for almost all 

Medicare Part B drugs not paid on a cost 

or prospective payment basis. 

Manufacturers’ submissions are due to 

us not later than 30 days after the last 

day of each calendar quarter. 

The methodology for developing 

Medicare drug payment allowances 

based on the manufacturer’s submitted 

ASP data is described in this final rule 

and reflected in final revisions to the 

regulations at § 405.517 and new 

Subpart K in part 414. Several 

comments discussed aspects of the 

manufacturers’ calculation of ASP that 

are beyond the scope of this final rule. 

We did not propose any changes to the 

regulations concerning the 

manufacturer’s calculation of ASP. We 

also received other comments regarding 

the use of the least costly alternative 

(LCA) methodology when pricing drugs, 

and requests for new HCPCS codes for 

drugs and coverage of compounded 

drugs. These comments are also outside 

the scope of this final rule. We did not 

propose any changes to the LCA policy, 

the HCPCS process, or coverage of 

compounded drugs. 

b. Provisions of the Final Rule 

i. The ASP Methodology 

Effective 2005, payment for certain 

drugs and biologicals not paid on a cost 

or prospective payment basis furnished 

on or after January 1, 2005 will be based 

on an ASP methodology. 

As described in section 

1847A(b)(3)(A) of the Act for multiple 

source drugs and section 1847A(b)(4)(A) 

for single source drugs, the ASP for all 

66300 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

drug products included within the same 

billing and payment code [or HCPCS 

code] is the volume-weighted average of 

the manufacturers’ average sales prices 

reported to us across all the NDCs 

assigned to the HCPCS code. 

Specifically, section 1847A(b)(3)(A) of 

the Act and section 1847A(b)(4)(A) of 

the Act require that this amount be 

determined by—

• Computing the sum of the products 

(for each National Drug Code assigned 

to those drug products) of the 

manufacturer’s average sales price and 

the total number of units sold; and 

• Dividing that sum by the sum of 

the total number of units sold for all 

NDCs assigned to those drug products. 

Section 1847A(b)(1)(A) of the Act 

requires that the Medicare payment 

allowance for a multiple source drug 

included within the same HCPCS code 

be equal to 106 percent of the ASP for 

the HCPCS code. This payment 

allowance is subject to applicable 

deductible and coinsurance. The 

payment limit is also subject to the two 

limitations described below in section 

III.E.1.b.v of this preamble concerning 

widely available market prices and 

average manufacturer prices in the 

Medicaid drug rebate program. As 

described in section 1847A(e) of the 

Act, the payment limit may also be 

adjusted in response to a public health 

emergency under section 319 of the 

Public Health Service Act in which 

there is a documented inability to access 

drugs and a concomitant increase in the 

price of the drug which is not reflected 

in the manufacturer’s average sales 

price. 

Section 1847A(b)(1)(B) of the Act 

requires that the Medicare payment 

allowance for a single source drug 

HCPCS code be equal to the lesser of 

106 percent of the average sales price for 

the HCPCS code or 106 percent of the 

wholesale acquisition cost of the HCPCS 

code. This payment allowance is subject 

to applicable deductible and 

coinsurance. The payment limit is also 

subject to the two limitations described 

below in section III.E.1.b.v concerning 

widely available market prices and 

average manufacturer prices in the 

Medicaid drug rebate program. As 

described in section 1847A(e) of the 

Act, the payment limit may also be 

adjusted in response to a public health 

emergency under section 319 of the 

Public Health Service Act. 

Comment: One commenter suggested 

that we implement the ASP 

methodology on a pilot basis prior to a 

national rollout. A physician interest 

group recommended that we delay the 

implementation of the ASP payment 

system for at least one year. The interest 

group stated that we should inform 

physicians of the ASP for all covered 

drugs before the final rule is issued and 

allow physicians to comment on the 

proposed rates after an informed and 

complete review process.

Response: The law requires that the 

new ASP-based drug pricing system be 

implemented January 1, 2005. The 

January 1, 2005 prices will be based on 

the data submitted to us no later than 30 

days after the end of the third calendar 

year quarter of 2004. Given the 

requirements surrounding the timing of 

the promulgation of the physician fee 

schedule final rule, we will not have the 

January 1, 2005 prices available before 

the publication of the final rule. 

However, our goal is to provide as much 

information on Medicare Part B drug 

payment rates as possible as early as 

possible prior to the January 1, 2005 

effective date of those rates. 

Comment: A provider asked that we 

earmark funds to enable physicians to 

transition from the AWP–15 percent 

payment system to the ASP + 6 percent 

payment system. 

Response: We do not have statutory 

authority to create such a transition 

fund. 

Comment: One commenter stated that 

the ASP plan does not account for price 

increases in a timely manner. Another 

commenter expressed concern that 

because ASP modifications lag by at 

least two calendar quarters, market 

prices would not be reflected in a drug’s 

payment limit for at least six months 

after a pricing adjustment. 

Response: The ASP methodology is 

based on average sales prices reported 

by manufacturers quarterly. 

Manufacturers must report to us no later 

than 30 days after the close of the 

quarter. We implement these new prices 

through program instructions or 

otherwise at the first opportunity after 

we receive the data, which is the 

calendar quarter after receipt. 

Comment: Some commenters 

expressed concern that the ASP + 6 

percent payment methodology would 

discourage providers from using generic 

drugs and would increase the tendency 

to use newer or more expensive agents. 

Response: It is true that the higher the 

average sales price of a drug, the greater 

amount of money represented by 6 

percent of that price. However, Section 

1847A specifies that payment is at 106 

percent of ASP. The law requires the 

use of the new ASP + 6 percent payment 

system except in the limited instances 

described below in Sections V and VI. 

Comment: Several commenters 

suggested that we should establish a 

mechanism to provide the public with 

an opportunity to identify errors in the 

ASP-based payment rates before the 

start of the calendar quarter in which 

the rates are effective. They believe that 

this mechanism would minimize errors 

by permitting posting of the rates 

several weeks prior to the effective date.

Response: Our goal is to provide as 

much information on Medicare Part B 

drug payment rates as possible as early 

as possible prior to the effective date of 

those rates. 

Comment: A physician specialty 

group recommended that we use our 

inherent reasonableness authority to 

increase drug payments up to 15 percent 

where necessary to make the Medicare 

payment level sufficient to cover the 

price of drugs charged by specialty 

distributors that service the physician 

office market. 

Response: We do not have sufficient 

data to determine whether our inherent 

reasonableness authority would apply 

in this instance. Even if our inherent 

reasonableness authority were triggered, 

our data are insufficient to determine 

whether the adjustment the commenters 

request would be appropriate. 

Comment: Several commenters urged 

us to weigh the full range of potential 

consequences to patient care, especially 

in the oncology setting, with the 

implementation of the ASP payment 

methodology. They recommended that 

we take into consideration concerns 

such as the potential inability of 

providers to purchase drugs below the 

new reimbursement rate, the inability of 

oncologists to provide access to 

important under-reimbursed support 

services, and the disproportionate 

impact of these changes on rural 

providers necessitating a shift in care of 

sick cancer patient from community 

settings to the hospital. Some 

commenters suggested that we place a 

form on its Web site enabling 

beneficiaries to identify access 

problems. One commenter suggested 

that we perform a 1-year monitoring 

study to evaluate the quality of care 

issues and delay implementation until 

the results of the study are known. 

Response: Although we do not expect 

access problems under the new ASP + 

6 percent payment system, we will be 

monitoring patient access through our 

1–800–MEDICARE line, regional office 

staff, claims analysis, and other 

environmental scanning activities. We 

will work with Congress if access issues 

arise. The law requires that the new 

ASP-based drug pricing system be 

implemented January 1, 2005. 

Comment: Several commenters 

expressed concern regarding the 

statements on joining group purchasing 

organizations (GPOs) to improve their 

purchasing power. They indicate that 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66301

the size of the discount is based on the 

individual GPO member’s purchases, 

not the combined purchases of the GPO 

members. Thus, membership in a GPO 

would not necessarily result in a greater 

discount. They also point out that retail 

pharmacies do not have access to GPO 

purchasing arrangements. One 

commenter requested that we offer more 

tangible suggestions for obtaining drugs 

at the ASP +6 percent price other than 

encouraging physicians to participate in 

purchasing groups. 

Response: The law requires that the 

new ASP-based drug pricing system be 

implemented January 1, 2006. A recent 

survey of oncology practices performed 

by the American Society of Clinical 

Oncology indicated that the purchase 

price of drugs is not necessarily driven 

by practice size. It would appear that 

smaller purchasers are on average 

sometimes able to achieve similar drug 

pricing to larger purchasers. The OIG is 

conducting a study due not later than 

October 1, 2005, on the ability of 

different size physician practices in the 

specialties of hematology, hematology/

oncology, and medical oncology to 

obtain drugs at 106 percent of the 

average sales price. We are currently 

conducting another MMA-mandated 

study of sales of drugs to large volume 

purchasers that is due not later than 

January 1, 2006. We will seek to work 

with physicians, providers, and 

suppliers on ways to encourage prudent 

purchasing, including to the extent 

practicable the dissemination of 

information on lower cost suppliers of 

Medicare Part B drugs. We would 

welcome suggestions on ways to 

accomplish this goal. 

Comment: One commenter suggested 

that classes of trade should be taken into 

account when establishing ASP 

payment rates. 

Response: The law does not permit 

the exclusion of or differentiation by 

classes of trade in the calculation of the 

ASP payment rates, except for the 

specific statutory exceptions described 

in the Medicaid best price calculation 

under sections 1927(c)(1)(C)(i) and 

1927(c)(1)(C)(ii)(III) of the Act. The 

statute specifies a payment rate of 106 

percent of ASP. 

Comment: A drug manufacturer urges 

us to reject any requests to publish the 

NDC-specific ASPs as the publishing of 

the rates would facilitate inappropriate 

conduct. 

Response: The law does not permit 

the disclosure of NDC level ASPs in a 

form that discloses the identity of a 

specific manufacturer or prices charged 

by the manufacturer except in 

accordance with Section 1927(b)(3)(D) 

of the Act. That provision permits the 

disclosure of such data as the Secretary 

determines to be necessary to effectuate 

the provisions of section 1847A of the 

Act. 

v. Limitations on ASP

Section 1847A(d)(1) of the Act states 

that ‘‘The Inspector General of the 

Department of Health and Human 

Services shall conduct studies, which 

may include surveys, to determine the 

widely available market prices of drugs 

and biologicals to which this section 

applies, as the Inspector General, in 

consultation with the Secretary, 

determines to be appropriate.’’ Section 

1847A(d)(2) of the Act states that 

‘‘Based upon such studies and other 

data for drugs and biologicals, the 

Inspector General shall compare the 

average sales price under this section for 

drugs and biologicals with—

• The widely available market price 

for such drugs and biologicals (if any); 

and 

• The average manufacturer price (as 

determined under section 1927(k)(1)) for 

such drugs and biologicals.’’

Section 1847A(d)(3) of the Act states 

that ‘‘The Secretary may disregard the 

average sales price for a drug or 

biological that exceeds the widely 

available market price or the average 

manufacturer price for such drug or 

biological by the applicable threshold 

percentage (as defined in subparagraph 

(B)).’’ Section 1847A(d)(3)(B) states that 

‘‘the term ‘applicable threshold 

percentage’ means—

• In 2005, in the case of an average 

sales price for a drug or biological that 

exceeds widely available market price 

or the average manufacturer price, 5 

percent; and 

• In 2006 and subsequent years, the 

percentage applied under this 

subparagraph subject to such 

adjustment as the Secretary may specify 

for the widely available market price or 

the average manufacturer price, or 

both.’’

Section 1847A(d)(3)(C) of the Act 

states that ‘‘If the Inspector General 

finds that the average sales price for a 

drug or biological exceeds such widely 

available market price or average 

manufacturer price for such drug or 

biological by the applicable threshold 

percentage, the Inspector General shall 

inform the Secretary (at such times as 

the Secretary may specify to carry out 

this subparagraph) and the Secretary 

shall, effective as of the next quarter, 

substitute for the amount of payment 

otherwise determined under this section 

for such drug or biological the lesser 

of—

• The widely available market price 

for the drug or biological (if any); or 

• 103 percent of the average 

manufacturer price (as determined 

under section 1927(k)(1)) for the drug or 

biological.’’

Comment: One commenter urged us 

to provide further guidance on the 

widely available market price (WAMP) 

methodology, specifically how the OIG 

will compare ASP to WAMP. The 

commenter also requested guidance on 

how WAMP will be determined in the 

case of multiple drugs represented by a 

single J-code. Other commenters stated 

that we should provide greater guidance 

for how it will substitute WAMP for 

ASP. These commenters also suggested 

that we provide guidance on how it will 

treat quarterly oscillations between ASP 

and WAMP. 

Response: The OIG is developing its 

methodology regarding the widely 

available market price. Because the 

determination of WAMP is within OIG’s 

purview, we believe it is premature to 

address the implementation issues prior 

to the OIG establishing its methodology 

and conducting its first review. 

Comment: Several commenters 

recommend that we make adjustments 

where there is a disparity between the 

ASP-based payment limit and the 

physician acquisition cost. These 

commenters recommended that we raise 

the payment rate if the WAMP is higher 

than ASP. 

Response: Section 1847A of the Act 

does not provide authority to increase 

the ASP-based payment system based 

on the review of the OIG.

vi. Payment Methodology in Cases 

Where the Average Sales Price During 

the First Quarter of Sales Is Unavailable 

Section 1847A(c)(4) of the Act states 

that ‘‘In the case of a drug or biological 

during an initial period (not to exceed 

a full calendar quarter) in which data on 

the prices for sales for the drug or 

biological is not sufficiently available 

from the manufacturer to compute an 

average sales price for the drug or 

biological, the Secretary may determine 

the amount payable under this section 

for the drug or biological based on—

• The wholesale acquisition cost; or 

• The methodologies in effect under 

this part on November 1, 2003, to 

determine payment amounts for drugs 

or biologicals.’’

Comment: Several commenters 

requested that we provide guidance on 

how the payment rate for a new drug in 

its second calendar quarter will be 

determined. They recommend that we 

utilize the same methodology for the 

2nd quarter payment as for the 1st 

quarter; that is, use the WAC or 

methodologies in effect on November 1, 

2003. 

66302 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

Response: Pursuant to section 

1847A(c)(4) of the Act, during an initial 

period (not to exceed a full calendar 

quarter) where data on prices for sales 

for a drug are not sufficiently available 

from the manufacturer to compute an 

ASP, we will pay based on WAC or the 

methodologies in effect on November 1, 

2003 for a limited period. This time 

period will start on the date that sales 

of the drug begin and end at the 

beginning of the quarter after we receive 

information from the manufacturer 

regarding ASP for the first full quarter 

of sales. 

c. Payment for Influenza, 

Pneumococcal, and Hepatitis B 

Vaccines 

Section 1841(o)(1)(A)(iv) of the Act 

requires that influenza, pneumococcal, 

and hepatitis B vaccines described in 

subparagraph (A) or (B) of section 

1861(s)(10) of the Act be paid based on 

95 percent of the average wholesale 

price (AWP) of the drug. The AWP 

payment rates for these vaccines will be 

updated quarterly. No commenters 

objected. 

d. Payment for Drugs Furnished During 

2005 in Connection With the Furnishing 

of Renal Dialysis Services if Separately 

Billed by Renal Dialysis Facilities 

Section 1881(b)(13)(A)(ii) of the Act 

indicates that payment for a drug 

furnished during 2005 in connection 

with the furnishing of renal dialysis 

services, if separately billed by renal 

dialysis facilities, will be based on the 

acquisition cost of the drug as 

determined by the Inspector General(IG) 

report to the Secretary required by 

section 623(c) of the MMA or, insofar as 

the IG has not determined the 

acquisition cost with respect to a drug, 

the Secretary shall determine the 

payment amount for the drug. In the 

report, ‘‘Medicare Reimbursement for 

Existing End-Stage Renal Disease 

Drugs,’’ the IG found that, on average, in 

2003 the four largest chains had drug 

acquisition costs that were 6 percent 

lower than the ASP of 10 of the top 

drugs, including erythropoietin. A 

sample of the remaining independent 

facilities had acquisition costs that were 

4 percent above the ASP. Based on this 

information, the overall weighted 

average drug acquisition cost for renal 

dialysis facilities is 3 percent lower than 

the ASP. Therefore, we proposed that 

payment for a drug or biological 

furnished during 2005 in connection 

with renal dialysis services and 

separately billed by renal dialysis 

facilities will be based on the ASP of the 

drug minus 3 percent. We proposed to 

update this quarterly based on the ASP 

reported to us by drug manufacturers. 

We received numerous comments 

regarding our proposed payments rate of 

ASP minus 3 percent. Those comments 

and responses are provided below. 

Comment: Commenters questioned 

the basis for our decision to pay for 

separately reimbursed drugs at a rate of 

ASP minus three percent. These 

commenters stated that ASP minus 3 

percent was not acquisition cost as 

determined by OIG and did not reflect 

the acquisition cost relationship 

between these drugs. Some commenters 

questioned the relationship between the 

ASP definition used by the OIG and the 

current definition. Commenters stated 

that we should base the payment rates 

on the acquisition cost of each drug as 

reported by the OIG updated to 2005 

rather than an ASP-based formula. Some 

commenters indicated that the 

acquisition cost should be updated to 

2005 and suggested an update using the 

same annual factor used for budget 

neutrality calculations. For drugs not 

included in the OIG report, some 

commenters suggested that we use the 

same methodology for most other 

Medicare Part B drugs, namely ASP plus 

6 percent. Commenters indicated we 

should consider two tiers of payment 

based on provider size to minimize the 

discrepancy between large and small 

providers or in the absence of two tiers 

base the payment on the acquisition cost 

of the facilities not owned or managed 

by the four largest providers. 

Commenters also asked for clarification 

of the payment basis for separately 

billable ESRD drugs other than EPO 

billed by hospital based ESRD facilities 

since these drugs historically were not 

paid based on AWP but rather based on 

reasonable cost.

Response: We agree with the 

commenters who suggested we base the 

2005 payment rates for separately 

billable ESRD drugs on the actual dollar 

value of the acquisition costs as 

determined by the IG rather than the 

acquisition costs relative to the ASP. We 

also agree that we should update the IG 

acquisition costs to calculate 2005 rates. 

After consideration of the available 

price data, we have determined that the 

Producer Price Index (PPI) for 

prescription preparations is the most 

appropriate price measure for updating 

EPO and other separately billable drugs 

from 2003 to 2005. The PPI for 

prescription preparations is released 

monthly by the Bureau of Labor 

Statistics, and reflects price changes at 

the wholesale or manufacturer stage. By 

comparison, the Consumer Price Index 

(CPI) for prescription drugs reflects 

price changes at the retail stage. Because 

EPO and many of the separately billable 

drugs used by dialysis facilities are 

purchased directly from the 

manufacturer, the use of a price index 

that measures wholesale rather than 

retail prices is more appropriate. The 

PPI for prescription drugs is the 

measure used in the various market 

baskets that update Medicare payments 

to hospitals, physicians, skilled nursing 

facilities, and home health agencies. In 

addition, the PPI for prescription drugs 

was recommended for use in the 

proposed composite rate market basket 

detailed in the 2003 Report to Congress. 

Based on historical data through the 

second quarter of 2004, we used the 

Global Insight Inc. forecast of the PPI for 

prescription drugs to determine the 

update factors for 2004 and 2005. We 

feel the use of an independent forecast, 

in this case from Global Insight Inc., is 

superior to using the Naational Health 

Expenditure projections for drug prices 

(which is the CPI for prescription drugs) 

and is consistent with the methodology 

used in projecting market basket 

increases for Medicare prospective 

payment systems. 

We also agree with those commenters 

who suggested that the drugs not 

contained in the IG study should be 

paid at ASP plus 6 percent. We believe 

it is appropriate for the payment amount 

for these drugs when separately billed 

by ESRD facilities during 2005 to be the 

same as the payment amount for other 

entities that are paid by Medicare on 

other than a cost or prospective 

payment basis. We do not agree with 

commenters that we should establish 

separate drug payment rates for large 

and small providers. For reasons 

discussed in the section of this final rule 

on the ESRD composite rate, we believe 

it is appropriate to establish a single 

add-on payment to the composite rate 

and therefore appropriate to establish 

the same drug payment rates for both 

large and small providers. We do not 

believe it is appropriate to base the 

payment amount on only the higher 

acquisition cost of the facilities not 

owned or managed by the four largest 

providers and not take into account the 

acquisition costs of the largest four 

providers who represent the majority of 

the drug expenditures. Section 

1881(b)(13)(A)(ii) of the Social Security 

Act refers to ‘‘the acquisition cost of the 

drug or biological’’ and not the 

acquisition costs of the drug or 

biological. In accordance with the 

statute and our understanding of 

Congressional intent for 2005, we 

believe it is more appropriate to base the 

2005 payment amounts on a weighted 

average of the acquisition costs of the 

four largest providers and the other 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66303

facilities rather than base the 2005 

payment amounts solely on the 

acquisition costs of the other facilities. 

In response to the commenters who 

requested clarification of the payment 

basis for separately billable ESRD drugs 

other than EPO billed by hospital-based 

ESRD facilities, we did not propose 

changes to the reasonable cost payment 

basis for these drugs. The OIG did not 

study separately billable ESRD drugs 

other than EPO billed by hospital-based 

ESRD facilities and accordingly, we did 

not propose to change the payment basis 

for these drugs.

e. Payment for Infusion Drugs Furnished 

Through an Item of DME 

In 2005, section 1841(o)(1)(D)(i) of the 

Act requires that an infusion drug 

furnished through an item of DME 

covered under section 1861(n) of the 

Act be paid 95 percent of the average 

wholesale price for that drug in effect on 

October 1, 2003. No commenters 

objected. 

2. Drug Administration Payment Policy 

and Coding Effective in 2005 

Section 1848(c)(2)(J) of the Act (as 

added by section 303(a) of the MMA) 

requires the Secretary to promptly 

evaluate existing drug administration 

codes for physicians’ services to ensure 

accurate reporting and billing for those 

services, taking into account levels of 

complexity of the administration and 

resource consumption. According to 

section 1848(c)(2)(B)(iv) of the Act (as 

amended by section 303(a) of the 

MMA), any changes in expenditures in 

2005 or 2006 resulting from this review 

are exempt from the budget neutrality 

requirement of section 1848(c)(2)(B)(ii) 

of the Act. The statute further indicates 

that the Secretary shall use existing 

processes for the consideration of 

coding changes and, to the extent 

changes are made, shall use those 

processes to establish relative values for 

those services. The Secretary is also 

required to consult with physician 

specialties affected by the provisions 

that change Medicare payments for 

drugs and drug administration. 

The AMA’s CPT Editorial Panel 

established a workgroup, with 

representatives from affected specialties 

that met earlier this year to develop 

recommendations to the CPT Editorial 

Panel in August. Based on these 

recommendations, that panel adopted 

several new drug administration codes 

and revised several existing codes. 

Subsequently, the AMA’s Relative Value 

Update Committee (RUC) met at the end 

of September to make recommendations 

to us on the practice expense resource 

inputs and work relative values for the 

new and revised drug administration 

codes. 

We indicated in the proposed rule 

that we would consider whether it is 

necessary for us to make coding changes 

effective January 1, 2005 through the 

use of G-codes (because the 2005 CPT 

book will have already been published), 

and we requested public comment. As 

described in detail below, we are 

establishing new G-codes for 2005 that 

correspond with the new CPT codes that 

will become active in 2006. These new 

G-codes are interim until 2006. 

The new CPT codes can be 

categorized into the following three 

categories of drug administration 

services: infusion for hydration; 

nonchemotherapy therapeutic/

diagnostic injections and infusions 

other than hydration; and chemotherapy 

administration (other than hydration) 

which includes infusions/injections. 

There are some important changes in 

the new codes relative to current drug 

administration coding. The infusion of 

substances such as monoclonal antibody 

agents or other biologic response 

modifiers is reported under the 

chemotherapy codes, instead of the 

nonchemotherapy infusion codes, as is 

currently the case. There are also new 

codes in both the chemotherapy and 

nonchemotherapy sections for reporting 

the additional sequential infusion of 

different substances or drugs. 

As we stated in the proposed rule, we 

plan to analyze any shift or change in 

utilization patterns once the payment 

changes for drugs and drug 

administration required by MMA go 

into effect. While we do not believe the 

changes will result in access problems, 

we plan to continue studying this issue. 

We also note that the MMA requires the 

Medicare Payment Advisory 

Commission (MedPAC) to study how 

the changes in payments for drugs and 

drug administration affect other 

specialties. 

We received many comments on 

various aspects of coding and payment 

for drug administration services in 

response to the proposed rule. We are 

also responding below to comments we 

received on the January 7, 2004 interim 

final rule with comment period that 

announced the provisions of section 303 

of the MMA affecting drug 

administration services that took effect 

in 2004 (69 FR 1094). Specifically, 

section 303 of the MMA required the 

following changes in 2004: a transitional 

adjustment that increases payments for 

specific drug administration services by 

32 percent in 2004 (and 3 percent in 

2005); establishing work RVUs for 

certain drug administration services 

equal to the work RVUs for a level 1 

office medical visit for an established 

patient; the incorporation of 

supplemental survey data in the 

calculation of the practice expense 

RVUs for drug administration codes; 

and allowing oncologists to bill for 

multiple drug administrations by the 

‘‘push’’ technique on a single day. 

Comment: Many commenters 

supported the efforts to promptly 

evaluate existing drug administration 

codes to ensure accurate reporting and 

billing for services. They support our 

proposal to use G-codes until the new 

CPT codes are active. They asked us to 

adopt the recommendations of the CPT 

Editorial Panel for new drug 

administration codes.

Response: We appreciate the support 

of the commenters of all of the efforts to 

expeditiously review and update these 

codes. We also would like to 

specifically recognize the efforts of the 

CPT Editorial Panel’s Drug 

Administration Workgroup to develop 

the new CPT codes, the Editorial Panel 

for its consideration and approval of the 

new codes, and the RUC for its similar 

efforts to develop recommendations for 

the inputs for the new codes. 

We have reviewed the 

recommendations of the CPT Editorial 

Panel and, with one exception noted 

below, agree with their new and revised 

codes for drug administration for 2005. 

Because the new CPT codes will not be 

included in the 2005 CPT, we have 

decided to establish G-codes, where 

applicable. At this time, we anticipate 

these new G-codes will be temporary 

until the new CPT codes become active 

January 1, 2006. 

A listing of the old CPT codes and 

their corresponding G-codes are in the 

table below. Some of the old CPT codes 

will correspond to more than one Gcode, and there are codes that will allow 

physicians to bill for services that 

previously did not have a code or were 

bundled into other services. 

The drug administration codes are 

divided into three categories: infusion 

codes for hydration; codes for 

therapeutic/diagnostic injections; and 

chemotherapy administration codes. 

The descriptions of the codes below are 

taken primarily from the AMA CPT 

Editorial Panel. We are including these 

specific descriptions here in order to 

provide as much information as possible 

about the new G-codes prior to their 

implementation on January 1, 2005. 

However, we anticipate that we will 

issue further instructions regarding the 

appropriate use of these G-codes, 

including clarifications, interpretations, 

and other modifications to the following 

guidance (apart from the G-codes 

66304 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

themselves) as part of any instructions 

issued through a subregulatory process. 

The codes for hydration (G0345 and 

G0346 in the table below) are for 

reporting hydration intravenous (IV) 

infusions consisting of a prepackaged 

fluid and electrolytes. These codes are 

not used to report infusion of drugs or 

other substances. The codes for 

chemotherapy administration are to be 

used for reporting the administration of 

non-radionuclide anti-neoplastic drugs, 

and anti-neoplastic agents provided for 

treatment of noncancer diagnoses, or 

substances such as monoclonal antibody 

agents and other biologic response 

modifiers. The remaining codes are for 

reporting injections and infusions for all 

drug administrations that were 

previously reported using CPT codes 

90780–90788, 96400, and 96408–96414 

(other than those described above as 

hydration or chemotherapy).

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The following coding guidance is 

based on the CPT Editorial Panel’s 

explanatory language for the new CPT 

codes. As noted above, we plan to issue 

further guidance as needed. 

Infusions that were previously 

reported under CPT code 90780 (nonchemotherapy infusion, 1st hour) will 

be billed under one of three G-codes 

beginning January 1, 2005. The first 

hour of a hydration infusion will be 

billed under G0345. The first hour of 

infusion of a nonchemotherapy drug 

other than hydration will be billed 

under G0347. The first hour of infusion 

of anti-neoplastic agents provided for 

treatment of noncancer diagnoses or 

substances such as monoclonal antibody 

agents and other biologic response 

modifiers is billed under G0359. 

Similarly, services that were 

previously reported under CPT code 

90781 (non-chemotherapy infusion, 

each additional hour) will be billed 

under one of four G-codes beginning 

January 1, 2005. Each additional hour of 

a hydration infusion will be billed 

under G0346. Each additional hour of a 

nonchemotherapy infusion will be 

billed under G0348. Currently, if a 

second (or other subsequent) 

nonchemotherapy drug is administered 

sequentially, the physician would bill 

code 90781 for the additional hour of 

infusion. Under the new G-codes, the 

physician will bill G0349, the sequential 

administration of a second or 

subsequent nonchemotherapy drug. In 

addition, each additional hour of the 

infusion of anti-neoplastic agents for the 

treatment of noncancer diagnoses or 

substances such as monoclonal 

antibodies and other biological 

modifiers is billed under G0360. 

Injections that were previously billed 

under CPT code 90782 will now be 

billed under HCPCS code G0351. 

Physicians should use HCPCS code 

G0352 for injections previously billed 

under CPT code 90783. 

Nonchemotherapy drugs administered 

by IV push (currently using CPT code 

90784) should now be billed under 

HCPCS code G0353. The CPT book does 

not currently contain a code for 

physicians to bill a second (or other 

subsequent) nonchemotherapy drug 

administered by IV push. The CPT 

Editorial Panel created a new code for 

each additional nonchemotherapy drug 

administered by IV push. For 2005, the 

physician should bill HCPCS code 

G0354.

The CPT coding system will be 

deleting code 90788 (Intramuscular 

injection of antibiotic) in 2006. We are 

maintaining CPT code 90788 as an 

active code until it is changed in the 

CPT coding system and instructions are 

provided on the code to bill in its place 

beginning January 1, 2006. 

Chemotherapy injections, previously 

billed under the CPT code 96400, will 

now be billed using one of two new Gcodes. For injection of nonhormonal 

anti-neoplastic drugs, the physician 

should bill HCPCS code G0355. For 

injection of hormonal anti-neoplastic 

drugs, the physician should bill HCPCS 

code G0356. CPT is not recommending 

any changes to CPT codes 96405 

(Chemotherapy administration; 

intralesional, up to and including 7 

lesions) and 96406 (more than 7 

lesions), and these codes will remain 

active for Medicare in 2005. 

Chemotherapy drugs administered by 

IV push (currently billed under CPT 

code 96408, or, if the drug meets the 

expanded definition of chemotherapy 

including monoclonal antibodies or 

other biologic response modifiers, 

currently billed under CPT code 90784) 

should be billed using G0357 for the 

initial drug administered. In 2004, 

Medicare paid for the second (or other 

subsequent) chemotherapy drug 

administered by IV push under CPT 

code 96408. CPT will be establishing a 

code that recognizes the resource inputs 

associated with each additional 

chemotherapy drug administered by IV 

push. For 2005, the analogous code to 

bill the second (or other subsequent) 

chemotherapy drug administered by IV 

push is G0358. 

The first hour of chemotherapy 

administration, previously billed under 

CPT code 96410, should now be billed 

under CPT code G0359. Each additional 

hour of chemotherapy (previously billed 

under CPT code 96412) should now be 

billed under CPT code G0360. CPT is 

also recommending a new code for the 

first hour of a different chemotherapy 

drug administered sequentially by 

infusion. If a second chemotherapy drug 

is administered sequentially, the 

physician should bill for HCPCS G0362 

for the first hour of infusion of the 

second drug. All additional hours (up to 

eight total hours) of chemotherapy 

infusion should be billed using HCPCS 

code G0360. Prolonged chemotherapy 

infusions (8 hours or more, previously 

billed under code 96414) should be 

billed in 2005 using HCPCS code 

G0361. 

For three codes (G0350, G0354, 

G0363), the table above has an ‘‘N/A’’

listed in the ‘‘Old CPT’’ column, 

meaning there were no CPT codes that 

existed explicitly for these services. 

These services will now be billable 

under the new coding system. For 

instance, CPT will be establishing a 

code for a ‘‘concurrent infusion.’’ A 

concurrent infusion refers to the 

simultaneous infusion of two 

nonchemotherapy drugs. We are using 

temporary code G0350 for this service. 

Code G0350 is an add-on code. It must 

be reported as an ‘‘add-on’’ or with 

another code and our payment reflects 

the incremental resources associated 

with infusing the second drug. For 

example, if two nonchemotherapy drugs 

are infused concurrently, the physician 

bills G0347 for the initial drug infused 

and G0350 as an add-on. 


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As indicated above, HCPCS code 

G0354 is a new code for each additional 

sequentialnonchemotherapy drug 

administered by IV push. HCPCS code 

G0354 is also an add-on code. In 

general, G0354 will be an add-on to 

G0353. However, it is possible that a 

nonchemotherapy drug administered by 

IV push may follow the administration 

of a chemotherapy drug administered by 

IV push, and HCPCS code G0354 would 

then be an add-on to HCPCS code 

G0357. 

HCPCS code G0363 is a new code for 

irrigation of an implanted venous access 

device. There is currently no code to 

describe this service. Medicare will pay 

for G0363 if it is the only service 

provided that day. If there is a visit or 

other drug administration service 

provided on the same day, payment for 

this service is bundled into payment for 

the other service.

We are creating the following new 

add-on G-codes: G0346, G0348, G0349, 

G0350, G0354, G0358, G0360 and 

G0362. As indicated above, add-on 

codes must be billed with other codes, 

and our payment reflects the 

incremental resources associated with 

providing the additional service. The 

initial codes that these add-on codes 

could potentially be billed with include: 

G0345, G0347, G0353, G0357 and 

G0359. If a combination of 

chemotherapy, nonchemotherapy drugs, 

and/or hydration is administered by 

infusion sequentially, the initial code 

that best describes the service should 

always be billed irrespective of the 

order in which the infusions occur. 

Comment: In the January 7, 2004 

interim final rule with comment, we 

revised our payment policy for pushes 

of chemotherapy drugs to allow for 

payment of multiple pushes of different 

chemotherapy agents in one day. A 

commenter asked that we revise our 

policy for multiple pushes of 

nonchemotherapy agents, to allow 

multiple billings on a single day. 

Response: The CPT/RUC 

recommendations address this 

comment. New codes have been created 

to account for the resources associated 

with multiple chemotherapy and 

nonchemotherapy drugs administered 

by IV push. HCPCS code G0353 is used 

for the initial IV push of a 

nonchemotherapy drug, while HCPCS 

code G0354 is used for each additional 

push of a nonchemotherapy drug. For 

chemotherapy drugs administered by IV 

push, HCPCS code G0357 is used for the 

first drug administered, while HCPCS 

code G0358 is used for each additional 

drug. 

We also note that existing CPT codes 

90782–90788 (Therapeutic, prophylactic 

or diagnostic injections) currently have 

a status indicator of ‘‘T’’, which means 

that payment for the service is bundled 

unless it is the only service billed by the 

physician for the patient that day. 

However, based on the RUC 

recommendations and the resulting 

values for the injection services, we are 

making the status indicator on HCPCS 

codes G0351—G0354 an ‘‘A’’, which 

will allow them to be separately paid 

even if another physician fee schedule 

service is billed for the same patient that 

day. 

Comment: A commenter stated that, 

given the increased work and practice 

expense RVUs for drug administration 

codes, it follows that both the work and 

practice expense RVUs for the 

immunization administration codes 

(90471, 90472, 90473, and 90474) 

should also be increased. The 

commenter argued that the service 

involved in administering vaccines is 

more intense/complex than the service 

involved in the drug infusion codes. 

Response: We agree with the 

commenter that the physician work and 

practice expenses associated with 

administering injections are similar to 

immunizations. In addition, we would 

point out that we currently pay for 

vaccine administrations (G0008–G0010) 

based on crosswalking the RVUs to CPT 

code 90471. Therefore, any changes to 

the physician work and practice 

expense RVUs for code 90471 would 

also affect payments for vaccine 

administrations. 

Because we agree these services 

should be similar in the amount of 

physician work involved, we are 

assigning the physician work value 

recommended by the RUC for code 

90782 (G-code G0351) to code 90471 

and HCPCS G-codes G0008–G0010. We 

are combining the utilization data for all 

of these codes to determine a single 

practice expense RVU that will be 

applied to each of these codes. 

We are also assigning a work RVU of 

0.15 to code 90472. Codes 90473 

(Immunization administration by 

intranasal or oral route; one vaccine 

(single or combination vaccine/toxoid)) 

and 90474 (Each additional vaccine 

(single or combination vaccine/toxoid)) 

are currently not covered. We are 

changing the status of these codes to 

‘‘R’’, or restricted, meaning they are 

payable under some circumstances after 

carrier review. These codes will be 

carrier priced. 

Comment: If a patient receives 

chemotherapy infusions, CPT code 

96410 is used to report the infusion of 

the first drug up to one hour. 

Chemotherapy drugs are usually 

administered sequentially. Thus, if a 

patient receives the administration of a 

second chemotherapy drug at the same 

treatment session, CPT code 96412 is 

used to report the infusion of the second 

drug for each additional hour of 

infusion. In 2004, the national payment, 

including the transitional payment 

adjustment of 32 percent, for CPT code 

96410 is $217. The comparable payment 

for CPT code 96412 is $48. 

Commenters pointed out that this 

policy does not take into account the 

levels of complexity of administration 

and resource consumption. The 

administration of multiple drugs 

requires additional preparation time, 

supplies, and patient education, not 

currently accounted for in CPT code 

96412. 

Response: The CPT/RUC 

recommendations addressed this issue. 

We are implementing new code G0362, 

Chemotherapy administration, 

intravenous technique; each additional 

sequential infusion, up to one hour. 

This code will allow, effective January 

1, 2005, physicians to begin to bill for 

the first hour of chemotherapy of the 

second chemotherapy drug 

administered.

Comment: Several commenters 

requested clarification that the changes 

to the drug administration codes 

resulting from the CPT changes and our 

G-codes would be exempted from 

budget neutrality by the provision at 

section 1848(c)(2)(B)(iv)(III), as added 

by MMA section 303(a)(1). This 

provision stipulates that the evaluation 

of the existing drug administration 

codes described above as leading to the 

interim G-codes and the new CPT codes 

for 2006, is to be exempt from budget 

neutrality. 

Response: The commenters are correct 

that the additional expenditures that 

result from the interim G-code changes 

we are implementing in this rule are 

exempt from budget neutrality. 

Comment: Several commenters asked 

that we continue payment for drug 

administration codes at the 2004 levels, 

which included the 32 percent 

transitional payment adjustment, 

instead of paying at the 3 percent 

transitional payment adjustment for 

2005, or adopt other measures. For 

example, commenters suggested 

temporary codes to offset the large 

reductions that would otherwise go into 

effect in 2005. 

Response: Section 303(a)(4) of the 

MMA is very specific on the application 

of the transitional payment adjustments 

in 2004 and 2005. We do not have the 

legal authority to continue payments 

based on the 2004 payment levels. In 

2005, the transitional adjustment 

percentage for drug administration 

66308 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

decreases from 32 percent to 3 percent. 

No transitional percentage is applied in 

2006 or subsequent years. 

Comment: One commenter requested 

additional temporary G-codes to offset 

the payment reductions for oncologists 

that would otherwise go into effect in 

2005. According to this commenter, the 

payment amount associated with each 

of these codes would be a percentage 

add-on amount sufficient to offset the 

reductions in drug margins and 

payments for drug administration 

services. 

Response: We have worked 

extensively with the major associations 

representing oncologists and their 

patients to ensure that Medicare 

continues to pay appropriately for these 

extremely critical services. The payment 

changes we made for 2004, the new Gcodes, and allowing additional payment 

for injections and additional infusions, 

either have already increased, or will 

increase, payments for drug 

administration services. The impacts of 

these changes are discussed extensively 

in the impact analysis section of this 

final rule. 

In addition, as we indicated above, we 

plan to analyze any shift or change in 

utilization patterns once the payment 

changes for drugs and drug 

administration required by MMA go 

into effect. While we do not believe the 

changes will result in access problems, 

we plan to continue studying this issue. 

Comment: One commenter expressed 

concern that the reductions in payments 

to oncologists described in the proposed 

rule could make it difficult, if not 

impossible, for many patients to 

continue to access cancer care in 

nonhospital community settings. 

Response: As noted above, we have 

taken several steps to increase payments 

for drug administration services in this 

final rule. We recognize that oncology 

patients in the Medicare population 

undergoing chemotherapy face serious 

and unique issues and problems related 

to quality of care throughout the life 

cycle of their disease process; from the 

time of first diagnosis, through 

treatment, until the patient experiences 

an end to medical (including hospice) 

care. Patients, national cancer 

organizations, and medical providers 

have identified certain factors that they 

believe affect the comfort and ultimately 

the care for cancer patients in the 

physician office setting. 

We believe that the goals and 

objectives of optimal treatment include 

reviewing and analyzing pain control 

management, minimization of nausea 

and vomiting, explaining treatment 

options, outlining existing 

chemotherapy regimens, assessing 

quality of life, assessing patient 

symptoms and complaints, supporting 

and educating caregivers, and avoidance 

of unnecessary Emergency Department 

visits and inpatient hospitalizations. 

Further, we believe that clinicians 

armed with appropriate assessments can 

proactively intervene with medical 

treatment and nonmedical assistance to 

help ameliorate some of the distressing 

and unpleasant, but frequent and 

predictable, events that may accompany 

certain cancers and chemotherapeutic 

regimens used to combat cancer. 

The Secretary has been given the 

authority under sections 402(a)(1)(B) 

and 402(a)(2) of the Social Security Act 

Amendments of 1967 (Pub. L. 90–248), 

as amended, to develop and engage in 

experiments and demonstration projects 

to provide incentives for economy, 

while maintaining or improving quality 

in provision of health services. In order 

to identify and assess certain oncology 

services in an office-based oncology 

practice that positively affect outcomes 

in the Medicare population, we will 

initiate a one-year demonstration project 

for CY 2005. While we encourage 

optimal care in all facets of treatment, 

the focus of the demonstration project 

will be on three areas of concern often 

cited by patients: pain control 

management, the minimization of 

nausea and vomiting, and the reduction 

of fatigue.

Practitioners participating in the 

project must provide and document 

specified services related to pain control 

management and minimization of 

nausea and vomiting, and the reduction 

of fatigue. To facilitate the collection of 

this information, we have established 12 

new G-codes to be reported by program 

participants. 

G-Codes for Assessment of Nausea and/

or Vomiting 

G9021: Chemotherapy assessment for 

nausea and/or vomiting, patient 

reported, performed at the time of 

chemotherapy administration; 

assessment level one: not at all (for use 

in a Medicare-approved demonstration 

project).

G9022: Chemotherapy assessment for 

nausea and/or vomiting, patient 

reported, performed at the time of 

chemotherapy administration; 

assessment level two: a little (for use in 

a Medicare-approved demonstration 

project).

G9023: Chemotherapy assessment for 

nausea and/or vomiting, patient 

reported, performed at the time of 

chemotherapy administration; 

assessment level three: quite a bit (for 

use in a Medicare-approved 

demonstration project).

G9024: Chemotherapy assessment for 

nausea and/or vomiting, patient 

reported, performed at the time of 

chemotherapy administration; 

assessment level four: very much (for 

use in a Medicare-approved 

demonstration project).

G-Codes for Assessment for Pain 

G9025: Chemotherapy assessment for 

pain, patient reported, performed at the 

time of chemotherapy administration, 

assessment level one: not at all (for use 

in a Medicare-approved demonstration 

project).

G9026: Chemotherapy assessment for 

pain, patient reported, performed at the 

time of chemotherapy administration, 

assessment level two: a little (for use in 

a Medicare-approved demonstration 

project).

G9027: Chemotherapy assessment for 

pain, patient reported, performed at the 

time of chemotherapy administration 

assessment level three: quite a bit (for 

use in a Medicare-approved 

demonstration project).

G9028: Chemotherapy assessment for 

pain, patient reported, performed at the 

time of chemotherapy administration, 

assessment level four: very much (for 

use in a Medicare-approved 

demonstration project).

G-Codes for Assessment for Lack of 

Energy (Fatigue) 

G9029: Chemotherapy assessment for 

lack of energy (fatigue), patient 

reported, performed at the time of 

chemotherapy administration, 

assessment level one: not at all (for use 

in a Medicare approved demonstration 

project).

G9030: Chemotherapy assessment for 

lack of energy (fatigue), patient 

reported, performed at the time of 

chemotherapy administration, 

assessment level two: a little (for use in 

a Medicare approved demonstration 

project).

G9031: Chemotherapy assessment for 

lack of energy (fatigue), patient 

reported, performed at the time of 

chemotherapy administration, 

assessment level three: quite a bit (for 

use in a Medicare approved 

demonstration project).

G9032: Chemotherapy assessment for 

lack of energy (fatigue), patient 

reported, performed at the time of 

chemotherapy administration, 

assessment level four: very much (for 

use in a Medicare-approved 

demonstration project).

The codes correspond to four patient 

assessment levels (‘‘not at all,’’ ‘‘a 

little,’’ ‘‘quite a bit,’’ or ‘‘very much’’) for 

each of the following three patient 

status factors: nausea and/or vomiting; 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66309

pain; and lack of energy (fatigue). These 

levels, based on the Rotterdam scale, 

were chosen since they appear to be less 

burdensome for the practitioner and 

more easily understood by the patient. 

Participating practitioners must bill the 

applicable G-codes for each patient 

status factor (that is, one G-code each for 

patient comfort assessment factors: 

nausea and/or vomiting; pain; and 

fatigue) assessed during a chemotherapy 

encounter in order to receive payment 

under the demonstration. A G-code for 

each patient status factor must appear 

on the claim for payment to be made 

under the demonstration project. A 

patient chemotherapy encounter is 

defined as chemotherapy administered 

through intravenous infusion or push, 

limited to once per day. During the 

course of the demonstration, an 

additional payment of $130 per 

encounter will be paid to participating 

practitioners for submitting the patient 

assessment data as described above. 

Any office-based physician or 

nonphysician practitioner operating 

within the State scope of practice laws 

who takes care of and administers 

chemotherapy to oncology patients in 

an office setting is eligible to participate 

in this demonstration project. By billing 

the designated G-codes, the practitioner 

self-enrolls in the project and agrees to 

all of the terms and conditions of the 

demonstration project. 

This information will help us to work 

with those who care for cancer patients 

to determine ways to improve the 

quality of care and quality of life for 

patients as demonstrated by measuring 

objective parameters and the medical 

response to those standardized 

measurements. The evaluation of the 

project will be based on data reported to 

us by the practitioners and the use of 

our administrative claims data to 

examine Emergency Department visits 

and inpatient hospitalizations. 

We anticipate that further information 

regarding this demonstration project 

will be forthcoming after publication of 

this final rule. 

Comment: Commenters pointed out 

that, under the MMA, we added 

physician work RVUs to specified drug 

administration codes equivalent to a 

level 1 established office visit. They 

indicated that we should also have 

increased the practice expense inputs 

for the same drug administration codes 

to account for the practice expense 

inputs associated with a level 1 

established office visit. 

Response: Section 1848(c)(2)(H)(iii) of 

the Act (as added by 303(a)(1)(B) of the 

MMA) specified that we increase the 

work RVUs for drug administration 

services equal to the work RVUs for a 

level 1 established patient office visit 

(CPT code 99211). As indicated in the 

January 7, 2004 Federal Register (69 FR 

1093), we established work RVUs of 

0.17 for specific CPT codes that met the 

statutory definition of ‘‘drug 

administration services.’’

However, the legislation did not 

direct us to also increase the practice 

expense RVUs of the drug 

administration codes to include the 

clinical staff time associated with a level 

1 office visit. The practice expense 

inputs of the existing CPT codes for 

drug administration were refined in 

2002. We believe the recommendations 

from the PEAC included the typical 

clinical staff time associated with each 

drug administration service. 

The CPT Editorial Panel approved 

new and revised codes for drug 

administration services for 2005. 

Depending upon the service, the RUC is 

recommending work RVUs for the new 

drug administration codes that may 

equal, exceed or be less than 0.17. 

Although section 1848(c)(2)(H)(iii) of 

the Act requires that the work RVUs for 

drug administration services shall equal 

those of a level 1 office medical visit, 

new subparagraph (J) requires the 

Secretary to ‘‘promptly evaluate existing 

drug administration codes for 

physicians’ services’’. The statute 

further indicates that the ‘‘Secretary 

shall use existing processes for the 

consideration of coding changes and 

* * * in establishing relative values 

*** ’’

Because we typically use the CPT and 

RUC processes to establish codes and 

relative values, we believe the statute 

gives us authority to establish work 

RVUs at a level other than those of a 

level 1 established patient office visit. 

Therefore, for 2005, we are accepting 

the RUC recommendations for the 

interim G-codes even though they result 

in work RVUs that are different than 

0.17. 

Comment: Several organizations and 

physicians commented that the 

Medicare payments for the 

chemotherapy codes do not include 

payment for many services provided by 

an oncology practice. These services 

include support services such as 

nutrition counseling, social work 

services, case management, 

psychosocial counseling, and 

educational services provided by an 

oncology nurse to the patient.

Response: Under certain 

circumstances, Medicare does make 

explicit payment for clinical social 

worker and medical nutrition therapy 

services. Medicare can pay separately 

for the services of clinical psychologists 

(CPs), clinical social workers (CSWs), 

and nurse practitioners (NPs), clinical 

nurse specialists (CNS) and physician 

assistants (PAs). 

CPs can bill directly for services and 

supplies they are legally authorized by 

the State to perform that could also be 

furnished by a physician or incident to 

a physician’s service. Payment for CP 

services is made at 100 percent of the 

physician fee schedule for services they 

are authorized to provide that are 

comparable to those of a physician. 

CSWs can furnish services for the 

diagnosis and treatment of mental 

illnesses that they are legally authorized 

by the State to provide. Payment for 

CSW services is made at 75 percent of 

the CP fee schedule, which is 100 

percent of the physician fee schedule. 

NPs, CNSs and PAs can bill for 

mental health services consistent with 

their authority under law to furnish 

physician services. They may also bill 

for services furnished incident to their 

own professional services that fall under 

the State scopes of practice. Payment for 

these services is made at 85 percent of 

the physician fee schedule. Medicare 

will pay for medical nutrition therapy 

services provided by a registered 

dietitian or nutrition professional for a 

beneficiary with diabetes or renal 

disease. Based on a comment on our 

August 20, 2003 proposed rule (68 FR 

50428), we understand that social 

worker services could involve different 

tasks (‘‘helping patients with their 

health insurance, filling and refilling 

prescriptions’’) than those that are 

explicitly paid for by Medicare. 

However, we believe Medicare does pay 

for these services indirectly through the 

practice expense RVUs for drug 

administration services. If these services 

are typically provided to cancer 

patients, we believe the RUC could 

consider whether it is possible for 

resource inputs for these types of staff 

to be incorporated into the new drug 

administration codes. We also believe 

that the RUC could consider whether 

these types of staff activities are unique 

to physicians who provide drug 

administration or if they apply to other 

physicians’ services as well. 

Comment: Current CPT code 96412 

(infusion techniques, one to 8 hours, 

each additional hour) is an add-on code, 

billed in addition to the primary code, 

96410 (the first hour of chemotherapy). 

There is no national coding policy that 

explains how this add-on code is to be 

reported if less than a full hour of 

chemotherapy infusion is provided. A 

commenter pointed out that the 

Medicare carriers have different policies 

for reporting this service. Some carriers 

require the infusion to extend at least 16 

minutes into the subsequent hour before 

66310 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

an add-on code can be billed, and others 

impose a 31 minute requirement. The 

commenter asked that we establish a 

uniform policy for the carriers to follow. 

Response: The CPT Editorial Panel 

addressed this issue as part of its review 

of the drug administration codes. 

Effective in 2006, the add-on code is to 

be used for ‘‘infusion intervals of greater 

than thirty minutes beyond one hour 

increments’’. We are adopting this 

policy for chemotherapy administration 

codes furnished on or after January 1, 

2005. 

Comment: The nonchemotherapy 

subcutaneous injection is currently 

reported and paid under CPT code 

90782, while a chemotherapy 

subcutaneous injection is currently 

reported under CPT code 96400. Some 

commenters recommended that we 

permit billing for nonchemotherapy 

injections for cancer patients to be made 

under CPT code 96400. They believe 

this code more appropriately reflects the 

practice expenses related to supportive 

care for chemotherapy. 

Response: The CPT Editorial Panel 

explicitly addressed this issue by 

creating separate drug administration 

codes for hydration, nonchemotherapy 

infusions and injections, and 

chemotherapy infusions and injections. 

It further expanded the definition of 

chemotherapy to include those drugs 

where the resource costs associated with 

the drug administration are similar to 

those administered as anti-neoplastics. 

Other drugs administered in support of 

chemotherapy, such as anti-emetics and 

drugs to prevent anemia, are billed 

using the injection code, G0351, which 

replaces CPT code 90782 (consistent 

with the CPT recommendations). We 

have reviewed the practice expense 

inputs for this code from the RUC and 

accepted their recommendation. 

Comment: Some commenters asked 

that complex non-oncology infusions, 

such as Remicade, be paid at the same 

level as chemotherapy infusions. They 

indicate that these nonchemotherapy 

infusions have similar complexity and 

resource use as chemotherapy infusions. 

Response: The CPT recommendations 

address this issue. The codes for 

chemotherapy administration are for 

reporting the administration of nonradionuclide, anti-neoplastic drugs, 

anti-neoplastic agents provided for 

treatment of noncancer diagnoses or 

substances such as monoclonal antibody 

agents, and other biologic response 

modifiers.

Comment: Some commenters inquired 

about the recognition of a severe drug 

reaction management code that could be 

used during the administration of high 

complexity biologic medications and 

less frequently during other drug 

administrations or chemotherapy 

services. While the CPT Drug 

Administration Workgroup supported 

the creation of a severe drug reaction 

management code, the CPT Editorial 

Panel did not approve this code. 

Response: We recognize that 

considerable physician effort may be 

required to monitor and attend to 

patients who develop significant 

adverse reactions to chemotherapy 

drugs, or otherwise have complications 

in the course of chemotherapy 

treatment. Physicians may not be aware 

that these services can be billed using 

existing CPT codes. The following 

scenarios are examples where existing 

codes may be used in addition to the 

routine billing for the physician’s care 

of a cancer patient: 

• Bill for the Physician Visit. If a 

patient has a significant adverse 

reaction to drugs during a chemotherapy 

session and the physician intervenes, 

the physician could bill for a visit in 

addition to the chemotherapy 

administration services. 

• Bill for the Higher-Level Physician 

Visit. If the patient had already seen the 

physician prior to a chemotherapy 

session for a problem that is unrelated 

to the supervision of the administration 

of chemotherapy drugs, the physician 

may bill a visit for a significant adverse 

drug reaction. The total time, resources, 

and complexity of the physician’s 

interaction with the patient may justify 

a higher level of visit service. 

• Bill for a Prolonged Service. If the 

patient had a physician visit prior to the 

chemotherapy session and experienced 

a significant adverse reaction to drugs 

on the same day, the physician can bill 

a prolonged service code in addition to 

the physician visit. There are several 

code combinations to use depending on 

the number of minutes involved. The 

physician must have a face-to-face 

encounter with the patient and must 

spend at least 30 minutes beyond the 

threshold or typical time for that level 

of visit for the physician to bill for the 

prolonged service code. 

• Bill for Critical Care Service. If the 

patient had a physician visit prior to the 

chemotherapy session and experienced 

a life-threatening adverse reaction to the 

drugs, the physician could bill for a 

critical care service in addition to the 

visit if the physician’s work involves at 

least 30 minutes of direct face-to-face 

involvement managing the patient’s lifethreatening condition. Examples of lifethreatening conditions are: central 

nervous failure, circulatory failure, 

shock, renal, hepatic, metabolic, and/or 

respiratory failure. 

These instructions are published here 

for informational purposes, and we 

anticipate that we will issue further 

instructions regarding the appropriate 

use of these G-codes including 

clarifications, interpretations and other 

modifications to the following guidance 

as part of any instructions issued 

through a subregulatory process. 

Comment: The American Urological 

Association (AUA) commented in 

response to the January 7, 2004 interim 

final rule to ask us to include the 

following codes in the MMA-mandated 

evaluation of existing drug 

administration codes for physicians’

services to ensure accurate reporting 

and billing for such services: CPT codes 

11980, 11981, 11982, 11983, 51700, 

51720, 54200, 54231, and 54235. The 

AUA asked that we consider applying 

the transitional adjustment payment to 

these codes for 2005. 

Response: We presented these codes 

to the CPT Drug Administration 

Workgroup. After subsequent discussion 

with representatives of the AUA, the 

AUA withdrew these codes from 

consideration by the workgroup.

These codes are not subject to the 

‘‘transitional adjustment payment 

provision’’ because they are not 

included in the definition of ‘‘drug 

administration codes.’’

Comment: Ophthalmologists 

frequently perform the procedure 

photodynamic therapy (CPT code 67221 

and 67225) by infusing the drug 

Visudyne. While separate payment is 

allowed for the drug, the infusion is 

considered an integral part of the 

photodynamic therapy code. Thus, the 

physician is not allowed to bill a 

separate code for the infusion of the 

drug. 

According to one commenter, 

Visudyne is also a drug used in cancer 

chemotherapy. The commenter pointed 

out that when Visudyne is provided for 

photodynamic therapy, 

ophthalmologists incur drug 

administration costs similar to 

oncologists who use infused drugs. 

The AAO asked why we did not 

include CPT codes 67221 and 67225 

among the drug administration codes 

that benefited under the MMA. 

Response: In this instance, the 

infusion of the drug is an integral part 

of the surgical procedure and it was 

valued by the RUC and CMS that way. 

The code of which it is a part is not 

considered a drug administration code 

under section 303 of the MMA. 

3. Blood Clotting Factor 

For clotting factors furnished on or 

after January 1, 2005, we proposed to 

establish a separate payment of $0.05 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66311

per unit to hemophilia treatment 

centers, homecare companies and other 

suppliers for the items and services 

associated with the furnishing of blood 

clotting factor. Section 303(e)(1) of the 

MMA requires the Secretary, after 

review of the January 2003 report to the 

Congress by the Comptroller General of 

the United States, to establish a 

furnishing fee for the items and services 

associated with the furnishing of blood 

clotting factor. 

Based on a review of the Government 

Accountability Office (GAO) report and 

data received from various clotting 

factor providers, we proposed a 

furnishing fee in order to cover the 

administrative costs associated with 

supplying the clotting factor. As 

outlined in the MMA, any separate 

payment amount established may 

include the mixing and delivery of 

factors, including special inventory 

management and storage requirements, 

as well as ancillary supplies and patient 

training necessary for the selfadministration of these factors. The 

MMA states that, in determining the 

separate payment, the total amount of 

payments and these separate payments 

must not exceed the total amount of 

payments that would have been made 

for the factors if the amendments in 

section 303 of the MMA had not been 

enacted. 

As indicated in the GAO report, 

‘‘[w]hen Medicare’s payment for clotting 

factor more closely reflects acquisition 

costs, we recommend that the 

Administrator establish a separate 

payment for providers based on the 

costs of delivering clotting factor to 

Medicare beneficiaries.’’ Effective upon 

implementation of the ASP-based 

payment rates, payment for blood 

clotting factors will more closely reflect 

acquisition costs, since payment will be 

based on the average sales price as 

reported by drug manufacturers plus 6 

percent. 

Therefore, we stated in the August 5, 

2004 proposed rule that in the absence 

of additional data we believe that a 

furnishing fee of $0.05 per unit for the 

cost of delivering clotting factor is an 

appropriate amount. However, we also 

sought updated data and comments on 

the GAO report, as well as information 

on the fixed and variable costs of 

furnishing clotting factor. We 

recognized that there may be 

alternatives to a fee, which varies 

entirely based on the number of units of 

clotting factor furnished. We indicated 

we would closely examine all data and 

information submitted in order to make 

a final determination with respect to the 

appropriateness of the $0.05 per unit 

amount.

We received comments from various 

sources including, but not limited to, 

hemophilia treatment centers, 

hemophilia coalitions, and other 

suppliers of clotting factors regarding 

our request for additional data and 

information on the appropriateness of 

our proposed fee. The comments and 

responses are provided below. 

Comment: Many commenters 

recommended that we incorporate cost 

information received from homecare 

providers and any updated cost data 

from hemophilia treatment centers in 

determining the separate furnishing fee 

payment amount for 2005. The 

commenters cited an industrysponsored survey of full-service 

hemophilia homecare companies that 

recommended a furnishing fee of $0.20 

per unit. This survey collected CY 2003 

data from three hemophilia homecare 

suppliers that the commenter indicated 

supplied 42 percent of all Medicare 

hemophilia patients. Commenters also 

stated that the GAO report was 

inadequate to serve as the basis for 

determining the separate payment for 

clinically appropriate items and services 

related to furnishing blood clotting 

factor. They questioned the accuracy of 

the recommended payment range in the 

GAO report, given what they viewed as 

an insufficient sample size; that is, the 

GAO report received data from only 4 

hemophilia treatment centers and 

lacked any cost data from national or 

regional full-service hemophilia 

homecare providers. These commenters 

also indicated that the GAO survey may 

have included homecare companies that 

purchase clotting factor at a lower price 

through the Public Health Service’s 

340B program. More information on the 

340B program is available on the Health 

Resources and Services 

Administration’s Web site at http://

bphc.hrsa.gov/opa/howto.htm. The 

commenters also stated that the GAO 

report focused solely on estimating 

providers’ blood clotting factor delivery 

costs, which the GAO defined as 

inventory management, storage, 

shipping, and the provision of ancillary 

supplies. According to the commenters, 

the MMA directed us to establish a 

separate payment for items and services 

related to the furnishing of blood 

clotting factor that takes into 

consideration a wider range of items 

and services than the delivery costs 

addressed in the GAO report, for 

example patient education. 

Response: We agree with the 

commenters that full-service hemophilia 

homecare companies provide services 

that may be of benefit to Medicare 

beneficiaries with hemophilia, such as 

disease and patient management 

activities. However, we do not believe 

that the scope of the furnishing fee 

includes these services. As noted above, 

Section 303(e) specifies the items and 

services that may be taken into 

consideration in setting the furnishing 

fee. Disease and patient management 

activities are not included in the items 

and services specified in Section 303(e). 

However, these activities may be more 

appropriately addressed through a 

future phase of the new Medicare 

Chronic Care Improvement Program. 

The new Medicare Chronic Care 

Improvement Program is an important 

component of the MMA and 

demonstrates a commitment to 

improving and strengthening the 

traditional fee-for-service Medicare 

program. This program is the first largescale chronic care improvement 

initiative under the Medicare fee-forservice program. We will select 

organizations that will offer self-care 

guidance and support to chronically ill 

beneficiaries. These organizations will 

help beneficiaries manage their health 

and adhere to their physicians’ plans of 

care, and help ensure that they seek or 

obtain medical care that they need to 

reduce their health risks. More 

information regarding this program is 

available on the CMS Web site at

http://www.cms.hhs.gov/

medicarereform/ccip/.

With regard to the other costs 

identified in the comments and in the 

industry-sponsored survey, we also do 

not believe the scope of a furnishing fee 

includes costs associated with sales and 

marketing. We do not believe it is 

appropriate to build an explicit profit 

margin into the furnishing fee, but 

rather have the margin associated with 

the furnishing fee result from efficient 

furnishing of clotting factor. We agree 

with the commenters that the GAO 

report did not include amounts for 

education and that these are appropriate 

for the furnishing fee. Therefore, after 

removing the costs associated with sales 

and marketing, an explicit profit margin, 

and patient management, the resulting 

figure from the homecare survey is 

$0.14 per unit of clotting factor. We are 

establishing the furnishing fee for 2004 

at $0.14 per unit of clotting factor. For 

years after 2005, the MMA specifies that 

the furnishing fee for clotting factor 

must be updated by the percentage 

increase in the consumer price index for 

medical care for the 12-month period 

ending with June of the previous year. 

Comment: One commenter 

recommended that the beneficiary’s 20 

percent coinsurance not be applicable to 

this separate payment. The commenter 

indicated that the additional financial 

66312 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

burden would limit many beneficiaries’

access to this lifesaving product. 

Response: Under provisions designed 

to protect the Medicare program from 

fraud and abuse, a broad waiver of 

beneficiary cost sharing of the type the 

commenter recommends would not be 

permitted. However, we make no 

statement regarding the applicability of 

existing statutory and regulatory 

provisions that may allow for the waiver 

of cost sharing in certain cases.

4. Supplying Fee 

Section 1842(o)(6) of the Social 

Security Act requires the Secretary to 

pay a supplying fee (less applicable 

deductible and coinsurance) to 

pharmacies for immunosuppressive 

drugs described in section 1861(s)(2)(J) 

of the Act, oral anticancer 

chemotherapeutic drugs described in 

section 1861(s)(2)(Q) of the Act, and oral 

anti-emetic drugs used as part of an 

anticancer chemotherapeutic regimen 

described in section 1861(s)(2)(T) of the 

Act, as determined appropriate by the 

Secretary. In the interim final rule 

published on January 7, 2004 (69 FR 

1084), we considered this fee to be 

bundled into the current payment for 

these drugs for 2004 and did not 

establish a separately billable supplying 

fee. 

Effective January 1, 2005, we 

proposed to establish a separately 

billable supplying fee of $10 per 

prescription for immunosuppressive 

drugs, oral anti-cancer 

chemotherapeutic drugs and oral antiemetic drugs. We based this proposed 

fee on information provided by retail 

chain pharmacies on the costs of 

supplying these drugs to non-Medicare 

patients combined with steps to reduce 

the administrative burden associated 

with billing Medicare. 

We also sought data and information 

on the additional services pharmacies 

provide to Medicare beneficiaries, the 

extent to which oral drugs can be 

furnished without these additional 

services and the extent to which such 

services are covered under Medicare. 

Additionally, we requested comments 

concerning whether the supplying fee 

should be somewhat higher during the 

initial month following a Medicare 

beneficiary’s transplant to the extent 

that additional resources are required 

for example, due to more frequent 

changes in prescriptions for 

immunosuppressive drugs. 

Comment: Several commenters stated 

that they were not in a position to 

determine whether the proposed $10.00 

supplying fee was adequate since they 

did not know the actual 2005 payment 

rates for Part B drugs. These 

commenters indicated that the 

supplying fee needed to cover return on 

investment, the costs of supplying the 

drugs, and make up for any differences 

between the product costs and the ASP 

based payment for the drug. Some 

commenters indicated that aside from 

the adequacy of the ASP-based payment 

for the drug, a $10.00 supplying fee 

appeared to be too low. These 

commenters indicated that the average 

cost to a retail pharmacy to dispense a 

non-Medicaid third party or cash paying 

prescription ranges anywhere from 

$7.50–$8.00. The commenters indicated 

that Medicare should pay at least $2.00–

$2.50 more per prescription since costs 

associated with supplying Medicare 

prescriptions are higher. 

We received a comment from a large 

retail pharmacy indicating that a 

supplying fee of $25 would be adequate 

to cover the higher costs of dispensing 

Medicare Part B oral drugs. 

We received comments from specialty 

immunosuppressive pharmacies that 

included information from a recent 

survey of their supplying costs. The 

survey indicated that the cost for 

specialty pharmacies to dispense 

Medicare Part B immunosuppressants is 

$35.48 per prescription. The specialty 

immunosuppressive pharmacies 

indicated that they provide services not 

typically provided by retail chain drug 

stores or large mail-order pharmacy 

benefit management companies. These 

services include direct patient care 

through pro-active pharmacist contact, 

expeditious processing and turnaround 

of medication orders, direct billing of 

Medicare and coordination of benefits 

on behalf of transplant patients to 

reduce the costs to the patients, and 

maintaining expensive 

immunosuppressant in stock to ensure 

timely receipt when needed by 

beneficiaries. These pharmacies also 

indicated that the retail chains typically 

do not supply immunosuppressive 

drugs or file Medicare claims.

Several commenters indicated that the 

lack of on-line adjudication for 

Medicare claims was one of the major 

drivers, among other reasons, for the 

additional costs of supplying Medicare 

prescription. 

Response: We agree that the cost of 

supplying Medicare Part B oral drugs is 

higher than many other payers because 

of the lack of on-line adjudication for 

Medicare Part B oral drug claims. Due 

to operational issues, we do not 

anticipate the establishment of an online adjudication system in the near 

future. Accordingly, we believe it is 

appropriate to establish a supplying fee 

higher than the fees paid by some other 

payers with on-line adjudication. We 

note that many other payers with online adjudication have fees in the range 

of $5–$10 per prescription. We note that 

this is consistent with the 

approximately $8 cost for non-Medicaid 

dispensing stated by some commenters 

and described earlier. Other than 

administrative costs associated with 

billing Medicare Part B for oral drugs, 

we do not agree with commenters that 

the supplying fee for these drugs should 

exceed the dispensing fees of other 

payers because we do not believe there 

are other significant differences between 

supplying Medicare Part B and other 

oral drugs. We also do not agree that the 

supplying fee should include product 

costs. Product costs are paid through the 

ASP + 6 percent drug payment system. 

For the additional burden associated 

with billing Medicare Part B for oral 

drugs, we note the commenters who 

suggested an additional fee of 

approximately $2 for Medicare billing 

costs. Added to the $8 non-Medicaid fee 

described above, this would result in a 

supplying fee of approximately $10. We 

also note the survey of the specialty 

immunosuppressive pharmacies that 

indicated Medicare claims processing 

costs of approximately $8. This same 

survey also indicated total personnel 

costs of approximately $9, a portion of 

which we assume is attributable to the 

additional work associated with 

Medicare billings because the comments 

indicated Medicare billing was laborintensive. Using the $5 to $10 figures for 

payers with on-line adjudication 

described above, the specialty pharmacy 

data on Medicare claims processing 

costs and personnel costs, we developed 

a range of possible supplying fees based 

on the specialty pharmacy data. 

Depending upon the portion of the 

personnel costs associated with 

Medicare billings, this would result in 

a supplying fee between a minimum of 

$13 (= $5 + $8) and a maximum of $27 

(= $10 + $8 + $9). The comment of the 

large chain pharmacy recommending a 

$25 supplying fee indicated that this 

amount would be adequate to cover the 

costs of supplying Medicare Part B 

drugs including the additional costs of 

processing Medicare claims; however, 

this amount included a margin for 

profit. We do not believe it is 

appropriate to build an explicit profit 

margin into the supplying fee, but rather 

have the margin associated with the 

supplying fee result from efficient 

supplying of these drugs. Although the 

profit margin included in the $25 was 

not explicitly stated in the comment, if 

we assume a 5 percent margin, then a 

supplying fee of approximately $24 

would cover the large chain pharmacy’s 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66313

costs of supplying Medicare Part B 

drugs. We are not indicating that 5 

percent is an appropriate margin. 

There was variability in the submitted 

comments with respect to an 

appropriate supplying fee. On the low 

end, analysis of the submitted 

comments would indicate a supplying 

fee of $10. On the high end, the analysis 

would indicate a supplying fee of $27. 

Given the variability in the values and 

assumptions included in various 

calculations, we do not think it is 

appropriate to simply take the rounded 

midpoint of this range, $19, as the 

supplying fee. However, we do not 

think it appropriate to take the 

maximum amount of this range, $27, 

given that it is unlikely that all of the 

personnel costs indicated in the 

specialty pharmacy survey are related to 

the costs of billing for oral Medicare 

Part B drugs. The amount in the 

comment from the large chain 

pharmacy, after adjusting for a possible 

profit margin, or $24, is consistent with 

our belief that not all of the additional 

personnel costs identified in the 

specialty pharmacy survey are related to 

the costs of billing for oral Medicare 

Part B drugs. We are therefore 

establishing a per prescription 

supplying fee of $24 as the value 

consistent with both the large retail 

pharmacy comment (after making an 

adjustment for built-in profit margins) 

and the higher end of the broad range 

of the specialty pharmacy survey. 

Although we believe that a $24 

supplying fee coupled with the ASPbased drug payment will not result in 

any access problems for Medicare 

beneficiaries, we will monitor access as 

we implement the new ASP-based 

payment system. 

Comment: Some commenters 

recommended that we update the 

supplying fee annually. Some 

commenters indicated this fee should be 

updated by the average annual increase 

in the costs of pharmacies supplying 

these drugs to Medicare beneficiaries 

(costs such as rent, utilities and 

salaries), but no less than the increase 

in the medical care inflation index for 

the most recent twelve months for 

which it can be calculated before the 

next calendar year.

Response: We will study the issue of 

appropriate future increases for the 

supplying fee and proceed, as necessary, 

through notice and comment 

rulemaking. 

Comment: A specialty organization 

suggested that we develop a sliding 

supplying fee, which would be 

calculated as a percentage of the cost 

that the pharmacy incurred in acquiring 

a particular drug. 

Response: We do not agree that the 

supplying fee should vary by product 

costs. Product costs are paid through the 

ASP-based drug payment system. 

Comment: Several commenters agreed 

with our suggestion to increase the 

supplying fee in the first month 

following a transplant, but 

recommended that we extend this 

increase to at least the first 3 months 

following the transplant. One 

commenter suggested that extra 

resources are associated with frequent 

changes in prescriptions during the 

initial month following a beneficiary’s 

organ transplant. One commenter 

recommended a fee of $50 for an initial 

prescription fill. However, one 

commenter advocated against a 

supplying fee that distinguished 

between new and refill prescriptions 

stating that it would be impractical, of 

questionable benefit and would 

discourage long-term pharmacy-patient 

relationships as pharmacy providers 

would only have an incentive to serve 

patients in the short term. 

Response: We agree that additional 

costs are most likely to occur nearer the 

time when the beneficiary has a 

transplant. In order to recognize these 

costs, we are establishing a higher 

supplying fee of $50 for the supplying 

of the initial oral immunosuppressive 

prescription in the first month after a 

beneficiary has a transplant because the 

costs of supplying immunosuppressives 

are likely to be higher immediately 

following a transplant, when the 

practitioner is adjusting the dose of 

immunosuppressive drugs. With regard 

to the comment opposing higher 

supplying fees for new patients 

regardless of their transplant date, we 

agree with the commenter that it would 

result in inappropriate incentives and 

are not implementing any such fee. 

Comment: Commenters recommended 

that the supplying fee should account 

for the different prices paid by 

pharmacies and physicians, recognizing 

that these are separate classes of trade 

that may not have access to comparable 

pricing. Thus, we should increase the 

supplying fee associated with providing 

and overseeing the use of oral anticancer drugs. 

Response: We do not agree that the 

supplying fee should vary by product 

costs. Product costs are paid through the 

ASP based drug payment system. 

Comment: Commenters recommended 

that we extend the supplying fee to 

physicians that directly supply covered 

oral anti-cancer, immunosuppressive 

and oral anti-emetic drugs to patients, as 

well as create a dose management and 

compliance fee for physicians that 

prescribe oral chemotherapy products. 

These commenters state that we could 

use the premise that the MMA does not 

provide a definition of the word 

‘‘pharmacy’’ and we could permit 

payment of a supplying fee to include 

a physician acting in the capacity of a 

pharmacist. Alternatively, commenters 

suggested that we use its inherent 

reasonableness authority to extend the 

supplying fee to physicians. 

Response: Given our current 

understanding of Congressional intent, 

we do not believe it would be 

appropriate to pay a supplying fee to 

physicians. Moreover, we do not have 

sufficient data to determine whether our 

inherent reasonableness authority 

would apply in this instance. However, 

we will study these issues further. 

5. Billing Requirements 

In the proposed rule, we proposed the 

following changes to certain billing 

requirements and clarified policy for 

other billing requirements in an effort to 

reduce a pharmacy’s costs of supplying 

covered immunosuppressive and oral 

chemotherapy drugs to Medicare 

beneficiaries: 

• Original signed order. We clarified 

Medicare’s policy regarding the 

necessity of an original signed order 

before the filling of a prescription. 

According to the Medicare Program 

Integrity Manual (section 5.1 of Chapter 

5), which addresses the ordering 

requirement for durable medical 

equipment, prosthetics, orthotics and 

supplies (DMEPOS), including drugs, 

most DMEPOS items can be dispensed 

based on a verbal order from a 

physician. A written order must be 

obtained before submitting a claim, but 

that written order may be faxed, 

photocopied, electronic, or pen and ink. 

The order for the drug must specify the 

name of the drug, the concentration (if 

applicable), the dosage, and the 

frequency of administration. The 

clarification of this requirement should 

reduce a pharmacy’s costs of supplying 

covered immunosuppressive and oral 

drugs to Medicare beneficiaries to the 

extent that pharmacies are currently 

applying an original signed prescription 

requirement.

Comment: Commenters recommended 

that a prescription be filled and billed 

based solely on a verbal order from a 

physician and an actual signed written 

prescription should not be necessary 

before billing. 

Response: The policy that allows 

dispensing based on a verbal order but 

requires a written order for billing 

applies to all DMEPOS items. This 

policy balances fraud and abuse 

concerns with prompt dispensing of 

DMEPOS items to beneficiaries. We 

66314 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

point out that the written order from the 

physician can be faxed, photocopied, 

electronic, or pen and ink. We currently 

allow pharmacies to accept electronic 

prescriptions from physicians. 

• Assignment of Benefits Form. We 

proposed to eliminate use of the 

Assignment of Benefits form for Part B 

items and services, including drugs, 

where Medicare payment can only be 

made on an assigned basis. For Part B 

covered oral drugs, this would be a 

means of reducing a pharmacy’s costs of 

supplying these drugs to Medicare 

beneficiaries. Currently, pharmacies 

must obtain a completed Assignment of 

Benefits form in order to receive 

payment from Medicare. This 

requirement increases a pharmacy’s cost 

of supplying covered drugs to Medicare 

beneficiaries, as other payers do not 

impose this requirement. Thus, we do 

not believe that it is necessary for an 

assignment of benefits form to be filled 

out for drugs covered under Part B, 

since payment for them can only be 

made on an assignment-related basis. 

Comment: Some commenters 

suggested that the Assignment of 

Benefits form be eliminated for diabetic 

supplies dispensed by pharmacy 

suppliers. 

Response: Our proposal to eliminate 

the Assignment of Benefits form applied 

to services where Medicare payment can 

only be made on an assigned basis. That 

is not the case with diabetic supplies. 

Thus, we are not eliminating the AOB 

form for diabetic supplies. 

• DMERC Information Form (DIF).

The DIF is a form created by the DMERC 

Medical Directors that contains 

information regarding the dates of the 

beneficiary’s transplant and other 

diagnosis information. This form is a 

one-time requirement that pharmacies 

must complete in order to receive 

payment. Since section 1861(s)(2)(J) of 

the Act no longer imposes limits on the 

period of time for coverage of 

immunosuppressive drugs, we believe 

that the information on transplant 

diagnosis can be captured through other 

means (for example, diagnosis codes on 

the Part B claim form). 

Comment: Several commenters 

applauded our efforts to eliminate use of 

the DIF in an effort to reduce the cost 

that the billing requirements imposed. 

These commenters asked that we ensure 

that this requirement is applied 

uniformly by all the DMERCs. 

Response: We appreciate the support 

regarding the elimination of the DIF 

form. Action is being taken to eliminate 

the DIF form, including accommodating 

systems issues and providing for 

notifications. We anticipate resolution 

of issues to occur soon and elimination 

would occur next year. 

• Other Billing Issues. We also 

received other comments regarding 

other billing issues related to the 

supplying of immunosuppressive, oral 

anti-cancer, and oral anti-emetic drugs. 

Comment: Commenters suggested that 

we allow physicians to bill the carrier 

when oral drugs are provided directly 

by the physician in his office rather than 

having the physician bill the DMERC for 

the oral anti-cancer drug. Others stated 

that we should allow for billing for 

pharmaceutical products to be 

conducted on current electronic 

platforms, because ‘‘batch billing’’

creates operational and patient care 

problems, and adds significant 

participation costs. Commenters also 

stated that we should eliminate the 

requirement for a diagnosis code to be 

present on the prescription; while, at 

the same time, adopt the usage of the 

physician’s DEA number instead of the 

UPIN number when submitting claims.

Response: We thank the commenters 

for identifying these issues. We plan to 

examine these aspects of billing. 

6. Shipping Time Frame 

In the proposed rule, we highlighted 

the fact that the guidelines regarding the 

time frame for subsequent deliveries of 

refills of DMEPOS products had been 

revised. Effective February 2, 2004, the 

shipping of refills of DMEPOS products 

may occur ‘‘approximately’’ on the 25th 

day of the month in the case of a 

month’s supply. In the proposed rule, 

we emphasized the word 

‘‘approximately’’; while we indicated 

that normal ground service shipping 

would allow delivery in 5 days, if there 

were circumstances where ground 

service could not occur in 5 days, the 

guideline would still be met if the 

shipment occurs in 6 or 7 days. This 

change should eliminate the need for 

suppliers to utilize overnight shipping 

methods and would permit the shipping 

of drugs via less expensive ground 

service. 

F. Section 952—Revision to 

Reassignment Provisions 

As discussed in the August 5, 2004 

proposed rule, section 1842(b)(6)(A)(ii) 

of the Act, as amended by section 952 

of the MMA, allows, in many 

circumstances, a physician or NPP to 

reassign payment for Medicare-covered 

services, regardless of the site of service, 

providing there is a contractual 

arrangement between the physician or 

NPP and the entity through which the 

entity submits the bill for those services. 

Thus, the services may be provided on 

or off the premises of the entity 

receiving the reassigned payments. The 

MMA Conference Agreement states that 

entities that retain independent 

contractors may enroll in the Medicare 

program. The expanded exception 

created by section 952 of the MMA 

applies to those situations when an 

entity seeks to obtain the medical 

services of a physician or NPP. 

Section 952 of the MMA states that 

reassignment is permissible if the 

contractual arrangement between the 

entity that submits the bill for the 

service and the physician or NPP who 

performs the service meets the program 

integrity and other safeguards as the 

Secretary may determine to be 

appropriate. The Conference Agreement 

supports appropriate program integrity 

efforts for entities with independent 

contractors that bill the Medicare 

program, including joint and several 

liability (that is, both the entity 

accepting reassignment and the 

physician or NPP providing a service 

are both liable for any Medicare 

overpayments). The Conference 

Agreement also recommends that 

physicians or NPPs have unrestricted 

access to the billings submitted on their 

behalf by entities with which they 

contract. We incorporated these 

recommended safeguards in a change to 

the Medicare Manual, implementing 

section 952 of the MMA that was 

published on February 27, 2004. In the 

August 5, 2004 rule, we proposed to 

revise § 424.71 and § 424.80 to reflect 

these safeguards, as well as the 

expanded exception established by 

section 952 of the MMA. 

Section 952 of the MMA revises only 

the statutory reassignment exceptions 

relevant to services provided in 

facilities and clinics (section 

1842(b)(6)(A)(ii) of the Act). Section 952 

of the MMA does not alter an individual 

or entity’s obligations under any other 

applicable Medicare statutes or 

regulations governing billing or claims 

submission. 

In addition, physician group practices 

should be mindful that compliance with 

the physicians’ services exception and 

the in-office ancillary services exception 

to the physician self-referral prohibition 

in section 1877 of the Act requires that 

a physician or NPP who is engaged by 

a group practice as an independent 

contractor may provide ‘‘designated 

health services’’ to the group practice’s 

patients only in the group’s facilities. 

See the definition of physician in the 

group at 42 CFR 411.351.

We also cautioned that parties must 

be mindful that contractual 

arrangements involving reassignment 

may not be used to camouflage 

inappropriate fee-splitting arrangements 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66315

or payments for referrals. In the August 

5, 2004 proposed rule, we solicited 

comments on potential program 

vulnerabilities and on possible 

additional program integrity safeguards 

to guard against those vulnerabilities. 

Comment: We received positive 

comments for the proposed changes to 

the reassignment rules from two 

physician associations and one 

association representing non-physician 

practitioners. 

Response: We are pleased to receive 

positive feedback to the changes to the 

reassignment rules. We believe these 

changes balance the need to respond to 

the changing business arrangements in 

the delivery of health care services with 

the need to protect the Medicare trust 

funds from fraudulent and abusive 

billing practices. 

Comment: An association 

representing emergency medicine 

physicians and numerous members of 

that association commented that 

requiring independent contractor 

physicians to have unrestricted access 

to the billings submitted on their behalf 

is not sufficient to ensure such access. 

The commenters requested that we 

revise our regulations to require the 

entity submitting the bills to provide 

duplicates of the Medicare remittance 

notices (which indicate the services 

billed and the amounts paid for those 

services) to the independent contractor 

physicians. Some of the commenters 

requested that we require independent 

contractor physicians to receive 

itemized monthly reports of the claims 

submitted and remittances received on 

their behalf. 

Response: We believe that requiring 

independent contractors to have 

unrestricted access to the billings 

submitted on their behalf is sufficient to 

satisfy the independent contractors’

need to review the claims information. 

We recognize that some independent 

contractors may not wish to receive 

copies of all bills submitted on their 

behalf. It would place an unnecessary 

burden on entities if we require them to 

furnish duplicate remittance notices to 

independent contractors on a routine 

basis. Similarly, it would place a 

significant burden on our claims 

processing systems if we were obligated 

to provide duplicate remittance notices 

to those who have reassigned their 

payments. We note that the method and 

frequency of obtaining access to billing 

records is an issue that the independent 

contractor and the entity to which the 

independent contractor is reassigning 

payments can resolve in their written 

contract. 

Comment: A commenter asked 

whether or not the new reassignment 

exception (which essentially expanded 

or revised the previous exceptions 

pertaining to independent contractors), 

established by section 952 of the MMA, 

is available when one entity contracts 

with a second entity, which in turn 

contracts with a physician or nonphysician practitioner to furnish 

services for the first entity. 

Response: We refer to this situation as 

an indirect contractual arrangement 

between the independent contractor 

furnishing the service and the entity 

doing the billing and receiving payment 

(excluding billing agents). Thus, the 

reassignment is between the individual 

furnishing the service and the entity 

receiving the reassigned benefits. 

Indirect contractual arrangements were 

permissible prior to passage of section 

952 of the MMA and remain 

permissible. The CMS–855–R 

enrollment form would need to be 

completed by the entity receiving the 

reassigned benefits and the person 

furnishing the service. In accordance 

with section 952 of the MMA, the 

contractual arrangement and any 

program integrity safeguard 

requirements deemed appropriate by the 

Secretary are between the independent 

contractor and the entity receiving the 

reassigned payments, with the program 

integrity safeguards applying to both 

parties. If the parties involved also wish 

to include the intermediary entity in a 

similar contract, and apply standards 

identical or similar to the program 

integrity safeguards to their 

arrangement, they have that option; but, 

it is not required or necessary to comply 

with the exception to the reassignment 

prohibition for contractual 

arrangements. 

Comment: Several members of the 

Congress urged us not to delay the 

enrollment process of providers or 

suppliers while implementing section 

952 of the MMA. 

Response: We do not expect any 

delays in provider or supplier 

enrollment to result from implementing 

the reassignment provisions of this 

regulation. We are sensitive to the need 

for an efficient and timely enrollment 

process. If the new reassignment 

exception results in the submission of a 

particularly high volume of claims, or if 

a Medicare contractor has to process a 

large number of new enrollment 

applications, it is possible that delays 

may occur in some cases. A provider or 

supplier whose enrollment was delayed 

must contact the appropriate Medicare 

contractor’s provider or supplier 

enrollment office to discuss the reasons 

for the delay. 

Comment: A trade association of 

physician specialists asked that we 

clarify our definitions of onsite and offsite services. This trade association also 

requested that we further describe the 

potential program vulnerabilities that 

the revised Medicare reassignment 

exception might create.

Response: We consider onsite services 

to be services of an independent 

contractor that are performed in space 

owned or leased by the entity billing 

and receiving the reassigned payments. 

We consider offsite services to be 

services of an independent contractor 

that are performed in space that is not 

owned or leased by the entity billing 

and receiving the reassigned payments, 

that is, services performed off the 

premises. 

The Congress originally passed the 

prohibition on reassignment provision 

due to experience with fraudulent and 

abusive billing practices. As we 

discussed in the preamble to the August 

5, 2004 proposed rule, the new 

reassignment exception for contractual 

arrangements will potentially permit 

myriad relationships and financial 

arrangements. Some of these 

relationships may have the potential to 

increase fraudulent and abusive billing 

practices that the reassignment rules 

were designed to prevent. We also 

stated in the proposed rule that the new 

reassignment exception does not alter 

an individual’s or entity’s obligations 

under existing Medicare statutes and 

regulations (for example, the physician 

self-referral prohibition, the antikickback statute, purchased diagnostic 

test rules, incident to rules, etc.). 

Comment: Several commenters 

expressed concern over the recent 

growth of so-called pod, salon, turnkey, 

mini-mall, or condo labs, especially 

since section 952 of the MMA appears 

to liberalize the Medicare reassignment 

rules. 

As we understand the situation, some 

entities have created a building or a 

floor of a building that contains a 

number of cubicles, each of which is 

equipped with a microscope and other 

supplies that enable a pathologist to go 

to a particular cubicle or pod to analyze 

any tissue sample that is submitted by 

the group practice that rents pod space 

on a full-time basis. Apparently, some of 

the owners of these anatomical 

laboratories assert that each pod is a 

centralized location for a laboratory that 

is owned by a group practice. Other 

owners assert that each pod serves as an 

offsite office of a pathologist who works 

for a group practice as an independent 

contractor. 

These entities market their services to 

specialists in certain disciplines, such 

as gastroenterology, urology, and 

dermatology, which rely on a high 

66316 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

volume of anatomic pathology services. 

The commenters stated that these lab 

arrangements are subject to excess, 

waste, and abuse, including, but not 

limited to: (a) Generation of medically 

unnecessary biopsies; (b) kickbacks; (c) 

fee-splitting; and, (d) referrals that 

would otherwise be prohibited under 

the physician self-referral statute. 

The commenters agree with us that 

safeguards are necessary to prevent the 

increased incidence of fraudulent and 

abusive billing practices resulting from 

the new reassignment exception for 

contractual arrangements. To reach the 

goal of closing any loophole for excess, 

waste, and abuse opened by the new 

independent contractor reassignment 

exception, the commenters provided 

several suggestions. One commenter 

recommends that we add language to 

proposed § 424.80(d) that would 

prohibit a physician from making a 

reassignment to another physician, 

under the independent contractor 

exception, if the physicians do not 

practice in substantially the same 

medical specialty. This limitation 

would not apply if the entity accepting 

the assignment is a bona fide multispecialty physician practice, meaning 

that it employs (on a W–2 basis) 

physicians who regularly practice in 

two or more specialties of medicine. 

The commenters believe that the 

regulations need to state more clearly 

that all requirements of the purchased 

diagnostic test rules and purchased test 

interpretation rules need to be met. In 

other words, the commenters want to 

prevent the new reassignment exception 

from applying to services furnished by 

independent contractor pathologists. 

These commenters are urging us to 

review these practices to see if they fail 

to meet existing obligations under the 

physician self-referral prohibition or 

anti-kickback statute. The commenters 

believe that these business arrangements 

are exploiting the in-office ancillary 

services exception and other exceptions 

to the physician self-referral 

prohibition. 

Response: We appreciate comments 

that specify situations where fraud and 

abuse may occur and propose solutions 

to prevent such occurrences. While we 

decline to incorporate the commenters’

suggested regulatory revisions at this 

time, we share the commenters’

concerns. We will be paying close 

attention to this issue, and may initiate 

future rulemaking to address 

arrangements that are fraudulent or 

abusive. 

To respond to commenters’ concerns, 

we are amending the regulations 

governing reassignment at § 424.80(a) to 

clarify that nothing in § 424.80 alters an 

individual or entity’s obligations under 

other Medicare statutes or rules, 

including, but not limited to, the 

physician self-referral prohibition 

(section 1877 of the Act), the antikickback statute (section 1128(B)(b)(1) 

of the Act), the regulations regarding 

purchased diagnostic tests, and 

regulations regarding services and 

supplies provided incident to a 

physician’s services.

In response to the concerns expressed 

by the commenters, we wish to further 

expand on the fact that section 952 of 

the MMA did not affect the obligation 

of an individual or entity to comply 

with the physician self-referral 

prohibition (section 1877 of the Act and 

the corresponding regulations). As 

stated in the proposed rule, ‘‘physician 

group practices should be mindful that 

compliance with the in-office ancillary 

services exception to the physician selfreferral prohibition requires that a 

physician who is engaged by a group 

practice on an independent contractor 

basis must provide services to the group 

practice’s patients in the group’s 

facilities. As noted in the Phase I 

physician self-referral final rule (66 FR 

887), ‘‘we consider an independent 

contractor physician to be ‘in the group 

practice’ if: (1) He or she has a 

contractual arrangement to provide 

services to the group’s patients in the 

group practice’s facilities; (2) the 

contract contains compensation terms 

that are the same as those that apply to 

group members under section 

1877(h)(4)(iv) of the Act or the contract 

fits in the personal services exception; 

and, (3) the contract complies with the 

reassignment rules * * * ’’ See also 66 

FR 886.’’ This test is specified at 

§ 411.351 in the definition of physician 

in the group practice, which contains a 

premises requirement independent of 

the reassignment rules. 

In addition, the use of independent 

contractors at off-premises locations 

may impact the ability of a group 

practice to meet the definition of a 

group practice at § 411.352 for purposes 

of complying with section 1877 of the 

Act. Accordingly, some group practices 

may need to be careful about the 

number of physician-patient encounters 

that independent contractors perform 

off-premises to ensure that they meet 

the 75 percent patient-physician 

encounters test as set forth in 

§ 411.352(h). 

We will continue to monitor 

compliance with the reassignment rules 

and we will analyze the impact of the 

physician self-referral prohibition on 

‘‘pod’’ labs. If we determine that 

changes to the physician self-referral 

prohibition are necessary, these changes 

will be made in a separate rulemaking 

document. 

Comment: We received a number of 

comments and recommendations from 

three organizations that utilize the 

services of independent contractor 

emergency department physicians. One 

of the three organizations represents 

management companies that employ 

independent contractor emergency 

department physicians. The 

commenters believe that the changes to 

the reassignment rules necessitated by 

section 952 of the MMA should be 

implemented in a manner that does not 

impose additional burdens on the 

Medicare enrollment process. They 

believe that implementation of the 

proposed regulations could impede the 

enrollment process. They expressed 

concern that amendments to current 

contracts might be necessary to 

incorporate the program integrity 

safeguards included in the proposed 

regulations. Since they believe requiring 

contract amendments would be 

burdensome and costly to hospitals, 

they are urging us not to require parties 

to amend their contracts to reflect the 

program integrity safeguards that we 

proposed. 

Response: We do not believe that 

implementation of the proposed 

regulations will impede the enrollment 

process. Our proposed regulations 

would not require parties to amend their 

contracts to reflect the program integrity 

safeguards. We plan to include the 

program integrity safeguard 

requirements on the CMS–855–R 

enrollment form. The program integrity 

safeguards will apply to arrangements 

entered into pursuant to the new 

reassignment exception for contractual 

arrangements, regardless of whether the 

parties reference the safeguards in their 

contracts.

Comment: Three commenters 

representing groups that utilize 

independent contractor emergency 

physicians strongly oppose our 

implementation of the two proposed 

program integrity safeguard 

requirements: (1) Joint and several 

liability/responsibility for Medicare 

overpayments; and (2) unrestricted 

access to the billings for services 

provided by independent contractors. 

The commenters believe that 

establishing program integrity 

safeguards is premature and that we 

should first formally assess the need for 

such safeguards. These commenters also 

ask us to clearly define joint and several 

liability/responsibility. They express 

concern over our attempt to impose 

joint and several liability/responsibility 

on both the contracting entity and 

practitioner furnishing the services and 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66317

note that the CMS–855–R enrollment 

form certification holds the enrolling 

provider or supplier responsible for any 

Medicare overpayments. The 

commenters argue that we should 

impose these program integrity 

safeguards on employer/employee 

relationships if we are going to impose 

them on contractual arrangements. The 

commenters ask how we would monitor 

compliance with joint and several 

liability/responsibility. The commenters 

also have concerns about regulating 

access to claims submitted by an entity 

for services furnished by an 

independent contractor. In their view, 

this type of requirement should be part 

of the compliance programs of entities 

and employers rather than mandated as 

part of the reassignment rules. 

Response: We disagree with the 

commenters’ assertion that it is 

premature to implement the proposed 

program integrity safeguards. Section 

952 of the MMA specifically authorizes 

the Secretary to implement program 

integrity safeguards. Further, in the 

Conference Report to the MMA, the 

Congress specifically highlighted the 

two program integrity safeguards that 

we have proposed. 

Our assessment of the need for 

program integrity safeguards is based 

upon prior experience with certain 

types of entities and their subsidiary 

billing companies. For example, on 

April 6, 2000, Lewis Morris, Assistant 

Inspector General for Legal Affairs, 

Office of Inspector General (OIG), U.S. 

Department of Health and Human 

Services, testified before the House 

Committee on Commerce, 

Subcommittee on Oversight and 

Investigations regarding Medicare and 

third-party billing companies. Mr. 

Morris of the OIG detailed the upcoding 

activities of two firms that provided 

billing services for entities contracting 

with emergency department physicians. 

One firm paid $15 million and the other 

paid $15.5 million to settle their 

respective liabilities. Moreover, as we 

have noted, we have received numerous 

comments from physicians stating that 

they have been prevented from seeing 

the Medicare remittance notices for 

services they furnished, on penalty of 

termination. 

In addition, we understand the 

commenters’ concerns that if the 

Agency plans to implement the two 

proposed program integrity safeguards, 

we should apply these same program 

integrity safeguards to employees, as 

well as to independent contractors. Joint 

and several responsibility/liability and 

unrestricted access to billings may or 

may not be appropriate for employees 

and employers as it is for the parties 

involved in contractual arrangements. 

CMS will study this issue further, and 

if necessary will address it in a separate 

rulemaking document. 

We use the words responsibility and 

liability interchangeably, and in the 

context of claims filing and payment, 

they both have the same meaning. We 

define joint and several liability/

responsibility to mean that both the 

person furnishing a service and the 

entity billing for that service (and to 

which payments have been reassigned) 

can be held liable or responsible for any 

errors in billing that result in a Medicare 

overpayment, including, but not limited 

to, upcoding and billing for services 

never rendered. 

We will monitor the program integrity 

safeguards as we monitor all other 

program integrity requirements. We also 

believe that entities and independent 

contractors will report violations to us, 

since both may be held responsible for 

any Medicare overpayments. If an 

independent contractor is refused access 

to the billings submitted on his or her 

behalf, the independent contractor may 

report this to the appropriate Medicare 

contractor. 

Comment: An organization 

representing entities that use 

independent contactor emergency 

department physicians believes if we 

retain the proposed program integrity 

requirements, then these requirements 

should be clarified and included in 

other reassignment exceptions and in 

other Medicare conditions of 

participation. 

Response: It is our goal to have the 

program integrity requirements 

identified and included on the 

appropriate CMS–855–R enrollment 

form. As we have discussed above, 

while we will study whether it is 

appropriate to extend the program 

integrity safeguards to employer/

employee relationships, we do not 

believe it is necessary to include the 

program integrity requirements in other 

reassignment exceptions (or in other 

Medicare conditions of participation) at 

this time.

Comment: Three commenters 

representing organizations that use 

independent contractor emergency 

physicians recommend that we revise 

our definition of entity to specifically 

identify the types of entities that are 

listed in the Conference Report to 

section 952 of the MMA. They believe 

that our existing definition which 

defines entity as a person, group or 

facility enrolled in the Medicare 

program is ambiguous and inconsistent 

with Congressional intent. Therefore, 

they are recommending that we add the 

language to the definition that specifies 

that an entity includes but is not limited 

to, a hospital, clinic, medical group, a 

physician practice management 

organization, or a staffing company. One 

of the commenters opposes stating that 

entities need to be enrolled in Medicare 

in the definition of entity because the 

commenter believes it is not necessary 

to include such information in the 

regulations on reassignment. This 

commenter believes that instructions on 

enrollment should be addressed in an 

enrollment regulation. The commenter 

also states that our current reassignment 

regulation does not define facility as a 

hospital or other institution enrolled in 

the Medicare program. These groups 

believe that their proposed definition of 

entity more accurately reflects the 

language from the Statement of the 

Managers filed by the MMA Conference 

Committee and is included in the 

Conference Report (Conference 

Agreement). Finally, these groups do 

not believe that a definition of entity is 

necessary, since we do not define 

employer in the reassignment 

regulations definition section. 

Response: We continue to believe that 

our definition of entity in the proposed 

rule is appropriate. We believe that 

defining entity as a person, group, or 

facility that is enrolled in Medicare 

encompasses all entities that are 

allowed to bill and receive payment 

from Medicare, and does not prevent 

those entities that were specifically 

identified in the Conference Report from 

benefiting from the new contractual 

arrangement reassignment exception. 

We will not specifically include a 

staffing company in the definition of 

entity because a staffing company 

cannot enroll in Medicare as a staffing 

company. Staffing companies can enroll 

as either a group practice or clinic, 

depending on how they are licensed or 

allowed to do business in the state 

where they are located. We further 

believe that a definition of entity is 

necessary to distinguish between 

entities that are allowed to reassign their 

right to payment and to receive 

reassigned payments from entities that 

are not allowed to reassign their right to 

payment or to receive reassigned 

payments (for example, billing agents, 

entities that provide services under 

arrangements, and substitute 

physicians, (for example, locum tenens 

physicians or physicians working on a 

reciprocal basis) all of which are not 

required to enroll in Medicare). 

Comment: Three commenters 

representing organizations that use 

independent contractor emergency 

physicians found our use of the term 

supplier confusing when denoting the 

physician or non-physician practitioner 

66318 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

that contracts with an entity and 

reassigns his or her right to bill and 

receive payment. Specifically, the 

commenters found the proposed 

revision to § 424.80(c) (Prohibition on 

reassignment of claims by suppliers) 

confusing because it refers to a hospital 

or facility as the supplier of services for 

purposes of the reassignment revision 

when Medicare already has regulations 

that separately define provider and 

supplier. The commenters recommend 

that we clarify our intent regarding the 

use of the term supplier. 

Response: In instances of 

reassignment, the supplier is the person 

furnishing the service and reassigning 

his or her right to bill and receive 

payment to another entity. This is 

consistent with our definition of 

supplier in § 400.202. In our proposed 

revision to § 424.80(c), we state that the 

employer or entity is considered to be 

the supplier of the services for subparts 

C, D, and E of this part, subject to the 

provisions of paragraph (d) of the 

section. Once a supplier reassigns his or 

her right to receive Medicare payments, 

the entity receiving the reassigned 

payments essentially takes the place of 

the supplier. We have revised 

§ 424.80(c) to reflect the new contractual 

arrangement reassignment exception. 

The existing § 424.80(c) includes the 

same formulation and we have simply 

proposed to replace the words ‘‘facility’’

and ‘‘system’’ with ‘‘entity,’’ because the 

new exception for payment to an entity 

under a contractual arrangement now 

replaces the previous exceptions for 

payment to a facility or health care 

delivery system.

Comment: Three commenters that use 

independent contractor emergency 

physicians expressed concern about our 

statement in the preamble to the 

proposed rule that the new 

reassignment exception may create 

fraud and abuse vulnerabilities, which 

may not become apparent until the 

program has experience with the range 

of contractual arrangements permitted 

by the new reassignment exception. 

These groups do not believe that the 

new reassignment exception will result 

in an increase in violations of the types 

addressed in the preamble to the 

proposed rule. The groups also disagree 

with our statement in the preamble to 

the proposed rule that contractual 

arrangements with independent 

contractor physicians may be used to 

camouflage inappropriate fee-splitting 

arrangements or payment for referrals. 

These groups state that Medicare does 

not govern fee-splitting arrangements, 

that policing such arrangements is a 

matter of State law, and that Medicare 

reassignment policy has no direct effect 

on this issue. They question why we 

have expressed concern over potential 

violations of the physician self-referral 

prohibition, because section 952 of the 

MMA does not affect or otherwise 

change the obligation of providers and 

suppliers to comply with the physician 

self-referral prohibition and its 

accompanying regulations. 

Response: The Congress originally 

passed the prohibition on reassignment 

provision because of increasing fraud 

and abuse in billing practices. Since the 

new reassignment exception has 

expanded the circumstances under 

which suppliers can reassign their right 

to receive Medicare payments, we are 

concerned that the potential exists for 

an increased incidence of fraud and 

abuse, which may not become apparent 

until the program has experience with 

the range of contractual arrangements 

permitted by the new reassignment 

exception. Fee-splitting arrangements 

may violate the physician self-referral 

prohibition and the anti-kickback 

statute. Preventing fraudulent and 

abusive billing practices continues to be 

the primary purpose of the reassignment 

rules, even as they are amended to 

reflect changing practices in the 

delivery of health care. 

We agree that section 952 of the MMA 

does not change the obligations of 

providers and suppliers under the 

physician self-referral prohibition, and 

all other Medicare statutes and 

regulations. We are incorporating this 

clarification in § 424.80(a). 

Comment: Three organizations that 

use independent contractor emergency 

physicians raised procedural concerns 

regarding the timing of the final rule, 

which is effective January 1, 2005. The 

commenters claim that providers and 

suppliers do not have time to comply 

with the new program integrity 

safeguards. They are asking us to 

provide providers and suppliers with an 

additional time frame of at least six 

months for compliance with the 

program integrity safeguards, if they are 

finalized. They recommend that we 

make the new safeguards applicable to 

enrollment applications submitted on or 

after the effective date of the final rule.

Response: We do not believe 

additional time is necessary for 

compliance with the program integrity 

safeguards. Providers and suppliers will 

not have to amend contracts to include 

the proposed program integrity 

requirements. Thus, enrollment 

applications are not affected by this 

regulation. The program integrity 

safeguards will be effective on the 

effective date of this final rule and these 

requirements will be applicable to all 

Medicare providers and suppliers 

affected by the section 952 change to the 

reassignment rules. 

Comment: One commenter believes 

that the public comment period for this 

rule was shortened to 50 days instead of 

the 60-day comment period required by 

statute. The proposed rule was 

published in the Federal Register on 

August 5, 2004 and the public comment 

period ended at 5 p.m. on September 24, 

2004. 

Response: While the law requires that 

we provide a 60-day public comment 

period and that the notice of proposed 

rulemaking be published in the Federal 

Register, it does not require that the 

date of Federal Register publication be 

the first day of the comment period. The 

two requirements are independent. We 

post the proposed rule on our Web site 

on the date of display of the proposed 

rule at the Office of the Federal Register, 

satisfying the requirement for a 60-day 

comment period. By making the 

proposed rule available on the CMS 

Web site (as well as at the Office of the 

Federal Register), we provided the 

public with access to not only the 

proposed rule, but also to all of the 

supporting files and documents cited in 

the proposed rule in a manner that can 

be used for analysis. We note that the 

computer files posted on the Web site 

can be used for independent analysis. 

Therefore, we believe that beginning the 

comment period for the proposed rule 

with the display date at the Office of the 

Federal Register, and posting the 

proposed rule and data files on the CMS 

Web site on the display date, fully 

complies with the statute and provides 

a far better opportunity for the public to 

have meaningful input than the past 

practice under which the comment 

period began with the publication date 

in the Federal Register, a week or longer 

after the display date and no other data 

in any other form was furnished. 

G. Section 642—Extension of Coverage 

of IVIG for the Treatment of Primary 

Immune Deficiency Diseases in the 

Home 

In the August 5, 2004 proposed rule, 

we stated that for dates of service 

beginning on or after January 1, 2004, 

Medicare would pay for IVIG 

administered in the home. The benefit 

is for the drug and not for the items or 

services related to the administration of 

the drug when administered in the 

home, if deemed medically appropriate. 

The implementing instructions for this 

benefit were provided in a transmittal 

released on January 23, 2004. We 

received several comments regarding 

this new benefit. The comments and our 

responses are provided below. 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66319

Comment: Several commenters 

expressed concern regarding the lack of 

coverage for the items and services 

needed to administer IVIG. These 

commenters urged us to use our 

authority to pay for the items that are 

necessary for the effective use of IVIG. 

Response: The MMA provided 

coverage for the approved pool plasma 

derivative for treatment in the home; 

however, new section 1861(zz) of the 

Act specifically precludes coverage for 

the items and services related to the 

administration of the derivative. 

Comment: The commenter stated that 

on January 23, 2004, we released a 

transmittal implementing the new IVIG 

coverage. The transmittal contained the 

following language: ‘‘for coverage of 

IVIG under this benefit, it is not 

necessary for the derivative (IVIG) to be 

administered through a piece of durable 

medical equipment.’’ Commenters 

stated that this language has resulted in 

the denial of coverage of IVIG for 

patients because providers are using the 

rationale that it is medically 

unnecessary to infuse IVIG through an 

infusion pump and therefore IVIG is 

medically unnecessary. The 

commenters recommended that we 

issue a new transmittal stating that IVIG 

is to be covered even when 

administered through durable medical 

equipment (DME), as determined 

necessary by a physician. 

Response: It was not our intention to 

deny any beneficiary the coverage of 

IVIG in the home. It appears that the 

sentence that references the use of DME 

for the administration of IVIG is both 

confusing and misleading. Therefore, 

we will issue a new transmittal 

removing the apparent DME restriction. 

Result of Evaluation of Comments 

We are finalizing the proposed 

revisions to § 410.10 without alteration. 

H. Section 623—Payment for Renal 

Dialysis Services 

Section 623 of the MMA amended 

section 1881(b) of the Act and directed 

the Secretary to revise the current renal 

dialysis composite rate payment system. 

The MMA included several major 

provisions that require the development 

of revised composite payment rates for 

ESRD facilities. 

The following is a summary of the 

proposed revisions to the composite 

payments rate methodology 

implementing provisions in section 623 

of the MMA that are required to be 

effective January 1, 2005. 

• The proposed rule provides for a 

1.6 percent increase to the current 

composite payment rates effective 

January 1, 2005. 

• The proposed rule included an addon to the composite rate for the 

difference between current payments for 

separately billable drugs and payments 

based on a revised drug pricing 

methodology using acquisition costs. 

For purposes of this adjustment, in the 

proposed rule, we defined acquisition 

costs as the ASP minus 3 percent. We 

proposed a single adjustment to the 

composite payment rates for both 

hospital-based and independent 

facilities, equal to 11.3 percent. 

• In the proposed rule, we discussed 

the reinstatement of the ESRD 

exceptions process for pediatric 

facilities as provided in section 623(b) 

of MMA. The statute defines pediatric 

ESRD facilities as renal facilities at least 

50 percent of whose patients are under 

age 18. Since April 1, 2004, we have 

accepted ESRD composite rate 

exception requests from ESRD facilities 

that believe they qualify for exceptions 

as pediatric ESRD facilities.

• Section 1881(b)(12)(D) of the Act, 

added by section 623(d)(1) of the MMA 

gives the Secretary discretionary 

authority to revise the current wage 

indexes and the urban and rural 

definitions used to develop them. In the 

proposed rule, we proposed to take no 

action at this time to revise the current 

composite rate wage indexes. Because of 

the potential payment implications of 

recently revised definitions of urban 

areas, we believe further study is 

required. 

• The proposed rule described the 

proposed methodology for a case-mix 

adjustment to a facility’s composite 

payment rate based on the statutorily 

required limited number of patient 

characteristics. We used co-morbidity 

data for all Medicare ESRD patients 

obtained from the Form CMS–2728, 

supplemented with co-morbidity 

information obtained from Medicare 

claims. We measured the degree of the 

relationship between specified comorbidities and ESRD facility per 

treatment costs, controlling for the 

effects of other variables, using standard 

least square regression. The source of 

the per treatment costs was the 

Medicare cost report. The result, after 

all necessary statistical adjustments, 

was a set of eight case-mix adjustment 

factors based on age, gender, AIDS, and 

peripheral vascular disease (PVD). 

Section 623(d)(1) of the MMA requires 

that aggregate payments under the casemix adjusted composite payment system 

be budget neutral. Therefore, the 

proposed rule provided an adjustment 

0.8390 to be applied to a facility’s 

composite payment rate to account for 

the effects of the case-mix adjustments. 

A. Composite Rate Increase 

The current composite payment rates 

applicable to urban and rural hospitalbased and independent ESRD facilities 

were effective January 1, 2002. Section 

623(a)(3) of the MMA requires that the 

composite rates in effect on December 

31, 2004 be increased by 1.6 percent. 

The updated wage adjusted rates were 

published in Tables 18 and 19 of the 

proposed notice. 

The tables reflected the updated 

hospital-based and independent facility 

composite rate of $132.41 and $128.35, 

respectively, adjusted by the current 

wage index. The rates shown in the 

tables do not include any of the basic 

case-mix adjustments required under 

section 623 of the MMA. 

Comment: Although there were no 

specific comments on the 1.6 percent 

adjustment, several commenters wanted 

to emphasize the importance of 

providing an annual adjustment to the 

composite rate in order to recognize the 

increased costs that face renal dialysis 

facilities. They stated that failure to 

increase the composite rate on a regular 

basis has caused dialysis providers to 

suffer a significant loss of income from 

their Medicare reimbursement and that 

dialysis facilities are the only Medicare 

entities that do not receive a statutorily 

mandated annual increase in their 

reimbursement rates. 

Response: We do not have the 

authority to establish an annual update 

to the composite payment rates. Section 

4201(a)(2) of Pub. L. 101–508 effectively 

froze the methodology for calculation of 

the rates, including the data and 

definitions used as of January 1, 1991. 

Since that time, the Congress has set the 

composite payment rate for ESRD 

services furnished to Medicare 

beneficiaries. As a result, we do not 

have the authority to update the 

composite payment rate. 

B. Composite Rate Adjustments To 

Account for Changes in Pricing of 

Separately Billable Drugs and 

Biologicals 

Section 623(d) of MMA provides for 

an add-on to the composite rate for 

thedifference between current payments 

for separately billable drugs and 

payments based on a revised drug 

pricing methodology using acquisition 

costs.

In the proposed notice we proposed to 

pay for separately billable ESRD drugs 

using ASP minus 3 percent based on the 

average relationship of acquisition costs 

to average sales prices from the drug 

manufacturers as outlined in the OIG 

report. We developed the proposed drug 

add-on adjustment using the ASP minus 

66320 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

3 percent drug prices. As discussed 

below, the drug add-on adjustment for 

this final rule is based on average 

acquisition costs for the top ten ESRD 

drugs updated to 2005 and ASP plus 6 

percent for the remaining separately 

billable ESRD drugs. See section III.E, 

Payment for Covered Outpatient Drugs 

and Biologicals, for a discussion of the 

final payment methodology for ESRD 

separately billable drugs. 

In the proposed notice, we outlined 

the methodology and data used to 

develop the proposed drug add-on 

adjustment to the composite rate of 11.3 

percent for both hospital-based and 

independent ESRD facilities. Since the 

composite rate payment for hospitalbased facilities is higher than the 

composite rate for independent 

facilities, the proposed adjustment 

results in a higher payment rate for 

hospital-based facilities. The 2005 

composite rates (including the 1.6 

percent increase) would be $132.41 for 

hospital-based facilities and $128.35 for 

independent facilities with the hospitalbased facilities’ rate higher by $4.06. We 

found this result consistent with section 

1881(b)(7) of the Act, which requires 

that our payment methods differentiate 

between hospital-based facilities and 

others. We also indicated that the 

proposed methodology for making this 

drug add-on adjustment to the 

composite rate is designed to ensure 

that the aggregate payments to ESRD 

facilities for separately billable drugs 

would be budget neutral with what 

would have been paid absent the MMA 

provisions. 

The proposed rule also discussed an 

alternative approach that produced 

separate adjustments to the composite 

rate of 2.7 percent for hospital-based 

and 12.8 percent for independent 

facilities. In contrast to a single add-on, 

separate add-on adjustments would 

result in a significantly higher 

composite payment rate for independent 

facilities than hospital-based facilities, 

of $8.79 more per treatment. 

Comment: We received many 

comments from independent facilities, 

chain organizations and groups 

objecting to our proposal to establish a 

single add-on adjustment to the 

composite payment rate. Several 

commenters expressed concern that 

since hospital-based facilities are paid 

reasonable cost for their separately 

billed drugs other than EPO, those 

facilities should receive an adjustment 

based only on the spread related to EPO 

payments. They stated that our proposal 

to spread the drug savings to all 

facilities does not comply with the 

provision in the statute that they believe 

is intended to hold facilities harmless 

with respect to their drug payment 

profit margins. The commenters also 

contend that since hospital-based 

facilities already receive about $4.00 per 

treatment more than independent 

facilities, they should not share in the 

drug add-on adjustment for other than 

their specific EPO usage. 

Response: As we indicated in the 

proposed rule, we believe that the 

statutory language supports one uniform 

drug add-on adjustment to composite 

payment rates set forth in section 

1881(b)(7) of the Act after updating by 

1.6 percent. The provision speaks of one 

‘‘difference between payment amounts’’

and ‘‘acquisition costs * * * as 

determined by the Inspector General.’’ It 

is reasonable to infer that the Congress 

intended us to compute one 

‘‘difference’’ based only on the payment 

amounts under sections 1842(o) and 

1881(b)(11) of the Act. 

Although the language of section 

1881(b)(7) contemplates differential 

composite rates for hospital-based 

facilities and 623(d) contemplates 

existing composite rates as the starting 

point for application of the new rate 

adjustments prescribed under section 

1881(b)(12)(A) of the Act, the MMA 

language does not suggest that these 

adjustments would be applied 

differentially across facilities. 

Otherwise, all of the adjustments, 

including case-mix and budget 

neutrality would have to be developed 

separately based on facility type. 

We note that the amount of the drug 

add-on has decreased significantly from 

the proposed rule as a result of our 

revised policy of paying for ESRD drugs 

for 2005. Since the drug payment 

amounts increased, the amount of the 

drug add-on to the composite rate 

decreased. The resulting drug add-on 

amount is now 8.7 percent. 

We also note that there is not a 

significant difference in composite rates 

for independent facilities under single 

and separate add-ons. With a single addon of 8.7 percent, the 2005 composite 

rate for independent facilities would be 

$139.52. Under a separate add-on 

approach, the 2005 composite rate for 

independent facilities would be 

$140.93, a difference of $1.41 or about 

1 percent before taking other 

considerations into account. This 

difference is about 27 percent less than 

the difference based on the approach 

and figures in the proposed rule.

While a composite rate difference of 

$1.41 is important, such difference does 

not take into account two other factors: 

(1) Since Medicare’s 2005 payments for 

ESRD drugs will be a weighted average 

of the acquisition costs determined by 

the Inspector General, the payment 

amounts for the most utilized ESRD 

drugs (such as EPO) will be significantly 

higher than payment based on ASP–3 

percent; and (2) Beginning with 2005, 

Medicare will pay separately for 

syringes that are currently included in 

the EPO payments. 

With separate add-ons, the composite 

rate for the independent facilities would 

be $7.33 higher than the composite rate 

for hospital-based facilities. However, 

the composite rate for hospital-based 

facilities would be $10.33 lower under 

separate add-ons than under a single 

add-on approach. We believe the 

current difference in composite rates 

where the hospital-based rate is about 

$4.00 higher than the independent 

facility rate would effectively be 

preserved with a single add-on and 

significantly reversed with separate addons. 

Finally, we note that a key purpose of 

the MMA legislation was to eliminate 

the cross-subsidization of composite 

rate payments by drug payments. If the 

composite rate was inadequate before 

the MMA provision, it was inadequate 

for both hospital-based and independent 

facilities. As such, increasing the 

composite rate by relatively greater 

amounts for independent facilities than 

hospital-based facilities would place the 

latter facilities at a competitive 

disadvantage relative to the former 

facilities. 

Comment: One comment from a drug 

manufacturer suggested that in order to 

preserve high quality care to ESRD 

patients and prevent cost shifting 

behavior, we should require a facility to 

provide the full range of separately 

reimbursable drugs and biologicals in 

order to receive the drug add-on 

adjustment. 

Response: We do not believe the 

statute permits imposing such a 

requirement as a condition for receiving 

the add-on adjustment to the composite 

rate. However, other regulations require 

that ESRD facilities provide appropriate 

care to each patient based on a plan of 

care that would include the 

administration of medically necessary 

drugs as prescribed by the patient’s 

dialysis physician. 

1. Growth Factors Used To Update Drug 

Expenditures and Prices 

Comment: One commenter noted that, 

in the proposed rule, we updated the 

2004 ASP drug prices to 2005 prices by 

using the projected annual growth factor 

for National Health Expenditures 

prescription drugs of 3.39 percent. This 

commenter wanted to know why we did 

not use the actual growth factors for 

separately billable drugs that are 

furnished by ESRD facilities to ESRD 

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patients. The commenter states that this 

factor is currently running about 39 

percent. 

Response: After consideration of the 

available price data, as discussed in the 

section on payment for ESRD separately 

billable drugs, we have determined that 

the Producer Price Index (PPI) for 

prescription preparations is the most 

appropriate price measure for updating 

EPO and other separately billable drugs 

from 2003 to 2005. The PPI for 

prescription preparations is released 

monthly by the Bureau of Labor 

Statistics, and reflects price changes at 

the wholesale or manufacturer stage. By 

comparison, the Consumer Price Index 

(CPI) for prescription drugs reflects 

price changes at the retail stage. Because 

EPO and many of the separately billable 

drugs used by dialysis facilities are 

purchased directly from the 

manufacturer, the use of a price index 

that measures wholesale rather than 

retail prices is more appropriate. The 

PPI for prescription drugs is the 

measure used in the various market 

baskets that update Medicare payments 

to hospitals, physicians, and skilled 

nursing facilities, and home health 

agencies. In addition, the PPI for 

prescription drugs was recommended 

for use in the proposed composite rate 

market basket detailed in the 2003 

Report to the Congress.

Based on historical data through the 

second quarter of 2004, we used the 

Global Insight Inc. forecast of the PPI for 

prescription drugs to determine the 

update factors for 2004 and 2005. We 

feel the use of an independent forecast, 

in this case from Global Insight Inc., is 

superior to using the NHE projections 

for drug prices (which is the CPI for 

prescription drugs) and is consistent 

with the methodology used in projecting 

market basket increases for Medicare 

prospective payment systems. 

Comment: One comment questioned 

the 3 percent growth rate that we used 

in the proposed rule to estimate 2005 

Medicare AWP payment amounts for 

purposes of calculating the drug add-on 

amount. Specifically, the commenter 

asked whether the 3 percent figure 

represented the AWP growth trends for 

all drugs as opposed to the AWP growth 

trends for only ESRD separately billable 

drugs and biologicals. The commenter 

also asked for clarification of the 

timeframe used to establish the 

historical trend. 

Several comments also expressed 

concern that we used a 10-quarter 

average as an approximation for 2002 

expenditures, and as a result, the 

projected 2005 drug expenditures were 

understated. These comments strongly 

recommended that we establish an 

accurate baseline using actual 2002 

expenditures. A study performed for 

commenters by an industry consultant 

was cited as confirming that our base 

year estimate is materially below actual 

drug spending computed using CMS’s 

2002 Outpatient Five Percent Standard 

Analytic File (SAF). Commenters were 

also concerned that the drug add-on 

does not reflect the true difference 

between payments under the current 

system and acquisition costs described 

by the OIG. 

Response: We have taken all these 

comments into consideration and have 

re-evaluated our 2005 projection of 

aggregate ESRD facility drug 

expenditures. We did not use an average 

over 10 quarters to determine aggregate 

drug payments. The 10 quarters of data 

were used only to establish historical 

growth trends. However, we determined 

that our estimates of aggregate drug 

payment amounts were in fact 

understated because they did not 

include deductibles and coinsurance. 

Since drug payment rates are set at 100 

percent of the allowable payment, we 

incorrectly calculated the aggregate drug 

payment for 2005. We revised our 

calculation to ensure that we capture 

the allowable payment before 

deductible and coinsurance are 

removed. In addition, we updated our 

estimates to incorporate the June 2004 

update to the 2003 standard analytical 

file. The 3 percent growth represents 

our best estimate of the expected growth 

rate in AWP prices. In addition, due to 

numerous coding changes for the 

various ESRD drugs, we were unable to 

do direct comparisons for each of the 

AWP prices from year-to-year. 

Therefore, we believe the 3 percent 

inflation factor we used to update the 

AWP prices is appropriate. 

Comment: One comment expressed 

concern that the projected number of 

dialysis treatments in 2005 would be 

overstated if home peritoneal dialysis 

(PD) treatments for home patients are 

included because facilities do not bill 

for non-EPO drugs in that setting. 

Response: Since ESRD facilities also 

receive composite rate payments for 

their Method I home patients, the drug 

add-on would also apply to composite 

rate payments for those patients. 

Therefore, it is appropriate for us to 

count those treatments in projecting the 

number of dialysis treatments for 

computation of the drug add-on amount. 

We did not, however, count treatments 

attributable to Method II home patients 

since payment for these patients is made 

based on reasonable charges as opposed 

to the composite rate. 

Comment: One comment from a 

patient organization raised concern that 

the add-on provision would remove any 

incentives the current payment policy 

creates for facilities to provide 

separately billable drugs and biologicals 

to dialysis patients. This comment 

suggested that we establish new clinical 

guidelines or indicators to ensure that 

dialysis patients receive necessary drugs 

and biologicals. This commenter also 

asked whether we have longer term 

plans to revise payment for dialysis 

treatment and ancillary services. 

Response: We share this commenters 

concern that changes in payments to 

dialysis facilities could produce 

perverse incentives for dialysis facilities 

to skimp on care to ESRD patients. In 

order to ensure that patients continue to 

receive quality care, we are revising the 

ESRD facility conditions for coverage so 

that they are more patient-centered and 

outcome-oriented. We will publish 

proposed ESRD conditions by the end of 

2004. We note that section 623 of MMA 

also requires us to develop a bundled, 

case-mix adjusted payment system and 

report to the Congress by October 1, 

2005. This section also requires the 

establishment of a demonstration to test 

the revised payment system over a 3-

year period beginning January 1, 2006. 

2. Update Methodology for Drug Add-on 

Adjustment in 2006

Comment: Several commenters 

recommended that we publish the 

methodology that we intend to use to 

update the drug add-on component of 

the basic case-mix adjusted payment 

amounts, beginning in 2006, and that 

we provide the opportunity for public 

comment. 

Response: We did not propose a 

mechanism for updating the 2006 

payments in this document since this 

rule addresses payment for 2005. It is 

our intent to publish a proposed rule in 

mid-2005 to address payment changes 

for 2006. The public will be given an 

opportunity to comment on those 

proposals at that time. 

3. Computation of Final Drug Add-On 

Adjustment to the Composite Payment 

Rate 

To develop the final drug add-on 

adjustment we used historical total 

aggregate payments for separately billed 

ESRD drugs for half of 2000 and all of 

2001, 2002 and 2003. For EPO, these 

payments were broken down according 

to type of ESRD facility (hospital-based 

versus independent). We also used the 

2003 data on dialysis treatments 

performed by these two types of 

facilities over the same period. 

66322 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

I. 2005 Average Acquisition Payment 

(AAP) Amounts 

The OIG report contained 2003 

average acquisition costs for the top ten 

drugs supplied by the four largest 

dialysis chain organizations and by a 

sample of those facilities not managed 

by the four largest chain organizations. 

According to the OIG report, these ten 

drugs accounted for about 98 percent of 

total expenditures for separately billed 

drugs furnished by ESRD facilities. The 

report also indicated that payment to 

the four largest dialysis chains 

accounted for 73 percent of Medicare 

drug reimbursement in 2002. Therefore, 

we weighted the average acquisition 

costs using a 73–27 split. As discussed 

earlier, we then updated the 2003 

weighted average acquisition costs to 

arrive at the 2005 AAP amounts by 

using the PPI for prescription drugs. 

These factors were 4.81 percent and 

3.72 percent for 2004 and 2005, 

respectively.

II. Estimated 2005 Medicare Payment 

Amounts Based on 95 Percent of AWP 

We estimated what Medicare would 

pay for ESRD drugs in 2005 if the MMA 

had not been enacted. We adjusted the 

first quarter 2004 Medicare payment 

amounts (95 percent of AWP), based on 

the prices from the January 2004 Single 

Drug Pricer, for drugs other than EPO, 

to estimate 2005 prices by using an 

estimated AWP growth of 3 percent. As 

discussed earlier, these growth factors 

are based on historical trends of AWP 

pricing over years. We did not increase 

the price for Epogen since payment was 

maintained at $10.00 per thousand units 

prior to MMA.


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III. Dialysis Treatments 

We updated the number of dialysis 

treatments based on 2003 data by 

actuarial projected growth in the 

number of ESRD beneficiaries. Since 

Medicare covers a maximum of three 

treatments per week, utilization growth 

is limited, and therefore any increase in 

the number of treatments will be due to 

enrollment. In 2005, we project there 

will be a total of 34.8 million treatments 

performed. 

IV. Estimated Drug Spending 

We updated the total aggregate 2003 

Epogen drug spending for hospitalbased and independent facilities using 

historical trend factors. For 2004 and 

2005, we increased the 2003 spending 

levels by trend factors of 1.0 percent for 

hospital-based facilities and by 10.0 

percent for independent facilities based 

on historical growth from 2000 to 2003. 

We also updated the aggregate AWP 

based spending for separately billed 

drugs, other than EPO, for independent 

facilities by using the 10 percent growth 

factor for Epogen. Since aggregate 

spending in this category show 

extremely varied growth in recent 

history, we could not establish a clear 

growth trend. For this reason we 

decided to apply the Epogen growth rate 

to the other separately billed drugs. 

Given the problems establishing growth 

trends for the other drugs, plus the fact 

the expenditures for Epogen account for 

about 70 percent of the total spending 

for the top ten ESRD drugs, we believe 

this approach to updating all of the 

separately billed drugs is appropriate. 

Additionally, we deducted 50 cents 

for each administration of Epogen from 

the total Epogen spending for both 

hospital based and independent 

facilities, to account for payment for 

syringes that is currently included in 

the EPO payments. Payment for syringes 

used in administering EPO will be made 

separately beginning January 1, 2005. In 

2005, we estimate that the total 

spending for syringes associated with 

the administration of Epogen will 

amount to $1.6 million for hospitalbased facilities and $27 million for 

independent facilities. For 2005, we 

estimate that the total spending for 

Epogen provided in hospital-based 

facilities will be $210 million, and 

$2.913 billion for drugs provided in 

independent facilities ($2.003 billion for 

Epogen and $910 million for other 

drugs). 

V. Add-On Calculation and Budget 

Neutrality 

For each of the ten drugs in the 

previous tables, we calculated the 

percent by which 2005 AAP amounts 

are projected to be different from the 

payment amounts under the pre-MMA 

system. For Epogen, this amount is 2 

percent. We applied this 2 percent 

figure to the total aggregate drug 

payments for Epogen in hospital-based 

facilities, resulting in a difference of $5 

million. 

Since the top 10 ESRD drugs will be 

paid at 2005 AAP amounts and the 

remainder will be paid at ASP plus six 

percent, we then calculated a weighted 

average of the percentages by which 

AAP amounts would be below current 

Medicare prices, for the top 10 drugs, 

and the percentage by which ASP plus 

6 percent would be below current 

Medicare payment amounts. For other 

than the top ten drugs, we do not have 

detailed data on expenditures for drugs 

billed by ESRD facilities. Therefore, we 

computed the percentage by which ASP 

plus 6 percent is below the estimated 

2005 pre-MMA payment amounts for 

those drugs, using the average of the 

comparable ASP prices for the top 10 

ESRD drugs. This procedure resulted in 

a weighted average of 13 percent by 

which the overall revised 2005 drug 

payment amounts applicable to 

independent facilities is projected to be 

less than the 2005 estimated pre-MMA 

system (that is, 95 percent of AWP). We 

then applied the 13 percent weighted 

average to total aggregate drug spending 

projections for independent facilities, 

producing a projected difference of $385 

million. 

Combining the 2005 estimates of $5 

million and $385 million, for a total of 

$390 million and then distributing this 

over a total projected 34.8 million 

treatments would result in an add-on to 

the per treatment composite rate of 8.7 

percent. We estimate that an 8.7 percent 

adjustment to the ESRD composite 

payment rate would be needed to 

achieve budget neutrality with respect 

to drug expenditures for ESRD facilities. 

A. Patient Characteristic Adjustments 

As explained in the proposed rule, the 

current ESRD composite payment rates 

are not adjusted for variation in patient 

characteristics or case-mix. Section 

623(d)(1) of the MMA added section 

1881(b)(12)(A) of the Act to require that 

the outpatient dialysis services included 

in the composite rate be case-mix 

adjusted. Specifically, the statute 

requires us to establish a basic case-mix 

adjusted prospective payment system 

for dialysis services. Also, the statute 

requires adjustments under this system 

for a limited number of patient 

characteristics. In the proposed notice, 

we described the development of the 

methodology for the proposed patient 

characteristic case-mix adjusters 

required under the MMA. 

In summary, we proposed to use a 

limited number of patient 

characteristics that explain variation in 

reported costs for composite rate 

services, consistent with the legislative 

requirement. The proposed adjustment 

factors are as follows:

66324 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

Although the magnitude of some of 

the patient-specific case-mix 

adjustments appears to be significant, 

facility level variation in case-mix is 

limited because of the overall similarity 

of the distribution of patients among the 

eight case-mix classification categories 

across facility classification groups. 

We received a significant number of 

comments regarding the case-mix 

adjustment factors, which are 

summarized in this section with our 

corresponding responses. 

1. Sample Data Used To Develop the 

Basic Case-Mix System 

Comment: Comments regarding the 

sample or universe used to derive the 

proposed basic case-mix adjustments in 

the proposed rule expressed concerns 

about the size of the sample, the number 

of hospitals and freestanding facilities 

included, as well as the number of 

facilities excluded from the data. 

Response: We used the database 

established by our contractor to develop 

the basic case-mix system in the 

proposed rule. Facility cost report data 

were matched to the corresponding 

facility billing data to insure that the 

sample reflected the most valid and 

reliable data available. The specific 

methodology used to develop the 

database is discussed in Kidney 

Epidemiology and Cost Center’s 

(KECC’s) Phase I report. The Phase I 

report entitled: ‘‘An Expanded Medicare 

Outpatient End Stage Renal Disease 

PPS—Phase I’’ is available on the 

University of Michigan Web site:

http://www.sph.umich.edu/kecc. The 

contractor has been updating the data 

files for subsequent phases of their 

research and is beginning to analyze 

these data for the bundled prospective 

payment system. The data used for the 

basic case-mix proposed system were 

also assessed in terms of consistency. 

Data from 2000, 2001, and 2002 were 

examined separately as well as 

combined to determine if there were 

consistent trends over the 3-year period. 

The data were updated to include the 

latest 2002 data that was available as of 

September 2004. The updated data 

reflect an increase of approximately 10 

percent in the number of facilities 

represented in the database. 

Comment: Several comments 

expressed concerns regarding the 

timeliness of the data used to develop 

the proposed case-mix measures. These 

concerns focused on the availability of 

cost reports for 2002. In the proposed 

notice we acknowledged we were 

delayed in obtaining cost reports for 

2002 and that the final rule would 

reflect the most recent data on the 

number of cost reports available. 

Response: Table 12 indicates the 

number of dialysis facilities with at least 

one cost report for 2000 to 2002. This 

table also reflects the availability of the 

most recent cost reports data for 2002 

and reflects an increase from the 

proposed rule of an additional 564 cost 

reports for the independent facilities in 

2002.

The availability of cost reporting data 

may be delayed because of a number of 

factors including late submissions by 

facilities and necessary reconciliation 

and verification of data by fiscal 

intermediaries prior to submission to 

our data systems. The comment on 

delays and availability of data is also 

related to concerns expressed by other 

comments regarding the reporting of comorbid conditions. Several comments 

addressed potential inconsistencies in 


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facility reporting of co-morbid 

conditions, specifically with the impact 

of the variation of the reporting of AIDs 

noted in the 2000 data compared to 

other years. This variation, coupled 

with the potential incompleteness of the 

2002 data, led us to examine options for 

selecting the time period to be used for 

determining the case-mix adjustments. 

In this final rule, we have decided to 

use combined data for the 3-year period 

2000–2002, to determine the case-mix 

adjustment factors. The use of combined 

data enables us to eliminate any impact 

caused by annual variation in reporting, 

delays in the availability of 

administrative files, and 

overemphasizing the predictive 

significance of selected variables, 

because case-mix variables are 

combined and averaged over a 3-year 

period, thus representing a more stable 

database. 

Comment: Several comments focused 

on the number of facilities that were 

excluded from the study sample in the 

development of the proposed case-mix 

adjustments. For the proposed 

regulation, we excluded from our 

sample facilities where cost report data 

could not be matched to claims data and 

vice versa, or where key data elements 

were missing. In addition we excluded 

outlier facilities (those with high or low 

average costs, or high or low 

proportions of co-morbid conditions.) 

Data from small facilities (fewer than 20 

patients) and those with existing 

composite rate exceptions were also 

excluded. 

Response: We concurred with the 

recommendation to reassess the sample. 

For the final rule, we are including, 

within the sample, data for facilities 

with existing exceptions. However, we 

have continued to exclude data for 

small facilities, outliers, and facilities 

with missing or unusable data. Missing 

data excluded approximately 11 percent 

of the sample, and not including small 

facilities or outlier facilities eliminated 

approximately 9 percent of the study 

sample. 

We did not accept the suggestion that 

smaller sized facilities were proxies for 

rural facilities, however, and we will 

continue to study the rural and urban 

issue in future research and in updates 

to the wage index. 

Overall, including those facilities 

with exceptions provides a more robust 

study sample. In this way any effects on 

the case-mix values due to fluctuations 

in the data from year to year are greatly 

diminished.

Comment: Several commenters 

objected that the database used to 

develop the basic case mix was not 

available. One commenter indicated that 

not having the data made it difficult to 

evaluate the impact of the proposed 

case-mix variables on specific facilities. 

Response: The database developed for 

the basic case-mix system is the same 

database that was developed by the 

University of Michigan for the ongoing 

research project to develop a bundled 

payment system. This database was 

compiled using our administrative data. 

We make available for purchase data 

available in the form of public use files 

or standard analytic files. Commenters 

can use the same data files that were 

used by the University of Michigan to 

develop the database used. The 

proposed rule provides the factors 

necessary to determine impact on 

individual facilities based on the casemix within that facility. In addition, we 

have expanded our discussion of the 

impact of the case-mix adjustments and 

have provided a more detailed example 

to assist facilities in evaluating the 

impact of the case mix on their specific 

facilities. 

2. Including Co-Morbid Conditions in 

the Case-Mix Adjustment 

Comment: A number of comments 

expressed concerns regarding the coding 

of co-morbid conditions. Some 

comments acknowledged that limited 

time has been spent by ESRD facilities 

in coding multiple conditions. Some 

stressed that training should be 

provided to ensure that facilities 

understand this reporting requirement. 

One commenter attributed the proposed 

delay in implementation of the case-mix 

adjustments to potential difficulties in 

coding co-morbid conditions and in 

integrating these coded conditions into 

the payment. 

Response: We considered the 

commenters concerns regarding 

incorporating co-morbid conditions and 

the findings from analyzing more recent 

data. Although our regression modeling 

suggests that the inclusion of comorbidities in the case-mix system 

would be appropriate, we are concerned 

that the data available to determine 

patient level co-morbidities may not 

accurately reflect diagnoses relevant to 

the dialysis patient population. 

Therefore, in this final rule we are not 

including co-morbidities as case-mix 

adjustments. As discussed later in this 

section, we are establishing the case-mix 

adjustments based on the following 

variables: age, body mass index (BMI) 

and body surface area (BSA). More 

recent analysis of the data and clinical 

concerns expressed regarding the 

inclusion of AIDs and selected PVD 

diagnoses support this decision. 

However, while co-morbid conditions 

are not currently part of the basic casemix system, we encourage all facilities 

to more thoroughly report and code comorbid conditions on their claims. This 

will enable appropriate refinements to 

the basic case-mix adjustments and also 

provide a better database from which we 

can develop case-mix measures for a 

bundled payment system. 

Comment: One commenter 

representing a chain of ESRD facilities 

stated that we overstated the prevalence 

of patients with peripheral vascular 

disease (PVD). The commenter 

maintained that overstating the 

incidence of PVD in the ESRD 

outpatient population results in an 

overstatement of the offset for budget 

neutrality because of the proposed 1.07 

case-mix adjuster for PVD patients, 

thereby decreasing the otherwise 

applicable composite payment rate prior 

to case-mix adjustments. The 

commenter identified 51 diagnoses from 

the list of PVD diagnosis codes included 

in the proposed rule that he believed 

were either not reflective of PVD in 

ESRD patients, were not usually 

considered as a cause of PVD in ESRD 

patients, or were poorly differentiated 

clinically and could occur even in the 

absence of PVD. The commenter 

believed that these 51 diagnoses should 

be excluded from our list of PVD 

diagnoses for purposes of determining 

the case-mix and budget neutrality 

adjustments to the composite payment 

rates. Another commenter pointed out 

that there is substantial clinical 

disagreement about the definition of 

PVD and that the ESRD claims data 

presently do not contain sufficient 

information to implement the proposed 

PVD adjustor. 

Response: The selection of specific 

co-morbid conditions for purposes of 

adjusting the composite payment rates 

to reflect the patient characteristics 

associated with cost differences across 

facilities is an important issue, and we 

appreciate the commenter’s suggestions. 

However, we disagree with the 

recommendation that we exclude 

certain diagnoses because they are not 

usually considered a cause of ESRD in 

patients. We believe that whether a 

particular co-morbid condition caused 

the onset of ESRD is irrelevant. The 

important factor is whether a particular 

co-morbid condition is associated with 

facility differences in composite rate 

costs, regardless of their role in the 

etiology of ESRD. 

We agree with the commenter’s 

suggestion that diagnoses which can 

occur in the absence of PVD will be 

excluded for purposes of applying a 

case mix adjustment based on PVD. In 

addition, there is apparent disagreement 

among clinicians as to whether certain 

66326 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

diagnoses are reflective of PVD in ESRD 

patients, and we will try to achieve as 

much consensus as possible before 

proceeding to implement a case mix 

adjuster which purports to reflect PVD. 

Accordingly, we are eliminating the 

case mix adjustment for PVD as set forth 

in the proposed rule. We point out that 

further analyses with more restricted 

sets of diagnostic codes revealed that 

the omitted codes were still strong 

predictors of costs. We intend to revisit 

the issue of appropriate co-morbidity 

adjustments as we continue our research 

to develop the bundled ESRD payment 

system. 

We point out that our case mix model 

that included PVD explained about 35.7 

percent of the variation in facility 

composite rate costs. By comparison, 

our model using five age groups without 

co-morbidities explains about 35.6 

percent of the cost variations. Although 

PVD was a statistically significant case 

mix variable, its contribution to the 

model’s performance overall in 

explaining facility differences in costs 

was minimal. While co-morbidity 

adjustments will be excluded under the 

basic case mix adjusted composite 

payment system, accuracy in the 

reporting of co-morbid conditions on 

the bills will become increasingly 

important because of the likelihood that 

a bundled ESRD payment system will 

include co-morbidities associated with 

differences in patient resource 

consumption.

Comment: Two commenters 

recommended that we exclude AIDS as 

a co-morbidity warranting case-mix 

adjustment. These commenters stated 

that because of State laws requiring that 

a patient’s AIDS status be kept 

confidential, most facilities do not know 

whether their patients have AIDS. This 

does not pose a risk to other patients or 

caregivers because of the universal 

precautions which dialysis facilities are 

required to use in order to prevent 

exposure and infection. 

Response: Because the claims data 

contain primarily the patient’s primary 

diagnosis, AIDS is not likely to be 

recorded as a claims diagnosis for 

outpatient dialysis patients. Requiring 

the recording of the AIDS diagnosis on 

the bills would create powerful 

incentives for ESRD facilities to 

circumvent confidentiality restrictions. 

In those States with AIDS 

confidentiality requirements, the 

diagnosis is not likely to be recorded at 

all. Given the relatively low incidence 

of AIDS patients in the outpatient 

dialysis population, the fact that 

facilities in States with AIDS 

confidentiality requirements would be 

potentially disadvantaged if AIDS were 

included as a payment adjuster, and the 

fact that the relationship between AIDS 

and dialysis costs was not stable from 

year to year, we have decided to 

eliminate AIDS as a basis for case-mix 

adjustment to the composite payment 

rates at the present time. 

3. Case-Mix Adjustment for Gender 

Comment: One commenter suggested 

that we eliminate gender as one of the 

patient characteristic variables used to 

case-mix adjust the composite payment 

rates. The commenter stated that gender 

was essentially a surrogate for 

differences in height and weight 

measures that would yield a superior 

case-mix adjustment. 

Response: Although height and 

weight are much better predictors of 

facility variation in composite rate costs, 

these data were only available on the 

Form CMS 2728, not on the bills 

submitted for payment. Accordingly, we 

used gender as a surrogate measure in 

proposing adjustments, because gender 

is reported on the outpatient bill (for 

example, UB92 or the equivalent 

electronic form). However, the National 

Uniform Billing Committee has 

approved the use of two new value 

codes for reporting weight and height 

(A8—weight in kilograms, A9—height 

in centimeters) on the billing forms 

effective January 1, 2005. 

The mandatory reporting of height 

and weight permits the development of 

case mix measures that reflect both 

variables, such as BMI and BSA, each of 

which are superior to weight alone as 

predictors of resource use. Given the 

impending availability of height and 

weight data on the outpatient dialysis 

bill, we examined the predictive power 

of weight, BMI, and BSA in lieu of 

gender based on data reported on the 

Form 2728 from 2000 through 2002. We 

found that both BMI and BSA are 

superior predictors to weight alone and 

that BSA, coupled with a variable for 

low BMI, is the best predictor of facility 

differences in composite rate costs. 

Accordingly, we have eliminated gender 

in this final rule as a patient 

classification variable for purposes of 

case mix adjustment. Instead we are 

substituting BSA, and a variable for low 

BMI, each of which are explained in 

another section of this final rule. 

4. Age Groupings Used in Proposed 

Case-Mix Adjustment 

Comment: Several comments 

indicated that the proposed age groups 

were too broad. Some of the comments 

recommended that we create more age 

categories for purposes of the case-mix 

adjustments. 

Response: In the proposed rule we 

established three age categories for 

example: less than 65, 65–79, and 

greater than 79. In reassessing the study 

sample and the proposed case mix 

adjusters, we also explored the age 

categories. We concur with the 

comments to expand the number of age 

categories. For the final rule, there will 

be five age groupings. These are: 18–44, 

45–59, 60–69, 70–79, and 80+. Patients 

under 18 are discussed in the following 

section on pediatrics. We believe that 

the revisions to the age groupings more 

accurately describe the distribution of 

the patient population and reflect more 

refined predictors of age for payment 

purposes. 

Comment: One commenter asked 

what would happens under our 

proposed adjustment if during the 

course of a month, an ESRD patient’s 

age changed and they cross the line into 

another case-mix adjustment factor. For 

example, on August 15 a 64-year-old 

ESRD patient turns 65. They questioned 

how is this situation is handled and is 

the age used as of the last day of the 

month. 

Response: We believe it is appropriate 

to handle this situation as it is handled 

for enrollment. Thus, for a month when 

the patient has a birthday that puts him 

or her into another age category, the first 

of the month would be the effective date 

of the patient’s new age category. 

5. Case-Mix Adjustment for Pediatric 

Patients 

Comment: Several commenters 

expressed concern over the lack of a 

case-mix adjustment for pediatric ESRD 

patients. The commenters stated that 

although section 623(b) of the MMA 

provided for an exception process for 

pediatric ESRD facilities, qualification 

for a pediatric exception is limited to 

those facilities where pediatric patients 

(those under age 18), comprise at least 

50 percent of the caseload. The 

commenters pointed out that ESRD 

pediatric patients are unusually 

resource intensive and costly and are 

widely scattered among facilities, most 

of which would not qualify as pediatric 

facilities under the definition set forth 

in the statute. The commenters 

recommended that we develop a casemix adjuster for pediatric ESRD patients 

using other data sources. 

Response: Using the same regression 

methodology described in the proposed 

rule, we attempted to develop a casemix adjuster for outpatient ESRD 

patients under age 18. However, based 

on the approximately 600 Medicare 

patients for whom bills were available 

each year from 2000 through 2002, the 

results were highly variable, statistically 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66327

unstable, and therefore inappropriate for 

development of a case-mix adjuster in 

accordance with the proposed rule’s 

methodology. However, because of the 

costliness of pediatric ESRD patients, 

we believe that an alternative case-mix 

adjustment is warranted, particularly for 

those facilities, which do not meet the 

definition of a pediatric facility under 

section 623(b) of the MMA.

As the commenter correctly pointed 

out, some facilities would not qualify 

for consideration for the pediatric 

exception provided in the law because 

their pediatric caseload does not 

constitute 50 percent of their patients. 

These facilities may still incur 

substantial costs for the treatment of 

pediatric ESRD patients. Pending the 

development of more refined case-mix 

adjustments that are more sensitive to 

individual variation in treatment costs 

under a fully bundled ESRD PPS, we are 

providing for a single adjustment to a 

facility’s otherwise applicable 

composite payment rate, developed 

based on the methodology described 

below, for outpatient ESRD pediatric 

treatments. We want to emphasize that 

the pediatric adjustment factor resulting 

from this methodology is intended to be 

a temporary measure. It will only apply 

until we can develop an adjustor under 

the bundled ESRD PPS that is more 

similar with the case-mix adjustments 

that would apply to non-pediatric ESRD 

patients. 

During the period from November 1, 

1993 to the present time, we identified 

19 hospital-based and one freestanding 

ESRD facility, each of which sought and 

received an atypical services exception 

based on the higher costs incurred for 

the treatment of outpatient pediatric 

patients. For each of these facilities we 

obtained the number of treatments at the 

time the exception was submitted and 

determined the unadjusted composite 

payment rate that would have applied 

beginning January 1, 2005 without 

regard to any exception amount, that is, 

each facility’s unadjusted composite 

payment rate was inflated to January 1, 

2005 to reflect the statutory increases of 

1.2 percent effective January 1, 2000, 2.4 

percent effective January 1, 2001, and 

1.6 percent effective January 1, 2005. 

We then subtracted the inflated 

January 1, 2005 unadjusted composite 

rate from each facility’s composite 

payment rate, including the exception 

amount granted, to obtain the estimated 

amount of the exception projected to 

2005. This amount was multiplied by 

the number of treatments previously 

provided, summed for all 20 facilities, 

and then divided by the number of 

treatments for all 20 providers to yield 

an average atypical services exception 

amount per treatment. The average 

exception amount for ESRD facilities 

that received exceptions due to their 

pediatric caseload, adjusted to 2005, 

was $86.79 per treatment. The average 

unadjusted composite payment rate for 

these same 20 facilities projected to 

2005, similarly weighted by the number 

of treatments, was $139.32. Thus, the 

average composite payment rate 

adjusted to January 1, 2005, including 

the average exception amount of $86.79, 

was $139.32 + $86.79 or $226.11. 

Because the average exception amount 

was calculated from facilities located in 

areas with differing wage levels, we 

converted the average pediatric 

exception amount to a ratio,

$226.11/$139.32 or 1.62. 

This is the case-mix adjustment factor 

that will be applied to each facility’s 

composite payment rate per treatment 

for outpatient maintenance dialysis 

services furnished to pediatric patients. 

This includes both in-facility and home 

dialysis. Applying the adjuster 

multiplicatively in this manner 

recognizes the wage index variation in 

labor costs among urban and rural areas 

built into the composite rates. 

Notwithstanding this case-mix 

adjustment per treatment for ESRD 

pediatric patients, facilities who 

otherwise qualify as a pediatric facility 

under section 623(b) of the MMA will 

be permitted to seek an exception to this 

rate if they believe their circumstances 

warrant a higher payment rate under the 

atypical services exception provisions 

set forth in the regulations. We intend 

the pediatric adjustment factor of 1.62 to 

be a temporary measure. We anticipate 

its elimination once the case-mix 

methodology that will apply in the 

context of the bundled ESRD PPS is 

developed. We want the same 

methodology to apply to both pediatric 

and non-pediatric ESRD patients.

6. Facility Level Control Variables Used 

in the Proposed Regression Model 

In developing the regression model 

used to derive the case-mix adjustments, 

we included variables reflective of 

facility characteristics. Because facility 

characteristics do account for 

differences in facility composite rate 

costs, we included them in the 

regression model through the use of 

facility control variables, so that the 

patient characteristic case-mix adjusters 

are not distorted. The facility control 

variables included the wage index, 

facility size (based on the annual 

number of treatments), facility status as 

hospital-based or freestanding, percent 

of patients with urea reduction ratios 

greater than or equal to 65 percent, 

chain ownership, year of cost report, 

and percent of pediatric patients 

treatments. These variables were not 

used to calculate the basic case-mix 

adjustment factors. 

Comment: One comment questioned 

the inclusion of the proportion of 

patients with urea reduction ratios 

(URRs) greater than 65 as a facility 

control variable in the least squares 

regression model used to develop the 

case-mix adjustment factors. The 

comment maintained that because a 

patient’s URR may be correlated with 

other co-morbid conditions, the 

coefficients for the variables tested in 

the model might be distorted. The 

comment recommended an evaluation 

of the degree of association between 

URR and the main co-morbid conditions 

to determine the extent of any 

multicolinearity. The comment further 

stated that if URR is appropriate as a 

facility control variable, then other 

surrogates of dialysis efficiency, such as 

standardized mortality ratio and 

proportion of patients with hemoglobin 

readings above specified target levels, 

should also be considered as control 

variables. 

Response: We believe that case-mix 

adjustments to the composite payment 

rate must be determined by patient and 

not by facility characteristics. To the 

extent that facility differences in costs 

are statistically explained by facility and 

not patient characteristics, we account 

for them in the regression model 

through the use of control variables, so 

that the potential case-mix adjusters are 

not distorted. Facility control variables 

were not used to develop the adjustment 

factors to the composite payment rates. 

For example, chain affiliation, facility 

size, and status as a hospital-based or 

freestanding facility were associated 

with statistically significant differences 

in facility costs. However, it would be 

inappropriate to object to the payment 

rates based on a facility belonging to a 

particular chain, or based on the 

number of annual treatments. 

To test for multicolinearity, that is, to 

ensure that each co-morbidity tested for 

inclusion in the regression model was 

not correlated with other variables, we 

ran a correlation matrix. The correlation 

matrix included URR. URR was found 

not to correlate with any of the comorbidities tested; in statistical 

parlance, it was orthogonal. 

Accordingly, low URR was not a 

surrogate of co-morbidity. Therefore, we 

believe it was appropriate to treat URR 

as a quality of care outcome measure at 

each facility. The effect of using URR as 

a facility control variable was to ensure 

that the case-mix adjustment factors 

were not distorted for facilities with 

similar URR outcomes. For example, if 

66328 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

larger patients receive lower doses of 

dialysis, not controlling for URR could 

impart a downward bias on the 

coefficient for patient size. The 

comment also suggested the use of other 

variables as facility control variables 

such as standardized mortality ratio 

(SMR) and hemoglobin count. Because 

SMR standardizes or controls for the 

effect of case mix on the ratio, we would 

have to ensure consistency in the 

reporting of specified co-morbidities on 

the bills in order to ensure the validity 

of each facility’s SMR. That consistency 

currently does not exist. Facilities are 

only required to report hematocrit/

hemoglobin on the claims available for 

those patients receiving erythropoeitin 

(EPO). However, because the proportion 

of patients receiving EPO is high, the 

use of hematocrit/hemoglobin as 

another outcome facility control 

variable is feasible, but mainly in the 

context of the bundled payment system. 

Since the drugs and lab tests associated 

with anemia management are paid 

outside the composite payment rate, 

hematocrit/hemoglobin level would not 

be appropriate as a control variable 

applicable to composite rate costs. 

7. Propriety of Case-Mix Adjustment 

Comment: Several commenters 

expressed reservations about our 

proceeding with the implementation of 

a case-mix adjustment to the composite 

payment rates using the methodology 

set forth in the proposed rule. One 

commenter cited the May 19, 2004 

report prepared by the KECC of the 

University of Michigan, which pointed 

out that the proposed case-mix variables 

collectively explained less than 1 

percent of the facility variation in 

composite rate costs, although the 

addition of facility control variables 

increased this proportion to about 33 

percent. One commenter stated that the 

low explanatory power of the proposed 

case-mix variables indicated that they 

do not accurately predict cost variation 

and are flawed. The commenter 

suggested that we defer applying a casemix model until the results of the 

demonstration project mandated under 

section 623(e) of the MMA are available. 

Response: We would have preferred 

to develop a case-mix adjustment in the 

context of a bundled outpatient ESRD 

PPS. In a fully bundled PPS, which 

section 623(f) of the MMA anticipates, 

routine and separately billable dialysis 

related services, drugs, and clinical 

laboratory tests would be included in 

the payment bundle. KECC’s previous 

research revealed that, for separately 

billable services, case-mix explained 

about 23 percent of the variation in cost 

across dialysis facilities. (See Hirth, et 

al., Is Case-Mix Adjustment Necessary 

for an Expanded Dialysis Bundle?, 

Health Care Financing Review, 2003, 24, 

pages 77–88). 

However, the enactment of Pub. L. 

No. 108–173 foreclosed the option of 

deferring implementation of a casemix 

adjusted composite rate based on a 

limited number of patient 

characteristics effective January 1, 2005. 

We do not believe that the statutory 

directive set forth in section 623(d) of 

the MMA permits us to defer the 

development of a basic case-mix 

measure, one based on a ‘‘limited 

number of patient characteristics.’’

We do not agree with the statement 

that, because the proposed case-mix 

adjusters collectively account for about 

1 percent of the facility variation in 

composite rate costs, the variables used 

are fundamentally flawed. In fact, when 

data is combined over three years, each 

of the proposed case-mix variables is 

highly significant statistically, despite 

the low proportion of facility variation 

in costs explained. A more important 

indicator of the importance of the case 

mix factors identified is the size of the 

adjustments. If the identified case mix 

variables did not have a meaningful 

relationship with costs, the magnitude 

of the adjustment factors would be 

insignificant or trivial. They are not. As 

explained in this final rule, based on 

our analysis of the comments we 

received, we have revised the case-mix 

variables used to adjust the composite 

payment rates. Our research to develop 

a statistically robust clinically coherent 

case-mix measure in the context of the 

fully bundled ESRD PPS will continue. 

8. Alternative Case-Mix Variables 

Comment: Several commenters 

suggested alternative case-mix variables 

which they believe account for patient 

differences in resource consumption 

and would better distinguish facility 

differences in composite rate costs. The 

patient characteristics proposed by 

commenters included quarterly serum 

albumin values, cancer, limb 

amputation, gastrointestinal disorders, 

body mass index, weight, revised age 

groupings, hypertension, duration of 

dialysis treatment, and others. The 

commenters indicated that, based on 

their clinical judgment, the suggested 

factors were more likely to be predictors 

of variability in the cost of care than the 

proposed AIDS and PVD co-morbidities. 

A few commenters recommended a 

delay in the implementation of the casemix adjusted composite payment rates 

pending evaluation of the suggested 

variables. A number of comments 

indicated that BMI was a significant 

predictor of cost and recommended that 

BMI be included in the case-mix 

adjustment. Another commenter 

recommended BSA be examined as a 

potential case-mix predictor. 

Response: We appreciate all of the 

comments we received proposing 

alternative case-mix variables. We 

welcome suggestions for case-mix 

refinement based on sound clinical 

judgment, especially when analyses 

including separately billable ESRD 

services are performed as our research 

for development of the bundled ESRD 

payment system progresses. However, 

we point out, that unless the existence 

of a suggested co-morbidity or patient 

characteristic could be determined from 

either the Form CMS 2728 or claims 

data which could be linked to a specific 

ESRD dialysis patient, we were unable 

to evaluate its potential to predict 

facility differences in composite rate 

costs. Furthermore, unless a patient 

characteristic can be reported on the UB 

92 claim form (or the equivalent 

electronic version), it cannot be used to 

adjust a facility’s composite payment 

rate. These limitations eliminate for 

consideration many of the commenters’

suggested alternative patient 

characteristic variables. 

Nonetheless, our regression model 

evaluated 35 patient characteristics 

including weight, BMI, BSA, seven 

types of cancer, diabetes, chronic 

obstructive pulmonary disease, four 

types of heart disease, and race. Comorbidities selected for inclusion in the 

model with significant negative 

coefficients were removed from 

subsequent iterations of the stepwise 

regression model. The inclusion of such 

co-morbidities would have resulted in 

reductions in the otherwise applicable 

composite rate payments. Because we 

can now require the reporting of height 

and weight on the claim form beginning 

January 1, 2005, we have adopted the 

commenters’ suggestions to use either 

BMI or BSA as a predictor variable. We 

selected BSA and low BMI because they 

improve the model’s ability to predict 

the costs of composite rate service 

compared to using BMI or weight alone. 

In addition, we have increased the 

number of age groups from three to five 

and eliminated gender as a payment 

variable entirely. 

As explained later in the 

‘‘Implementation Date’’ section, we do 

not believe it would be appropriate to 

further delay the implementation of the 

basic case-mix adjustment. We proposed 

delaying implementation of the casemix payments until April 1, 2005 in 

order to ensure all systems, 

programming, and other operational 

requirements are in place. Between 

publication of this final rule and the 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66329

implementation date, we will conduct 

training programs to ensure that 

facilities understand both the payment 

methodology and reporting 

requirements necessary to ensure 

appropriate payment to ESRD facilities. 

9. Continuing Research To Develop a 

More Fully Bundled Case-Mix System 

Comment: Several comments 

requested additional detail regarding the 

continuing research for the development 

of a more fully bundled system. 

Response: The research activities for 

the fully bundled system have focused 

on updating the database. Research 

efforts since the passage of MMA have 

focused on supporting the 

Congressional mandate for the 

development of a limited number of 

case-mix variables. Following the 

publication of this rule, we anticipate 

that the emphasis will return to the 

development of a bundled prospective 

payment system that includes bundling 

of drugs, clinical laboratory tests, and 

other items that are separately billed by 

such facilities. This research will be 

reflected in an October 1, 2005 Report 

to the Congress. 

In addition, the MMA requires us to 

establish the fully case-mix adjusted 

demonstration which will bundle into 

the payments both separately billable 

drugs and biologicals and clinical labs. 

Both the Report to the Congress and the 

demonstration will be supported by 

continuing research. 

10. Body Measurements as Case-Mix 

Adjusters 

In the proposed rule, we had 

discussed the importance of the BMI as 

a measure of resource consumption 

related to the composite payment rate. 

At that time, our analysis indicated that 

patients with very low or high BMI were 

more costly to treat. At the time of the 

publication of the proposed rule, we 

had no mechanism to obtain indicators 

for height and weight on the claims 

form. We had indicated that we would 

be exploring adding height and weight 

to the bills.

Comment: A number of commenters 

endorsed the use of low BMI as an 

appropriate surrogate for the severity of 

morbid conditions associated with 

malnourishment in the dialysis 

population, and some suggested that a 

BMI below 20.0 kg/m2 is generally 

considered in the underweight range. In 

addition, we also received comments 

regarding the inclusion of a measure of 

BSA. 

Response: We concur with the 

comments to include BMI and BSA as 

case-mix adjusters reflecting patient 

characteristics that explain variation in 

the reported costs for composite rate 

services. We have obtained approval to 

collect both height and weight on the 

bill through the use of two new value 

codes. ESRD facilities will be required 

to report height and weight using these 

value codes, so that payment can be 

based on the case-mix adjusted 

composite rate payment system on April 

1, 2005. 

For the implementation of the basic 

case-mix payments, we are providing an 

adjustment for low BMI, that is, any 

patient with a BMI less than 18.5 kg/m2. 

We included this variable because our 

regression analysis indicated that those 

patients who are underweight and 

malnourished consume more resources 

than other patients. Although we 

received one comment suggesting 

defining low BMI as 20 kg/m2, we chose 

the measure of low BMI that is 

consistent with the CDC and NIH 

definition for malnourishment. 

Furthermore, our exploration of 

alternative BMI thresholds did not 

improve the model’s ability to predict 

the costs of composite rate services. 

In addition, we are providing casemix adjustments based on BSA. Our 

research into this body measurement 

indicated that BSA (meters2) is a good 

predictor of composite rate resource 

consumption. We examined all of the 

formulas for BSA. While we found very 

little differences between the formulas 

in predictive power, we are adopting the 

Dubois and Dubois formula for BSA 

since our literature search revealed that 

this particular formula was the most 

widely known and accepted. This 

formula is: BSA=W0.425 * H0.725 * 

0.007184 (DuBois D. and DuBois, EF. ‘‘A 

Formula to Estimate the Approximate 

Surface Area if Height and Weight be 

Known’’: Arch. Int. Med. 1916 17:863–

71.), where w and h represent weight in 

kilograms and height in centimeters, 

respectively. 

In addition, we explored a number of 

options for setting the reference values 

for the BSA. We examined the 

distributions for both the midpoint of 

the BSA and the count of dialysis 

patients by age, body surface and low 

BMI. Based on this analysis, we are 

setting the reference point at a BSA of 

1.84 (the average BSA among dialysis 

patients in 2002). By setting the 

reference point at the average BSA, the 

adjusters will reflect the relationship of 

a specific patient’s BSA to the average 

BSA of all patients. Therefore, some 

adjusters will be greater than 1.0 and 

some will be less than 1.0. In this way, 

we are able to minimize the magnitude 

of the budget neutrality offset to the 

composite payment rate. 

The following presents an example of 

the method for calculating patient level 

multipliers that were derived from the 

coefficients resulting from the 

regression model that includes control 

variables, expanded age groups, BSA, 

and an indicator for low BMI (<18.5 kg/

m2). The model excluded small 

facilities, and outliers.

Case-mix adjuster = Age factor * low 

BMI factor * BSA factor

Although we could have selected any 

increment, we believed an increment of 

0,1 provided and appropriate degree of 

precision of the calculation of the 

exponent used to compute the BSA 

case-mix adjustment. The BSA factor is 

defined as an exponent equal to the 

value of the patient’s BSA minus the 

reference BSA of 1.84 divided by 0.1. 

The BSA adjustment factor of 1.037 is 

then exponentiated based on the 

calculated BSA factor as 1.037 ((BSA - 

1.84)/0.1) 

For Example: The case-mix adjuster 

for a 47-year old person who is 

underweight (BMI<18.5 kg/m2) and has 

a body surface area of 2.0 m2 is 

calculated by using the 1.84 BSA 

reference point:

Age Factor = 1.055

Low BMI Factor = 1.112

BSA Factor = 1.037 ((2.0-1.84)/0.1) = 

1.037 (1.6) = 1.060

Case-Mix Adjuster = 1.055 * 1.112 * 

1.06 = 1.244

The resulting case-mix adjustment 

factor of 1.244 for this patient would be 

applied to the facility’s composite 

payment rate that is adjusted for area 

wage index, drug add-on, and budget 

neutrality. 

11. Budget Neutrality for Case-Mix 

Adjustment 

Section 1881(b)(12)(E)(i) of the Act, as 

added by section 623(d)(1) of the MMA, 

requires that the basic case-mix adjusted 

composite rate system be designed to 

result in the same aggregate amount of 

expenditure for such services, as 

estimated by the Secretary, as would 

have been make for 2005 if that 

paragraph did not apply. Therefore, the 

patient characteristics case-mix 

adjustment required by section 623(d)(1) 

of the MMA must result in the same 

aggregate expenditures for 2005 as if 

these adjustments were not made.

In order to account for the payment 

effect related to the case-mix 

adjustment, we proposed to standardize 

the composite rate by dividing by the 

average case-mix modifier of 1.1919. 

The proposed budget neutrality 

adjustment to the composite rate was 

0.8390. However, we were not able to 

simulate case-mix effects at the bill level 

66330 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

because co-morbidities are generally not 

reported on the ESRD bill. We still 

intend to refine our case-mix 

adjustments once we have more 

complete patient data on the ESRD bill. 

In this final rule, we have refined our 

adjustment for budget neutrality related 

to the case-mix factor. We simulated 

payment for each ESRD provider by 

applying a facility-specific case-mix 

multiplier to the composite rate 

applicable for that facility. Since the 

pediatric case-mix adjustment was 

developed outside the regression model, 

we simulated payments separately for 

those treatments. The results of these 

tow computations were then combined 

to arrive at the total case-mix adjusted 

payments. We also simulated payment 

for each provider as if they did not 

receive any case-mix adjustments. We 

then compared the total simulated 

payments with case-mix adjustment to 

total simulated payments without casemix adjustment. The resulting budget 

neutrality adjustment to the composite 

rate is 0.9116. 

B. Revised Patient Characteristic 

Adjustments 

The following section discusses in 

detail the final case-mix adjustments to 

the ESRD composite rate payment. 

In summary, based on the comments 

that we received on the proposed casemix and additional analyses prepared 

by our contractor, KECC, in this final 

rule, we are modifying the proposed 

case-mix adjustments. We have 

broadened the number of age groups to 

include five age categories and added 

low BMI and BSA as measures. We have 

also included a specific case-mix 

adjustment for pediatric patients under 

age 18. We excluded the proposed 

categories gender and co-morbid 

conditions. We will be using a limited 

number of patient characteristics for the 

basic case mix system; however, we 

believe that these adjustments 

adequately explain variation in the 

reported costs per treatment for the 

composite rate services consistent with 

the legislative requirement. The 

adjustment factors for the basic case mix 

are listed in Table 13 below.

The following table illustrates the 

average case-mix adjustment by type of 

provider based on the 2002 data that 

was used to develop the adjustment 

factors.


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As illustrated in table 14, regardless of 

the type of provider, the projected 

average case-mix adjustments for patient 

characteristics do not vary significantly. 

C. Rural Facilities

Comments: Some commenters 

focused on the potential impact the 

revised composite rate payment system 

could have on rural facilities. They were 

initially concerned that excluding small 

facilities from the overall sample 

actually reflected the elimination of 

rural facilities from the sample. As a 

means of resolving this issue, they 

suggested that a rural facility exception 

be restored. 

Response: The MMA provision for 

composite rate exceptions limited the 

availability of exceptions only to 

pediatric facilities. To the extent that a 

qualifying pediatric facility is located in 

a rural area, it would be able to apply 

for an exception to its composite 

payment rate. 

D. Dual Eligible Dialysis Population 

Comment: One commenter expressed 

concerns regarding potential impact on 

the dual eligible population, specifically 

with respect to coverage of deductibles 

and coinsurance amounts. Concern was 

expressed regarding the impact of this 

proposal on the Medicaid population on 

a state-by-state basis. 

Response: We recognize that this is an 

important issue for ESRD facilities and 

can be particularly problematic for 

chain organizations that own facilities 

in multiple States. While we cannot 

direct States for payment for dual 

eligible beneficiaries, we will take 

appropriate action to ensure that States 

are aware of the changes we are 

implementing so they can take steps to 

adjust their payments for dual eligible 

dialysis patients. 

E. Budget Neutrality 

Section 623(d)(1) of the MMA added 

section 1881(b)(12)(E)(i) of the Act, 

which requires that the basic case-mix 

adjusted composite rate system be 

designed to result in the same aggregate 

amount of expenditure for services, as 

estimated by the Secretary, as would 

have been made for 2005 if that 

paragraph did not apply. Therefore, the 

drug add-on adjustment and the patient 

characteristics case-mix adjustment 

required by section 623(d)(1) of the 

MMA must result in the same aggregate 

expenditures for 2005 as if these 

adjustments were not made. 

For the proposed drug payment addon adjustment, we indicated in the 

proposed rule that the methodology we 

used to estimate the difference between 

the current and proposed drug 

payments was designed so that 

aggregate payments would be budget 

neutral. 

In addition, the proposed rule 

provided for a budget neutrality 

adjustment to the composite payment 

rate of 0.8390 to account for the effects 

of the proposed case-mix adjustments 

on aggregate expenditures.

Comment: We received a number of 

comments concerning our application of 

the budget neutrality provision of 

section 623 of MMA. Specifically, many 

comments suggested that we did not 

comply with Congressional intent that 

facilities would be held harmless by this 

provision, that is, that facilities would 

not receive lower payments then they 

otherwise would have. 

Response: Section 623 of MMA 

requires that aggregate payments in 

2005 not exceed payments that would 

otherwise be paid. The budget neutrality 

provision is to ensure that total 

aggregate payments from the Medicare 

trust fund will not increase or decrease 

as a result of changes in the payment 

methodology. As with other Medicare 

payment systems, changes in the 

payment mechanism will result in the 

redistribution of Medicare dollars across 

facilities. There is no provision (nor any 

implication) in section 623 of the MMA 

that guarantees that individual facilities 

would receive the same amount of 

payment under a case-mix adjusted 

system as they did previously. 

The final budget neutrality 

adjustment to the ESRD composite 

payment rate applicable to the case mix 

adjustments (including the pediatric 

adjustment) is 0.9116. Also in the 

proposed rule, the calculation of the 

drug add-on adjustment was designed to 

ensure budget neutrality with respect to 

aggregate drug payments. 

F. Geographic Index 

Comment: Several comments 

expressed disappointment that we did 

not propose revisions to the current 

outdated wage indexes reflected in the 

composite payment rates, despite the 

discretionary authority set forth in 

section 623(d)(1) of the MMA to replace 

them. These comments stated that this 

decision likely would have the greatest 

impact on facilities located in high cost 

and high wage areas, where competitive 

labor market pressures are more 


ER15NO04.510</GPH>
66332 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

pronounced. Comments generally were 

in favor of using the most up-to-date 

information available for developing a 

revised composite rate wage index. 

Response: The wage index currently 

used in the composite rates is a blend 

of two wage index values, one based on 

hospital wage data from fiscal year 1986 

and the other developed from 1980 data 

from the Bureau of Labor Statistics. The 

wage index is calculated for each urban 

and rural area based on 1980 U.S. 

Census definitions of metropolitan 

statistical areas (MSAs) and areas 

outside of MSAs. Restrictions apply to 

the wage index values used to develop 

the composite payment rates. Payments 

to facilities in areas where labor costs 

fall below 90 percent of the national 

average, or exceed 130 percent of that 

average, are not adjusted below the 90 

percent or above the 130 percent level. 

This effectively means that facilities 

located in areas with wage index values 

less than 0.90 are paid more than they 

would receive if we fully adjusted for 

area wage differences. Conversely, 

facilities in locales with wage index 

values greater than 1.30 are paid less 

than they would receive if we fully 

adjusted payment for these higher wage 

levels. 

We agree that the current ESRD 

composite rate wage indexes, and the 

definitions of the geographic areas on 

which they are based, need to be 

updated. On June 6, 2003, OMB issued 

Bulletin 03–04, which announced new 

geographic areas based on the 2000 

Census. The extent to which we use the 

new OMB geographic definitions, 

incorporate them into the various 

prospective payment systems (PPSs) we 

administer, and whether we rely on 

hospital wage and employment data to 

develop new composite rate wage index 

values will have the potential to 

significantly redistribute payments 

among ESRD facilities. 

In the August 11, 2004 Federal 

Register (69 FR 48916), we announced 

how we were revising the hospital wage 

index used in connection with inpatient 

PPS. Although one comment stated that 

we should adopt the same wage index 

used in connection with the inpatient 

PPS, several of the hospital wage index 

revisions stem from specific provisions 

of law (for example, geographic 

reclassification of hospitals) and would 

not necessarily be appropriate to apply 

to a revised ESRD wage index for the 

composite payment rates. Because of the 

discretion afforded the Secretary in 

developing a new wage index for ESRD 

payment purposes, we are carefully 

assessing the propriety and payment 

implications of policy options before 

recommending revisions to the current 

measure. We will not take action to 

replace the current composite rate wage 

index at this time. We point out that, in 

accordance with section 623(d)(1) of the 

MMA, any revisions to the wage index 

ultimately adopted must be phased in 

over a multiyear period.

G. Payment Exceptions and the Revised 

Composite Payment Rate 

1. Application of Statutory Increases to 

Exception Amounts 

Comment: Several comments were 

critical of our policy of not applying 

increases to composite rates, mandated 

by the Congress, to amounts paid under 

exceptions. The comments maintained 

that this policy is inequitable, precludes 

the proper application of inflation 

updates to costs that we had recognized 

as appropriate in granting the exception, 

and over time erodes the value of the 

exception because of the cumulative 

impact of an effective ‘‘historical 

freeze.’’

Response: The commenters are correct 

that we have only applied the 

Congressionally mandated statutory 

increases to the basic wage index 

adjusted composite payment rates, not 

to exception payments. For example, a 

provider which was authorized a $12.00 

atypical services exception amount per 

treatment in addition to its otherwise 

applicable composite payment rate of 

$125.00 effective August 12, 2000 

would not be entitled to the 2.4 percent 

increase applicable to composite rate 

payments on January 1, 2001, because 

its exception rate of $137.00 exceeded 

its basic rate of $125.00 increased by 2.4 

percent or $128.00. While the 

commenter believes that our policy of 

not applying the Congressional 

mandated increases to exception 

amounts is unfair, we believe that the 

policy is consistent with the law. 

Section 422(a)(2)(C) of SCHIP, enacted 

December 21, 2000, states as follows in 

pertinent part:

Any exception rate under such section in 

effect on December 31, 2000 * * * shall 

continue in effect so long as such rate is 

greater than the composite rate as updated 

* * *.

Thus, the statute seems to distinguish 

between an exception rate and the 

composite rate, as ‘‘updated’’ by the 

Congress. The clear implication of the 

text is that the exception rate is not so 

updated. Accordingly, we believe that 

our policy of not applying mandated 

composite rate increases to exception 

amounts is consistent with the statute. 

Moreover, we point out that section 

422(a)(2) of SCHIP prohibited the 

granting of new exceptions and that we 

are providing facilities the option of 

either retaining their exception rates, or 

at any time, electing payment under the 

case-mix adjusted composite payment 

rates. We do not believe providers, 

given this option, will be disadvantaged. 

2. Home Dialysis Training Exceptions 

Comment: We received comments 

asking for clarification concerning home 

dialysis training exceptions since the 

proposed rule only addressed 

exceptions in a very general way. They 

stated that the rule proposes that each 

facility with an exception rate would 

compare their exception rate to the new 

basic case-mix adjusted prospective 

payment and then decide if it wishes to 

withdraw the exception rate and be 

subject to the basic case-mix adjusted 

composite rate. The commenters stated 

that this language does not consider a 

facility that would choose to accept the 

basic case-mix adjusted prospective 

payment for its chronic treatments, but 

continue its exception rates for the 

training of home patients. The home 

training exception is the most widely 

used exception and provides a higher 

rate for the higher cost of training a 

patient in fewer than the maximum 

number of allowed treatments. 

Response: We agree and are providing 

that a home training exception rate may 

be continued. Facilities with home 

training exceptions will be able to retain 

their current exception training rates as 

well as take advantage of the case-mix 

adjusted rate for non-training dialysis. 

3. New Exception Window 

Comment: One commenter requests 

that a new ‘‘exceptions window’’ for 

pediatric facilities be opened in early 

2005. It will not be until after this rule 

is final that its members will be able to 

determine the exact impact of this new 

methodology on their operations. 

Response: Section 623(b) of MMA 

reinstated exceptions for qualifying 

pediatric facilities defined as facilities 

with at least 50 percent of their patients 

under 18 years of age. The current 

exception window for pediatric 

facilities closed on September 27, 2004. 

At this time, future exception windows 

will be open only for pediatric facilities. 

The exceptions process is opened each 

time there is a legislative change in the 

composite payment rate or when we 

open the exception window. The fiscal 

intermediary will notify the ESRD 

pediatric facilities when a new 

exception window opens. However, it is 

our intent to open pediatric exception 

windows on an annual basis. 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66333

4. Home Dialysis Training Rates 

Comment: One commenter asked if 

the training rate add-on to the 

composite rate would still be applied. 

Response: Yes, the following rates 

will apply for self-dialysis or home 

dialysis training sessions: 

• For intermittent peritoneal dialysis 

(IPD), continuous cycling peritoneal 

dialysis (CCPD) and hemodialysis 

training, the facility’s case-mix adjusted 

payment excluding any approved 

exception rates will be increased by $20 

per training session, furnished up to 

three times per week. 

• For continuous ambulatory 

peritoneal dialysis (CAPD), the facility’s 

case-mix adjusted payment excluding 

any approved exception rates will be 

increased by $12 per training session, 

furnished up to three times per week. 

Based on the example for John Smith 

in section L (Example of Payment 

Calculation Under the Case-Mix 

Adjusted Composite Rate System), the 

hemodialysis (IPD & CCPD) training rate 

would be his case-mix adjusted rate of 

$170.80, increased by the training addon of $20 for a total training rate of 

$190.80. For CAPD training, the training 

rate would be $182.80 ($170.80+$12) 

H. Implementation Date 

Comment: We received a number of 

comments supporting our proposed 

delay in implementing the case-mix 

portion of the revised composite 

payment methodology. Many comments 

maintained that the proposed April 1, 

2005 effective date was overly 

ambitious, and some suggested that a 

July 1, 2005 implementation date would 

be more realistic given the need for 

facility and fiscal intermediary training 

and education.

Response: The MMA requires that the 

basic case-mix adjusted composite 

payment rates be effective for services 

beginning January 1, 2005. Despite the 

statute’s specificity, we pointed out in 

the proposed rule that all of the 

numerous systems, programming, and 

operational changes necessary to 

implement the case-mix adjusted 

payments cannot be completed in time 

for a January 1, 2005 implementation 

date. 

As presented in the proposed rule, we 

considered two options that we believed 

effectively complied with the statute’s 

January 1, 2005 implementation date. 

While we stated in the proposed rule 

that either of these options substantively 

complies with the January 1, 2005 

implementation date requirement of the 

statute, we rejected both alternatives. 

The likelihood of payment error, 

potential disruption of facility 

payments, and the cost of reprocessing 

bills militated against either option. We 

proposed instead an April 1, 2005 

implementation date for the basic casemix adjustments to the composite 

payment rates, including the budget 

neutrality reduction. This option avoids 

the need for reprocessing of bills and 

applies the budget neutrality adjustment 

applicable to the case-mix adjustments 

effective April 1, 2005. Although we 

agree with the comment that a July 1, 

2005 effective date would be ideal in 

light of the systems and operational 

changes required to implement the casemix provisions, we believe that an April 

1, 2005 effective date for the case-mix 

adjustments is feasible, and have 

decided not to revise that date. We have 

concluded based on our evaluation of 

ESRD claims processing systems that 

the April 1, 2005 implementation date 

is achievable. As we stated in the 

proposed rule, the 1.6 percent increase 

to the composite payment rates and 

drug add-on will be effective January 1, 

2005. 

I. Summary of Final Rule Implementing 

Changes to the ESRD Composite 

Payment Rate (Section 623 of MMA) 

As set forth in this final rule, we will 

increase the ESRD composite payment 

rates by 1.6 percent effective January 1, 

2005 in accordance with section 623(a) 

of the MMA. Also, the composite 

payment rates will be increased January 

1, 2005 by 8.7 percent to reflect 

revisions to the drug pricing 

methodology for separately billable 

drugs, as discussed previously in this 

rule (Composite Rate Adjustments to 

Account for Changes in Pricing of 

Separately Billable Drugs and 

Biologicals). This section explains the 

development and computation of the 

revised drug add-on, which differs from 

the 11.3 percent amount described in 

the proposed rule, and our response to 

comments which advocated separate 

add-on amounts for hospital-based and 

independent facilities. 

Despite the discretionary authority set 

forth in section 623(d)(1) of the MMA to 

replace the current outdated wage index 

used in the composite payment rates, 

we are taking no action to revise the 

wage index at the present time. A 

revised wage index will potentially 

significantly redistribute ESRD 

payments. We believe that further study 

is warranted before we revised the 

current index. Those assessments are 

presently underway. 

We have also adopted a revised basic 

case-mix methodology for adjusting the 

composite payment rates based on a 

limited number of patient 

characteristics, as prescribed in section 

623(d) of the MMA. The development 

and application of the revised case-mix 

adjusters were previously explained in 

the ‘‘Revised Patient Characteristic 

Adjustments’’ section of this final rule. 

The variables for which adjustments 

will be applied to each facility’s 

composite payment rate include age, 

BSA, and low BMI. In response to 

comments, we eliminated gender in this 

final rule as a patient classification 

variable for purposes of case-mix 

adjustment, substituting BSA and a low 

BMI variable instead. We have also 

increased the number of age categories 

from three to five, and eliminated comorbidities pending further study. 

Because height and weight are necessary 

to compute each patient’s BSA and BMI, 

those measurements, in centimeters and 

kilograms, respectively, will be required 

on the UB 92 for outpatient ESRD 

services furnished on and after January 

1, 2005. This final rule also provides for 

a case-mix adjustment of 1.62 to a 

facility’s composite payment rate for 

pediatric ESRD patients (that is, under 

age 18). The methodology used to 

develop the pediatric case-mix 

adjustment factor of 1.62 is described in 

the ‘‘Case-Mix Adjustment for Pediatrics 

Patients’’ section of this rule. Although 

the MMA requires that the basic casemix adjusted composite payment rates 

be effective for services beginning 

January 1, 2005, the systems and 

operational changes necessary to 

implement them cannot be completed in 

time for a prospective January 1, 2005 

effective date. The case-mix adjustments 

and the applicable budget neutrality 

adjustment of 0.9116 will be effective 

April 1, 2005. 

Example of Payment Calculation Under 

the Case-Mix 

Example 1 

Adjusted Composite Rate System

The following example presents 2 

patients dialyzing at Neighbor Dialysis, 

an independent ESRD facility located in 

Baltimore, MD. 

Calculation of Basic Composite Rate for 

Neighbor Dialysis 

Wage adjusted composite rate for 

independent facilities in Baltimore, 

MD: $134.93 

Wage adjusted composite rate increased 

by drug add-on adjustment $134.93 

× 1.087: $146.67 

Adjusted Facility Composite Rate after 

budget neutrality adjustment 

($146.67 × 0.9116): $133.70 

Patient #1 

John Smith attains age 18 on April 10, 

2005 and undergoes hemodialysis. John 

66334 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

weighs 75.5 kg. and is 181.5 cm. in 

height. Because John Smith attains age 

18 April 10, he is considered age 18 for 

the entire month of April, and would 

not be classified as a pediatric patient. 

Calculation of Case Mix Adjusted 

Payment 

The BSA and BMI for John Smith will 

be calculated by the PRICER program 

used to compute the composite payment 

for each patient based on the height and 

weight reported on the UB 92. However, 

the computations of the BSA and BMI 

for John Smith are shown below:

BSA = 0.007184 × (height) 0.725 ×

(weight) 0.425

BSA = 0.007184 × 181.5 0.725 × 75.50.425

BSA = 0.007184 × 43.4196 × 6.2824 = 

1.960 

BMI = weight/height(m) 2

John Smith is 181.5 cm. in height, 

which converts to 1.815 meters. 

BMI = 75.5/1.815 2 = 22.919

The case mix adjustment factor for 

John Smith, an 18 year old whose BMI 

exceeds 18.5 kg/m2 and has a BSA of 

1.960 is calculated as follows:

Age adjustment factor (age 18–44) 1.223 

BMI adjustment factor (BMI ≥ 18.5 kg/

m2) 1.000 

BSA adjustment factor (1.0371.960–1.84/0.1) 

1.0446

Case mix adjustment factor (1.223 ×

1.000 × 1.0446) 1.2775 

Basic case mix adjusted composite 

payment ($133.70 × 1.2775) $170.80 

Patient 2 

Jane Doe is a 82 year old 

malnourished patient who undergoes 

hemodialysis. Jane is 158.0 cm. in 

height. 

Calculation of Case Mix Adjusted 

Payment 

The BSA and BMI for Jane Doe, which 

will be automatically computed by the 

PRICER program, are calculated as 

follows:

BSA = 0.007184 × (height) 0.725 ×

(weight) 0.425

BSA = 0.007184 × 158.0 0.725 ×

31.25 0.425

BSA = 0.007184 × 39.2669 × 4.3183 = 

1.2182 

BMI = weight/height(m) 2

Jane Doe is 158 cm. in height, which 

converts to 1.580 meters. 

BMI = 31.25/1.580 2 = 12.5180

The case mix adjustment factor for 

Jane Doe, an 82 year old whose BMI is 

less than 18.5 kg/m2 and has a BSA of 

1.2182, is calculated as follows:

Age adjustment factor (age 80+) 1.174 

BMI adjustment factor (BMI ≤ 18.5 kg./

m2) 1.112 

BSA adjustment factor 

(1.037 1.2182–1.84/0.1) 0.7978 

Case-mix adjustment factor (1.174 ×

1.112 × 0.7978) 1.0415 

Basic case mix adjusted composite 

payment ($133.70 × 1.0415) $139.24 

Example 2 

Linda Jones is age 16 and undergoes 

peritoneal dialysis at Community 

Hospital, a hospital-based facility in 

New York City. Linda weighs 35 kg and 

is 160.0 cm in height. The basic 

composite rate for Linda Jones is 

calculated as follows:

Wage adjusted composite rate for 

hospital-based facilities in New 

York, New York: $146.35 

Wage adjusted composite rate increased 

by drug adjustment factor ($146.35 

× 1.087): $159.08 

Adjusted Facility Composite Rate after 

budget neutrality adjustment 

($159.08 × 0.9116) $145.02

Because Linda is a pediatric ESRD 

patient, the automatic pediatric 

adjustment factor of 1.62 applies. 

Neither the age, BMI, nor BSA 

adjustments are applicable because 

Linda is less than age 18.

Pediatric adjusted composite rate 

($145.02 × 1.62) $234.93

If Community Hospital were entitled 

to a composite rate exception, then the 

provider could elect to retain its 

exception rate in lieu of receiving the 

otherwise applicable pediatric payment 

rate of $234.93. 

Impact Analysis 

Comment: One commenter observed 

that the budgetary impact on the 

Medicare program of proposed section 

623 changes (impact table) generally 

indicates an ‘‘overall’’ neutral or modest 

reimbursement increase for all types of 

dialysis facilities (independent and 

rural, for profit and non-profit, urban 

and rural). This commenter requested 

data that indicate the number of dialysis 

facilities that are operating at a loss in 

the U.S., by corresponding facility 

characteristics shown in the impact 

table. 

Response: The purpose of the impact 

table is to simulate what ESRD facilities 

will receive in payments under the 

MMA section 623 changes compared to 

what ESRD facilities would receive 

without any changes to the current 

composite payment rates. We do not 

have data to determine whether or not 

a facility may operate at a loss under 

MMA section 623. 

J. Section 731—Coverage of Routine 

Costs for Category A Clinical Trials 

Before the enactment of the MMA, 

Medicare did not cover services related 

to a noncovered Category A device. The 

MMA authorizes Medicare to cover the 

routine costs associated with certain 

Category A clinical trials for services 

furnished on or after January 1, 2005. 

For a trial to qualify for payment, it 

must meet certain criteria to ensure that 

the trial conforms to appropriate 

scientific and ethical standards. In 

addition, the MMA established 

additional criteria for trials initiated 

before January 1, 2010 to ensure that the 

devices involved in these trials are 

intended for use in the diagnosis, 

monitoring, or treatment of an 

immediately life-threatening disease or 

condition. Seven commenters were in 

favor of this provision. Of them, four 

had additional comments. One 

commenter was against the provision. 

Comment: One commenter stated that 

this provision would result in money 

being taken away from the pool of 

money for physician payments of nonexperimental procedures.

Response: We considered this issue in 

determining the SGR for 2005. Since we 

have made a regulatory change to allow 

for coverage of routine costs associated 

with Category A clinical trials, we are 

required by statute to reflect any 

increased costs of this policy in the 

2005 SGR. At this time, we are 

estimating that the costs associated with 

coverage of routine costs of Category A 

clinical trials will increase Medicare 

spending for physicians’ services by less 

than 0.1 percent. However, we are 

reviewing this issue and we will adjust 

our estimates once we have actual 

spending data for 2005. 

Comment: One commenter 

specifically requested that we define 

routine costs. 

Response: We discuss and define 

routine costs in section 310.1 of the 

Medicare National Coverage 

Determination Manual (pub 100.3). We 

will take this comment into 

consideration if we decide to revise 

section 310.1 in the future. 

Comment: Two commenters 

recommended that we adopt a 

definition of ‘‘immediately lifethreatening’’ that would allow 

contractors some level of flexibility 

when they apply this criteria to evaluate 

trials. 

Response: We will consider the 

importance of some level of flexibility 

in defining ‘‘immediately lifethreatening.’’ Although we are not 

defining this term in our regulation, we 

intend to provide guidance through 

implementing instructions. 

Comment: Another commenter 

suggested that contractors determine in 

advance if trials satisfy the immediately 

life threatening requirement. 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66335

Response: We are considering 

implementation requirements and will 

take this suggestion under advisement. 

Result of Evaluation of Comments 

We are finalizing the changes to 

§ 405.207 as proposed. 

K. Section 629—Part B Deductible 

Section 629 of the MMA provides for 

regular updates to the Medicare Part B 

deductible in consideration of 

inflationary changes in the nation’s 

economy. Since 1991, the Medicare Part 

B deductible has been $100 per year. 

The MMA stipulates that the Medicare 

Part B deductible will be $110 for 

calendar year 2005, and, for a 

subsequent year, the deductible will be 

the previous year’s deductible increased 

by the annual percentage increase in the 

monthly actuarial rate under section 

1839(a)(1) of the Act, ending with that 

subsequent year (rounded to the nearest 

dollar). Section 1839(a)(1) of the Act 

requires the Secretary of Health and 

Human Services to calculate the 

monthly actuarial rate for Medicare 

enrollees age 65 and over. 

We proposed to update § 410.160(f), 

‘‘Amount of the Part B annual 

deductible,’’ to conform to the MMA 

and to reflect that the Medicare Part B 

deductible is $100 for calendar years 

1991 through 2004. 

Comment: Commenters stated that 

they understand that we are following 

the statute in implementing this 

provision, but encouraged us to educate 

Medicare beneficiaries regarding this 

change. 

Response: We agree that it is 

important to educate beneficiaries about 

the deductible, as well as the other 

provisions of the MMA, such as the new 

screening benefits, and we will be using 

publications such as the ‘‘Medicare and 

You Handbook’’ for this purpose. 

Result of Evaluation of Comments 

We are finalizing the proposed 

changes to § 410.160(f). 

L. Section 512—Hospice Consultation 

1. Coverage of Hospice Consultation 

Services 

As discussed in the proposed rule 

published August 5, 2004, effective 

January 1, 2005, section 512 of the 

MMA provides for payment to a hospice 

for specified services furnished by a 

physician who is either the medical 

director of, or an employee of, a hospice 

agency. Payment would be made on 

behalf of a beneficiary who is terminally 

ill (which is defined as having a 

prognosis of 6 months or less if the 

disease or illness runs its normal 

course), has not made a hospice 

election, and has not previously 

received the pre-election hospice 

services specified in section 

1812(a)(1)(5) of the Act as added by 

section 512 of the MMA. These services 

comprise an evaluation of an 

individual’s need for pain and symptom 

management, counseling the individual 

regarding hospice and other care 

options, and may include advising the 

individual regarding advanced care 

planning. 

We believe that most individuals will 

seek this type of service from their own 

physicians. Thus, we do not expect that 

the services of a hospice physician 

would be necessary for all individuals 

who elect hospice. However, a 

beneficiary, or his or her physician, may 

seek the expertise of a hospice medical 

director or physician employee of a 

hospice to assure that a beneficiary’s 

end-of-life options for care and pain 

management are discussed and 

evaluated.

Currently, beneficiaries are able to 

receive this evaluation, pain 

management, counseling, and advice 

through other Medicare benefits. For 

example, physicians who determine the 

beneficiary’s terminal diagnoses can 

provide for these E/M services as well 

as for pain and symptom management 

under the physician fee schedule. 

Beneficiaries may also obtain assistance 

with decisions pertaining to end-of-life 

issues through discharge planning by 

social workers, case managers, and other 

health care professionals. To the extent 

that beneficiaries have already received 

Medicare-covered evaluation and 

counseling for end-of-life care, the 

hospice evaluation and counseling 

would seem duplicative. We plan to 

monitor data regarding these services to 

assess whether Medicare is paying for 

duplicative services. 

In the proposed rule, we proposed to 

cover the services described above for a 

terminally ill beneficiary when the 

services are requested by a beneficiary 

or the beneficiary’s physician. The 

service would, in accordance with the 

statute, be available on a one-time basis 

to a beneficiary who has not elected or 

previously used the hospice benefit, but 

who might benefit from evaluation and 

counseling with a hospice physician 

regarding the beneficiary’s decisionmaking process or to provide 

recommendations for pain and symptom 

management. The beneficiary or his or 

her physician decides to obtain this 

service from the hospice medical 

director or physician employee. Thus, 

the evaluation and counseling service 

may not be initiated by the hospice, that 

is, the entity receiving payment for the 

service. 

The statute specifies that payment be 

made to the hospice when the physician 

providing the service is an employee 

physician or medical director of a 

hospice. Therefore, other hospice 

personnel, such as nurse practitioners, 

nurses, or social workers, cannot furnish 

the service. The statute requires that the 

physician be employed by a hospice; 

therefore, the service cannot be 

furnished by a physician under 

contractual arrangements with the 

hospice or by the beneficiary’s 

physician, if that physician is not an 

employee of the hospice. Moreover, if 

the beneficiary’s physician is also the 

medical director or physician employee 

of a hospice, that physician already 

possesses the expertise necessary to 

furnish end-of-life evaluation, 

management, and counseling services 

and is providing these services to the 

beneficiary and receiving payment for 

these services under the physician fee 

schedule through the use of E/M codes. 

In the event that the individual’s 

physician initiates the request for 

services of the hospice medical director 

or physician, we indicated in the 

proposed rule that we would expect that 

appropriate documentation guidelines 

would be followed. The request or 

referral would be in writing, and the 

hospice medical director or employee 

physician would be expected to provide 

a written note on the patient’s medical 

chart. The hospice employee physician 

providing these services would be 

required to maintain a written record of 

this service. If the beneficiary initiates 

the services, we would expect that the 

hospice agency would maintain a 

written record of the service and that 

communication between the hospice 

medical director or physician and the 

beneficiary’s physician would occur, 

with the beneficiary’s permission, to the 

extent necessary to ensure continuity of 

care. 

We proposed to add new § 418.205 

and § 418.304(d) to implement section 

512 of the MMA. 

Comment: Several commenters 

requested that this provision be 

extended to contracted physicians and 

nurse practitioners. 

Response: Section 1812(a)(5) of the 

Act explicitly indicates that a physician 

employed by a hospice agency must 

provide the services under this 

provision. We recognize that contractual 

relationships are permitted by hospice 

agencies for medical director and 

physicians’ services under the hospice 

benefit as described in section 1861(dd) 

of the Act. However, the plain language 

of section 1812(a)(5) provides only for 

employees of the hospice to furnish the 

service.

66336 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

Section 1812(a)(5) of the Act also 

requires that this service be provided by 

a physician as defined in section 

1861(r)(1) of the Act. While nurse 

practitioners may serve as attending 

physicians for beneficiaries who have 

elected the hospice benefit, this 

provision does not permit nonphysicians to provide this pre-hospice 

service. 

Comment: We received several 

comments that supported this provision 

as beneficial for end-of-life care. 

Response: We believe that this 

provision supports and supplements 

options available to beneficiaries as they 

make end-of-life decisions when the 

individual’s health care provider and 

community resources are not able to 

provide the expertise and information. 

Comment: We received a comment 

suggesting that the certification of a 

terminal illness, with a 6-month 

prognosis if the disease runs its normal 

course, be eliminated and that this 

service should be available to any 

individual deemed to be terminal. 

Response: Section 1812(a)(5) of the 

Act explicitly indicates that this onetime service is available to Medicare 

beneficiaries who are terminally ill and 

have not previously elected the hospice 

benefit. Section 1861(dd)(3)(A) of the 

Act defines the phrase ‘‘terminally ill’’

as denoting a medical prognosis that the 

individual’s life expectancy is 6 months 

or less. Since section 1812(a)(5) of the 

Act specifies that the beneficiary must 

have a terminal illness, which includes 

the 6-month prognosis, we have no 

authority to eliminate this definition. 

Since the benefit is a pre-hospice one, 

we have not required that a certification 

be completed before this service is 

provided. Nonetheless, in the judgment 

of the individual’s physician, the 

individual must be terminally ill, that 

is, having a 6-month or less life 

expectancy if the disease or illness runs 

its normal course. 

2. Payment for Hospice Consultation 

Services 

Section 512(b) of the MMA amends 

section 1814(i) of the Act and 

establishes payment for this service at 

an amount equal to an amount 

established for an office or other 

outpatient visit for E/M associated with 

presenting problems of moderate 

severity and requiring medical decisionmaking of low complexity under the 

physician fee schedule, other than the 

portion of such amount attributable to 

the practice expense component. No 

existing CPT or HCPCS code specifically 

represents these services. We proposed 

establishing a new HCPCS code, G0337 

(proposed as G0xx4) Hospice—

evaluation and counseling services, preelection. The hospice would use this 

new HCPCS code to submit claims to 

the Regional Home Health Intermediary 

(RHHI) for payment for this service. 

Utilization of the code would allow us 

to provide payment for the service, as 

well as enable us to monitor the 

frequency with which the code is used 

and assess its appropriate use. Payments 

by hospices to physicians or others in a 

position to refer patients for services 

furnished under this provision may 

implicate the Federal anti-kickback 

statute. 

In accordance with the statute, we 

proposed that the payment amount for 

this service would be based on the work 

and malpractice expense RVUs for CPT 

code 99203 multiplied by the CF (1.34 

Work RVU + 0.10 Malpractice RVU) * 

(CF). The CPT code for an office or 

outpatient visit for the E/M of a new 

patient represents a detailed history, 

detailed examination and medical 

decision making of low complexity. We 

believe that this E/M service is quite 

similar to the components of the new 

service provided by a medical director 

or physician employed by the hospice 

agency. Assuming that there are no 

changes in RVUs for CPT code 99203, 

and that the CY 2005 update to the 

physician fee schedule is the 1.5 percent 

specified in the MMA, the national 

payment amount for this service would 

be $54.57 for this service (1.44 * 

$37.8975). 

Comment: We received several 

comments indicating that CPT Code 

99203, a mid-level office visit with a 

new patient, does not accurately reflect 

the complexity associated with the 

hospice consultation. One commenter 

suggested using CPT code 99205. In 

addition, commenters stated that 

payment for this benefit should reflect 

the length and intensity of each 

consultation. 

Response: Section 1814(i)(4) of the 

Act explicitly states that the payment 

for this service be equal to an amount 

established for an office or outpatient 

visit with presenting problems of 

moderate severity and requiring low 

complexity medical decision-making. 

We believe that CPT code 99203, rather 

than CPT code 99205, most closely 

conforms to the statutory language. 

However, in order to establish a 

payment rate that excludes the practice 

expense component and to ensure that 

we pay for the service only once, we 

established a G code. 

Comment: We received one comment 

that indicated that existing consultation 

codes coupled with a place of service 

should be used.

Response: We appreciate the concern 

about introducing another code into a 

complex system of codes. While the title 

of the provision indicates that this is a 

consultative service, we believe that, 

unlike other consultations, beneficiaries 

are able to seek this service without a 

referral. Moreover, we need to be able to 

distinguish this service so that we can 

ensure that it is furnished only once to 

an individual. In addition, existing E&M 

codes are billed by physicians. This 

provision is billed by the hospice 

agency and is not a result of 

reassignment of payment by a physician 

to a hospice agency. Finally, the G code 

will allow us to track utilization of this 

new benefit. 

Result of Evaluation of Comments 

We are adopting our proposed policy 

and revising the regulations at § 418.205 

and § 418.304(d). We are also finalizing 

our proposal to pay for this service 

using a G code (G0337) Hospice—

evaluation and counseling services, preelection, with the payment based on the 

work and malpractice expense RVUs for 

CPT code 99203. 

M. Section 302—Clinical Conditions for 

Coverage of Durable Medical Equipment 

(DME) 

Section 1832(a)(1)(E) of the Act, as 

added by section 302(a)(2) of the MMA, 

requires the Secretary to establish 

clinical conditions of coverage 

standards for items of DME. The statute 

requires the Secretary to establish types 

or classes of covered items that require 

a face-to-face examination of the 

individual by a physician or specified 

practitioner. Due to the timeframe and 

the extensive number of public 

comments received, we will implement 

this provision at a later date. We will 

address all public comments in a future 

Federal Register document. 

N. Section 614—Payment for Certain 

Mammography Services 

Medicare covers an annual screening 

mammogram for all beneficiaries who 

are women age 40 and older and one 

baseline mammogram for beneficiaries 

who are women age 35 through 39. 

Medicare also covers medically 

necessary diagnostic mammograms. 

Payment for screening mammography, 

regardless of setting, is paid under the 

physician fee schedule, but diagnostic 

mammography performed in the 

hospital outpatient department is 

currently paid under the hospital 

outpatient prospective payment system 

(OPPS). 

As stated in the August 5, 2004 

proposed rule, section 614 of the MMA 

amended section 1833(t)(1)(B)(iv) of the 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66337

Act to exclude payment for screening 

and diagnostic mammograms from the 

OPPS. Beginning January 1, 2005, we 

will pay for diagnostic mammograms 

under the OPPS based on the payments 

established under the physician fee 

schedule. Thus, both diagnostic and 

screening mammography services 

provided in the OPPS setting will now 

be paid based on the physician fee 

schedule. 

Comment: Commenters expressed 

support for this proposed change in 

payment and believe it will assist in 

ensuring that these services are 

available to women at risk for breast 

cancer. 

Response: We agree that it is 

important to ensure access to these 

services. Additional discussion of the 

MMA provision can also be found in the 

OPPS final rule, ‘‘Medicare Program; 

Changes to the Hospital Outpatient 

Prospective Payment System and CY 

2005 Payment Rates’’ currently under 

development. 

O. Section 305—Payment for Inhalation 

Drugs 

The August 5, 2004 proposed rule 

contained the ASP plus 6 percent 

payment amounts based on data 

received from manufacturers’ ASP for 

the first quarter of 2004 for albuterol 

sulphate and ipratropium bromide. We 

indicated that such payment amounts 

were not the payment rates for 2005 and 

specified that Medicare payment rates 

for the first quarter of 2005 would be 

based on data submitted by 

manufacturers from the third quarter of 

2004. 

We proposed to establish a separate 

dispensing fee for inhalation drugs. We 

noted that Medicare currently pays a 

monthly dispensing fee of $5 for each 

inhalation drug used in a nebulizer. We 

requested information about an 

appropriate dispensing fee amount.

We also proposed to make several 

changes related to billing for inhalation 

drugs. We proposed to allow a 

prescription for inhalation drugs written 

by a physician and filled by a pharmacy 

to be increased from 30-day to a 90-day 

period. We indicated that we had 

recently revised the guidelines 

regarding the time frame for delivery of 

refills of DMEPOS products to occur no 

sooner than ‘‘approximately five days’’

prior to the end of usage for the current 

product. We emphasized the word 

‘‘approximately’’ in this time frame. The 

change allows shipping of inhalation 

drug refills on ‘‘approximately’’ the 25th 

day of the month in the case of a 30-day 

supply and on ‘‘approximately’’ the 

85th day in the case of a 90-day supply. 

We indicated our belief that such 

revision eliminates the need for 

suppliers to use overnight shipping of 

inhalation drugs and allows shipping of 

inhalation drugs by less expensive 

ground service. 

We also clarified the ordering 

requirements for DMEPOS items, 

including drugs. Drugs, including, 

inhalation drugs, can be dispensed with 

a verbal physician order and without a 

written prescription. Although a written 

prescription must be obtained before 

submitting a claim, we reiterated that 

we allowed photocopied, electronic, or 

pen and ink prescriptions. We pointed 

out the recent revision to the Program 

Integrity Manual of acceptable proof of 

delivery requirements for DMEPOS 

items. Finally, we proposed to eliminate 

the requirement that pharmacies have a 

signed Assignment of Benefits (AOB) 

form from a beneficiary in order for 

Medicare to make a payment. Our 

proposal would eliminate a billing 

requirement for all drugs, including 

inhalation drugs and other items where 

Medicare payment is only made on an 

assigned basis. 

Comment: A number of commenters, 

particularly retail pharmacies, indicated 

that they are not able to obtain albuterol 

sulfate at the $0.04 per milligram and 

ipratropium bromide at the $0.30 per 

milligram rates specified in the 

proposed rule based on manufacturer 

submissions of data for the first quarter 

of 2004. A large company indicated that 

the ASPs stated in the proposed rule for 

albuterol sulfate and ipratropium 

bromide were extremely close to its own 

acquisition costs and inferred that the 

payment amount would be below 

smaller providers’ purchase prices. A 

commenter questioned the suggestion in 

the proposed rule that because albuterol 

sulfate and ipratropium bromide are 

generic drugs with multiple 

manufacturers a pharmacy might be able 

to obtain them at a price below the 

average. The commenter suggested that 

this is highly speculative because we 

have not yet received the information 

from manufacturers to set the ASP for 

the first quarter of 2005. 

Response: The ASP plus 6 percent 

prices for drugs in the proposed rule 

were calculated based on manufacturer 

submissions of data covering the first 

quarter of 2004. We indicated that such 

ASP plus 6 percent figures were not 

actual payment rates for the first quarter 

of 2005. ASP data submitted by 

manufacturers for the second quarter of 

2004 show some significant changes for 

inhalation drugs. The data show that the 

ASP plus 6 percent would be $0.05 per 

milligram for albuterol sulfate, a 25 

percent increase, and $0.45 per 

milligram for ipratropium bromide, a 50 

percent increase. We also note that in its 

recent study, ‘‘Medicare: Appropriate 

Dispensing Fee Needed for Suppliers of 

Inhalation Therapy Drugs’’ (GAO–05–

72), the GAO found that acquisition 

costs of inhalation drugs varied widely. 

The GAO found that acquisition costs of 

albuterol sulfate ranged from $0.04 to 

$0.08 and ipratropium bromide ranged 

from $0.23 to $0.64. Based on the 

submission of manufacturer’s average 

sales price data for the second quarter 

of 2004, Medicare’s payment rates for 

ipratropium bromide and albuterol 

sulfate are within the acquisition cost 

range found by the GAO. The GAO also 

found that acquisition cost was not 

necessarily related to the size of the 

supplier.

Comment: One commenter suggested 

that we should consider delaying the 

implementation of cuts in Medicare 

reimbursement for inhalation drugs 

until 2006. The commenter suggested 

that a delay would ensure that 

physicians and beneficiaries have a 

range of options available for managing 

respiratory diseases. 

Response: We do not believe that we 

can delay the implementation of the 

ASP payment system until 2006 because 

the MMA provides for the 

implementation of the ASP payment 

system in 2005. 

Comment: Commenters strongly 

supported our proposal to pay a 

separate dispensing fee for inhalation 

drugs, but we received varied comments 

on the scope of services appropriately 

included in a dispensing fee. 

Commenters indicated that an 

appropriate dispensing fee is necessary 

because the costs associated with 

dispensing these drugs typically exceed 

ASP plus six percent. Without adequate 

compensation, commenters argued that 

Medicare beneficiary access to 

inhalation drugs would be harmed. 

Commenters referenced an August 2004 

report prepared for the American 

Association of Homecare (AAH) by a 

consultant that surveyed 109 homecare 

pharmacies between the end of May and 

the middle of July 2004. Commenters 

cited survey results from the report 

suggesting that 89 percent of suppliers 

would discontinue providing inhalation 

drugs to Medicare beneficiaries in the 

absence of adequate compensation. One 

commenter believes it is reasonable to 

expect that reducing Medicare payment 

for inhalation drugs will trigger an 

increase in emergency room visits, 

doctor visits, and hospital admissions. 

Other commenters suggested a 

dispensing fee that is too low would 

result in a concentrated market, thereby 

adversely affecting beneficiary choice 

and access. 

66338 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

The AAH study indicated that in 

order to maintain 2004 levels of service 

to Medicare beneficiaries and provide 

an operating margin of 7 percent, 

Medicare would have to pay an 

additional payment of $68.10 per 

service encounter. This figure includes 

an average of the costs reported as being 

incurred during the first quarter of 2004 

for the pharmacies that responded to the 

AAH survey. The study defined a 

service encounter as each instance one 

or more billing codes were submitted to 

Medicare for payment. The study 

reported that the typical Medicare 

beneficiary has 8.8 service encounters 

each year, or one service encounter 

every 42 days. Most commenters who 

cited the AAH study supported a fee of 

$68.10 per service encounter. 

Commenters also cited another AAH 

report, dated September 2001 (and 

updated to 2003) from a different 

consultant, who surveyed a sample of 

19 homecare pharmacies and found that 

drug acquisition costs accounted for 26 

percent of costs incurred by homecare 

pharmacies. Facility, labor, delivery, 

patient care and education, billing and 

collection costs and other direct costs 

were found to account for 46 percent; 

indirect costs such as management 

information systems, regulatory 

compliance programs, professional 

liability insurance and field and 

corporate administration was 25 

percent; and bad debt was 3 percent. 

The study concluded that homecare 

pharmacies generated after-tax returns 

of 9.2 percent. 

A retail pharmacy commented that a 

dispensing fee five to six times the 

current dispensing fee of $5 is necessary 

to cover its costs. Another retail 

pharmacy indicated that a dispensing 

fee of $25 would be an adequate 

dispensing fee, including the additional 

costs of processing Medicare claims and 

instructing the patient on using the 

drugs, and would be profitable for it. 

A manufacturer urged CMS to 

conduct a study of the appropriate 

pharmacy activities and their costs in 

calculating a dispensing fee. The 

commenter believes such a study would 

yield a more accurate amount than data 

and information provided as part of 

comments to proposed rules does. One 

inhalation company indicated that the 

costs of rent, delivery and salary had 

recently increased by specific 

percentages. Several commenters 

opposed the inclusion in the dispensing 

fee of a transitional payment. Another 

commenter strongly urged establishing a 

dispensing fee that include an 

appropriate transitional payment, given 

the significant payment reductions 

scheduled to begin in 2005. 

On the scope of services, commenters 

indicated that various services involved 

with dispensing inhalation drugs to 

Medicare beneficiaries such as:

(i) Training beneficiaries and caregivers 

on proper use of drugs with nebulizers; 

(ii) establishing and revising a plan of 

care and coordinating care; (iii) 

providing in-home visits; (iv) providing 

24-hours/7-days a week on-call 

personnel; (v) contacting physicians and 

beneficiaries regarding dispensing of 

inhalation drugs; (vi) providing followup contact with beneficiaries, including 

compliance monitoring and refill calls. 

Commenters indicated that they felt 

CMS has the authority to pay for costs 

associated with delivering inhalation 

drugs under the durable medical 

equipment (DME) benefit.

An association representing 

pharmacists recommended an 

expansion of Part B to include 

compensation for therapy management 

services furnished by pharmacists. An 

association representing respiratory 

therapists recommended a separate 

payment for beneficiary training by 

practitioners with documented evidence 

of education, clinical training and 

competency testing, such as respiratory 

therapists. A company suggested that 

we establish a basic dispensing fee and 

separately reimbursable codes for those 

who provide additional services, 

reflecting the range of management 

services involved with inhalation drugs. 

Another association acknowledged that 

although limited peer reviewed studies 

exist on the role of homecare providers 

and the respiratory practitioners in 

furnishing care to COPD patients, 

significant anecdotal data and a 

consensus within the pulmonary 

medicine and respiratory therapy 

professional communities support the 

role and contribution of home 

respiratory care providers. Several 

commenters indicated that training a 

beneficiary on using a nebulizer should 

also be reimbursed. However, they 

pointed out that training cannot be done 

by the physician or physician’s staff 

because many physicians do not have a 

nebulizer on which to train the 

beneficiary and the Medicare payment 

is not sufficient to cover the physician’s 

staff time. 

Response: We appreciate the support 

for our proposal to establish a 

dispensing fee as well as the 

information about the levels and 

components of such a fee. 

The October 12, 2004 GAO report is 

based on a survey of 12 companies 

representing 42 percent of the 

inhalation therapy market. The GAO 

found wide variation in suppliers’

monthly costs associated with 

dispensing inhalation drugs. In 

addition, the GAO found that large 

suppliers do not necessarily have lower 

costs and do not necessarily realize 

economies in costs associated with 

dispensing inhalation therapy drugs. 

The GAO indicated that the wide range 

is due in part to the range of services 

offered by suppliers and that some costs 

incurred by suppliers may not be 

necessary to dispense inhalation drugs, 

for example marketing, overnight 

shipping, and 24-hour hotlines for 

beneficiary questions. The GAO report 

indicates that the range of costs 

suppliers are incurring is a good starting 

point for a dispensing fee amount, but 

that the appropriate dispensing fee 

Medicare pays must take into account 

how excess payments affect the costs. 

We note the extreme variation that the 

GAO found in the costs of dispensing 

nebulized drugs to Medicare 

beneficiaries: GAO found that per 

patient monthly costs of dispensing 

these medications ranged from a low of 

$7 to a high of $204 in 2003. Because 

it appears that the GAO survey and the 

2004 AAH survey may have included 

different costs and services, further 

research is needed to understand these 

differences. In addition to the GAO and 

AAH studies, we note the wide range of 

comments indicating what services a 

dispensing fee should cover. We believe 

that before a determination can be made 

as to an appropriate dispensing fee for 

inhalation drugs after 2005, we need to 

more fully understand the components 

of and the reasons behind the current 

variability in the costs of furnishing of 

these drugs and the services being 

provided. We intend to work with the 

AAH, others concerned with inhalation 

therapy and our partners in the 

Department of Health and Human 

Services to explore these issues more 

fully. 

In the interim, for 2005, we are 

establishing a $57 monthly fee and an 

$80 90-day fee for furnishing inhalation 

drugs using data in the AAH study and 

the GAO report. We established the 

monthly fee based on the weighted 

average of the costs for new and 

established patients from the 2004 AAH 

study after excluding sales and 

marketing, bad debt, and an explicit 

profit margin. Because the AAH study 

did not establish a fee for the 90-day 

period, we applied the methodology 

used in the GAO report to the data in 

the AAH study to calculate the 2005 90-

day fee. Accordingly, we assumed that 

direct costs associated with a monthly 

fee are similar to the direct costs 

associated with the 90-day fee and then 

we tripled the indirect costs. We intend 

to further examine the conversion of per 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66339

encounter costs as reported in the AAH 

study to comparable monthly and 90-

day cost figures. 

We note that although the AAH study 

contained costs related to services that 

may be of potential benefit to our 

beneficiaries, and many commenters 

indicated that we should provide 

payment for these and the other services 

described above, we are concerned that 

these services may be outside the scope 

of a dispensing fee. We are continuing 

to study these services and associated 

cost categories as the new payment 

systems are implemented and we gain 

experience with them. We intend to 

revisit this issue and proceed through 

notice and comment rulemaking in 

order to establish an appropriate 

dispensing fee for 2006.

Comment: A commenter suggested 

that the dispensing fee be established on 

a per dose basis. It was argued that this 

would provide Medicare with 

protection against pharmacies 

dispensing partial shipments or 

shipments more frequently than 30 or 

90 days in order to increase the number 

of dispensing fees. We received 

comments in support of a need-based 

dispensing fee to accommodate 

additional drugs when beneficiaries 

suffer from disease flare-ups. We also 

received comments indicating that 

beneficiary’s prescriptions change, often 

during the first month. Other 

commenters cited the AAH study, 

which calculated different costs 

associated with dispensing inhalation 

drugs for new patients and established 

patient. 

Response: The dispensing fee we are 

establishing covers all drugs shipped to 

a beneficiary during a month (or 90-day 

period) regardless of the number of 

times a supplier ships inhalation drugs 

to a beneficiary. If a supplier does not 

supply the prescription in full, it is the 

supplier’s responsibility to fill and 

deliver the remainder of the 

prescription, but Medicare will not pay 

additional monthly dispensing fees. We 

will monitor the issue about partial 

shipments and potentially erroneous 

billing for multiple monthly dispensing 

fees. We also are concerned that a perdose dispensing fee could provide an 

incentive to supply more drugs. 

The 2005 fee is an average across all 

beneficiaries, new and established, and 

covers additional drugs shipped during 

a month if a beneficiary’s prescription 

changes. We will study the issue further 

of different dispensing fees for new and 

established beneficiaries and the 

frequency that additional drugs are 

shipped for prescription changes. 

Comment: A manufacturer recognized 

that compounded products can be 

covered under certain circumstances 

and that compounding could be 

included appropriately in a dispensing 

fee. Another manufacturer expressed 

concern about including compounding 

in the activities that a dispensing fee 

covers. A suggestion was made that a 

HCPCS modifier be used for inhalation 

drugs that are compounded. 

Response: The costs of compounding 

are included in the AAH study but are 

not separately identified in the direct 

cost line items. Because the 2005 fee is 

based on the AAH study, we need to 

avoid duplicate payment. With 

compounding bundled into the fee for 

2005, we have concerns about paying 

separately for compounding in 2005. 

Comment: A commenter 

recommended that we address 

compounding circumstances that might 

be inconsistent with FDA’s policy 

prohibiting pharmacy compounding of 

two or more separate FDA-approved 

products when a combination product 

approved by the FDA is commercially 

available and compounding that might 

be done without the necessary controls 

to ensure drug product sterility and 

potency.

Response: The fact that we consider 

compounding to be included in the 

2005 fee to furnish inhalation drugs 

does not in any way support practices 

that are inconsistent with FDA 

guidelines. 

Comment: The commenter also 

suggested that we consider creating a 

HCPCS modifier for drugs that a 

prescribing physician intends to be 

compounded but which a pharmacy 

dispenses separately in noncompounded form. The commenter 

believes that such a modifier would 

help discourage pharmacies from 

leaving the responsibility for 

compounding to the beneficiary who 

would be combining the drugs in nonsterile, uncontrolled conditions. 

Response: We understand the 

commenter’s concerns and will study 

this issue. 

Comment: We received comments 

suggesting that the actual savings 

attributable to MMA section 305 may be 

both higher and lower than the 

November 20, 2003 Congressional 

Budget Office (CBO) estimate for MMA 

section 305. One company suggested 

that the actual savings could be less 

than estimated by CBO because the ASP 

model potentially motivates drug 

manufacturers to increase drug costs, 

which will be directly passed on to the 

government. Other commenters cited 

two different estimates from the AAH 

report. Using one calculation, the 

commenters argued that a dispensing 

fee of $68.10 per encounter would still 

enable Medicare to achieve savings of 

$350 million per year or more than $4 

billion over 10 years. Using another 

calculation, the commenters argued that 

the savings would be $7 billion over the 

10-year budget-scoring window. The 

commenters indicated that the $4 

billion savings figure was comparable to 

the initial projections made by the 

Congressional Budget Office (CBO) in 

2003 and the $7 billion figure was in 

excess of the CBO estimated savings. 

Commenters cited these figures to argue 

that establishment of a per service 

encounter fee of $68.10 would set the 

payment at the level originally 

envisioned by Congress. Another 

commenter suggested that a dispensing 

fee of $0.85 per 2.5 mg dose for 

albuterol sulfate and $0.97 per dose for 

a blended mix of other inhalation drugs 

including ipratropium bromide would 

be consistent with what they believe are 

the 17.7 percent savings assumed by 

CBO. One commenter indicated that 

CBO underestimated the savings from 

section 305. 

Response: MMA specifically requires 

the use of the ASP methodology to 

establish more appropriate payment 

rates for drugs. MMA explicitly requires 

the establishment of a supplying fee for 

Part B covered oral drugs as determined 

to be appropriate by the Secretary. 

MMA also explicitly requires 

establishment of a furnishing fee for 

blood clotting factors. However, MMA 

does not specify a particular dispensing 

fee amount for inhalation drugs, nor 

does MMA specify a method to 

determine a dispensing fee for 

inhalation drugs. Accordingly, CMS 

used existing authority to propose in the 

NPRM that an appropriate dispensing 

fee be established. Because MMA did 

not require a specific method or amount 

for a dispensing fee for inhalation drugs, 

we find the arguments unpersuasive 

that a dispensing fee of a particular 

amount was envisioned by Congress or 

consistent with Congressional intent as 

reflected in a CBO estimate. 

Comment: We received comments 

that supported and opposed the use of 

90-day prescriptions. One commenter 

supporting the proposed change 

indicated that most beneficiaries who 

receive nebulized medications suffer 

from chronic lung diseases and will 

require medication to manage their 

disease for prolonged periods. The 

commenter indicated that allowing a 

prescription for 90-days would reduce 

paperwork and redundant effort for 

beneficiaries, physicians and DME 

suppliers. A commenter indicated that 

there would be modest savings in 

dispensing, billing and shipping costs 

with allowance of a 90-day supply of 

66340 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

refills. One company suggested savings 

of 12.5 percent, most notably in 

shipping. Commenters opposing 90-day 

prescriptions gave various reasons, 

including that beneficiaries may 

experience side effects and change 

prescriptions within the first month and 

a certain percent of beneficiaries die 

each month resulting in non-returnable 

product. In addition, some argued that 

pharmacy savings for a 90-day shipment 

would not be significant because 

shipping costs account for only an 

estimated 16 percent of supplier’s nonacquisition costs associated with 

providing inhalation drugs. Another 

company argued that a 90-day shipment 

would substantially increase provider’s 

expenses for boxes and shipping. Some 

commenters agreed that certain chronic 

use medications should be provided in 

larger quantities, but urged caution due 

to the practices of some suppliers who 

automatically ship additional product 

without knowing whether the patient’s 

current supply is exhausted. Some 

comments suggested that a 60-day 

supply might be more cost-effective in 

the long-term because there would be a 

reduced risk that large quantities of 

medications might be wasted. Another 

commenter suggested that the policy be 

defined to cover only drugs that are 

proven to be stable for at least 90 days 

following dispensing.

Response: As we indicated in the 

proposed rule, we believe that 

reasonableness should govern filling a 

monthly vs. 90-day prescription 

depending on the circumstances of the 

beneficiary. We agree with the 

commenter that the initial prescription 

for a new patient should be written for 

a 30-day period because of the potential 

for adverse reactions or changes in the 

treatment regimen. We would expect 

prescriptions for new patients to be for 

30-day periods. In addition, we believe 

that it is reasonable for physicians to 

write a 30-day prescription for those 

beneficiaries who they believe are less 

stable. Similarly, we believe that refill 

prescriptions for 90-day periods are 

reasonable, particularly for stable 

beneficiaries. Although the Medicare 

program would achieve savings from the 

appropriate use of 30-day and 90-day 

prescriptions, we believe that given the 

comments it would be prudent for us to 

monitor the 90-day supply issue. 

Section 4.26.1, the Proof of Delivery 

Methods section of the Program 

Integrity Manual, instructs that 

suppliers of DMEPOS product refills 

contact the beneficiary prior to 

dispensing the refill to ensure that the 

refilled item is necessary and confirm 

any changes or modifications to the 

order. Suppliers who ship either a 30-

day or 90-day supply of inhalation 

drugs without knowing the beneficiary’s 

current supply is exhausted would be in 

violation of this policy. The 90-day 

period should not be of concern for 

inhalation drugs because most of these 

drugs are stable for at least 90-days and 

thus can be dispensed for such period. 

We would revisit this issue if additional 

inhalation drugs that are unstable after 

90-days become available. 

Because we received limited data on 

costs of furnishing a 90-day supply, it is 

more difficult to determine a 2005 fee 

for furnishing a 90-day supply of 

inhalation drugs. However, given that 

this is an optional payment arrangement 

for beneficiaries whose course of 

treatment has stabilized to the point that 

the required dosage can be predicted 

with a reasonable degree of certainty 

over a 90-day period, we believe that it 

is important to establish a 90-day fee. As 

described earlier, we are establishing a 

90-day fee for furnishing inhalation 

drugs by applying the methodology 

from the GAO report to the data in the 

AAH study. We assumed all of the 

direct costs associated with a monthly 

fee are similar to the direct costs 

associated with a 90-day fee and we 

tripled the indirect costs. We plan to 

study this issue further. 

Comment: Many commenters 

acknowledged that most DMEPOS 

items, including drugs, can be 

dispensed based on verbal orders. 

Several commenters objected to the 

requirement that a written order from 

the physician still must be obtained 

before billing. They suggested that we 

revise policy so that a prescription 

could be both filled and billed based 

solely on a verbal order from a 

physician. They pointed out that the 

requirement that a pharmacy still obtain 

a written order for a prescription in 

order to be able to bill Medicare creates 

a significant administrative burden for a 

pharmacy because it often requires 

persistent follow-up with a physician. 

Another commenter suggested that we 

consider accepting electronic 

transmissions of prescriptions, for 

example, e-scripts. Another commenter 

requested clarification of the rule for 

dispensing based on a verbal order for 

inhalation drugs and the proposed 

requirement that an order for an item of 

DMEPOS be signed and dated within 30 

days of a face-to-face examination of a 

beneficiary. 

Response: The policy that allows 

dispensing based on a verbal order but 

requires a written order for billing 

applies to all DMEPOS items. This 

policy balances fraud and abuse 

concerns with prompt dispensing of 

DMEPOS items to beneficiaries. Written 

orders from the physician can be faxed, 

photocopied, or provided via electronic 

or pen and ink forms. In accordance 

with current policy, pharmacies may 

accept electronic prescriptions from 

physicians. 

Beneficiaries receiving inhalation 

drugs are having face-to-face exams 

routinely and generally do not need 

additional visits to re-order their drugs. 

A single face-to-face exam is generally 

sufficient for items ordered, that is, we 

would not require a separate face-to-face 

exam for the nebulizer and for the 

inhalation drugs. We assume that 

physicians would order them at the 

same time because they are used 

together. 

Comment: One commenter supported 

the revision made earlier this year that 

provides flexibility regarding the 

timeframe for refilling Medicare 

prescriptions. The commenter noted 

that most third party plans allow 

pharmacies to refill prescriptions within 

five days of the end of usage for the 

previous prescription quantity 

dispensed. Another commenter 

recommended that the time frame for 

subsequent deliveries be expanded 

beyond five days. The commenter 

indicated that they believe a five-day 

time frame is too short a period for 

ground service and would not eliminate 

the need for overnight shipping. This is 

based on the commenter’s experience 

that beneficiaries do not respond to calls 

to confirm that they need additional 

supply until the beneficiary has only a 

few days’ supply left.

Response: As we indicated in the 

proposed rule, the revised time frame 

for delivery of refills of DMEPOS 

products provides for refills to occur no 

sooner than ‘‘approximately five days 

prior to the end of the usage for the 

current product.’’ In the proposed rule 

we emphasized the word 

‘‘approximately.’’ While we believe that 

normal ground service would allow 

delivery in five days, if there were 

circumstances where ground service 

could not occur in five days, the 

guideline would still be met if the 

shipment occurs in six or seven days. 

As another commenter noted, the fiveday standard is consistent with the time 

frame for shipping used by most third 

party plans. Given the consistency with 

private sector plans, because the 

requirement applies to all DMEPOS 

product refills, and because the 

standard is not a firm five-day limit, we 

do not believe that it is necessary to 

lengthen the standard. We will study 

further the ability of a supplier to 

contact beneficiaries for refills 

compared with its ability to provide 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66341

beneficiary and caregiver training on a 

monthly basis. 

Comment: One commenter indicated 

that the DMERCs have not consistently 

implemented the revised proof of 

delivery provisions but that they are 

engaged in dialogue with CMS and the 

DMERCs to clarify the requirements and 

standardize their interpretation across 

the four DMERCs. Other commenters 

suggested that the proof of delivery 

requirement be eliminated. 

Response: We encourage dialogue to 

ensure consistent understanding and 

application of the proof of delivery 

requirements. The proof of delivery 

requirements have recently undergone 

an extensive review and revision and, 

based on the need to prevent fraud and 

abuse, we see a need to continue them. 

Comment: Those commenters who 

addressed our proposed elimination of 

the Assignment of Benefits (AOB) form 

for items and services, including drugs, 

where assignment is required by statute, 

supported our proposed change. 

Commenters agreed that obtaining an 

AOB in each instance is redundant 

because the supplier is required by 

statute to accept the assignment. Some 

commenters suggested that a onetime 

AOB be obtained from the beneficiary 

that will be valid for every DMEPOS 

item he or she receives during the 

period of his or her medical necessity. 

Response: We appreciate the support 

for our proposal. As discussed in 

section IV of this final rule, we are 

adopting our proposal to eliminate the 

requirement for AOB form for items and 

services, including drugs, where 

assignment is required by statute. We do 

not agree with the suggestion to allow 

for a one-time AOB form to cover items 

and services provided in the future 

because there could be fraud and abuse 

issues. 

Comment: We received conflicting 

comments about the impact of the 

changes and clarifications relating to 

billing requirements on the costs of 

dispensing inhalation drugs. 

Commenters differed on the impact of 

the revisions to the proof of delivery 

requirements that we pointed out in the 

proposed rule that went into effect in 

early 2004. One company that currently 

uses automated systems indicated that 

the revision to the proof of delivery 

requirements would not generate 

savings for them. Commenters indicated 

that the DMERCs have not consistently 

implemented the changes, and that 

consequently there has not been 

significant administrative relief and 

subsequent savings. 

We received conflicting comments 

about the impact of the revised time 

frame for shipping guidelines. While 

one commenter indicated that savings 

had already been achieved because the 

provision had already been 

implemented, another commenter 

indicated that the revision would have 

negligible effect because the commenter 

would not change its existing business 

practice of using overnight shipping. 

One commenter said it had already 

adopted the provision of prescriptions 

being filled by verbal order, followed up 

by a written order for the claim 

submission and that these changes did 

not generate any additional savings for 

the commenter. Some suggested that the 

elimination of the AOB form for drugs 

would have limited savings because 

some suppliers currently obtain the 

AOB form at the same time that they 

obtain other forms that would be 

continued. Retail pharmacies agreed 

that elimination of the AOB form and 

verbal prescription order would reduce 

their paperwork. However, inhalation 

companies did not agree. 

Response: We understand the 

commenters concerns and will study the 

impact of these billing changes on the 

different suppliers’ costs as the new 

payment system is implemented. 

Comment: Several commenters 

suggested that we review and consider 

changing several aspects of billing that 

might have cost-savings potential for 

suppliers of drugs. Several commenters 

indicated that Medicare’s lack of on-line 

adjudication represented a significant 

cost and burden to them. One retail 

pharmacy commented that pharmacies 

face higher than normal rejection rate on 

claims because Medicare claims are not 

processed on-line, resulting in higher 

administrative costs. Others commented 

that pharmacies that dispense Medicare 

prescriptions must obtain 

documentation that is typically 

provided by the physician. For example, 

one company indicated that suppliers 

are held responsible for the appropriate 

medical necessity documentation in the 

patient’s medical record but that the 

supplier has no control over physician 

records. Some suggested that we 

consider eliminating the requirement 

that a diagnosis code be required on the 

prescription. One pharmacy commented 

that pharmacies should not be expected 

to verify that the physician has in fact 

performed a face-to-face exam for the 

purpose of treating and evaluating the 

patient’s medical condition or whether 

the physician has created appropriate 

documents in his records. Rather, the 

pharmacy believes that this 

responsibility should be left to the 

physician, and the creation of a 

prescription should be all that is needed 

to verify that the physician has 

complied with all Medicare 

requirements. A commenter noted that 

Medicare requires that suppliers submit 

claims with the physician’s Unique 

Physician Identification Number (UPIN) 

while most third party plans require the 

physician’s DEA number and suggested 

that we consider adopting usage of the 

physician’s DEA number instead of 

UPIN. A pharmacy commented that 

dispensing units are different than 

current National Council for 

Prescription Drug Programs (NCPDP) 

standards; Medicare reimburses 

products based on a per mg price while 

the NCPDP standard suggests 

reimbursement on a per ml price. The 

pharmacy indicated that this makes it 

more difficult for the pharmacy to 

calculate proper reimbursement for 

these Medicare claims. Other 

commenters suggested that the Medicare 

enrollment and reenrollment process for 

suppliers be significantly streamlined. A 

retail pharmacy indicated that Medicare 

requires pharmacy suppliers to submit 

extensive and often duplicative 

pharmacy-specific paperwork that is 

more voluminous than any other third 

party plan in which retail pharmacies 

participate. One inhalation company 

suggested certain aspects of billing such 

as the requirement that the supplier 

query the physician and beneficiary to 

find out if the beneficiary had already 

received a same or similar item from 

another supplier. The company also 

identified what it claimed are several 

other labor-intensive, costly aspects of 

Medicare billing including electronic 

claims filing requirements; information 

system programming and testing; 

paperwork and new business 

procedures required to be compliant 

with HIPAA; Medicare and secondary 

insurance benefits verification and 

qualification; responding to 

significantly increased pre-payment 

audit activities; administering the 

Patient Financial Hardship Waiver prior 

to billing deductible and coinsurance 

amounts; billing and writing off 

beneficiary cost-sharing as bad debts; 

and differing DMERC policies 

concerning documentation needed to 

support home inhalation therapies. 

Response: We thank the commenters 

for identifying these items. We plan to 

examine these aspects of billing. To the 

extent that there are different 

interpretations or applications of 

national policy by DMERCs, our goal is 

increased standardization. 

Comment: A comment from a group 

focused on respiratory care indicated 

that there may be over utilization of 

albuterol sulfate. The comment 

indicated that a large amount of 

scientific evidence concludes that high 

albuterol sulfate use is indicative of 

66342 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

poor overall disease management. The 

commenter further indicated that 

Medicare’s costs related to the use of 

albuterol sulfate may result from the fact 

that alternative drug treatment regimes 

are not adequately considered in the 

management of the patient’s disease. 

The commenter urged us to examine the 

underlying causes of high utilization 

rates of albuterol sulfate.

Response: Our goal is to ensure that 

Medicare beneficiaries have access to 

the appropriate drugs to treat their 

diseases. We believe that the availability 

of discounts through the Medicare drug 

card and the implementation of the Part 

D drug benefit beginning in 2006 

promote treatment decisions being made 

based on the best clinical evidence, 

rather than being influenced by 

differential coverage. 

Comment: We received many 

comments addressing the issue of 

nebulizers versus metered dose inhalers 

(MDIs). Most commenters questioned 

whether a significant shift of Medicare 

beneficiaries to MDIs would occur when 

MDIs are covered in the Part D drug 

benefit beginning in 2006. We received 

many comments, studies and literature 

reviews on nebulizers and MDIs. Some 

commenters identified the specific 

disadvantages of MDIs and holding 

chambers or spacers. Some commenters 

questioned the conclusion of the 

literature review mentioned in the 

proposed rule that nebulizers are not 

clinically superior in delivering 

inhalation drugs than MDIs and the 

commenters asserted that the two are 

not fully substitutes. Some commenters 

quantified the costs to beneficiaries of 

nebulizers and MDIs. One commenter 

pointed out that MDIs would increase in 

2006 based on the ban of the propellent 

chlorofluorocarbon. Another commenter 

questioned the point in the proposed 

rule that MDIs are more portable than 

nebulizers since advances in nebulizer 

technology have included additional 

portability. The commenter noted that 

since Medicare covers only one 

standard nebulizer, many of their 

patients have purchased portable 

nebulizers on an out-of-pocket basis to 

use as a second device while outside of 

their home. 

Response: A number of drugs are 

available to treat the persons with 

asthma or who develop COPD. These 

include drugs, often inhaled, that 

expand the bronchial tubes and allow 

the patient to breathe more freely. 

Depending on the needs of the 

individual patient, these medications 

can be delivered using nebulizers or 

MDIs. Although nebulizers have long 

been covered under Medicare Part B, the 

MMA expanded access to MDIs 

beginning in 2006 through the new 

Medicare Part D drug benefit. While two 

meta-analyses cited by one commenter 

are consistent with the literature review 

mentioned in the proposed rule that 

found a lack of overall clinical 

superiority of MDIs over nebulizers, we 

recognize that even after coverage of 

MDIs begins in the Part D drug benefit 

in 2006, due to their particular 

circumstances, many beneficiaries will 

require the use of nebulizers and that 

nebulizers will continue to play an 

important role in inhalation therapy. 

Part B does not currently cover MDIs 

and we will gain experience with the 

costs of MDIs as the Part D drug benefit 

is implemented. 

Comment: Comments were received 

from respiratory drug distributors and 

homecare providers addressing drugs 

that are supplied from the manufacturer 

in more than one form. One company 

suggested that since inhalation drugs are 

provided by the manufacturer in two 

forms, a premixed solution or as a 

powder (or other concentrate) that is 

diluted by the pharmacist, the ASP 

should be calculated separately for each 

of these two forms in order to reflect the 

different acquisition costs to the 

pharmacy for the different forms. The 

company suggested use of a modifier for 

the J-code to distinguish between these 

two forms for reimbursement purposes. 

Response: We disagree. Consistent 

with the statute, the ASP is calculated 

by the HCPCS codes rather than the 

NDC code. This allows flexibility in 

appropriate drug delivery. 

Comment: We received letters from 

individual beneficiaries and their family 

members indicating that the beneficiary 

has tried MDIs unsuccessfully and that 

inhalation drugs administered through a 

nebulizer were a successful treatment. 

They asked us not to assume that 

everyone on a nebulizer could be 

switched to inhalers and asked that we 

allow inhalation medications 

administered through nebulizers to 

remain funded by Medicare.

Response: We recognize that 

nebulizers are required by many 

beneficiaries due to their particular 

health circumstances. We did not 

propose to eliminate Medicare funding 

for inhalation medications administered 

through nebulizers. 

Comment: Several commenters 

questioned why there should be public 

funding for COPD treatments for 

persons who chose to smoke cigarettes. 

The commenters indicate that it may be 

too harsh a policy to cease all 

reimbursement for COPD treatments, 

but they suggested two alternatives: (1) 

No individual who currently smokes 

should receive any Medicare benefit for 

the treatment of any respiratory 

condition, and (2) Any individual who 

historically smoked heavily and 

receives treatment for respiratory 

disorders should face an annual 

deductible equal to the cost of smoking 

a pack of cigarettes a day. 

Response: As we indicated in the 

proposed rule, smoking has been linked 

to a large number of health problems 

and is the leading cause of cancer and 

pulmonary disease. The Department of 

Health and Human Services (HHS) has 

been actively encouraging Americans to 

quit smoking through its smoking 

cessation initiatives. Americans who 

quit smoking will enjoy longer, 

healthier lives and avoid diseases such 

as COPD. However, the Medicare law 

does not limit benefits to persons who 

do not currently smoke, nor does the 

Medicare law impose a deductible that 

is different for smokers and nonsmokers. This regulation implements 

the law as it is currently written. 

Result of Evaluation of Comments 

In the proposed rule, we requested 

comments on the appropriate separate 

dispensing fee for inhalation drugs used 

in a nebulizer. In this final rule we are 

establishing 2005 fees of $57.00 for 

furnishing a 30-day prescription and 

$80.00 for furnishing a 90-day 

prescription for inhalation drugs. This 

fee would be paid in addition to the 

Medicare payment amount for the drug. 

As discussed in section IV, we are 

finalizing our proposal to eliminate the 

Assignment of Benefits (AOB) form for 

items and services, including drugs, 

where assignment is required by statute. 

We reiterate language in the recently 

updated guidelines for DMEPOS refills, 

emphasizing the word ‘‘approximately’’. 

This allows for refill prescriptions to be 

shipped by ground service on 

‘‘approximately’’ the 25th or 85th day of 

the respective prescription period. In 

addition, we clarified the ordering 

requirements for DMEPOS items, 

including drugs, which can be 

dispensed with just a verbal physician 

order.

P. Section 706—Coverage of Religious 

Nonmedical Health Care Institution 

Services Furnished in the Home 

1. Background 

Section 706(a) of the MMA amended 

section 1821(a) of the Act by adding 

home health services to the list of 

services furnished to an individual by a 

religious nonmedical health care 

institution (RNHCI). Section 706(b) 

added section 1861(aaa) to the Act to 

expand the term ‘‘home health agency’’

(HHA) to include a RNHCI. However, 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66343

this expansion is limited to RNHCI 

items (specified durable medical 

equipment) and services furnished in 

the beneficiary’s home when the items 

and services are comparable to those 

provided by a HHA that is not a RNHCI. 

Moreover, payment may not be in 

excess of $700,000 per calendar year, 

and may not be made after December 31, 

2006. Accordingly, we are 

implementing changes to the RNHCI 

regulation to include services furnished 

in the home that result from the 

enactment of the MMA and that are 

becoming effective January 1, 2005. 

The new time-limited home health 

services benefit will be referred to as 

‘‘home benefit’’ or ‘‘home services’’

throughout this rule. The RNHCI home 

benefit may only be provided to an 

eligible beneficiary who is confined to 

the home for health reasons and who 

has a condition that makes the 

beneficiary eligible to receive services 

under Medicare home health. 

Additionally, the beneficiary must have 

an effective RNHCI election and receive 

his or her home services from the 

RNHCI. The home benefit is not a 

substitute for hospice care. As in the 

original RNHCI benefit, Medicare will 

pay only for nonmedical services in the 

home, but not for those religious items 

or services provided by the RNHCI. 

Additionally, RNHCI home service 

patients who have a documented need 

for a specified DME item can obtain that 

item with the applicable deductible and 

coinsurance. 

2. Legislative History 

In 1965, payments to Christian 

Science sanatoria (inpatient nonmedical 

care facilities for bedfast patients) were 

included in the initial provisions of 

Medicare under title XVIII of the Act. In 

1996, in Children’s Healthcare Is a Legal 

Duty, Inc. v. Vladeck, 938 F. Supp. 1466 

(D. Minn. 1996) (‘‘CHILD I’’), a Federal 

district court held that some of the 

provisions pertaining to Christian 

Science sanatoria were unconstitutional 

on the grounds that they were sect 

specific, in violation of the 

Establishment Clause of the U.S. 

Constitution. 

Section 4454 of the BBA amended 

section 1861(a)(1) of the Act, deleting 

Christian Science sanatoria from the Act 

and creating instead the RNHCI benefit 

to provide Medicare Part A and 

Medicaid access for all religious groups 

whose belief structure does not include 

medical intervention. We note that, in 

the Conference Report to the BBA (H.R. 

Conference Report, No. 105–217, at 768 

(1997)), the Congress specified that the 

RNHCI provisions were a sect-neutral 

accommodation available to any person 

who is relying on a religious method of 

healing and for whom the acceptance of 

medical health services would be 

inconsistent with his or her religious 

beliefs. Further, the Congressional 

conferees were convinced that the 

RNHCI provisions fully responded to 

and satisfied the constitutional concerns 

that had been addressed by the district 

court in CHILD I. 

Besides adding the new RNHCI 

benefit, section 4454 of the BBA also 

added sections 1861(ss) and 1821 to the 

Act. Section 1861(ss) sets forth: 

• The ten requirements that a 

provider must meet in order to be 

considered a RNHCI; 

• Parameters for oversight and 

monitoring; 

• Authority for Federal review of 

items and services provided for 

excessive or fraudulent claims; and 

• Parameters for ownership/

affiliations.

As in the past, the new provisions do 

not mention the use of a religious 

counselor or practitioner; we consider 

that to be the responsibility of the 

patient. 

Section 1821 of the Act provides for 

conditions for coverage of RNHCI 

services including: 

• The election, revocation, and 

limitations of the RNHCI benefit 

(section 1821(b)); 

• The monitoring and safeguarding 

against expenditures (section 1821(c)); 

and 

• The sunset provisions for the 

RHNCI benefit (section 1821(d)). 

Section 1821(a) of the Act, as 

amended by the MMA, provides for Part 

A payment for inpatient hospital 

services, post-hospital extended care 

services, or home health services 

furnished to a beneficiary in, or by, a 

RNHCI only when the beneficiary has: 

• A valid election for the RNHCI 

benefit in effect; and 

• A condition that would qualify for 

inpatient hospital, extended care 

services, or home health if the 

beneficiary were an inpatient or resident 

in a hospital or skilled nursing facility, 

or was a patient residing at home under 

the care of a HHA that was not a RNHCI. 

The election of the RNHCI benefit 

becomes effective immediately after 

execution and remains in effect for a 

lifetime or until revoked. As described 

in section 1821(b) of the Act, the 

election is a written statement signed by 

the beneficiary or the beneficiary’s legal 

representative which states that: 

• The individual is conscientiously 

opposed to the acceptance of 

nonexcepted medical treatment; 

• The individual’s acceptance of that 

nonexcepted treatment would be 

inconsistent with the individual’s 

sincere religious beliefs; and 

• The individual’s receipt of 

nonexcepted medical care constitutes a 

revocation of the election. 

The RNHCI election may be revoked 

by voluntarily notifying the Secretary in 

writing of the revocation or the election 

may be revoked by simply receiving 

nonexcepted medical care for which 

payment is sought under Medicare. 

Once a RNHCI election is revoked twice, 

the next election may not take place 

until a date that is at least one year from 

the date of the most recent revocation. 

Any election thereafter does not become 

effective before a date that is at least five 

years after the date of the previous 

revocation. The receipt of excepted 

medical care does not result in a 

revocation of the election. As stated in 

§ 403.702 of the regulations, the 

following definitions apply—

• Excepted medical care or treatment

for purposes of the RNHCI benefit is 

defined as medical care or treatment 

(including medical or other health care 

services) received involuntarily (for 

example, following an accident), or 

required by any level of government (for 

example, immunizations). 

• Nonexcepted medical care or 

treatment refers to all medical care or 

treatment that is not defined as excepted 

medical care or treatment. The 

beneficiary always retains the right to 

receive medical care under Medicare 

based on his or her level of coverage (for 

example, Part A, Parts A and B). 

However, using nonexcepted care will 

result in the revocation of the RNHCI 

election. 

On November 30, 1999, we published 

the RNHCI interim final rule with 

comment period in the Federal Register

(64 FR 67028), effective on January 31, 

2000. The final RNHCI regulations were 

published on November 28, 2003 (68 FR 

66710). There are currently 16 RNHCIs 

in the United States: Three in California; 

two each in Florida and Ohio; and one 

each in: Colorado, Illinois, Indiana, 

Massachusetts, New York, Texas, 

Virginia, Washington, and Wisconsin. 

3. Summary of Section 706 of the MMA 

Section 706 of the MMA amended the 

Act to extend Medicare coverage of 

RNHCI items and services to the RNHCI 

beneficiary’s home when the items and 

services are comparable to those 

provided by a HHA that is not a RNHCI. 

Specifically, section 706(a) of the 

MMA amended section 1821(a) of the 

Act by adding home health services to 

the list of services furnished to an 

individual by a RNHCI. Section 706(b) 

of the MMA added section 1861(aaa) to 

the Act to expand the term ‘‘home 

66344 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

health agency’’ to include a RNHCI as 

defined in section 1861(ss)(1) of the Act, 

but only for items and services that are 

ordinarily furnished by a RNHCI to 

individuals in their homes, and that are 

comparable to items and services 

furnished to individuals by a HHA that 

is not a RNHCI. Section 1861(aaa)(2)(A) 

of the Act states that, subject to section 

1861(aaa)(2)(B), payment may be made 

for services provided by a RNHCI only 

to the extent and under the conditions, 

limitations, and requirements that are in 

regulations consistent with section 1821 

of the Act. Section 1861(aaa)(2)(B) states 

that payment may not be made for 

RNHCI home services under section 

1861(aaa)(2)(A) of the Act in excess of 

$700,000 per calendar year, or after 

December 31, 2006.

This interim final rule amends the 

existing RNHCI regulations in Subpart G 

to implement section 706 of the MMA. 

4. Discussion 

a. Implementation of Section 706 of the 

MMA 

As stated above, section 706 of the 

MMA added section 1861(aaa)(1) to the 

Act to expand the term ‘‘home health 

agency’’ to include a RNHCI, as defined 

in section 1861(ss)(1) of the Act, but 

only for items and services that are 

ordinarily furnished by that institution 

to individuals in their homes, and that 

are comparable to items and services 

furnished by a HHA that is not a RNHCI. 

This posed a number of implementation 

challenges as a RNHCI does not conform 

to the statutory definition or 

requirements of a HHA in section 

1861(m) of the Act, which is based on 

a medical model. Some of these 

challenges result from the fact that—

• RNHCIs were established to 

accommodate those religious groups 

that do not believe in the use of 

physicians to direct or supervise health 

care; and 

• RNHCI nursing does not correspond 

to the statutory or regulatory parameters 

established by Medicare for ‘‘skilled 

care’’ in the home setting. 

In addition, the RNHCI payment 

methodology does not readily lend itself 

to payment to the RNHCI for items and 

services under the RNHCI home benefit. 

Therefore, in an effort to implement the 

intent of the amendment, we will 

generally use the definition and 

requirements for a RNHCI, rather than a 

HHA (with some exceptions), in order to 

extend RNHCI services into the home 

environment. However, in order to aid 

in determining comparability, we are 

also utilizing, when appropriate, some 

of the home health requirements set 

forth in section 1861(m) of the Act. 

The presence of physician orders and 

oversight is a keystone in the 

operational viability of a HHA and 

nonexistent in the RNHCI, where the 

religious practitioner (noncovered by 

Medicare) is the primary focal person in 

establishing the course for the religious 

method of healing. In addition, the 

RNHCI nurse further assists the patient 

in navigating the course established for 

the religious method of healing. To 

address the need for oversight for the 

RNHCI home benefit as with the current 

inpatient RNHCI benefit, we are 

implementing section 706 of the MMA 

by continuing to require that the RNHCI 

utilization review committee review the 

need for care (expanded now to include 

both admission to the home benefit and 

continued care in the home setting), and 

to oversee the utilization of items and 

services in the time-limited home 

benefit. The utilization review 

committee, however, cannot act in place 

of a physician in ordering items and 

services other than those designated 

specifically for the purpose of this timelimited RNHCI home benefit. A claim 

from any other individual or provider 

attempting to seek Medicare payment 

for non-designated RHNCI home benefit 

items and services without a physician 

order will be disallowed. 

We also recognize that implementing 

section 706 is particularly challenging 

in light of the fact that no sophisticated 

physical treatments or procedures are 

provided in RNHCIs, while 

conventional medical care becomes 

more technical every year, making the 

care delivered by HHA personnel 

increasingly complex. The major 

challenge was determining 

comparability between home health 

services for HHAs defined in part 409 

subpart E, and RNHCI services which 

are nonmedical in nature. 

Medicare pays for supportive care or 

dependent services under the home 

health benefit only when under the 

orders and direction of a licensed 

physician if there is a medical need for 

skilled health care by a registered nurse, 

physical therapist, speech-language 

therapist, occupational therapist, or 

medical social worker. Under the 

Medicare home health benefit, when 

there is no longer a need for the 

‘‘skilled’’ health care services, the 

supportive dependent services no longer 

qualify for payment. Based on section 

1861(m) of the Act, we believe that 

Medicare home health care benefits are 

skilled-care oriented. These benefits 

were not designed to provide coverage 

for care related to help with activities of 

daily living unless the patient requires 

skilled nursing care or physical or 

speech therapy. The RNHCI nurse may 

be skilled in ministering to a 

beneficiary’s religious needs (not 

covered by Medicare), but does not have 

the training or nursing skill sets 

required of credentialed/licensed health 

care professionals (for example, a 

registered nurse). While the RNHCI 

nurse may provide supportive care, that 

care is focused primarily on religious 

healing and meeting basic beneficiary 

needs for assistance with activities of 

daily living (for example, bathing, 

toileting, dressing, ambulation), as part 

of creating an environment for religious 

healing. The care provided by a RNHCI 

nurse is not at the level of either a 

registered nurse or a licensed practical 

nurse. The physical care provided by a 

RNHCI nurse is at a level that could be 

considered as supportive, but is 

decidedly not skilled nursing care as 

that term is understood under the 

Medicare home health program.

In the search for comparability of 

services, we considered the 

requirements and functions of the home 

health aide contained in sections 

1861(m) and 1891(a)(3)(A) of the Act 

and in the regulations at 42 CFR 484.36. 

We performed a parallel review of the 

activities and skills utilized by home 

health aides and RNHCI nurses to 

determine comparability at an 

operational level. We determined that 

both the RNHCI nurse and the home 

health aide perform the following basic 

tasks—

• Assisting with activities of daily 

living (ADLs) that include: ambulation, 

bed-to-chair transfer, and assisting with 

range of motion exercises; bathing, 

shampoo, nail care, and dressing; 

feeding and nutrition; and toileting; 

• Performing light housekeeping, 

incident to visit; and 

• Documenting the visit. 

However, the home health aide is also 

responsible for—

• Care of catheters and drainage 

equipment; 

• Checking oxygen and other 

respiratory equipment; 

• Communicating with nurse or other 

skilled team members;* 

• Assisting with exercises as ordered 

by PT, OT or speech language therapist; 

• Observation and reporting of 

existing medical conditions;* 

• Recognizing and responding to 

emergency situations (including CPR); 

• Routine care of prosthetics and 

orthotics; 

• Taking and reporting vital signs;* 

• Using basic infection control 

procedures;* and 

• Care of wound/stoma dressings. 

The home health aide during a home 

visit will usually perform at least three 

of the four skills marked with an 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66345

asterisk (*) from the ten skills listed. 

The remaining areas of responsibility 

are carried out as indicated by the 

patient’s needs and the patient’s care 

plan. 

In analyzing the outcomes of the 

home health aide/RNHCI nurse review, 

we found that both groups engaged in 

the comparable tasks of assisting with 

activities of daily living, performing 

light housekeeping (incident to visit), 

and documenting the visit. Therefore, 

we will pay for the performance of these 

tasks by a RNHCI nurse in the home 

under the home benefit established by 

section 706 of the MMA. However, in 

reviewing for comparability of these 

services, we also found that the 

Medicare requirements for a home 

health aide exceed the preparation and 

skills of the RNHCI nurse for furnishing 

physical care. The home health aide 

performs activities that support the 

patient’s prescribed medical therapeutic 

regimen and contribute to the Outcome 

and Assessment Information Set 

(OASIS) data collection effort. 

Moreover, we assumed that a significant 

portion of each RNHCI nurse visit is 

focused on religious activity 

(noncovered by Medicare). However, in 

spite of the difference in skill levels and 

the incorporation of non-covered 

religious activity into a visit, Medicare 

payment for the RNHCI home benefit is 

based on a fixed payment per visit, 

rather than on a total number of hours 

or number of caregivers involved. 

Unlike the home health benefit, the 

RNHCI benefit does not involve 

multiple levels of covered caregivers. 

Under the home health PPS only the low 

utilization payment adjustment (LUPA) 

rate provides for payment for individual 

home health visits. Due to the 

uniqueness of the RNHCI and RNHCI 

nurses in the Medicare program, we 

have developed a payment rate that is 

a percentage of the PPS LUPA rate for 

home health aide visits provided under 

the home health PPS, which we believe 

adequately represents the percentage of 

comparable tasks performed by the 

RNHCI nurse. Only a visit by a RNHCI 

nurse to a home is payable by Medicare. 

The cost for the religious portion of the 

visit continues to be the responsibility 

of the individual patient or the specific 

RNHCI.

Another challenge was posed by the 

provision of DME items for RNHCI 

patients in the home, since all DME is 

covered for Medicare payment only 

when ordered by a physician. That 

physician order may provide the RNHCI 

patient with the desired DME item, but 

will also revoke the patient’s election 

for RNHCI care. We addressed the issue 

of DME by reviewing those items that 

are routinely found in a RNHCI that are 

comparable to those used by a HHA that 

is not a RNHCI. This resulted in a list 

of DME items that one could normally 

buy or rent off the shelf from a 

community pharmacy or health care 

supply store. For purposes of this timelimited benefit, we are permitting the 

RNHCI nurse to order from this list of 

designated items under the oversight of 

the RNHCI utilization review 

committee. A listing of these items is 

provided in Table 15 below. 

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ER15NO04.511</GPH>
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BILLING CODE 4120–01–C 

We will provide the specifics for 

implementing the DME items and 

payment under this time-limited benefit 

in later Medicare program instructions. 

Under section 1861(aaa)(2)(B) of the 

Act, payments for the RNHCI home 

benefit may not be made that exceed 

$700,000 per calendar year, and not 

after December 31, 2006. Under the 

RNHCI home benefit, Medicare will pay 

only for nonmedical health services in 

the home, as well as for those DME 

items included in Table 15 of this 

preamble. Medicare will not pay for 

religious items or services provided by 

the RNHCI. We have developed a 

special billing system for those RNHCI 

providers offering the home benefit to 

monitor expenditures on home services 

and items for purposes of staying within 

the statutory calendar year expenditure 

limit. 

5. RNHCI Regulatory Provisions—

RNHCI Medicare Benefits, Conditions of 

Participation, and Payment 

As noted previously, to implement 

section 706 of the MMA, we reviewed 

the requirements for both HHAs and 

RNHCIs to identify the most feasible 

approach. Accordingly, we have made 

the following changes to the RNHCI 

regulations: 

a. Basis and Purpose of Religious NonMedical Health Care Institutions 

Providing Home Services—§ 403.764 

We added § 403.764 to set forth the 

basis and purpose of the RNHCI home 

benefit. Specifically, we added 

subsection (a) to include a reference to 

section 1861(aaa) of the Act to the 

general RNHCI authority noted in 

§ 403.700 and a description of the 

provisions of section 1861(aaa). We also 

added subsection (b) to describe the 

home benefit, the statutory annual fiscal 

limitation, and the sunset provision. 

b. Definitions and Terms—§ 403.702 

We made no changes to the 

regulation. 

c. Conditions for Coverage—§ 403.720 

We made no changes to the 

regulation. 

We wish to emphasize that the RNHCI 

home benefit is an option available to 

each RNHCI, and the facility is not 

required to offer this service to either 

gain or maintain RNHCI status. 

The RNHCI home benefit is not to be 

confused with hospice care that may 

involve more frequent visits and can 

involve institutional services. If, for 

some reason, the RNHCI home-serviced 

patient requires more than what is 

provided under the RNHCI home 

benefit, RNHCI or other institutional 

services may be required. 

d. Valid Election Requirements—

§ 403.724 

We made no changes to the regulation 

because no modification or clarification 

to this requirement is needed to 

implement the RNHCI home benefit. 

Section 1821(b) of the Act addresses the 

issues involved in beneficiary election 

of RNHCI services. 

e. Conditions of Participation—

§ 403.730 through § 403.746 

We have not changed the following 

conditions of participation, as they do 

not require any modification or 

clarification for implementing the 

RNHCI home benefit: 

• Patient Rights (§ 403.730) 

• Quality Assessment and 

Performance Improvement (§ 403.732) 

• Administration (§ 403.738) 

• Staffing (§ 403.740) 

We have not changed the following 

conditions of participation, as they are 

specific to institutions and are not 

applicable to the implementation of the 

RNHCI home benefit: 

• Food Services (§ 403.734) 

• Discharge Planning (§ 403.736) 

• Physical Environment (§ 403.742) 

• Life Safety From Fire (§ 403.744) 

The following condition of 

participation requires the addition of a 

new standard to reflect the additional 

responsibility necessary for 

implementing the RNHCI home benefit: 

• Utilization Review (§ 403.746) 

As explained previously, the 

utilization review committee will 

review the need for care and oversee the 

utilization of items and services for the 

RNHCI home benefit. Accordingly, 

§ 403.746 will be revised to reflect the 

additional responsibility necessary for 

implementing the RNHCI home benefit. 

Specifically, § 403.746 will be modified 

to add a new subsection (c) to read as 

follows: 

(c) Standard: Utilization review 

committee role in RNHCI home services.

In addition to the requirements in (b), 

the utilization review committee is 

responsible for the admission and 

continued care review (at least every 30 

days) of each patient in the RNHCI 

home services program. The utilization 

review committee is responsible for 

oversight and monitoring of the home 

services program, including the 

purchase and utilization of designated 

durable medical equipment (DME) items 

for beneficiaries in the program.

We again note that under the RNHCI 

home benefit, one of the tasks of the 

RNHCI nurse is to order from a selected 

group of DME items that meet the 

documented needs presented by a 

patient, if that need is presented by the 

patient. The utilization review 

committee will provide oversight for the 

DME orders and utilization of the items. 

The utilization review committee 

cannot act as a physician in ordering 

DME items other than those items 

designated specifically for the purpose 

of this time limited RNHCI benefit. A 

claim from any other individual or 

provider attempting to seek Medicare 

payment for non-designated RNHCI 

home benefit DME items without a 

physician order will be disallowed. 

In implementing section 706 of the 

MMA, we have also revised the 

regulations to add the following 

provisions: 

a. Requirements for Coverage and 

Payment of RNHCI Home Services 

(§ 403.766) 

The RNHCI home benefit is an option 

available to each RNHCI, but it is not a 

service that the facility must offer to 

gain or maintain RNHCI status. With the 

exception of limited DME items, we 

have determined that services that 

RNHCI nurses provide are generally 

covered for Medicare payment under 

the time limited RNHCI home benefit as 

these services (for example, assistance 

with ADLs, light housekeeping incident 

to the visit, and documentation of the 

visit), are comparable to the services of 

home health aides in HHAs that are not 

RNHCIs. 


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66348 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

To reflect the requirements of this 

limited benefit, we are adding a new 

section 403.766. Specifically, in 

§ 403.766(a), we are requiring the 

RNHCI provider to submit a notice of 

intent if it is interested in providing 

RNHCI home services. This will help us 

facilitate the implementation of the 

RNHCI home benefit by letting us focus 

our efforts on those providers interested 

in providing this new benefit. The 

RNHCI provider is also responsible for 

providing RNHCI home services to 

eligible beneficiaries. We are imposing 

this requirement because we believe the 

RNHCI provider itself is responsible for 

providing the RNHCI home services, 

directly or under arrangement, to the 

eligible beneficiary. This means that the 

beneficiary cannot contract directly 

with a supplier or RNHCI nurse, but that 

the RNHCI provider itself is responsible 

for provision of the RNHCI home benefit 

services. This requirement conforms to 

the ‘‘under arrangement’’ requirement 

that home health agencies generally 

have to comply with to receive payment 

under the home health prospective 

payment system (see § 409.100(a)(2)). 

Furthermore, because the RNHCI is not 

a supplier, we are explicitly requiring 

the RNHCI provider to make 

arrangements for suppliers to furnish 

the designated RNHCI home benefit 

DME items. Likewise, the RNHCI 

provider will have to arrange for the 

RNHCI nursing services. While the 

RNHCI regulations currently require the 

RNHCI provider to have a utilization 

review plan and committee in place, we 

believe it would be prudent in the 

RNHCI home benefit regulation to 

explicitly require the RNHCI home 

benefit provider to have a utilization 

review committee that assumes the 

additional responsibility for the 

oversight and monitoring of the items 

and RNHCI nursing services provided 

under the home benefit. Lastly, because 

the RNHCI home benefit does not 

supersede or otherwise replace the 

existing RNHCI benefit, the provider 

will continue to have to meet all the 

existing applicable RNHCI regulatory 

requirements in subpart G of part 403. 

We will also define an ‘‘eligible 

beneficiary’’ for the RNHCI home 

benefit in § 403.766(b). First, the 

beneficiary must elect to receive RNHCI 

services. Clearly, the RNHCI home 

benefit can only be provided to a 

beneficiary who has elected RNHCI 

services. Second, we believe that the 

purpose of providing a home benefit by 

a RNHCI provider was not to expand the 

basic eligibility criteria for receiving 

home health services. In fact, section 

1821(a) of the Act, as amended by the 

MMA, now states that payment for 

RNHCI home services be made only if 

the individual has an election in effect 

and has a condition such that the 

individual would otherwise qualify for 

Medicare home health services. 

Specifically, this means that the 

individual must be confined to the 

home, as defined in section 1814(a) of 

the Aft and have a condition that would 

make him or her eligible to receive 

Medicare home health services. Third, 

much like the requirement that the 

RNHCI provider is responsible for 

providing RNHCI home services directly 

or under arrangement to the beneficiary, 

the beneficiary can only receive RNHCI 

home services through the RNHCI. The 

purpose of this requirement is to 

provide Medicare payment for the 

RNHCI home benefit only to 

beneficiaries who receive these services 

through the RNHCI. This requirement is 

consistent with section 1821(a) of the 

Act, as amended, which provides 

Medicare payment for home services 

furnished an individual by a RNHCI. We 

note that under the home health benefit 

beneficiaries are responsible for the 

deductible and coinsurance for DME 

furnished as a home health services. We 

see no reason to modify that 

requirement for beneficiaries receiving 

RNHCI home services. As this is a new 

benefit for RNHCI beneficiaries, we 

wish to make it clear that they are 

responsible for deductible and 

coinsurance for the designated RNHCI 

home benefit DME items in the same 

manner as Medicare beneficiaries 

receiving DME under the home health 

benefit.

b. Excluded Services (§ 403.768) 

Under the home health benefit, 

certain items and services are excluded 

under the benefit. The RNHCI home 

benefit will exclude the same items and 

services, which are: 

• Drugs and biologicals; 

• Transportation; 

• Services that would not be covered 

as inpatient services; 

• Housekeeping services; 

• Services covered under the ESRD 

program; 

• Prosthetic devices; and 

• Medical social services provided to 

family members. 

Accordingly, we are adding a new 

§ 403.768 to reflect the services 

excluded under the RNHCI home 

benefit. 

In addition, we note that the statute 

does not provide for the provision of the 

RNHCI home benefit in a home health 

agency that is not a RNHCI, and we will 

provide for this exclusion in the 

regulation. We wish to reiterate that 

items and services not provided by a 

RNHCI but instead provided by a 

supplier or RNHCI nurse not under 

arrangement with the RNHCI are not 

included under the RNHCI home 

benefit. The regulation will also note 

this exclusion. 

c. Payment for RNHCI Home Services 

(§ 403.770) 

As discussed above, providing home 

services in the RNHCI environment 

incorporates many of the same 

components of the provision of home 

health aide services under the Medicare 

home health benefit. Because this is a 

new benefit not contemplated under the 

original RNHCI legislation, an 

appropriate payment methodology 

needed to be developed. As explained 

previously, we believe that an 

appropriate proxy for the cost of 

providing RNHCI home services can be 

found in the low utilization payment 

amount for home health aide visits 

under the Medicare home health PPS. 

Generally, Medicare home health 

services are reimbursed a prospectively 

set payment amount for a 60-day 

episode of care, adjusted for case mix. 

This 60-day episode payment includes 

costs for non-routine medical supplies, 

as well as costs for the six major home 

health disciplines, including home 

health aide services. The home health 

episode payment rate does not include 

reimbursement for durable medical 

equipment, which is paid through a 

separate DME fee schedule. The home 

health PPS rates were required to be 

budget neutral to what would have been 

expended under the reasonable cost 

system. The 60-day episode rate is 

updated annually by some percentage of 

the home health market basket, as 

dictated by law, and is adjusted by the 

hospital wage index to account for 

geographic variations in labor costs. 

Medicare home health services may 

also be paid on a visit basis if the home 

health episode has four or fewer visits. 

Medicare pays on the basis of a national 

per-visit amount by discipline, referred 

to as low utilization payment 

adjustment (LUPA), adjusted for case 

mix. As mentioned previously, the 

LUPA rate for home health aide services 

is a very close approximation of the cost 

of providing home services in the 

RNHCI environment. However, due to 

the difference in skill levels and the 

incorporation of RNHCI religious 

activities that are not covered by 

Medicare, payment for the RNHCI home 

benefit is set at 80 percent of the per 

visit rate for a home health aide visit 

under the Medicare home health 

benefit. 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66349

The policies and rationale governing 

LUPA payments under the Medicare 

home health benefit are described in the 

July 3, 2000 HH PPS final rule (65 FR 

41127). Generally, low utilization 

episodes are paid at a standardized 

average per visit amount, adjusted for 

geographic differences in wages, which 

will be the basis of calculating payment 

under the RNHCI home benefit program. 

These amounts are updated annually by 

the home health market basket 

percentage as dictated by statute and are 

being used for the RNHCI home benefit. 

For CY 2005, the Medicare HHA PPS 

rates were updated by the home health 

market basket minus 0.8 percent. The 

HHA PPS LUPA amount for CY 2005 is 

$44.76 for a home health aide visit, as 

published in the Federal Register

October 23, 2004 (69 FR 62124). 

Because we believe the intent is to 

provide comparable home health 

services to a beneficiary at home 

provided by a RNHCI, we believe it is 

similarly necessary to develop a 

payment methodology to reflect the 

provision of these comparable services. 

As previously mentioned, we have 

determined that the LUPA payment, as 

calculated under the home health PPS 

and adjusted for geographic differences 

in wages is an appropriate payment 

methodology for the RNHCI home 

benefit. We further note that as the 

LUPA will be updated by the applicable 

market basket percentage under the 

home health PPS, we will also adopt the 

updated LUPA payment for CY 2006 as 

the basis of payment for the RNHCI 

home benefit in CY 2006. An update of 

the HHA payment rates is published 

annually in the Federal Register, with 

CY 2006 updated figures available in 

Fall 2005. As mentioned above, the 

beneficiary receiving the RNHCI home 

benefit will be responsible for 

deductible and coinsurance for the 

designated RNHCI home benefit DME 

items. The regulation will indicate that 

payment for DME as a RNHCI home 

item is made less the deductible and 

coinsurance amount. 

In view of the small size and low 

volume of most RNHCIs, we will use a 

30-day cycle for the submission of 

RNHCI home benefit claims. Unlike 

standard HHAs that use a 60-day cycle, 

the RNHCI will use a 30-day cycle for 

both payment request and as a 

minimum for continued care home 

benefit review by the utilization review 

committee. Specific instructions on the 

processing of RNHCI home benefit 

payments will be issued in separate 

Medicare instructions. 

Example of LUPA Payment Adapted 

for RNHCI Home Benefit Payment: 

A RNHCI in Baltimore, Maryland is 

providing the RNHCI home benefit to a 

patient with a RNHCI election. The 

RNHCI has provided 12 visits within a 

30-day cycle. The RNHCI would 

determine the payment for the home 

benefit visits as follows: 

BILLING CODE 4120–01–P

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ER15NO04.513</GPH>
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BILLING CODE 4120–01–C 

IV. Other Issues 

A. Provisions Related to Therapy 

Services 

1. Outpatient Therapy Services 

Performed ‘‘Incident To’’ Physicians’

Services 

Section 1862(a)(20) of the Act permits 

payment for therapy services furnished 

incident to a physician’s professional 

services only if the practitioner meets 

the standards and conditions that would 

apply to the therapy services if they 

were furnished by a therapist, with the 

exception of any licensing requirement. 

We proposed to amend the regulations 

at § 410.26, § 410.59, § 410.60, and 

§ 410.62 to reflect the statutory 

prohibition on payment for ‘‘therapy’’

services of individuals who do not meet 

the existing qualification and training 

standards for therapists (with the 

exception of licensure) as these 

standards are set out in § 484.4.

As discussed in the August 5, 2004 

proposed rule, section 1862(a)(20) of the 

Act refers only to PT, OT, and SLP 

services and not to any other type of 

therapy or service. This section applies 

to covered services of the type described 

in sections 1861(p), 1861(g) and 1861(ll) 

of the Act; it does not, for example, 

apply to therapy provided by qualified 

clinical psychologists. This section also 

does not apply to services that are not 

covered either as therapy or as E/M 

services provided incident to a 

physician or NPP, such as recreational 

therapy, relaxation therapy, athletic 

training, exercise physiology, 

kinesiology, or massage therapy 

services. 

In the following discussion, the 

phrase ‘‘therapy services’’ means only 

PT, OT, and SLP. Also, ‘‘therapist’’

means only a physical therapist, 

occupational therapist, and speechlanguage pathologist. 

Section 1861(s)(2)(K) of the Act 

permits certain NPPs, specifically PAs, 

NPs, and CNSs, to function as 

physicians for the purposes of 

furnishing therapy services which they 

are legally authorized to perform by the 

State in which the services are 

performed. Therefore, in our responses 

to comments in the following 

discussion, the statements concerning 

therapy services that apply to 

physicians also apply to PAs, NPs, and 

CNSs. 

We received many comments on this 

proposal from professionals and 

associations for audiologists, speechlanguage pathologists, physical 

therapists, occupational therapists, long 

term care facilities, kinesiotherapists, 

massage therapists, athletic trainers, 

nurses, and physicians such as 

physiatrists, neurologists, podiatrists, 

chiropractors, osteopaths, medical 

groups, and family practitioners. 

The proposal describes covered 

Medicare services and is not intended to 

affect the policies of other insurers who 

may cover services that Medicare does 

not, for example, therapy services 

performed by massage therapists or 

athletic trainers. 

Comment: Several associations 

believe that this proposal is based on an 

incorrect interpretation of the intent of 

section 1862(a)(20) of the Act. Some 

claim that the proposed clarification is 

prohibited by the statute. They note the 

lack of any elaboration upon the 

Congress’ intent in the Conference 

Report accompanying section 4541(b) of 

the BBA, but suggest the provision was 

based on a 1994 OIG report, ‘‘Physical 

Therapy in Physicians’ Offices’’ (OEI–

02–90–00590, March 1994). In the view 

of some commenters, the intended effect 

of section 1862(a)(20) of the Act was to 

apply to incident to therapy services the 

standards and conditions related to 

treatment plans, the need for goals, and 

the requirement that therapy is to be 

restorative. This position is based on the 

fact that these standards were the focus 

of the 1994 OIG report. The commenters 

point out that the report did not 

compare therapist services to services 

furnished by nontherapists in a 

physician’s office, but it only compared 

the services billed by therapists to those 

billed by physicians. 

Commenters argued that the plain 

meaning of section 1862(a)(20) of the 

Act indicates that incident to services 

are not necessarily furnished by 

therapists. They point to the 

parenthetical exclusion of licensure 

requirements in the statutory language 

as evidence that the Congress did not 

intend to apply the personnel 

requirements applicable to therapists in 

private practice to incident to therapy 

services. Some commenters believe this 

exclusion was intended to preserve the 

right of physicians to supervise 

auxiliary personnel that were not 

licensed as therapists. They suggest that 

we are creating a de facto licensure 

requirement. 

Comments from the two members of 

the Congress who introduced the act 

that resulted in section 1862(a)(20) of 

the Act support the proposed rule, 

stating that the proposed clarification 

meets the intent of the law when it was 

passed by the Congress in 1997. These 

commenters confirm that the legislation 

was based in part on the 1994 OIG 

report and the intent was to establish ‘‘a 

consistent standard for the delivery for 

PT services to ensure quality patient 

care.’’ Two additional comments were 

received from the Congress in support of 

the proposal. 


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Response: Our interpretation is based 

on the plain language of the law: no 

payment may be made for incident to 

therapy services ‘‘that do not meet the 

standards and conditions (other than 

any licensing requirement specified by 

the Secretary) under the second 

sentence of section 1861(p) * * * ’’

The second sentence of section 

1861(p) of the Act reads as follows:

‘‘The term ‘outpatient physical therapy 

services’ also includes PT services furnished 

an individual by a physical therapist (in his 

office or in such individual’s home) who 

meets licensing and other standards 

prescribed by the Secretary in regulations, 

otherwise than under an arrangement with 

and under the supervision of a provider of 

services, clinic, rehabilitation agency, or 

public health agency, if the furnishing of 

such services meets such conditions relating 

to health and safety as the Secretary may find 

necessary.’’

It is evident then, that the standards 

and conditions referenced in section 

1862(a)(20) of the Act encompass 

qualifications of the individual 

providing the therapy. Consequently, 

we disagree with those commenters who 

suggest that it was not the intent of 

section 1862(a)(20) of the Act to apply 

the personnel qualifications of the 

second sentence of section 1861(p) of 

the Act to therapy provided incident to 

a physician’s service. We believe our 

interpretation of the law is further 

supported by the comment received 

from the Congress members who 

sponsored the original bill that became 

section 1862(a)(20) of the Act. 

According to the proposed 

requirements, a person who is trained in 

therapy, but has not completed the 

further requirements of therapy 

licensure, may provide services incident 

to a physician’s services. These 

individuals are not therapists, since 

they are not licensed, but they are 

qualified personnel who may, under 

direct supervision, provide therapy 

services incident to a physician. 

A physician may utilize supervised 

unlicensed staff and may bill for a 

covered therapy service incident to the 

physician’s service if it is provided 

according to Medicare policies, 

including coverage and incident to 

policies. 

Comment: Commenters also note that 

qualifications at § 484.4 are in the home 

health agency section of the regulations, 

while the second sentence of section 

1861(p) of the Act (referenced by section 

1862(a)(20) of the Act) does not apply to 

therapy provided in home health 

agencies. 

Response: The statute specifies 

therapy services provided incident to a 

physician must meet the standards and 

conditions that would apply to a 

therapist, except licensure. For the 

history of the qualifications for the 

private practice setting, please see the 

discussion in this rule as described 

below in section IV.A.2, ‘‘Qualification 

Standards and Supervision 

Requirements in Therapy Private 

Practice Settings.’’ We proposed to 

apply to all settings the qualifications in 

§ 484.4 because they are standards that 

currently apply to therapists in provider 

settings. It is our intent to make 

therapist qualifications consistent in all 

settings (unless otherwise required by 

statute). Therefore, unless a person 

meets the standards in § 484.4, except 

licensure, their services may not be 

billed as therapy services incident to a 

physician’s service, regardless of any 

other training, other licensure or 

certification or other experience they 

may have. For example, the services of 

chiropractors or athletic trainers who do 

not meet the requirements in § 484.4 

except licensure, cannot be billed as 

therapy services incident to a 

physician’s service. 

Comment: Several associations 

indicated that we are changing our 

interpretation of the statute. They 

assumed any instruction relevant to the 

law was made in 1998 through 

Transmittal 1606. That transmittal 

provided guidance for therapy services, 

but did not address the qualification of 

the people who furnish therapy incident 

to physician services. It was also 

suggested that we delay implementation 

to allow further study and comment 

from interested parties. The AMA urged 

us to withdraw proposed changes and 

reissue a later proposal after consulting 

with all affected physician and other 

health professional organizations. 

Also, the commenters note that the 

Administrative Procedure Act (APA) 

requires that we characterize this as a 

change rather than a clarification. 

Response: In the past, we did not 

discuss the plain language of the law 

ecause we did not believe it needed 

extensive clarification. However, it has 

become clear to us that contractors have 

varied in their policies.

Some contractors created local 

policies that paid only for services 

provided by licensed therapists in all 

settings including incident to a 

physician’s service. Others had no 

policies that assured the qualifications 

of personnel furnishing services billed 

as therapy services incident to a 

physician. 

Study of the utilization of therapy 

services, internal discussions with 

contractors and medical review of 

claims for the purpose of error rate 

analysis all suggested that the services 

being performed in the offices of 

physicians did not consistently meet the 

standards and conditions we applied to 

therapy services in private practice or in 

provider settings. Problems associated 

with an imprecise definition of therapy 

services were discussed at length in 

Section 4.1 of the ‘‘Study and Report on 

Outpatient Therapy Utilization’’ (the 

DynCorp utilization study) found at 

http://www.cms.hhs.gov/medlearn/

therapy. Review of medical records 

following this report reinforced the 

personnel qualification problem. 

In Pub. 100–04, the Medicare Claims 

Processing Manual at chapter 5, section 

20, there is a list of codes that represent 

services that are always therapy services 

(available online at http://

www.cms.hhs.gov/manuals/104_claims/

clm104c05.pdf). Whenever these codes 

are billed, they must have a modifier 

that identifies the type of therapy (PT, 

OT, or SLP) and the services provided 

must meet the standards and conditions 

that apply to outpatient therapy 

services. In the medical review of 

therapy claims, there were frequent 

observations of ‘‘always therapy’’

services performed by persons other 

than therapists, which were billed 

inappropriately as therapy. 

Since the qualifications of therapists 

and therapy services continued to be 

problematic, we chose to raise the 

subject of therapist qualifications last 

year. Last year’s comments made it clear 

that there is widespread use of 

nontherapists, particularly athletic 

trainers, in the offices of physicians and 

those services are being billed as 

therapy services. The volume of similar 

comments this year made it evident to 

us that the clarification was needed. 

We characterize this statement as a 

clarification because it merely restates 

the law. Moreover, we announced our 

clarification in the proposed rule, and it 

has been subject to comment in last 

year’s proposed rule and again this year. 

So, assuming that it did change policy, 

its promulgation meets the requirements 

of the APA. 

In addition, we note that we continue 

to pay only for covered services whether 

they are therapy or other services. 

Coverage rules in the Program Integrity 

Manual, chapter 13.5.1, require, for 

example, that the service be safe, 

effective, in accordance with accepted 

standards of medical practice, and 

furnished by qualified personnel. 

We recognize there has been 

inconsistent application of this statutory 

requirement. Therefore, in order to 

allow sufficient time for physicians to 

adjust their practices, and to avoid 

disrupting ongoing therapy in affected 

practices, we will delay implementation 

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until manual instructions are published. 

We anticipate publication of manual 

instructions on or after March 1, 2005. 

Comment: Many commenters offered 

the opinion that restricting payment for 

therapy services to those performed by 

therapists would reduce access and 

quality of care and increase costs. They 

noted that it is more convenient for 

therapy to be available in a physician’s 

office than at another site. Also, there 

was concern that therapists may not 

work in rural areas, especially because 

there is a shortage of qualified 

therapists.

Response: The statute requires that 

those who provide therapy services 

meet therapy standards. It provides an 

exception for licensure in an incident to 

setting, but it does not provide an 

exception for rural areas. Since recent 

changes allow physical and 

occupational therapists that are enrolled 

in Medicare to work for physicians, 

there is no legal impediment to 

physicians being able to provide therapy 

services in their offices without the use 

of nontherapists. The Department of 

Labor Bulletin 2572, titled 

‘‘Occupational Projections and Training 

Data 2004–05 Edition’’, suggests no 

shortage of therapists. 

Nor do we find evidence to suggest 

the quality of care will be decreased by 

the use of personnel trained in therapy 

services as opposed to those trained in 

other disciplines. The cost of therapy 

services to Medicare will not be 

changed by the use of appropriately 

trained personnel. 

Comment: Many comments from 

physical therapists and PT associations 

agreed in principle with consistently 

defining the qualifications for therapists 

in all settings. They point out that, 

although the statute allows unlicensed 

people to provide therapy services 

incident to the services of a physician, 

the purpose of licensure is to assure that 

services are safely and effectively 

furnished by professionals who have 

demonstrated the necessary knowledge 

and skills. The statute permits the use 

of therapists who have not met licensing 

requirements and those whose licenses 

were revoked due to malpractice or 

fraud. The supervision requirement that 

the physician be present somewhere in 

the suite, but not in line of sight, is 

insufficient to assure the safety and 

quality of service provided by 

unlicensed staff. 

Response: Although the law permits 

unlicensed individuals to provide 

services incident to the services of a 

physician, we believe physicians will be 

motivated to screen employees to weed 

out sanctioned or incompetent people 

who have training in therapy since 

physicians would be liable for the 

actions of an incompetent employee. We 

require direct supervision of the 

employee by the physician as a 

minimum standard, but a physician will 

provide whatever guidance and 

supervision is required to assure the 

safety, effectiveness and quality of the 

service. 

Comment: Many comments were 

received from individuals such as 

athletic trainers, kinesiotherapists, 

massage therapists and chiropractors 

describing their training as equal or 

superior to therapists’ and suggesting 

that they provide care similar to 

therapists. 

Response: The statute allows 

Medicare to pay only for PT, OT and 

SLP services. Comments from therapists 

and nontherapists agreed that their 

training and licensure is unique to their 

professions, and they are separately 

trained and licensed for those unique 

professions. It is clear that many 

nontherapist health care practitioners 

are well-trained professionals dedicated 

to the provision of quality treatment for 

their patients. However, their training is 

not in PT, OT, or SLP, but in the other 

disciplines for which they are licensed 

or accredited. 

Comment: A number of physicians 

and associations for physicians wrote to 

tell us that they believe it is their right 

and within their authority to decide 

who can provide effective therapy 

services in their offices. 

Response: The statute requires 

Medicare to pay only for services that 

meet the standards and conditions, 

except licensure, that apply to 

therapists. It is the right and 

responsibility of a physician to 

recommend services for patients that in 

the physician’s judgment are needed 

and effective. Medicare, however, need 

not pay for all services that a physician 

recommends. We are required to pay for 

services that are covered in the statute 

and to deny payment for services that 

are not covered, even if the physician 

considers those services necessary and 

effective. 

Comment: Some physicians wrote to 

tell us they are currently billing 

Medicare for therapy services when 

athletic trainers perform services in 

their offices. Several commenters asked 

what services may be billed to Medicare 

when provided by auxiliary staff who 

are qualified as athletic trainers, or who 

have certification in fields other than 

therapy. 

Response: While some carriers may 

have paid claims for incident to therapy 

services furnished by individuals 

without therapy training, we have never 

had a policy that permits athletic 

trainers or any other staff who do not 

have training in PT to provide services 

that are billed as PT services. Carrier 

payment for a service is not conclusive 

evidence that the service was 

appropriately rendered. Billing with a 

code that does not accurately represent 

the service provided is inappropriate. If 

identified by carrier medical review, 

these claims must be denied, and 

further development of the claim may 

be indicated to determine if there was 

intent to bill improperly. 

Medicare defines PT, OT and SLP as 

services that require the skills of a 

physical therapist, occupational 

therapist or speech-language 

pathologist. Therapy codes are priced 

based on the salaries and expenses of 

therapists and we expect that therapy 

claims are made for services of 

therapists (or, for incident to services by 

someone with their training, except for 

licensure).

When a service is not a covered 

service, it is inappropriate to bill 

Medicare for that service as a service 

incident to a physician, or as an E/M 

service. For example, if a service is 

appropriately described as acupuncture 

or athletic training or massage therapy, 

Medicare will not pay for that service 

because it is not covered. 

A physician may not bill Medicare for 

a service that is on the list of ‘‘always 

therapy’’ services (see Pub. 100–04, the 

Medicare Benefit Policy Manual, 

chapter 5, section 20) if the service was 

done by staff that is not qualified to 

provide a skilled therapy service, 

because that is not a covered therapy 

service. The ‘‘always therapy’’ codes 

always require a modifier to describe 

whether the service was PT, OT or SLP. 

There are covered services that other 

staff, such as athletic trainers, may 

perform with other training, however, 

these are not therapy services. Other 

codes on the therapy list are ‘‘sometimes 

therapy’’ services and require modifiers 

only when they are therapy services 

rather than physician services. For 

example, a physician may apply a 

surface neurostimulator (CPT 64550) as 

an isolated service, outside of a therapy 

plan of care and appropriately bill the 

code without a therapy modifier. That 

service is not a therapy service. If that 

physician supervises auxiliary 

personnel in the provision of that same 

nontherapy service, the auxiliary 

personnel does not have to be qualified 

as a therapist because the service 

rendered is not therapy. In any case, 

when Medicare is billed for a service, 

the person providing the service must 

be qualified to provide the service, as 

determined by the contractor in 

accordance with coverage requirements 

66354 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

in Pub. 100–08, the Medicare Program 

Integrity Manual, chapter 13.5.1. 

However, if a therapist provides the 

service under any circumstance, or if 

either the physician or qualified 

personnel provides the service as part of 

a therapy plan of care, it is a therapy 

service and it requires a modifier. In 

cases where there is doubt, the 

contractor will determine whether the 

service is therapy or is not therapy. 

Further information about services 

that may be completed by nontherapists will be available in 

implementing instructions. 

Comment: The American Chiropractic 

Association commented that doctors of 

chiropractory are authorized to perform 

PT services in all but two States, 

Michigan and Washington. They request 

that we note that fact in our 

commentary and in the regulation. They 

note that Doctors of Chiropractic are 

included in the definition of 

‘‘physician’’ and they propose language 

in addition to that in § 484.4 to define 

the qualifications of chiropractors, in 

order to recognize the State-authorized 

practice privileges of Doctors of 

Chiropractic. 

Response: Chiropractors may bill 

services to Medicare as physicians, but 

only for the purposes of providing 

manipulation of the spine for the 

correction of a subluxation, which is a 

chiropractor service, and not a therapy 

service. For these manipulation 

services, chiropractors may directly 

supervise employees who provide 

incident to services. However, as 

Medicare physicians, chiropractors are 

not authorized to order therapy services 

or to perform any other services. To 

qualify to provide therapy services 

incident to a physician, chiropractors 

must meet all of the criteria set forth at 

§ 484.4 except licensure. 

Comment: Several associations and 

some individuals commented that we 

are creating a monopoly for therapists to 

provide therapy services and 

unnecessarily restricting other 

professions from providing therapy 

services. 

Response: We are bound by the 

statutory authority given to us in section 

1832 of the Act to pay only for services 

for which there are benefits enumerated 

in the statute. PT, OT and SLP have 

benefits in section 1861 of the Act. 

Therefore, Medicare pays only for those 

services. 

Comment: Several commenters noted 

that some NPPs, specifically PAs, NPs, 

and CNSs, may perform therapy services 

billable under Medicare as therapy 

services if their State scope of practice 

allows. The commenters question 

whether those NPPs may also perform 

therapy services incident to a physician 

or NPP. 

Response: Medicare does not impose 

therapy training requirements on 

physicians whose State scope of 

practice allows them to perform therapy 

services. Section 1861(s)(2)(K) of the Act 

permits PAs, NPs, and CNSs, to furnish 

services which would be physicians’

services, that is, to function as 

physicians for purposes of furnishing 

services, including therapy services, 

which they are legally authorized to 

perform by the State in which the 

services are performed. Therefore, this 

final rule has been modified to reflect 

that in States that authorize physicians, 

PAs, NPs, and CNSs to provide one or 

more of the therapy services (PT, OT, or 

SLP services), those NPPs may provide 

the services incident to the services of 

a physician or NPP under the same 

conditions as physicians, that is, 

without meeting the training 

requirements applicable to therapists.

Results of Evaluation of Comments 

To the extent that this policy is 

different from current manual text, we 

proposed this rule and received 

comments. We are finalizing the 

proposal in this final rule with the 

changes noted above in accordance with 

the APA. We will implement this 

regulation through manual guidance on 

or after March 1, 2005. 

2. Qualification Standards and 

Supervision Requirements in Therapy 

Private Practice Settings 

Sections 1861(g) and (p) of the Act 

include services furnished to 

individuals by physical and 

occupational therapists meeting 

licensing and other standards prescribed 

by the Secretary if the services meet the 

necessary conditions for health and 

safety. These services include those 

furnished in the therapist’s office or the 

individual’s home. By regulation, we 

have defined therapists under this 

provision as physical or occupational 

therapists in private practice (PTPPs 

and OTPPs). 

Under Medicare Part B, outpatient 

therapy services, including physical and 

occupational therapy services, are 

generally covered when reasonable and 

necessary and when provided by 

physical and occupational therapists 

meeting the qualifications set forth at 

§ 484.4. Services provided by qualified 

therapy assistants, including physical 

therapist assistants (PTAs) and 

occupational therapy assistants (OTAs), 

may also be covered by Medicare when 

furnished under the level of supervision 

by the therapist that is required for the 

setting in which the services are 

provided (institutions and private 

practice therapist offices). For PTPPs 

and OTPPs, the regulations now specify 

only that the PT or OT meet State 

licensure or certification standards; the 

regulations and do not currently refer to 

the professional qualification 

requirements at § 484.4. 

Since 1999, when therapy services are 

provided by PTAs and OTAs in the 

private practice of a PT or OT, the 

services must be personally supervised 

by the PTPP or OTPP. In response to a 

requirement to report to the Congress on 

State standards for supervision of PTAs, 

we contracted with the Urban Institute. 

The Urban Institute found that no State 

has the strict, full-time personal 

supervision requirement, for any setting, 

that Medicare places on PTAs in PTPPs. 

(The report examined only PTAs, who 

are more heavily regulated by the States 

than OTAs). 

To provide a consistent therapy 

assistant supervision policy, we 

proposed to revise the regulations at 

§ 410.59 and § 410.60 to require direct 

supervision of PTAs and OTAs when 

PTs or OTs provide therapy services in 

private practice. We also specifically 

solicited comments regarding the 

proposed PTA supervision policy, and 

whether or not it would have 

implications for the quality of services 

provided, or for Medicare spending, 

either through increased capacity to 

provide these services, or, in the event 

that the Congress again extends the 

moratorium on the implementation of 

the limits on Medicare reimbursement 

for therapy services imposed by the 

BBA of 1997. 

In addition, as discussed in the 

August 5, 2004 proposed rule, the 

current OTPP or PTPP regulations at 

§ 410.59(c) and § 410.60(c) do not 

reference qualification requirements for 

therapy assistants or other staff working 

for PTs and OTs in private practices. In 

order to create consistent requirements 

for therapists and for therapy assistants, 

we proposed to restore the 

qualifications by adding the crossreference to the qualifications at § 484.4 

for privately practicing therapists and 

their therapy assistants at § 410.59 and 

§ 410.60. 

Comment: Commenters representing 

therapy organizations, as well as 

individual providers, were supportive of 

our proposal to revise the regulations at 

§ 410.59 and § 410.60 to require direct, 

rather than personal, supervision of 

PTAs and OTAs when therapy services 

are provided by PTs or OTs in private 

practice.

(We use the 3 supervision levels defined 

at § 410.32, personal, direct, and 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66355

general, to describe the supervision 

requirements for various Medicare 

services and settings.)

Many commenters also stated that this 

is consistent with the Medicare 

requirements in other provider settings, 

such as hospitals, HHAs and 

rehabilitation agencies and is also 

consistent with the Medicare 

requirements for therapists in private 

practice that were in place prior to 1999. 

Commenters also believe that this will 

assist in ensuring access to therapy 

services and in protecting patient 

privacy. 

Response: Requiring direct 

supervision of therapy assistants in PT 

and OT private practice settings is 

consistent with the supervision 

requirements that PTs and OTs in 

independent practice were required to 

meet, prior to 1999, at § 410.59(c) and 

§ 410.60(c). This direct supervision 

requirement in PT and OT private 

practices requiring the therapist to be on 

site or ‘‘in the office suite’’ differs from 

our therapy assistant supervision 

requirements in institutional settings 

(for example, outpatient hospital 

departments, HHAs, and rehabilitation 

agencies). In those settings, PTs and OTs 

may provide general supervision of 

therapy assistants without being on-site.

We agree that changing the level of 

supervision of therapy assistants from 

personal to direct will help to improve 

access to medically necessary services. 

Comment: A few commenters stated 

they believe permitting general 

supervision, rather than direct, is more 

consistent with State therapy 

supervision requirements. While State 

requirements vary, this variation may be 

due to the fact that PTAs are not 

licensed in some States. Other 

commenters stated that therapy 

assistants are qualified to provide 

services without having therapists inthe-room to provide personal 

supervision. 

Response: A review of State practice 

acts revealed that Medicare’s personal 

in-the-room supervision requirement for 

therapy assistants in PT and OT private 

practices was more stringent than any 

State supervision requirement for any 

setting. The Urban Institute report also 

found that most States permit a 

supervision level similar to our general 

supervision requirement for 

institutional settings. However, we 

believe that services delivered by 

therapy assistants in private practices 

require a higher level of therapist 

supervision than those provided in 

institutional settings where stringent 

standards for Medicare participation are 

enforced through State survey and 

certification programs, rather than the 

simplified carrier enrollment process for 

the PT or OT private practice offices. 

Comment: One commenter stated that 

only licensed therapists should be 

allowed to provide and bill for therapy 

and another commenter demanded that 

therapy services only be reimbursed 

when provided by a therapist, not any 

other professional, including nurses, 

PAs, or chiropractors, and not by 

therapy assistants. They suggested that 

without this requirement there would be 

program abuses. 

Response: We concur with the 

therapy associations and the 

overwhelming majority of commenters 

that therapy assistants are qualified by 

their training and education to provide 

services without the personal in-theroom supervision in the private practice 

setting. This does not mean, however, 

that therapy assistants may bill for the 

services they provide. Under the law, 

only PTs and OTs in private practice 

may bill Medicare for the therapy 

services provided by PTAs and OTAs. 

These therapists enroll in the Medicare 

program and receive a provider 

identification number (PIN) in order to 

file claims for the therapy services 

provided as a PTPP or OTPP. 

Institutional therapy providers bill 

Medicare on behalf of the PTs, OTs, and 

speech language pathologists who 

provide therapy services in these 

settings. 

Other professionals, including nurses, 

athletic trainers, and chiropractors do 

not meet the statutory requirements for 

therapists in section 1861(p) of the Act 

and as implemented at § 484.4. We 

proposed to amend the regulations at 

§ 410.59 and § 410.60 to specify that 

only individuals meeting the 

qualification standards and training 

consistent with § 484.4 may bill and 

receive Medicare payment for therapy 

services. In addition, a State license or 

certification in PT or OT will continue 

to be required for therapist providing 

services as PTPPs or OTPPs. 

When PAs, NPs, or CNSs are 

authorized by their State practice acts to 

provide physical or occupational 

therapy services, and these NPPs are 

acting within their capacity to provide 

physician services under section 

1861(s)(2)(K) of the Act, their services 

are considered therapy services. 

Comment: One commenter stated that 

allowing lesser trained individuals such 

as therapist assistants to provide 

services if a therapist supervises, but 

prohibiting physicians from delegating 

performance of these services to doctors 

of chiropractic inappropriately gives 

therapists more authority than 

physicians.

Response: Medicare law recognizes 

chiropractors as physicians, but only for 

the limited purpose of providing 

manipulation of the spine for the 

correction of a subluxation. In order to 

qualify as a PT or OT for Medicare 

purposes, chiropractors would need to 

meet all of the criteria set forth at 

§ 484.4. 

Comment: In response to our request 

for information on the impact of this 

proposed change on the quality of 

services and Medicare spending, several 

individuals stated that the proposed 

change would not affect the way 

therapists practice, since they are fully 

accountable for services provided under 

their direction and, therefore, the 

change would not diminish the quality 

of services. Furthermore, commenters 

believe the change would also allow the 

appropriate and efficient utilization of 

therapist assistants because the in-theroom supervision unnecessarily drives 

up the cost of health care without 

providing additional consumer 

protection. 

The American Physical Therapy 

Association (APTA) anticipates there 

will be little, if any, increase in 

spending as a result of this policy and 

believes that any increases would be 

due to improving access to medically 

necessary outpatient therapy services 

provided by qualified practitioners. For 

spending implications, the APTA 

believes it is highly unlikely that 

physical therapists would significantly 

alter their staffing patterns and thereby 

increase spending as a result of this 

change in policy. The majority of States 

have laws that establish limits on the 

number of PTAs that a PT can supervise 

(referred to as ‘‘supervision ratios’’). For 

example, a large number of States have 

a supervision ratio of one PT to two 

PTAs. There are also a limited number 

of PTAs whom PTs could supervise, and 

APTA does not anticipate substantial 

growth in the number of PTAs in the 

foreseeable future. To the contrary, the 

number of PTA education programs is 

declining. 

Furthermore, services of PTs in 

private practice comprise a relatively 

small percentage of services billed 

under the Medicare program. Therefore, 

the overall financial impact of any 

change in the supervision requirement 

in this setting would be minimal. 

Response: We appreciate the 

information provided by the 

commenters. Other opportunities 

already exist for therapists to provide 

services under Medicare in 

rehabilitation agencies and CORFs 

where the therapy assistant supervision 

level is general. Therapists opting to 

utilize therapy assistants might be more 

66356 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

likely to own a rehabilitation facility 

where the physical or occupational 

therapy assistant supervision level is 

general, rather than a private practice 

office where the therapist is required to 

be on-site to supervise services of the 

therapy assistant. The Urban Institute 

Report confirmed the limited number of 

therapy assistants available to be hired 

and found that workforce and 

distribution percentages of PTs and 

PTAs parallel each other, with nearly 25 

percent of PTAs employed by PTPPs. 

We believe that the State supervision 

requirements and the limited number of 

PTAs are likely to limit the financial 

implications of this change. We plan to 

monitor this area to determine whether 

volume changes occur and, if so, in 

what settings they occur. 

Comment: Commenters supported our 

proposal to revise § 410.59 and § 410.60 

to cross-reference the qualifications at 

§ 484.4 for privately practicing 

therapists and their therapy assistants. 

Response: We appreciate the 

numerous letters of support for this 

proposal, including the national and 

State-level therapy organizations, other 

professional organizations, and many 

therapists and therapy assistants. 

Result of Evaluation of Comments 

We will finalize the proposed 

revisions to § 410.59 and § 410.60 to 

require direct supervision of PTAs and 

OTAs when therapy services are 

provided by PTs or OTs in private 

practice and also to cross-reference the 

qualifications at § 484.4 for privately 

practicing therapists and their therapy 

assistants. 

3. Other Technical Revisions 

We proposed technical corrections to 

§ 410.62 to refer consistently to SLP 

(currently the terms ‘‘speech pathology’’

and ‘‘speech-language pathology’’ are 

used interchangeably) and proposed 

revisions to § 410.62(a)(2)(iii) to 

appropriately reference § 410.61 (the 

current reference is to § 410.63). 

We also proposed removing subpart 

D, Conditions for Coverage: Outpatient 

Physical Therapy Services Furnished by 

Physical Therapists, from part 486. Our 

November 1998 rule (63 FR 58868) 

discussed replacing this subpart with a 

simplified carrier enrollment process for 

physical or occupational therapists in 

private practice; however, the 

conforming regulatory change to remove 

subpart D was never made. 

In addition, we proposed a technical 

change at § 484.4 to correct the title 

‘‘physical therapy assistant’’ to 

‘‘physical therapist assistant’’ and 

proposed amending § 410.59(e) and 

§ 410.60(e) to include a reference to the 

2-year moratorium on the therapy caps 

established by section 624 of the MMA.

Comment: Commenters representing 

therapy specialty organizations 

supported these changes. 

Response: We will finalize these 

changes as proposed. 

Result of Evaluation of Comments 

We are finalizing the changes as 

proposed. 

B. Low Osmolar Contrast Media 

High osmolar and low osmolar 

contrast media (LOCM) are used to 

enhance the images produced by 

various types of diagnostic radiological 

procedures. When the Medicare 

physician fee schedule was established, 

findings of studies of patients receiving 

both types of contrast media had been 

published, and the ACR had adopted 

criteria for the use of LOCM. At that 

time, we determined that the older, less 

expensive high osmolar contrast media 

(HOCM) could be used safely in a large 

percentage of the Medicare population. 

However, we also decided that separate 

payment for LOCM may be made for 

patients with certain medical 

characteristics. We adopted the ACR 

criteria, with some modification, as the 

basis for a policy that separate payments 

are made for the use of LOCM in 

radiological procedures for patients 

meeting certain criteria. These criteria 

were established at § 414.38. Under 

these conditions, we pay for LOCM, 

utilizing HCPCS codes A4644 through 

A4646. 

In the August 5, 2004 rule, we 

proposed to revise the regulations at 

§ 414.38 to eliminate the restrictive 

criteria for the payment of LOCM. This 

proposal would make Medicare 

payment for LOCM consistent across 

settings since, under the OPPS, there is 

no longer a payment difference between 

LOCM and other contrast materials. 

We also proposed that, effective 

January 1, 2005, payment for LOCM 

would be made on the basis of the ASP 

plus six percent in accordance with the 

standard methodology for drug pricing 

established by the MMA. However, 

because the technical portions of 

radiology services are currently valued 

in the nonphysician work pool and the 

CPEP inputs for these services are not 

used in calculating payment, we also 

indicated we would continue to reduce 

payment for LOCM by eight percent to 

avoid any duplicate payment for 

contrast media. 

Comment: Commenters representing 

radiology, interventional radiology, and 

imaging contrast manufacturers were 

supportive of this proposed change; 

however, our payment methodology of 

ASP plus six percent minus eight 

percent was questioned. Two 

commenters also believe that the 

implementation date for the application 

of ASP methodology should be changed 

from January 1, 2005. One requested an 

effective date of April 1, 2005 and the 

other requested an effective date of 

January 1, 2006. 

Response: We appreciate the 

commenters’ support for this change. 

We stated in the proposed rule that 

effective January 1, 2005, payment for 

LOCM would be made on the basis of 

the ASP plus six percent. However, 

there is an October 30, 2004 deadline for 

submission of the ASP data used for the 

January 1, 2005 payment, and this date 

occurred prior to our finalizing the 

proposed payment methodology for 

LOCM. Therefore, the ASP payment 

methodology for LOCM will be made 

effective April 1, 2005. Manufacturers of 

LOCM will be required to submit their 

fourth quarter 2004 (4Q04) ASP 

information to us on or before January 

30, 2005. Subsequent data must be 

submitted within 30 days after the end 

of each calendar quarter. The 4Q04 data 

will be used to determine the April 1, 

2005 ASP plus six percent payment 

limits. Further information on the 

specific format of the data submission 

and the address to which the 

information can be sent is found on the 

CMS ASP Web site, specifically at

http://www.cms.hhs.gov/providers/

drugs/asp.asp.

Our policy to reduce payment for 

LOCM by 8 percent stems from the fact 

that the technical component RVUs for 

these procedures took into account the 

use of (and expenses for) HOCM in the 

(see the November 25, 1991 final rule 

(56 FR 59502)). However, since that 

time, the price differential between 

HOCM and LOCM has declined. In 

addition, upon further review, we are 

not able to determine accurately the 

degree of duplicate payment that might 

occur when both the imaging procedure 

and LOCM are billed. Therefore, we are 

not applying the eight percent reduction 

to the LOCM payment as proposed. The 

payment for LOCM will be consistent 

with the payment rate for the majority 

of drugs administered by physicians. 

Comment: One contrast agent 

industry association suggested that we 

issue additional codes for the reporting 

of contrast media. 

Response: For 2005, we are 

continuing to use the current three 

HCPCS codes in the reporting of low 

osmolar contrast agents. However, we 

are exploring the possibility of 

additional codes to accurately capture 

the cost differences among all contrast 

agents as well as the differing clinical

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66357

uses, concentration, and dose 

administrations. We welcome input 

from the medical community and the 

manufacturers of contrast media on this 

issue. 

Comment: A commenter suggested 

that we use a model to capture volume 

and concentration variances of LOCM. 

In this model, ASP would be calculated 

as ASP = Total Sales/Total Volume.

Response: This suggested 

methodology does not take into account 

the weighted average for each national 

drug code (NDC) within a HCPCS code 

that must be used to derive an 

appropriate ASP code price. 

Result of Evaluation of Comments 

We are revising the regulations at 

§ 414.38 to eliminate the criteria for the 

payment of LOCM. In addition, effective 

April 1, 2005, payment for LOCM will 

be made on the basis of the ASP plus 

six percent. 

C. Payments for Physicians and 

Practitioners Managing Patients on 

Dialysis 

1. ESRD-Related Services Provided to 

Patients in Observation Settings 

In response to comments received on 

billing procedures for physicians and 

practitioners managing patients on 

dialysis when the dialysis patient is 

hospitalized during the month, we 

stated in the November 7, 2003 Federal 

Register (68 FR 63220) that ESRDrelated visits furnished to patients in 

observation status would not be counted 

as visits under the MCP but would be 

paid separately. Prior to this, longstanding Medicare policy had included 

ESRD-related visits furnished in the 

observation setting within the MCP. 

However, upon further review of this 

issue, in the proposed rule published 

August 5, 2004, we proposed a revision 

to this policy and stated that ESRDrelated visits provided to patients by the 

MCP physician in an observation setting 

would be counted as visits for purposes 

of billing the MCP codes. 

Comment: Several commenters 

expressed support for allowing ESRDrelated visits provided to patients by the 

MCP physician in the observation 

setting to be counted for purposes of 

billing the MCP codes. However, Kidney 

Care Partners (KCP) and the Renal 

Physicians Association (RPA) requested 

clarification as to how a physician or 

practitioner who is not part of the MCP 

practice team should bill for visits 

furnished in the hospital observation 

setting. The RPA suggested that a 

hemodialysis procedure with single 

physician evaluation as described by 

CPT code 90935 be used. 

Response: Physicians or practitioners 

who are not part of the MCP practice 

team but who furnish a visit to an ESRD 

beneficiary in the observation setting 

can bill the appropriate observation 

codes that accurately describe the 

service (CPT codes 99217 through 

99220). A hemodialysis procedure with 

single physician visit as described by 

CPT code 90935 will only be used when 

the beneficiary is an inpatient or for 

outpatient dialysis services for a nonESRD patient. 

2. Payment for Outpatient ESRD-Related 

Services for Partial Month Scenarios 

Since changing our payments for 

physicians and practitioners managing 

patients on dialysis, we have received a 

number of comments from the 

nephrology community requesting 

guidance on billing for outpatient ESRDrelated services provided to transient 

patients and in partial month scenarios 

(for example, when the patient is 

hospitalized during the month or 

receives a kidney transplant). To 

address this issue, we proposed to 

change the description of the G codes 

for ESRD-related home dialysis services, 

less than full month, as identified by 

G0324 through G0327. The new 

descriptor would include other partial 

month scenarios, in addition to patients 

dialyzing at home. The proposed 

descriptors for G0324 through G0327 are 

as follows: 

• G0324, End stage renal disease 

(ESRD) related services for dialysis less 

than a full month of service, per day; for 

patients under two years of age; 

• G0325, End stage renal disease 

(ESRD) related services for dialysis less 

than a full month of service, per day; for 

patients between two and eleven years 

of age; 

• G0326, End stage renal disease 

(ESRD) related services for dialysis less 

than a full month of service, per day, for 

patients between twelve and nineteen 

years of age. 

• G0327, End stage renal disease 

(ESRD) related services for dialysis less 

than a full month of service, per day, for 

patients twenty years of age and over. 

In the August 5, 2004 proposed rule, 

we stated that these G codes would 

provide a consistent way to bill for 

outpatient ESRD-related services 

provided under the following 

circumstances: 

• Transient patients—Patients 

traveling away from home (less than full 

month); 

• Home Dialysis Patients (less than 

full month); 

• Partial month where there were one 

or more face-to-face visits without the 

comprehensive visit and either the 

patient was hospitalized before a 

complete assessment was furnished, 

dialysis stopped due to death, or the 

patient had received a kidney 

transplant. 

However, we noted that this proposed 

change to the descriptions of G0324 

through G0327 was intended to 

accommodate unusual circumstances 

when the outpatient ESRD-related 

services would not be paid for under the 

MCP and that use of the codes would be 

limited to the circumstances listed 

above. Physicians who have an on-going 

formal agreement with the MCP 

physician to provide cursory visits 

during the month (for example 

‘‘rounding physicians’’) could not use 

the per diem codes. 

Clarification on Billing for Transient 

Patients 

In the August 5, 2004 proposed rule, 

we stated that, for transient patients 

who are away from their home dialysis 

site and at another site for fewer than 30 

consecutive days, the revised per diem 

G codes (G0324 through G0327) would 

be billed by the physician or 

practitioner responsible for the transient 

patient’s ESRD-related care. Only the 

physician or practitioner responsible for 

the traveling ESRD patient’s care would 

be permitted to bill for ESRD-related 

services using the per diem G codes 

(G0324 through G0327). 

If the transient patient is under the 

care of a physician or practitioner other 

than his or her regular MCP physician 

for a complete month, the physician or 

practitioner responsible for the transient 

patient’s ESRD-related care would not 

be able to bill using the per diem codes. 

We also solicited comments on when a 

patient will be considered transient.

Comment: Several commenters, 

including the ASN, KCP, and the RPA, 

supported our proposed change to the 

description of HCPCS codes G0324–

G0327 (per diem codes). The KCP 

believed that this change would provide 

a consistent billing method when the 

patient is transient, furnished home 

dialysis (less than full month), and for 

other partial month scenarios when the 

patient is hospitalized, has a transplant 

or when the patient expires. 

Additionally, several commenters 

praised us for our willingness to work 

with the renal community to address the 

multitude of issues surrounding the way 

physicians and practitioners are paid for 

managing patients on dialysis. 

However, the RPA and KCP suggested 

that, in addition to the situations 

described in the proposed rule, the per 

diem codes as described by G0324 

through G0327 should be used to bill 

whenever one or more visits occurred 

66358 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

during the month regardless of whether 

the complete monthly assessment was 

furnished. 

Response: As explained in the 

proposed rule, we believe the per diem 

codes will only be used for unusual 

circumstances where the ongoing 

management of an ESRD patient would 

not be paid through the MCP. As 

discussed earlier, we proposed to allow 

the per diem codes only in specific 

circumstances. However, after further 

review of this issue, we believe that it 

would also be appropriate to use the per 

diem codes when the beneficiary’s MCP 

practitioner changes permanently 

during the month. For example, the 

ESRD beneficiary moves from one State 

to another and a new MCP physician or 

practitioner has the ongoing 

responsibility for the E/M of the 

patient’s ESRD-related care who is not 

part of the same group practice as an 

employee of the previous MCP 

physician. We addressed this issue in a 

recent instruction published on 

September 17, 2004 (CR 3414 ‘‘Payment 

for Outpatient ESRD-Related Services’’, 

Transmittal 300). For more information 

on this instruction please visit our Web 

site at http://www.cms.hhs.gov/

manuals/ and select 2004 transmittals 

under the program transmittals link. 

However, we will not permit the use 

of per diem codes (HCPCS codes G0324 

through G0327) for all instances when 

the MCP physician or practitioner 

furnishes at least one visit during the 

month without regard to the status of a 

complete monthly assessment of the 

patient. We are concerned that 

permitting the per diem codes to be 

used in this manner may undermine the 

MCP. For example, the ESRD MCP 

includes various physician and 

practitioner services such as the 

establishment of a dialyzing cycle, 

outpatient E/M of the dialysis visit(s), 

telephone calls, patient management as 

well as clinically appropriate physician 

or practitioner visit(s) during the month. 

At least one of the visits must include 

a clinical examination of the vascular 

access site furnished face-to-face by a 

physician, CNS, NP or PA. When a 

practitioner bills for the MCP, the 

medical record must document that all 

of these services are furnished. By using 

the per diem codes in the manner 

suggested by the commenter, it would 

not be necessary for the practitioner to 

provide a complete monthly assessment 

of the ESRD beneficiary to receive 

payment for the ongoing management of 

patients on dialysis. 

Comment: With regard to the ESRDrelated services for home dialysis 

patients, less than full month, one 

healthcare corporation believes that the 

proposed coding changes continue to 

penalize nephrologists for prescribing 

home therapy because a per diem (prorated) payment is made when a 

hospitalization occurs. The commenter 

believes that this policy results in an 

inequity as compared to a physician 

providing 2–3 visits per month for 

center-based dialysis patients. 

Additionally, the commenter argues that 

the pro-rated methodology used for 

home dialysis patients (partial month) is 

inconsistent with how we pay the MCP 

physician for patients undergoing 

dialysis treatments in a dialysis facility. 

The commenter believes that we 

should increase the payment for ESRDrelated services for home dialysis 

patients to a level that is at least as high 

as the ESRD-related services (for full 

month) with 4 or more visits per month. 

The commenter contends that raising 

the payment amount for home-based 

dialysis patients would result in 

revenue opportunities similar to those 

available in the center-based scenario 

and would provide a greater incentive 

for home dialysis treatment. 

Response: We do not agree with the 

commenter’s statement that an 

inconsistency exists in the way we pay 

the MCP physician for managing a home 

dialysis patient (less than full month) 

and center dialysis patient (less than 

full month). 

Our proposed change to the 

description of HCPCS codes G0324 

through G0327 would apply to dialysis 

patients who receive dialysis in a 

dialysis center or other facility during 

the month as well as to home dialysis 

patients. For example, if a center 

dialysis patient is hospitalized during 

the month, has a transplant, or expires 

before a complete assessment is 

furnished (including a face-to-face 

examination of the vascular access site), 

the MCP physician would use the per 

diem rate to bill for ESRD-related care. 

When either a home dialysis patient or 

a patient who receives dialysis in a 

dialysis facility is hospitalized, the MCP 

physician or practitioner may bill for 

inpatient hemodialysis visits as 

appropriate (for example CPT codes 

90935 and 90937).

Additionally, we believe the current 

payment level for physicians managing 

patients on home dialysis for a full 

month already provides an incentive for 

an increased use of home dialysis. For 

instance, payment for the monthly 

management of home dialysis patients is 

made at the same rate as the MCP with 

2 to 3 visits. However, a monthly visit 

is not required as a condition of 

payment for physicians and 

practitioners managing home dialysis 

patients. Essentially, a physician or 

practitioner managing ESRD patients 

who receive dialysis in a dialysis 

facility would be required to furnish 2 

to 3 face-to-face visits in order to receive 

the same level of payment as he or she 

would have received for managing a 

home dialysis patient. We do not 

believe it would be appropriate to pay 

physicians managing home dialysis 

patients at the highest MCP amount 

when no visits are required as a 

condition of payment. 

Definition of a ‘‘Transient Patient’’

Comment: The RPA and KCP believe 

that it would be more appropriate to 

refer to these patients as ‘‘visiting 

patients’’. The RPA suggested that a 

‘‘visiting patient’’ be defined as a 

‘‘patient receiving dialysis or renalrelated care whose care is temporarily 

supervised (for less than one month’s 

time) by a physician who is not a 

member of the practice that usually 

charges under the MCP or G codes’’. 

Response: We believe the term 

‘‘transient patients’’ better describes a 

beneficiary who is away from his or her 

home dialysis site for less than a full 

month. 

General Comments on Our Changes in 

Payments for Physicians and 

Practitioners Managing Patients on 

Dialysis 

Comment: One commenter requested 

clarification as to how ESRD-related 

visits furnished to beneficiaries residing 

in a skilled nursing facility (SNF) 

adjacent to a hospital should be 

handled. The commenter explained that 

his SNF patients with ESRD usually 

receive dialysis treatments in an 

independent dialysis facility connected 

to a hospital’s SNF. However, in cases 

when the patient is ‘‘too ill’’ to be 

transported to the independent dialysis 

facility, the dialysis treatment occurs in 

the inpatient dialysis treatment area (but 

the patient is not admitted to the 

hospital as an inpatient). The 

commenter noted that ESRD-related 

visits may be furnished while the 

patient is dialyzing or at the SNF when 

the patient is not dialyzing. 

Response: Although we have not 

issued specific instructions on this 

issue, we believe that ESRD-related 

visits furnished to SNF residents are 

similar to other ongoing management 

services under the MCP. As such, ESRDrelated visits furnished to patients 

residing in a SNF will be counted for 

purposes of billing the MCP codes. 

However, if the beneficiary is admitted 

to the hospital as an inpatient, the 

appropriate inpatient visit code will be 

used, for example, CPT code 90935. 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66359

Comment: With regard to our 

revisions to the MCP (as published in 

the CY 2004 final rule), the American 

Association of Kidney Patients (AAKP) 

questioned if we have any current data 

on or future plans to study whether 

access to nephrologists or the quality of 

medical care for ESRD patients has been 

improved or impaired. Additionally, 

AAKP questioned whether we have any 

plans to develop additional proposals 

(beyond the telehealth proposal) to 

address access needs in rural and other 

underserved areas. 

Response: In evaluating the MCP, we 

will be looking for trends in 

hospitalization rates and resource 

utilization for ESRD patients. Moreover, 

we understand the challenges 

nephrologists face in visiting all patients 

on dialysis. To that end, we believe that 

our policy to allow clinical nurse 

specialists, nurse practitioners and 

physician assistants to furnish visits 

under the MCP, along with our addition 

of specific ESRD-related services to the 

list of Medicare telehealth services, will 

help ameliorate access issues. 

Comment: The RPA and the ASN 

continued to express concerns with the 

changes made in the CY 2004 final rule 

to the way physicians are paid for 

managing patients on dialysis. The RPA 

strongly believes that many of the 

underlying principles of the new 

HCPCS codes for managing ESRD 

patients need to be changed. The RPA 

cited the impact on rural providers, the 

lack of gradation in payment amounts 

between furnishing 2 and furnishing 3 

visits per month, and the premise that 

more visits will equate to better quality 

of care as major shortcomings of the 

new ESRD MCP. 

The RPA and ASN emphasized their 

belief that more physician and 

practitioner visits per month does not 

correlate to efforts to improve the 

quality of care for ESRD patients. RPA 

contends that a stratified MCP system 

based on the number of monthly 

physician and practitioner visits is 

unnecessarily complicated and believes 

that the vast majority of nephrologists 

provided appropriate ESRD-related care 

under the previous MCP. To that end, 

the RPA urged us to implement a 

simpler system based on a minimum 

number of patient visits and a new 

documentation requirement for the 

services provided under the MCP.

Response: We appreciate the 

commenters’ suggestions and will 

consider these comments as we 

continue to refine how we pay for 

physicians and practitioners managing 

patients on dialysis. 

Results of Evaluation of Comments 

ESRD-related visits provided to 

patients by the MCP physician or 

practitioner in an observation setting 

will be counted as visits for purposes of 

billing the MCP codes. 

Moreover, we will change the 

description of the G codes for ESRDrelated home dialysis services, less than 

full month, as identified by G0324 

through G0327. The new descriptor will 

include other partial month scenarios, 

in addition to patients dialyzing at 

home. The descriptors for G0324 

through G0327 will be as follows: 

• G0324: End stage renal disease 

(ESRD) related services for dialysis less 

than a full month of service, per day; for 

patients under two years of age. 

• G0325: End stage renal disease 

(ESRD) related services for dialysis less 

than a full month of service, per day; for 

patients between two and eleven years 

of age. 

• G0326: End stage renal disease 

(ESRD) related services for dialysis less 

than a full month of service, per day; for 

patients between twelve and nineteen 

years of age. 

• G0327: End stage renal disease 

(ESRD) related services for dialysis less 

than a full month of service, per day; for 

patients twenty years of age and over. 

The revised per diem ESRD-related 

services G codes will be used for 

outpatient ESRD-related services 

provided in the following scenarios: 

• Transient patients—Patients 

traveling away from home (less than full 

month); 

• Home dialysis patients (less than 

full month); 

• Partial month where one or more 

face-to-face visits without the 

comprehensive visit and either the 

patient was hospitalized before a 

complete assessment was furnished, 

dialysis stopped due to death, or the 

patient had a transplant. 

• Patients who have a permanent 

change in their MCP physician during 

the month. 

D. Technical Revision—§ 411.404 

In § 411.404, Medicare noncoverage of 

all obesity-related services is used as an 

example. Since we are currently 

revising this coverage policy, we 

proposed to omit this example. 

Commenters were supportive of this 

proposed change and we are finalizing 

it as proposed.

E. Diagnostic Psychological Tests 

All diagnostic tests covered under 

section 1861(s)(3) of the Act and 

payable under the physician fee 

schedule must be furnished under the 

appropriate level of supervision by a 

physician as defined in section 1861(r) 

of the Act. Section 410.32(b)(2)(iii) 

states an exception to these physician 

supervision requirements for clinical 

psychologists and independently 

practicing psychologists (who are not 

clinical psychologists) which allows 

them to personally perform diagnostic 

psychological testing services without 

physician supervision. However, 

diagnostic psychological tests 

performed by anyone other than a 

clinical psychologist or an 

independently practicing psychologist 

must be provided under the general 

supervision of a physician as defined in 

section 1861(r) of the Act. Accordingly, 

clinical psychologists and 

independently practicing psychologists 

have not been permitted to supervise 

others in the administration of 

diagnostic psychological tests. 

As discussed in the August 5, 2004 

proposed rule, we were asked to reevaluate our regulations regarding 

clinical psychologists’ supervision of 

diagnostic psychological tests, and 

additional information concerning 

provision of these services was also 

supplied. Based upon our review of this 

issue, we determined that clinical 

psychologists possess knowledge 

sufficient to direct test selection and 

interpret test data. Therefore, we 

proposed to change the requirements at 

§ 410.32(b)(2)(iii) to permit clinical 

psychologists to supervise the 

performance of diagnostic psychological 

and neuropsychological testing services. 

Comment: Two specialty societies 

representing psychologists and many 

individual commenters were in support 

of the change. One major association 

representing psychiatrists and a few 

individual commenters opposed the 

proposal. According to the association, 

expanding the supervision requirements 

will not lessen the burden on physicians 

and healthcare facilities within rural 

areas. In addition, this association asked 

that we provide data showing that the 

change to the supervision requirements 

will reduce the burden on physicians 

and health care facilities, and that 

access will be improved in rural areas. 

Response: We appreciate the positive 

comments in support of this proposal. 

In response to the request for 

evidence that this change will reduce 

burden and improve access, we would 

first note that our primary reason for 

proposing this change was that we 

believe clinical psychologists possess 

the core knowledge to sufficiently 

supervise the administration of these 

tests. By enabling them to do so, this 

change will allow greater flexibility in 

their practices. 

66360 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

With regard to improved access in 

rural areas, we noted previously in this 

rule that we recognize mental health 

HPSAs for incentive payments for 

psychiatrists. Accordingly, we believe 

that the expansion of the supervision 

requirements will help improve access 

in these areas. 

Result of Evaluation of Comments 

As proposed, we are revising 

§ 410.32(b)(2)(iii) to permit clinical 

psychologists to supervise the 

performance of diagnostic psychological 

and neuropsychological testing services. 

F. Care Plan Oversight 

Care Plan Oversight (CPO) refers to 

the supervision of patients receiving 

Medicare-covered home health or 

hospice services requiring complex 

multidisciplinary care modalities, 

including regular development and 

review of plans of care. In the August 5, 

2004 rule, we proposed to revise 

§ 414.39 to clarify that NPPs can 

perform home health CPO; however, 

they cannot certify a patient for home 

health services and sign the plan of care. 

We also proposed the conditions under 

which NPP services may be billed for 

CPO and explained that the proposed 

conditions are meant to ensure that the 

NPP has seen and examined the patient 

and that the appropriate and established 

relationship exists between the 

physician who certifies the patient for 

home health services and the NPP who 

will provide the home health CPO. 

Comment: Several commenters 

support the proposed revision and 

conditions of coverage. They support 

the integrated practice arrangements 

required by proposed § 414.39(c)(2)(iii). 

They believe the proposed conditions 

ensure appropriate, ongoing supervision 

of both the patient’s condition and the 

NPP. 

Response: We appreciate the 

commenters’ support for this proposal. 

Comment: We received a comment 

from an association representing home 

care physicians requesting that we 

include PAs in the clarification because 

PAs increasingly play the same role as 

NPs in home health care and bill under 

the same house call codes. 

Response: We agree with the 

commenter that we include PAs in the 

clarification. The definition of NPPs in 

proposed § 414.39(a) includes NPs, 

CNSs, and PAs. However, we also note 

that PAs cannot bill directly for their 

own services.

Comment: We received a comment 

requesting that we clearly state the 

definition of the appropriate 

relationship between the physician and 

the NPP. The commenter requested that 

we cross-reference applicable State 

standards because the meaning of 

collaboration varies across States and 

some States require employment 

relationships. Also, the commenter 

recommended that we require a written 

agreement regarding the responsibilities 

for managing care when the NP or PA 

is not from the same organization as the 

physician who has certified the skilled 

home care services. 

Response: We agree that State laws or 

regulations governing collaborative 

relationships, where applicable, would 

be useful in this regard. In the absence 

of State laws or regulations, NPs and 

CNSs will be required to document their 

scope of practice and indicate the 

relationships they have with physicians 

to handle issues outside their scope of 

practice. If the NPP is a PA, the 

physician signing the plan of care also 

must be the physician who provides 

general supervision of PA services for 

the practice. 

Comment: We received a comment 

requesting that this clarification be 

made retroactive to at least FY 2000 to 

allow denied claims to be resubmitted. 

The commenter stated that many claims 

for CPO services by NPs were denied 

over the past several years, despite CMS 

and legislative intent to have these 

claims reimbursed. 

Response: We clarified in the 

November 1, 2000 final rule (65 FR 

65407) that CPO services of NPPs, 

practicing within the scope of State law 

applicable to their services, could be 

paid under Medicare. However, our 

policy has also been that the physician 

who bills for CPO must be the same 

physician who signs the plan of care. 

Appeal rights are available for these 

claims for CPO services provided by 

NPPs in HHAs if the appeal is requested 

within 120 days of the date of the claim 

denial. If appeal rights have expired, the 

physician or supplier may request a 

reopening for any reason within 12 

months of the date of the notice of 

initial determination. After the 12-

month period, but within 4 years from 

the date of the initial determination, a 

reopening may be requested for good 

cause. The decision on whether to 

reopen a claim at the request of the 

physician or supplier is at the discretion 

of the Medicare contractor. 

Comment: We received comments 

noting that this clarification does not 

allow NPs, CNSs, or PAs to certify a 

patient for home health care services or 

to sign the plan of care. The commenters 

noted that certification by NPPs is not 

currently permitted under the statute. 

One of the commenters recommended 

that we revise the rules on certification 

and recertification to allow NPs, CNSs, 

or PAs to perform them. 

Response: The commenters are correct 

that the statute (sections 1814(a)(2)(C) 

and 1835(a)(2)(A) of the Act) requires a 

physician to certify a patient for home 

health care services or to sign the plan 

of care. Therefore, the issue of whether 

to allow NPs, CNSs, or PAs to certify a 

patient for home health care services or 

to sign the plan of care is not within the 

purview of this rule. 

Result of Evaluations of Comments 

We are adopting the proposed 

changes to § 414.39 that clarify that 

NPPs can provide care plan oversight 

for beneficiaries who receive home 

health services. 

G. Assignment of Medicare Claims—

Payment to the Supplier 

The current regulation requires the 

beneficiary (or the person authorized to 

request payment on the beneficiary’s 

behalf) to assign a claim to the supplier 

for an assignment to be effective. 

However, over time, the Act was 

amended in various sections to require 

that Medicare payment for certain 

services would only be made on an 

assigned basis regardless of whether or 

not the beneficiary actually assigns the 

claim to the supplier. In these instances, 

the current requirement in § 424.55(a), 

which specifies that the beneficiary 

assign the claim to the supplier, is now 

unnecessary. Therefore, we proposed to 

create an exception to the general rule 

in § 424.55(a). New § 424.55(c) would 

eliminate the requirement that 

beneficiaries assign claims to suppliers 

in situations when payment under the 

Act can only be made on an assignmentrelated basis or when payment is for 

services furnished by a participating 

physician or supplier. 

Comment: The ACLA supports the 

proposal and agrees that this new 

exception to the requirement for 

beneficiaries to assign benefits in 

situations where benefits can, by statute, 

only be paid on an assigned basis will 

reduce the paperwork burden on 

beneficiaries and suppliers. 

Response: We agree that the proposed 

regulation will reduce the paperwork 

burden on beneficiaries and suppliers 

and we are finalizing the revisions as 

proposed. 

Result of Evaluation of Comments 

We are finalizing § 424.55(c) as 

proposed.

H. Additional Issues Raised by 

Commenters 

Comment: Two specialty societies 

representing plastic surgeons and 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66361

podiatrists, as well as the RUC, 

recommended that the global period for 

CPT 15342, Application of bilaminate 

skin substitute/neodermis; 25 sq cm, be 

changed from a 10-day global period to 

a 0-day global period. The commenters 

stated that the plastic surgeons generally 

perform this procedure on more 

severely injured patients, such as burn 

patients, who are often seen in the 

inpatient setting. The podiatrists, on the 

other hand, typically treat patients with 

diabetic foot ulcers in the outpatient 

setting. Therefore, the commenters 

contend that though the work required 

to perform the procedure is the same for 

both specialties, the post-surgical work 

and time are not and the change in the 

global period would allow both 

scenarios to be paid appropriately. 

Response: We understand that this 

code can represent differing scenarios. 

However, while podiatrists perform 

approximately 45 percent of the 

procedures and general surgeons 17 

percent, plastic surgeons perform only 7 

percent. In addition, only 9 percent are 

performed in the inpatient hospital 

setting. Our general approach and the 

one adopted by the RUC for valuing all 

services is to base our review on the 

typical patient. In this case, the 

podiatric scenario would clearly 

dominate and applying a 10-day global 

period to capture the post-procedure 

office visit appears appropriate. 

However, we would be willing to 

discuss this issue further with the 

specialties involved and with the RUC. 

Comment: The American Society of 

Anesthesiologists (ASA) provided 

comments asking that we consider 

revising the current teaching regulations 

to place teaching anesthesiologists’

reimbursements on par with the 

teaching of resident physicians in 

surgery and other high-risk specialties. 

Also, that we redefine the HCPCS 

claims service modifier ‘‘AA’’ to include 

both the personal administration of the 

anesthesia by the physician and 

teaching up to two resident physicians 

concurrently. In its comments, the ASA 

stated that it believes we possess the 

authority under the terms of section 

1871 of the Medicare statute to make the 

requested change in its teaching 

reimbursement rules, effective January 

1, 2005, as follows: the agency can treat 

the rule as a logical outgrowth of a prior 

proposal; it can issue a final rule with 

comment period as part of the 2005 

physician payment final rule; or, it can 

promptly issue a free-standing rule 

proposing the change and allow for 

public comment and subsequent 

effectiveness along with the 2005 

physician payment rule. The American 

Association of Nurse Anesthetists 

(AANA) asked that, if we review 

proposed revisions to the teaching 

anesthesiologist rules, that we carefully 

consider how these revisions might 

impact teaching Certified Registered 

Nurse Anesthetists (CRNAs). The AANA 

commented that our rules should not 

favor one type of provider over another. 

Response: Surgical services are paid 

differently than anesthesia services. For 

example, surgical codes usually have 

global periods and payment includes 

the payment for the surgical procedure 

and postoperative visits during the 

global period. Anesthesia services 

include the preanesthesia examination 

and evaluation, the anesthesia service 

associated with the surgical service, and 

immediate postanesthesia care. 

Currently, the teaching physician’s 

presence during the key or critical 

period criteria applies to both the 

services of the teaching surgeon and the 

teaching anesthesiologist. The key or 

critical services are different for the 

service of each specialty. 

We plan to explore these issues 

further prior to deciding whether to 

include this change in the proposed rule 

for 2006. 

Comment: We received comments 

from a manufacturer, many providers 

and individuals requesting that new 

HCPCS codes be created for a specific 

laser surgery treatment for benign 

prostatic hyperplasia. Commenters 

stated that current CPT codes used for 

billing this service under the physician 

fee schedule are not specific to the 

unique technology involved with this 

laser surgery treatment and result in 

underpayment when this technology is 

used. They noted that under the 

hospital OPPS, this treatment was 

assigned to a new technology code. 

We also received requests from other 

individuals for new G codes and 

payment for other specific services, and 

for certain HCPCS codes that currently 

are paid only under OPPS. 

Response: We do not believe that it is 

necessary to create new HCPCS codes 

for these services. Commenters that 

believe the existing CPT codes do not 

reflect their technology or services, may 

contact the AMA’s CPT Editorial Panel 

to review these matters, particularly 

since the CPT Editorial Panel has a new 

coding classification specifically for 

new and emerging technologies. 

There will be situations where codes 

are used under OPPS but not recognized 

under the physician fee schedule (PFS) 

because of the different payment 

methodologies. 

Comment: A specialty society urged 

us to discontinue use of the HCPCS 

codes for positron emission tomography 

(PET) procedures and to instruct 

physicians to use the available CPT 

codes. They also urged us to adopt RUC 

recommendations for new PET codes 

rather than carrier price these services. 

The commenter stated they would like 

to meet to discuss these new codes and 

PET/computed tomography (CT) 

technology. 

Response: We will continue to use 

HCPCS codes and carrier price these 

services at this time. We will be 

examining the overall issue of Medicare 

coding, payment, and coverage of PET 

services and would be happy to meet 

with the specialty society to discuss this 

issue. 

General Issues 

We also received comments on issues 

and concerns that were beyond the 

scope of the proposed rule. These 

include: The need for quality standards 

for diagnostic imaging; concerns about 

outreach and access; requests for 

revisions to current policy; and, 

concerns about the accuracy of code 

descriptors. While we will try to ensure 

these comments are provided to 

appropriate CMS components, 

commenters should also feel free to 

contact the appropriate CMS 

components about their concerns. To 

the extent that these comments involved 

valuation of services under the 

physician fee schedule, we are also 

soliciting comments on services for 

which the physician work may be 

misvalued. See section VI for additional 

information on this process.

V. Refinement of Relative Value Units 

for Calendar Year 2005 and Response 

to Public Comments on Interim Relative 

Value Units for 2004 

[If you choose to comment on issues in 

this section, please include the caption 

‘‘Interim Work Relative Value Units’’ at 

the beginning of your comments.] 

A. Summary of Issues Discussed Related 

to the Adjustment of Relative Value 

Units 

Section V.B. and V.C. of this final rule 

describes the methodology used to 

review the comments received on the 

RVUs for physician work and the 

process used to establish RVUs for new 

and revised CPT codes. Changes to 

codes on the physician fee schedule 

reflected in Addendum B are effective 

for services furnished beginning January 

1, 2005. 

B. Process for Establishing Work 

Relative Value Units for the 2004 

Physician Fee Schedule 

Our November 7, 2003 final rule (69 

FR 1084) contained the work RVUs for 

Medicare payment for existing 

66362 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

procedure codes under the physician fee 

schedule and interim RVUs for new and 

revised codes beginning January 1, 

2004. We considered the RVUs for the 

interim codes to be subject to public 

comment under the annual refinement 

process. (Note that the November rule 

was subsequently revised on January 7, 

2004 to reflect revisions to procedure 

codes required by the MMA.) In this 

section, we summarize the refinements 

to the interim work RVUs published in 

the November 7, 2003 rule and our 

establishment of the work RVUs for new 

and revised codes for the 2005 

physician fee schedule. 

C. Work Relative Value Unit 

Refinements of Interim Relative Value 

Units 

1. Methodology (Includes Table Titled 

‘‘Work Relative Value Unit Refinements 

of the 2003 Interim and Related Relative 

Value Units’’) 

Although the RVUs in the January 

2004 final rule were used to calculate 

2004 payment amounts, we considered 

the RVUs for the new or revised codes 

to be interim. We accepted comments 

for a period of 60 days. We received 

substantive comments on approximately 

12 CPT codes with interim work RVUs. 

To evaluate these comments we used 

a process similar to the process used 

since 1997. (See the October 31, 1997 

final rule (62 FR 59084) for the 

discussion of refinement of CPT codes 

with interim work RVUs.) We convened 

a multispecialty panel of physicians to 

assist us in the review of the comments. 

The comments that we did not submit 

to panel review are discussed at the end 

of this section, as well as those that 

were reviewed by the panel. We invited 

representatives from the organizations 

from which we received substantive 

comments to attend a panel for 

discussion of the code on which they 

had commented. The panel was 

moderated by our medical staff, and 

consisted of the following voting 

members: 

• One or two clinicians representing 

the commenting organization. 

• One primary care clinician 

nominated by the American College of 

Physicians and American Society of 

Internal Medicine. 

• Four carrier medical directors. 

• Four clinicians with practices in 

related specialties who were expected to 

have knowledge of the service under 

review. 

The panel discussed the work 

involved in the procedure under review 

in comparison to the work associated 

with other services under the physician 

fee schedule. We assembled a set of 300 

reference services and asked the panel 

members to compare the clinical aspects 

of the work of the service a commenter 

believed was incorrectly valued to one 

or more of the reference services. In 

compiling the set, we attempted to 

include: (1) Services that are commonly 

performed whose work RVUs are not 

controversial; (2) services that span the 

entire spectrum from the easiest to the 

most difficult; and (3) at least three 

services performed by each of the major 

specialties so that each specialty would 

be represented. The intent of the panel 

process was to capture each 

participant’s independent judgment 

based on the discussion and his or her 

clinical experience. Following the 

discussion, each participant rated the 

work for the procedure. Ratings were 

individual and confidential, and there 

was no attempt to achieve consensus 

among the panel members. 

We then analyzed the ratings based on 

a presumption that the interim RVUs 

were correct. To overcome this 

presumption, the inaccuracy of the 

interim RVUs had to be apparent to the 

broad range of physicians participating 

in each panel. 

Ratings of work were analyzed for 

consistency among the groups 

represented on each panel. In addition, 

we used statistical tests to determine 

whether there was enough agreement 

among the groups of the panel and 

whether the agreed-upon RVUs were 

significantly different from the interim 

RVUs published in Addendum C of the 

final rule. We did not modify the RVUs 

unless there was a clear indication for 

a change. If there was agreement across 

groups for change, but the groups did 

not agree on what the new RVUs should 

be, we eliminated the outlier group and 

looked for agreement among the 

remaining groups as the basis for new 

RVUs. We used the same methodology 

in analyzing the ratings that we first 

used in the refinement process for the 

1993 physician fee schedule. The 

statistical tests were described in detail 

in the November 25, 1992 final rule (57 

FR 55938).

Our decision to convene 

multispecialty panels of physicians and 

to apply the statistical tests described 

above was based on our need to balance 

the interests of those who commented 

on the work RVUs against the 

redistributive effects that would occur 

in other specialties. 

We also received comments on RVUs 

that were interim for 2004, but for 

which we did not submit the RVUs to 

the panel for review for a variety of 

reasons. These comments and our 

decisions on those RVUs commented 

upon are discussed in further detail 

below. 

Table 17 below lists those interim 

codes reviewed under the refinement 

panel process described in this section. 

This table includes the following 

information: 

• CPT Code. This is the CPT code for 

a service. 

• Description. This is an abbreviated 

version of the narrative description of 

the code. 

• 2004 Work RVU. The work RVUs 

that appeared in the January 2004 rule 

are shown for each reviewed code. 

• Requested Work RVU. This column 

identifies the work RVUs requested by 

commenters. 

• 2005 Work RVU. This column 

contains the final RVUs for physician 

work.

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66363

2. Interim 2004 Codes 

CPT code 43752 Naso- or oro-gastric 

tube placement, requiring physician’s 

skill and fluoroscopic guidance 

(includes fluoroscopy, image 

documentation and report).

The RUC recommended a work RVU 

of 0.82 for this service based on a 

comparison of this procedure to CPT 

code 44500, Introduction of long 

gastrointestinal tube. While we agreed 

that CPT code 43752 is similar in work 

intensity to CPT code 44500, we 

believed the intra-service time is more 

appropriately valued at the 25th 

percentile (15 minutes of intra-service 

time vs. 20 minutes of intra-service 

time). This reduced the total time 

associated with CPT code 43752 from 30 

minutes to 25 minutes. We applied the 

ratio of the RUC recommended value of 

0.82 work RVU over 30 minutes to the 

revised intra-service time of 25 minutes 

and assigned 0.68 interim work RVUs 

for CPT code 43752. 

Comment: Commenters disagreed 

with our decision not to accept the RUC 

recommended WRVU of 0.82 and with 

our rejection of the survey time, 

particularly since this service involves 

both tube placement and imaging. Based 

on these comments, we referred this 

code to the multispecialty validation 

panel for review. 

Response: As a result of the statistical 

analysis of the 2004 multispecialty 

validation panel ratings, we have 

assigned 0.81 work RVUs to CPT code 

43752. 

CPT code 63103 Vertebral corpectomy 

(vertebral body resection), partial or 

complete, lateral extracavitary 

approach with decompression of spinal 

cord and/or nerve root(s) (for example, 

for tumor or retropulsed bone 

fragments); thoracic or lumbar, each 

additional segment (List separately in 

addition to code for primary procedure).

The RUC recommended a work RVU 

of 5.00 for this service based on a 

comparison of this procedure to CPT 

code 63088, the add-on code for the 

vertebral corpectomy, thoracic lumbar 

approach. We stated that it was unclear 

from the clinical vignettes supplied by 

the specialty society whether the 

additional corpectomy would more 

commonly involve the lumbar or the 

thoracic region of the spine. There is a 

significant difference in work intensity 

associated with the resection of an 

additional corpus in the thoracic region 

as opposed to the lumbar region. For 

this reason we applied the ratio of the 

reference service (CPT code 63088) to its 

primary service (CPT code 63087) to 

CPT code 63101 (primary service 

associated with CPT 63103) to assign 

3.90 interim work RVUs for CPT code 

63103. 

Comment: Commenters requested that 

we withdraw the arbitrary reduction of 

the work RVU for CPT code 63103 

stating that the unique aspects of the 

lateral extracavitary approach make the 

location in the lumbar and thoracic 

spine less relevant than the actual 

exposure of an additional level itself. 

The commenters stated that in contrast 

to anterior thoracic or lumbar 

approaches for vertebral corpectomy, 

the lateral extracavitary approach 

requires an unrelated and significantly 

greater muscle dissection of spinal/

paraspinal tissues, as well as an 

additional rib, transverse process, and 

pedicle removal with isolation and 

division of another pair of segmental 

vessels. Based on these comments, we 

referred this code to the multispecialty 

validation panel for review. 

Response: As a result of the statistical 

analysis of the 2004 multispecialty 

validation panel ratings, we have 

assigned 4.82 work RVUs to CPT code 

63103. 

CPT codes 38207 Transplant 

preparation of hematopoietic progenitor 

cells; cryopreservation and storage,

38208 Transplant preparation of 

hematopoietic progenitor cells; thawing 

of previously frozen harvest, without 

washing, 38209 Transplant preparation 

of hematopoietic progenitor cells; 

thawing of previously frozen harvest, 

with washing 38210 Transplant 

preparation of hematopoietic progenitor 

cells; specific cell depletion within 

harvest, T-cell depletion, 38211 

Transplant preparation of 

hematopoietic progenitor cells; tumor 

cell depletion, 38212 Transplant 

preparation of hematopoietic progenitor 

cells; red blood cell removal, 38213 

Transplant preparation of 

hematopoietic progenitor cells; platelet 

depletion, 38214 Transplant 

preparation of hematopoietic progenitor 

cells; plasma (volume) depletion, 38215 

Transplant preparation of 

hematopoietic progenitor cells; cell 

concentration in plasma, mononuclear, 

or buffy coat layer.—These codes were 

new for CY 2003 but we did not receive 

the final RUC recommendations in time 

for inclusion in the final rule. In the 

December 31, 2002 rule we discussed 

the interim RUC recommendations and 

our concerns for removing these codes 

from the laboratory fee schedule, and 

paying them instead on the physician 

fee schedule (67 FR 80007). We received 

the final RUC recommendations in May 

2003 and in the November 7, 2003 final 

rule we stated we were maintaining a 

status indicator ‘‘I’’ for these services 

making them not valid for payment 

under the physician fee schedule. (Note: 

In the December 31, 2002 rule, as part 

of the discussion about these CPT codes, 

we discussed the creation of HCPCS 

codes G0265, Cryopreservation, freezing 

and storage of cells for therapeutic use, 

each cell line; G0266 Thawing and 

expansion of frozen cells for therapeutic 

use, each aliquot; and G0267, Bone 

marrow or peripheral stem cell harvest,


ER15NO04.515</GPH>
66364 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

modification or treatment to eliminate 

cell type(s) (for example, T-cells, 

metastic carcinoma). We stated that 

these HCPCS codes are paid under the 

laboratory fee schedule.)

Comment: We received comments 

regarding these codes in response to the 

2002 and 2003 final rules. Commenters 

expressed concern, which was shared 

by the RUC about the CMS decision 

pertaining to these CPT codes. They 

stated that CMS was invited to conduct 

site visits to observe and have a better 

understanding of these services. They 

believe such visits would provide 

additional information on these services 

and allow for a more informed decision 

about their placement on the physician 

fee schedule. 

Response: CPT codes 38207, 38208, 

38209, 38210, 38211, 38212, 38213, 

38214 and 38215 reflect services that are 

typically provided by laboratory 

personnel who require general oversight 

and supervision by a laboratory 

physician, analogous to a physician 

providing oversight in a blood banking 

facility. Based on site visits, we 

continue to believe that these services 

are not typically provided by a 

physician. We recognize that variability 

pertaining to the clinical and laboratory 

management of patients does exist and 

that in some bone marrow transplant 

centers these laboratory services are 

closely supervised and managed by 

physicians. These centers, however, do 

not reflect the typical practice pattern 

for the majority of bone marrow 

transplant centers. Therefore, we will 

continue to allow use of HCPCS codes 

G0265 Cryopreservation, freezing and 

storage of cells for therapeutic use, each 

cell line and G0266 Thawing and 

expansion of frozen cells for therapeutic 

use, each aliquot to report these 

services, and G0267 Bone marrow or 

peripheral stem cell harvest, 

modification or treatment to eliminate 

cell type(s) (for example, T-cells, 

metastatic carcinoma). These services 

are currently on the laboratory fee 

schedule. We welcome additional 

comments to help us better determine 

whether to place CPT codes 38207 

through 38215 on either the physician 

or laboratory fee schedule. 

Note: We identified the services 

provided within transplant centers as 

clinical services typically provided by a 

physician in conjunction with the 

following codes: CPT codes 38205—

Blood-derived hematopoietic progenitor 

cell harvesting for transplantation, per 

collection; allogenic, CPT 38206—

Blood-derived hematopoietic progenitor 

cell harvesting for transplantation, per 

collection; autologous, CPT codes 

38240—Bone Marrow or bone derived 

peripheral stem cell transplantation; 

allogenic, CPT code 38241—Bone 

Marrow or bone derived peripheral stem 

cell transplantation; autologous, and 

CPT code 38242—Bone Marrow or bone 

derived peripheral stem cell 

transplantation; allogeneic lymphocyte 

donor infusions. We believe the 

physician work RVUs assigned by the 

RUC to these codes (CPT code 38205–

1.50, CPT code 38206–1.50, CPT code 

38240–2.24 RVUs, CPT code 38241–2.24 

RVUs, and CPT code 38242–1.71 RVUs) 

appropriately reflect the physician work 

intensity for each of these services and 

reaffirm our prior decision announced 

in 2002. CPT code 38204—Management 

of recipient hematopoietic progenitor 

cell donor search and cell acquisition 

was valued at 2.00 RVUs by the RUC in 

2002. We believe there may be 

physician work when providing this 

service. However, information obtained 

during our site visits revealed that the 

bulk of the service was provided by the 

transplant coordinator, who worked 

closely with the physician. It is unclear 

at this point what the appropriate value 

will be for the physician who provides 

this service. We welcome comments on 

this issue. 

CPT code 76514 Ophthalmic 

ultrasound, echography, diagnostic; 

corneal pachymetry, unilateral or 

bilateral (determination of corneal 

thickness).—We accepted the RUC 

recommendation of 0.17 work RVUs. 

Comments: The American Academy 

of Ophthalmology commented that the 

assigned work RVU does not accurately 

reflect the value intended by the RUC or 

CPT; the value should be doubled. The 

Academy stated that the problem arose 

when the RUC recommended to CPT 

that the descriptor should be changed 

from unilateral to unilateral or bilateral. 

The commenter suggested that either the 

descriptor be changed to reflect only the 

unilateral, which will take a while to 

accomplish, or that we increase 

valuation to correctly reflect valuation 

by RUC. 

Response: Because we have no data 

that indicates whether the unilateral or 

bilateral procedure is more typical, we 

are not changing the RVUs at this time. 

We would suggest that the Academy 

contact the CPT Editorial Panel if a 

change to the descriptor would be 

helpful to the specialty. 

Establishment of Interim Work Relative 

Value Units for New and Revised 

Physician’s Current Procedural 

Terminology (CPT) Codes and New 

Healthcare Common Procedure Coding 

System Codes (HCPCS) for 2005 

(Includes Table Titled ‘‘American 

Medical Association Specialty Relative 

Value Update Committee and Health 

Care Professionals Advisory Committee 

Recommendations and CMS’s Decisions 

for New and Revised 2005 CPT Codes’’) 

One aspect of establishing RVUs for 

2005 was to assign interim work RVUs 

for all new and revised CPT codes. As 

described in our November 25, 1992 

notice on the 1993 physician fee 

schedule (57 FR 55983) and in section 

III.B. of the November 22, 1996 final 

rule (61 FR 59505 through 59506), we 

established a process, based on 

recommendations received from the 

AMA’s RUC, for establishing interim 

work RVUs for new and revised codes.

This year we received work RVU 

recommendations for 149 new and 

revised CPT codes from the RUC. Our 

staff and medical officers reviewed the 

RUC recommendations by comparing 

them to our reference set or to other 

comparable services for which work 

RVUs had previously been established. 

We also considered the relationships 

among the new and revised codes for 

which we received RUC 

recommendations and agreed with the 

majority of the relative relationships 

reflected in the RUC values. In some 

instances, although we agreed with the 

relationships, we nonetheless revised 

the work RVUs to achieve work 

neutrality within families of codes. That 

is, the work RVUs have been adjusted so 

that the sum of the new or revised work 

RVUs (weighted by projected frequency 

of use) for a family will be the same as 

the sum of the current work RVUs 

(weighted by projected frequency of use) 

for the family of codes. We reviewed all 

the RUC recommendations and accepted 

approximately 99 percent of the RUC 

recommended values. For 

approximately 1 percent of the 

recommendations, we agreed with the 

relativity established by the RUC, but 

needed to adjust work RVUs to retain 

budget neutrality. 

We received four recommendations 

from the HCPAC. We agreed with two 

of these recommendations and 

disagreed with two of them. 

Table 18, titled ‘‘AMA RUC and 

HCPAC Recommendations and CMS 

Decisions for New and Revised 2005 

CPT Codes,’’ lists the new or revised 

CPT codes, and their associated work 

RVUs, that will be interim in 2005. This 

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table includes the following 

information: 

• A ‘‘#’’ identifies a new code for 

2005. 

• CPT code. This is the CPT code for 

a service. 

• Modifier. A ‘‘26’’ in this column 

indicates that the work RVUs are for the 

professional component of the code. 

• Description. This is an abbreviated 

version of the narrative description of 

the code. 

• RUC recommendations. This 

column identifies the work RVUs 

recommended by the RUC. 

• HCPAC recommendations. This 

column identifies the work RVUs 

recommended by the HCPAC. 

• CMS decision. This column 

indicates whether we agreed or we 

disagreed with the RUC 

recommendation. Codes for which we 

did not accept the RUC 

recommendation are discussed in 

greater detail following this table. An 

‘‘(a)’’ indicates that no RUC 

recommendation was provided. 

• 2005 Work RVUs. This column 

establishes the interim 2005 work RVUs 

for physician work. 

BILLING CODE 4120–01–P


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BILLING CODE 4120–01–C 

Table 19, which is titled ‘‘AMA RUC 

ANESTHESIA RECOMMENDATIONS 

AND CMS DECISIONS FOR NEW AND 

REVISED 2005 CPT CODES’’, lists the 

new or revised CPT codes for anesthesia 

and their base units that will be interim 

in 2005. This table includes the 

following information: 

• CPT code. This is the CPT code for 

a service. 

• Description. This is an abbreviated 

version of the narrative description of 

the code. 

• RUC Recommendations. This 

column identifies the base units 

recommended by the RUC. 

• CMS decision. This column 

indicates whether we agreed or we 

disagreed with the RUC 

recommendation. Codes for which we 

did not accept the RUC 

recommendation are discussed in 

grreater detail following this table. 

• 2005 Base Units. This column 

establishes the 2005 base units for these 

services.


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Discussion of Codes for Which There 

Were No RUC Recommendations or for 

Which the RUC Recommendations Were 

Not Accepted 

The following is a summary of our 

rationale for not accepting particular 

RUC work RVU or base unit 

recommendations. It is arranged by type 

of service in CPT order. Additionally, 

we discuss those CRP codes for which 

we received no RUC recommendations 

for physician work RVUs. This 

summary refers only to work RVUs or 

base units. 

New and Revised Codes for 2005

CPT mode 97605 Negative pressure 

wound therapy (for example, vacuum 

assisted drainage collection), including 

topical application(s), wound 

assessment, and instruction(s) for 

ongoing care, per session; total 

wound(s) surface area less than or equal 

to 50 square centimeters and CPT code 

97606 Negative pressure wound therapy

(for example, vacuum assisted drainage 

collection), including topical 

application(s), wound assessment, and 

instruction(s) for ongoing care, per 

session; total wound(s) surface area 

greater than 50 square centimeters.—

The RUC HCPAC review board 

recommended 0.55 work RVUs for CPT 

code 97605 and 0.60 work RVUs for 

CPT code 97606, which we did not 

accept. We disagree with their 

recommendation that these services 

contain physician work and will not 

assign work RVUs. Further, when the 

negative pressure wound therapy 

service does not encompass selective 

debridement, we consider this service to 

represent a dressing change and will not 

make separate payment. When the 

negative pressure wound therapy 

service includes the need for selective 

debridement, we consider the services 

represented by CPT codes 97605 and 

97606 to be bundled into CPT codes 

97597 or 97598, the new debridement 

codes, which will be appropriately 

billed. We are assigning a status 

indicator of ‘‘B’’ to these two new CPT 

codes (97605 and 97606), meaning that 

we will not make separate payment for 

these services. 

CPT code 57282, Colpopexy, vaginal; 

extra-peritoneal approach 

(sacrospinous, iliococcygeus) and CPT 

code 57283 Colpopexy, vaginal; intraperitoneal approach (uterosacral, 

levator myorrhaphy).—The CPT 

Editorial Panel revised an existing code 

(57282) and created a new code (57283) 

to describe vaginal extra and 

intraperitoneal colpopexies. The RUC 

recommended maintaining the current 

work PVUs of 8.85 for 57282 and 

recommended 14.00 work PVUs for 

57283. Previously, both the extraperitoneal approach and intra-peritoneal 

approach were billed under CPT code 

57282. Effective January 1, 2005, CPT 

code 57282 will be used to report 

colpopexy, vaginal; extra-peritoneal 

approach, while CPT code 57283 will be 

used to report colpopexy vaginal; 

intraperitoneal approach. Although we 

agree with the relativity established by 

the RUC, we believe that the work RVUs 

for CPT code 57282 should have been 

adjusted to reflect that the intraperitoneal approach is now being 

reported using CPT code 57283. In order 

to retain work neutrality between these 

two services, we adjusted the work 

RVUs using the utilization crosswalks 

provided by the specialty survey to 

account for the work that was 

previously associated with performing 

these procedures when only one code 

existed. This results in work RVUs of 

6.86 for CPT code 57282 and 10.84 work 

RVUs for CPT code 57283.

We have not received the final 

recommendations from the RUC on 

these services and carriers will price 

these services in 2005. 

CPT Code 32855 Backbench 

standard preparation of cadaver donor 

lung allograft prior to transplantation, 

including dissection of allograft from 

surrounding soft tissues to prepare 

pulmonary venous/atrial cuff, 

pulmonary artery, and bronchus; 

unilateral; CPT Code 32856

Backbench standard preparation of 

cadaver donor lung allograft prior to 

transplantation, including dissection of 

allograft from surrounding soft tissues 

to prepare pulmonary venous/atrial 

cuff, pulmonary artery, and bronchus; 

bilateral; CPT Code 33933 Backbench 

standard preparation of cadaver donor 

heart/lung allograft prior to 

transplantation, including dissection of 

allograft from surrounding soft tissues 

to prepare aorta, superior vena cava, 

inferior vena cava, and trachea for 

implantation; CPT Code 33944

Backbench standard preparation of 

cadaver donor heart allograft prior to 

transplantation, including dissection of 

allograft from surrounding soft tissues 

to prepare aorta, superior vena cava, 

inferior vena cava, pulmonary artery, 

and left atrium for implantation; CPT 

Code 44715 Backbench standard 

preparation of cadaver or living donor 

intestine allograft prior to 

transplantation, including mobilization 

and fashioning of the superior 

mesenteric artery and vein; CPT Code 

47143 Backbench standard 

preparation of cadaver donor whole 

liver graft prior to allotransplantation, 

including cholecystectomy, if necessary, 

and dissection and removal of 

surrounding soft tissues to prepare the 

vena cava, portal vein, hepatic artery, 

and common bile duct for implantation; 

without trisegment or lobe spilt; CPT 

Code 47144 Backbench standard 

preparation of cadaver donor whole 

liver graft prior to allotransplantation, 

including cholecystectomy, if necessary, 

and dissection and removal of 

surrounding soft tissues to prepare the 

vena cava, portal vein, hepatic artery, 

and common bile duct for implantation; 

with trisegment split of whole liver graft 

into two partial liver grafts (that is, left 

lateral segment (segments II and III) and 

right trisegment (segments I and IV 

through VIII)); CPT Code 47145

Backbench standard preparation of 

cadaver donor whole liver graft prior to 

allotransplantation, including 

cholecystectomy, if necessary, and 

dissection and removal of surrounding 

soft tissues to prepare the vena cava, 

portal vein, hepatic artery, and common 

bile duct for implantation; with lobe 

split of whole liver graft into two partial 

liver grafts (that is, left lobe (segments 

II, III, and IV) and right lobe (segments 

I and V through VIII)); CPT Code 48551

Backbench standard preparation of 

cadaver donor pancreas allograft prior 

to transplantation, including dissection 

of allograft from surrounding soft 

tissues, splenectomy, duodenotomy, 

ligation of bile duct, ligation of 

mesenteric vessels, and Y-graft arterial 

anastomoses from iliac artery to 

superior mesenteric artery and to 

splenic artery, CPT Code 50323

Backbench standard preparation of 

cadaver donor renal allograft prior to 

transplantation, including dissection 

and removal of perinephric fat, 

diaphragmatic and retroperitoneal 

attachments, excision of adrenal gland, 

and preparation of ureter(s), renal 

vein(s), and renal artery(s), ligating 

branches, as necessary; CPT Code 50325

Backbench standard preparation of 

living donor renal allograft (open or 

laparoscopic) prior to transplantation, 

including dissection and removal of 

perinephric fat and preparation of 

ureter(s), renal vein(s), and renal 

artery(s), ligating branches, as 

necessary; and CPT Code 93745 Initial 

set-up and programming by a physician 

of wearable cardioverter-defibrillator 

includes initial programming of system, 

establishing baseline electronic ECG, 

transmission of data to data repository, 

patient instruction in wearing system 

and patient reporting of problem or 

events.

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Establishment of Interim Practice 

Expense RVUs for New and Revised 

Physician’s Current Procedural 

Terminology (CPT) Codes and New 

Healthcare Common Procedure Coding 

System (HCPCS) Codes for 2005 

We have developed a process for 

establishing interim practice expense 

RVUs for new and revised codes that is 

similar to that used for work RVUs. 

Under this process, the RUC 

recommends the practice expense direct 

inputs (the staff time, supplies and 

equipment) associated with each new 

code. We then review the 

recommendations in a manner similar to 

our evaluation of the recommended 

work RVUs. 

The RUC recommendations on the 

practice expense inputs for the new and 

revised 2005 codes were submitted to us 

as interim recommendations. 

We have accepted, in the interim, the 

practice expense recommendations 

submitted by the RUC for the codes 

listed in the table titled ‘‘AMA RUC and 

HCPAC RVU Recommendations and 

CMS Decisions for New and Revised 

2005 CPT Codes.’’ However, we will be 

reviewing the supplies, including the 

DNA probes, for the new and revised in 

situ hybridization codes (CPT 88365, 

88367 and 88368) to ensure that the 

practice expense database accurately 

reflects the supplies associated with 

these services.

Other Issues 

Comment: The RUC requested that we 

modify the definition of the 

‘‘preservice’’ portion for the 0-, 10- and 

90-day global periods to state, ‘‘The 

preservice period includes the 

physicians’ services following the visit 

at which the decision for surgery is 

finalized until the time of the operative 

procedure.’’ The current definition of 

the preservice time for the 0 and 10-day 

global periods includes the preservice 

work occurring on the day of surgery, 

while the 90-day global period includes 

the preservice work occurring the day 

before surgery. 

Response: We are reluctant to revise 

the definition of preservice until there is 

further review of the issue. Though the 

suggested change in preservice 

definition for physician work would 

correspond to the change made in the 

definition for practice expense 

purposes, that revision was made at the 

beginning of the practice expense 

refinement. It is not clear to us how the 

relativity would be maintained between 

existing codes valued under the current 

definition and new codes valued using 

an expanded definition of preservice 

work. In addition, among different 

procedures, there is most likely much 

variation in the time period between the 

decision to perform surgery and the 

time of the operative procedure. The 

absence of a specific timeframe could 

result in an inconsistent application of 

the definition. However, we would look 

forward to further discussion with the 

RUC concerning this issue. 

Comment: Solid compensator-based 

intensity modulated radiation therapy 

(IMRT) is one of the IMRT technologies 

currently paid using the radiation 

therapy CPT code 77418, Intensity 

modulated treatment delivery. For 2005, 

CPT created a Category III tracking code 

0073T, Compensator-based beam 

modulation treatment delivery of 

inverse planned treatment using three or 

more high resolution (milled or cast) 

compensatory convergent beam 

modulated fields, per treatment session.

CPT instructions for CPT code 77418 

now specifically exclude this 

technology. 

Physicians performing compensatorbased IMRT expressed concern that we 

generally carrier price tracking codes 

and that carriers often will not pay for 

them, considering services reported 

with a tracking code to be experimental. 

One commenter requested that, in order 

to allow payment for solid compensatorbased IMRT under the physician fee 

schedule, we assign RVUs to the new 

CPT tracking code 0073T. 

Response: As noted by the 

commenters, we generally do not 

nationally price tracking codes, which 

are most often used to report new or 

experimental services. Rather, we 

designate them as carrier priced until 

there is sufficient volume and 

information to develop appropriate 

RVUs. However, solid compensator 

based IMRT is an established 

technology that is currently paid both 

under the physician fee schedule and in 

the hospital outpatient department. We 

are concerned that having this service 

be reported using a carrier-priced 

tracking code could have an adverse 

effect on access to this technology. 

Therefore, we are assigning interim 

RVUs to this tracking code. For payment 

under the physician fee schedule, we 

will crosswalk the practice expense and 

malpractice RVUs assigned to CPT code 

77418 to the Category III tracking code 

0073T. (Note that this is a technical 

component only service and there are 

no associated physician work RVUs.) 

Comment: For 2005, CPT has 

eliminated CPT code 79900, Provision 

of Therapeutic Radiopharmaceuticals.

We received comments from several 

organizations and individuals 

concerning elimination of this CPT 

code. Commenters requested we either 

grant a grace period for the CPT code or 

reinstate the HCPCS code Q3001, 

Radioelements for brachytherapy, any 

type, each, so that payment can be made 

under the physician fee schedule. 

Response: We are reinstating HCPCS 

code Q3001 under the physician fee 

schedule. This service will be carrier 

priced. 

Note that there have been new HCPCS 

drug administration codes for 

physicians’ services established for CY 

2005. Please see section III.E.2 for 

specific information related to these 

new HCPCS codes. 

VI. Five-Year Refinement of Relative 

Value Units 

[If you choose to comment on issues in 

this section, please include the caption 

‘‘Five Year Refinement of Work Relative 

Value Units for Calendar Year 2004’’ at 

the beginning of your comments.] 

A. Background 

The work RVUs were originally 

developed by a research team at the 

Harvard School of Public Health in a 

cooperative agreement with us. Harvard 

established the work RVUs for almost 

all fee schedule codes. The RVUs for 

anesthesia services were based on 

relative values from the American 

Society of Anesthesiology. The original 

RVUs for radiology codes were based on 

the American College of Radiology 

relative value scale. The work RVUs 

reflect the physician’s effort in 

providing a service by accounting for: 

the physician’s time; the technical 

difficulty of the procedure; the average 

severity of illness among patients 

receiving the procedure; and the degree 

of physical and mental effort required of 

the physician to perform the procedure. 

Section 1848(c)(2)(B)(i) of the Act 

requires that we review all RVUs no less 

than every 5 years. We initiated the first 

5-year review in 1994 and refinements 

went into effect beginning in 1997. The 

second 5-year review began in 1999 and 

refinements went into effect beginning 

in 2002. It is now time to begin the third 

5-year review of the physician work 

RVUs with the resulting changes being 

effective beginning in 2007. 

As part of the final rule published 

December 8, 1994 (59 FR 63453), we 

solicited public comment on all work 

RVUs for approximately 7,000 CPT and 

HCPCS codes. The scope of the 5-year 

review was limited to work values, 

since at that time, the statute required 

practice expense and malpractice RVUs 

be calculated based on 1991 allowed 

charges and practice expense and 

malpractice expense shares for the 

specialties performing the services. 

Also, the December 8, 1994 final rule 

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outlined the proposed process for 

refinement of the work RVUs and 

provided a suggested format for 

submission of comments.

We indicated that we were 

particularly interested in receiving 

comments on physicians’ services for 

which medical practice had changed 

since the Harvard surveys were 

performed, but for which there were no 

code changes and, therefore, no 

reconsideration of whether the work 

RVUs were still accurate. As a result of 

the December 8, 1994 final rule, we 

received more than 500 comments on 

approximately 1,100 codes. Subsequent 

to review of the comments by our 

medical staff, comments on 

approximately 700 codes were 

forwarded to the AMA’s Specialty 

Society RUC for review. An additional 

300 codes identified by our staff as 

potentially misvalued were also 

forwarded to the RUC. A process similar 

to that used for the annual physician fee 

schedule update was used for evaluating 

the proposed changes to the work RVUs 

and a notice discussing these proposed 

changes was published in the May 3, 

1996 Federal Register (61 FR 19992). As 

outlined in this notice, we proposed to 

increase the work RVUs for 28 percent 

of the codes; we proposed to maintain 

the work RVUs for 61 percent of the 

codes and we proposed to decrease the 

work RVUs for 11 percent of the codes. 

(Our proposed work RVUs agreed with 

the RUC recommendations for 93 

percent of the codes.) In response to the 

May 3, 1996 proposed notice, we 

received more than 2,900 comments on 

approximately 133 codes plus all 

anesthesia services. In order to address 

these comments, we convened multispecialty panels of physicians. A 

detailed discussion of this process, as 

well as the results of the 5-year review 

were included in the final rule with 

comment period published November 

22, 1996 (61 FR 59490). 

We initiated the second 5-year review 

by soliciting comments on potentially 

misvalued work RVUs for all services in 

the CY 2000 physician fee schedule in 

the November 2, 1999, final rule (64 FR 

59427). We indicated that the scope of 

the second 5-year review would be 

restricted to work RVUs, since resourcebased malpractice RVUs had only just 

been implemented in CY 2000, and we 

were in the middle of transitioning to a 

fully resource-based system for practice 

expense RVUs. 

In our July 17, 2000 proposed rule (66 

FR 31028), we explained the process 

used to conduct the second 5-year 

review of work, beginning with the 

solicitation of comments on services 

that were potentially misvalued, in our 

November 2, 1999 final rule with 

comment period. 

We received comments from 

approximately 30 specialty groups, 

organizations, and individuals involving 

over 900 procedure codes. After review 

by our medical staff, we shared all of the 

comments we received concerning 

potentially misvalued services with the 

RUC. 

The RUC submitted work RVU 

recommendations for all of the codes we 

forwarded with the exception of the 

anesthesia codes and conscious sedation 

codes. We analyzed all of the RUC 

recommendations and evaluated both 

the recommended work RVUs and the 

rationale for the recommendations. If we 

had concerns about the application of a 

particular methodology, but thought the 

recommended work RVUs were 

reasonable, we verified that the 

recommended work RVUs were 

appropriate by using alternative 

methodologies. We announced our 

proposed decisions on the revised work 

RVUs in the proposed notice published 

June 8, 2001 (66 FR 31028). 

Overall, we proposed to accept 92 

percent of RUC recommended work 

RVUs (RVUs or 792 services). Of the 

RUC recommendations we disagreed 

with, we proposed to increase the work 

RVUs for 37 services and decrease the 

work RVUs for 22 services. We did not 

accept the RUC recommendations of an 

increase for 6 services that were 

previously reviewed by a multispecialty physician panel in 2000. The 

Health Care Professional Advisory 

Committee (HCPAC), an advisory 

committee to the RUC representing nonphysician health professionals, also 

reviewed a total of 12 services as part of 

the 5-year review. For 5 of the services 

reviewed, the HCPAC did not offer a 

recommendation. Of the remaining 7 

services, we proposed to accept the 

HCPAC recommendations.

Comments received on the June 8, 

2001 proposed notice generally 

supported our proposed changes. In 

addition, we received more than 125 

comments on approximately 39 specific 

codes plus all the anesthesia services. 

The majority of these comments 

addressed the gastrointestinal 

endoscopy codes and anesthesia 

services. As with the first 5-year review, 

we convened a multi-specialty panel of 

physicians to assist us in the review of 

the comments. For additional 

information about this process, the 

comments received, and the results of 

the second 5-year review, see the final 

rule with comment period published 

November 2, 2001 (66 FR 55285). 

B. Scope of the 5-Year Refinement 

As with the second 5-year review, we 

are soliciting comments only on the 

work RVUs that may be inappropriately 

valued. The malpractice RVUs were 

implemented in CY 2000 and revisions 

to these RVUs are addressed as part of 

this final rule. 

We are not including the practice 

expense RVUs as part of this refinement. 

The PEAC, an advisory committee of the 

RUC, has been providing us with 

recommendations for refining the direct 

practice expense inputs (clinical staff, 

supplies, and equipment) used in 

calculating the practice expense RVUs 

for established codes. As discussed in 

the August 5, 2004 proposed rule, the 

PEAC held its last meeting March 2004 

and future practice expense issues, 

including the refinement of the 

remaining codes not addressed by the 

PEAC, would be handled by the RUC. 

As we determine the process that will 

be used to refine the remaining codes, 

we will also be considering how to 

address future review of practice 

expense RVUs. We would also welcome 

comments on how this might be 

addressed. However, to the extent that 

there are changes in physician time or 

in the number or level of post procedure 

visits as a result of the 5-year review of 

work, there would be a potential impact 

on the practice expense inputs, and we 

would revise the inputs accordingly. 

C. Refinement of Work Relative Value 

Units 

During the first and second 5-year 

reviews, we relied on public 

commenters to identify services that 

were potentially misvalued. 

For the third 5-year review, we are 

again requesting comments on 

potentially misvalued work RVUs for all 

services in the CY 2005 physician fee 

schedule. However, we recognize that 

this process generally elicits comments 

focusing on undervalued codes. 

Therefore, in addition to the codes 

submitted by commenters, we will also 

identify codes (especially high-volume 

codes across specialties) that: 

• Are valued as being performed in 

the inpatient setting, but that are now 

predominantly performed on an 

outpatient basis; and 

• Were not reviewed by the RUC, 

(that is, Harvard RVUs are still being 

used, or there is no information). 

Public comments must include the 

appropriate CPT code (for example, CPT 

code 90918) and the suggested RVUs 

(for example, 11.00 RVUs), and 

evidence that the current work RVU is 

misvalued. Failure to provide this 

information may result in our inability 

66372 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

to evaluate the comments adequately. 

We will consider all comments on all 

work RVUs in the development of a 

proposed rule that we intend to publish 

in 2006. In that rule, we will propose 

the revisions to work RVUs that we 

believe are needed. We will then review 

and analyze the comments received in 

response to our proposed revisions and 

publish our decisions in the 2006 final 

rule.

In addition to internal review and 

analysis, we propose to share comments 

we receive on all work RVUs with the 

RUC, which currently makes 

recommendations to us on the 

assignment of RVUs to new and revised 

CPT codes. This process was used 

during the last 5-year review, and we 

believe that it was beneficial. The RUC’s 

perspective will be helpful because of 

its experience in recommending RVUs 

for new and revised CPT codes since we 

implemented the physician fee 

schedule. Furthermore, the RUC, by 

virtue of its multispecialty membership 

and consultation with approximately 65 

specialty societies, involves the medical 

community in the refinement process. 

D. Nature and Format of Comments on 

Work Relative Value Units 

While all written public comments 

are welcomed, based on our past 

experience we have found it particularly 

beneficial if the comments include 

certain information: the CPT code or 

codes recommended for review, a 

clinical description of the service(s), the 

current work RVUs and the suggested 

work RVUs. Because our initial 

assumption will be that each code is 

currently appropriately valued, the 

commenter may also include some 

rationale to support the need for review. 

For example, one approach would be to 

compare the physician work of each 

nominated code to the work involved in 

an analogous service that has higher or 

lower work RVUs. In other situations, 

the commenter could demonstrate that 

there is a rank order anomaly within a 

family of codes. Another reason for 

reviewing the physician work involved 

in a service could be that the physician 

time or intensity required by the 

procedure has changed since it was last 

reviewed, perhaps because of a change 

in technology or in patient 

characteristics. 

The RUC has also developed more 

detailed ‘‘Compelling Evidence 

Standards’’ which are used by the RUC 

as part of their process to determine if 

a recommendation to change the work 

RVUs is warranted for a given code. We 

are including these standards below 

solely for informational purposes so that 

commenters are aware what kind of 

information will be needed to make a 

successful argument to the RUC for 

changing work RVUs. 

RUC Compelling Evidence Standards 

The RUC operates with the initial 

presumption that the current values 

assigned to the codes under review are 

correct. This presumption can be 

challenged by a society or other 

organization presenting a compelling 

argument that the existing values are no 

longer rational or appropriate for the 

codes in question. The argument for a 

change must be substantial and meet the 

RUC’s compelling evidence standards. 

This argument must be provided in the 

comment letter to us, and then later to 

the RUC in writing on the Summary of 

Recommendation form. The following 

guidelines may be used to develop a 

‘‘compelling argument’’ that the 

published relative value for a service is 

inappropriately valued: 

• Documentation in the peerreviewed medical literature or other 

reliable data that there have been 

changes in physician work due to one 

or more of the following:

+ Technique 

+ Knowledge and technology 

+ Patient population 

+ Site-of-service 

+ Length of hospital stay 

+ Physician time

• An anomalous relationship between 

the code being valued and other codes. 

For example, if code A describes a 

service that requires more work than 

codes B, C, and D, but is nevertheless 

valued lower. The specialty would need 

to assemble evidence on service time, 

technical skill, patient severity, 

complexity, length of stay and other 

factors for the code being considered 

and the codes to which it is compared. 

These reference services may be both 

inter- and intra-specialty. 

• Evidence that technology has 

changed physician work that is, 

diffusion of technology.

• Analysis of other data on time and 

effort measures, such as operating room 

logs or national and other representative 

databases. 

• Evidence that incorrect 

assumptions were made in the previous 

valuation of the service, as documented, 

such as: 

+ A misleading vignette, survey or 

flawed crosswalk assumptions in a 

previous evaluation; 

+ A flawed mechanism or 

methodology used in the previous 

valuation, for example, evidence that no 

pediatricians were consulted in 

assigning pediatric values; and 

+ A previous survey was conducted 

by one specialty to obtain a value, but 

in actuality that service is currently 

provided primarily by physicians from 

a different specialty according to 

utilization data. 

We emphasize, however, as we 

reiterated for the last 5-year review, that 

we retain the responsibility for 

analyzing the comments on the 

suggested work RVU revisions, 

developing the proposed rule, 

evaluating the comments on the 

proposed rule, and deciding whether to 

revise RVUs. We are not delegating this 

responsibility to the RUC or any other 

organization. 

VII. Update to the Codes for Physician 

Self-Referral Prohibition 

[If you choose to comment on issues in 

this section, please include the caption 

‘‘Physician Self-Referral Designated 

Health Services’’ at the beginning of 

your comments.] 

A. Background 

Section 1877 of the Act prohibits a 

physician from referring a Medicare 

beneficiary for certain designated health 

services (DHS) to a health care entity 

with which the physician (or a member 

of the physician’s immediate family) has 

a financial relationship, unless an 

exception applies. The following 

services are DHS, as specified in section 

1877 of the Act and in regulations at 

§ 411.351:

• Clinical laboratory services. 

• Physical therapy, occupational 

therapy, and speech-language pathology 

services. 

• Radiology and certain other imaging 

services. 

• Radiation therapy services and 

supplies. 

• Durable medical equipment and 

supplies. 

• Parenteral and enteral nutrients, 

equipment, and supplies. 

• Prosthetics, orthotics, and 

prosthetic devices and supplies. 

• Home health services. 

• Outpatient prescription drugs. 

• Inpatient and outpatient hospital 

services. 

In § 411.351, the entire scope of the 

first four of these DHS categories is 

defined in a list of CPT/HCPCS codes 

(the Code List), which is updated 

annually to account for changes in the 

most recent CPT and HCPCS 

publications. The updated Code List 

appears as an addendum to the 

physician fee schedule final rule and is 

available on our Web site at http://

cms.hhs.gov/medlearn/refphys.asp. We 

also include in the Code List those items 

and services that may qualify for either 

of the following two exceptions to the 

physician self-referral prohibition: 

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• EPO and other dialysis-related 

drugs furnished in or by an ESRD 

facility (§ 411.351(g)). 

• Preventive screening tests, 

immunizations or vaccines 

(§ 411.351(h)). 

The Code List was updated in the 

physician fee schedule final rule 

published in the Federal Register on 

November 7, 2003 (68 FR 63196). It was 

subsequently corrected in a notice that 

was published in the Federal Register

on March 26, 2004 (69 FR 15729). We 

also published the Phase II physician 

self-referral interim final rule with 

comment period on March 26, 2004 in 

the Federal Register (69 FR 16054), 

which made several additional changes 

to the Code List, effective July 26, 2004. 

The updated all-inclusive Code List 

effective January 1, 2005 is presented in 

Addendum L of this final rule. 

B. Response to Comments 

We received two public comments 

relating to the Code List published in 

the November 7, 2003 physician fee 

schedule final rule. One commenter 

supported the exclusion of 

interventional radiology services from 

the definition of radiology and certain 

other imaging services, as reflected on 

the Code List. The other commenter 

raised a concern over the exclusion of 

nuclear medicine services as a DHS. 

Additionally, the proposed physician 

fee schedule rule that was published on 

August 5, 2004 in the Federal Register

(69 FR 47488) generated one comment 

relating to the Code List. That comment 

and our response also are provided 

below. We note that we will address in 

a separate Federal Register document 

those public comments relating to the 

Code List that were received in response 

to the Phase II physician self-referral 

final rule published on March 26, 2004. 

Comment: One commenter requested 

that we include nuclear medicine 

services as DHS. The commenter is 

concerned that physicians may engage 

in lucrative financial relationships 

associated with nuclear medicine 

studies such as PET scans. 

Response: We are mindful of the issue 

raised by the commenter, and we 

continue to consider the application of 

section 1877 of the Act to nuclear 

medicine procedures. However, we note 

that the purpose of this update is merely 

to conform the Code List to the most 

recent publications of HCPCS and CPT 

codes. Substantive changes to DHS 

definitions, such as that advocated by 

the commenter, are beyond the scope of 

this rulemaking. 

Comment: One commenter asked us 

to clarify that the Code List does not 

define all DHS and that we indicate 

where providers can obtain more 

information on the remaining categories. 

Additionally, the commenter suggested 

that we define all DHS in the Code List 

and that the definitions be included in 

the quarterly updated Microsoft Excel 

spreadsheet of RVU values, global 

periods and supervision levels for 

Medicare covered services posted on 

our Web site.

Response: We believe that most 

readers are aware that the Code List 

does not define every DHS category. 

Nevertheless, we will add a footnote to 

the Code List indicating that § 411.351 

defines those DHS categories not 

reflected on the Code List. 

The comment advocating that we 

define all DHS by CPT or HCPCS code 

on the Code List would require a 

substantive change to existing DHS 

definitions and is therefore beyond the 

scope of this rulemaking. We will 

explore the possibility of identifying 

certain DHS in the National Physician 

Fee Schedule Relative Value File

(http://www.cms.hhs.gov/providers/

pufdownload/rvudown.asp). 

C. Revisions Effective for 2005 

Tables 20 and 21, in this section, 

identify the additions and deletions, 

respectively, to the comprehensive Code 

List included in the Phase II physician 

self-referral interim final rule published 

March 26, 2004. Tables 20 and 21 also 

identify the additions and deletions to 

the lists of codes used to identify the 

items and services that may qualify for 

the exceptions in § 411.355(g) (regarding 

EPO and other dialysis-related 

outpatient prescription drugs furnished 

in or by an ESRD facility) and in 

§ 411.355(h) (regarding preventive 

screening tests, immunizations and 

vaccines). 

We will consider comments for the 

codes listed in Tables 20 and 21 below, 

if we receive them by the date specified 

in the DATES section of this final rule. 

We will not consider any comment that 

advocates a substantive change to any of 

the DHS defined in § 411.351. 

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The additions specified in Table 20 

generally reflect new CPT and HCPCS 

codes that become effective January 1, 

2005 or that became effective since our 

last update. It also reflects the addition 

of codes that will be recognized by 

Medicare for payment purposes 

effective January 1, 2005. 

Additionally, we are adding HCPCS 

code Q0092 to the category of radiology 

and certain other imaging services since 

it may be billed in conjunction with the 

provision of portable x-ray services and 

had been inadvertently omitted. 

We are also adding two existing 

brachytherapy codes (CPT 57155 and 

58346) to the category of radiation 

therapy services and supplies. As noted 

in the March 26, 2004 Phase II 

physician self-referral interim final rule 

(69 FR at 16104–16105), brachytherapy 

is a DHS. We inadvertently omitted 

these codes when compiling the Code 

List. 

Table 20 also reflects the addition of 

a flu vaccine code (CPT 90656), CV 

screening blood tests (CPT 80061, 

82465, 83718 and 84478) and diabetes 

screening tests (CPT 82947, 82950 and 

82951) to the list that identifies 

preventive screening tests, 

immunizations and vaccines that may 

qualify for the exception described in 

§ 411.355(h) for such items and services. 

The physician self-referral prohibition 

will not apply to these services if the 

conditions set forth in § 411.355(h) are 

satisfied. We note that CPT codes 80061, 

82465, 83718, 84478, 82947, 82950, and 

82951 are eligible for the exception at 

§ 411.355(h) only when billed with the 

appropriate screening diagnosis codes 

specified on the Code List for each test. 

Table 21 reflects the deletions 

necessary to conform the Code List to 

the most recent publications of CPT and 

HCPCS codes. 

VIII. Physician Fee Schedule Update 

for Calendar Year 2005 

A. Physician Fee Schedule Update 

The physician fee schedule update is 

determined using a formula specified by 

statute. Under section 1848(d)(4) of the 

Act, the update is equal to the product 

of 1 plus the percentage increase in the 

MEI (divided by 100) and 1 plus the 

update adjustment factor (UAF). For CY 

2005, the MEI is equal to 3.1 percent 

(1.031). The UAF is ¥7.0 percent 

(0.930). Section 1848(d)(4)(F) of the Act 

requires an additional 0.8 percent 

(1.008) increase to the update for 2005. 

The product of the MEI (1.031), the UAF 

(0.930), and the statutory adjustment 

factor (1.008) equals the CY 2005 update 

of ¥3.3 percent (0.967). However, 

section 601 of the MMA amended 

section 1848(d) of the Act to specify that 

the update to the single CF for 2005 

cannot be less than 1.5 percent. Because 

the statutory formula will yield an 

update of ¥3.3 percent, consistent with 

section 601 of the MMA, we are 

establishing a 2005 physician fee 

schedule update of 1.5 percent. 

Our calculations of all of the above 

figures are explained below. 

B. The Percentage Change in the 

Medicare Economic Index Medicare 

Economic Index (MEI) 

The MEI measures the weightedaverage annual price change for various 

inputs needed to produce physicians’

services. The MEI is a fixed-weight 

input price index, with an adjustment 

for the change in economy-wide 

multifactor productivity. This index, 

which has 2000 base year weights, is 

comprised of two broad categories: 

physician’s own time and physician’s 

practice expense. 

The physician’s own time component 

represents the net income portion of 

business receipts and primarily reflects 

the input of the physician’s own time 

into the production of physicians’

services in physicians’ offices. This 

category consists of two 

subcomponents: wages and salaries, and 

fringe benefits.

The physician’s practice expense 

category represents nonphysician inputs 

used in the production of services in 

physicians’ offices. This category 

consists of wages and salaries and fringe 

benefits for nonphysician staff and other 

nonlabor inputs. The physician’s 

practice expense component also 

includes the following categories of 

nonlabor inputs: office expense, medical 

materials and supplies, professional 

liability insurance, medical equipment, 

professional car, and other expenses. 

The components are adjusted to reflect 

productivity growth in physicians’

offices by the 10-year moving average of 

multifactor productivity in the private 

nonfarm business sector. The Table 22 

below presents a listing of the MEI cost 

categories with associated weights and 

percent changes for price proxies for the 

2005 update. For calendar year 2005, 

the increase in the MEI is 3.1 percent, 

which includes a 0.9 percent change in 

the 10-year moving average of 

multifactor productivity. This result is 

the result of a 3.0 percent increase in 

Physician’s Own Time and a 5.2 percent 

increase in Physician’s Practice 

Expense. Within the Physician’s 

Practice Expense, the largest increase 

occurred in Professional Liability 

Insurance, which increased 23.9 

percent. 

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C. The Update Adjustment Factor 

Section 1848(d) of the Act provides 

that the physician fee schedule update 

is equal to the product of the MEI and 

a UAF. The UAF is applied to make 

actual and target expenditures (referred 

to in the statute as ‘‘allowed 

expenditures’’) equal. Allowed 

expenditures are equal to actual 

expenditures in a base period updated 

each year by the sustainable growth rate 

(SGR). The SGR sets the annual rate of 

growth in allowed expenditures and is 

determined by a formula specified in 

section 1848(f) of the Act. 

1. Calculation Under Current Law 

Under section 1848(d)(4)(B) of the 

Act, the UAF for a year beginning with 

2001 is equal to the sum of the 

following—

• Prior Year Adjustment Component. 

An amount determined by—

+ Computing the difference (which 

may be positive or negative) between 

the amount of the allowed expenditures 

for physicians’ services for the prior 

year (the year prior to the year for which 

the update is being determined) and the 

amount of the actual expenditures for 

those services for that year; 

+ Dividing that difference by the 

amount of the actual expenditures for 

those services for that year; and 

+ Multiplying that quotient by 0.75. 


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• Cumulative Adjustment 

Component. An amount determined 

by—

+ Computing the difference (which 

may be positive or negative) between 

the amount of the allowed expenditures 

for physicians’ services from April 1, 

1996, through the end of the prior year 

and the amount of the actual 

expenditures for those services during 

that period; 

+ Dividing that difference by actual 

expenditures for those services for the 

prior year as increased by the 

sustainable growth rate for the year for 

which the update adjustment factor is to 

be determined; and 

+ Multiplying that quotient by 0.33. 

Section 1848(d)(4)(E) of the Act 

requires the Secretary to recalculate 

allowed expenditures consistent with 

section 1848(f)(3) of the Act. Section 

1848(f)(3) specifies that the SGR (and, in 

turn, allowed expenditures) for the 

upcoming CY (2005 in this case), the 

current CY (2004) and the preceding CY 

(2003) are to be determined on the basis 

of the best data available as of 

September 1 of the current year. 

Allowed expenditures are initially 

estimated and subsequently revised 

twice. The second revision occurs after 

the CY has ended (that is, we are 

making the final revision to 2003 

allowed expenditures in this final rule). 

Once the SGR and allowed expenditures 

for a year have been revised twice, they 

are final. 

Table 23 shows annual and 

cumulative allowed expenditures for 

physicians’ services from April 1, 1996 

through the end of the current CY, 

including the transition period to a CY 

system that occurred in 1999. Also 

shown is the SGR corresponding with 

each period. The calculation of the SGR 

is discussed in detail below. 

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Consistent with section 1848(d)(4)(E) 

of the Act, Table 23 includes our final 

revision of allowed expenditures for 

2003, a recalculation of allowed 

expenditures for 2004, and our initial 

estimate of allowed expenditures for 

2005. To determine the update 

adjustment factor for 2005, the statute 

requires that we use allowed and actual 

expenditures from April 1, 1996 through 

December 31, 2004 and the 2005 SGR. 

Consistent with section 1848(d)(4)(E) of 

the Act, we will be making further 

revisions to the 2004 and 2005 SGRs 


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and 2004 and 2005 allowed 

expenditures. Because we have 

incomplete actual expenditure data for 

2004, we are using an estimate for this 

period. Any difference between current 

estimates and final figures will be taken 

into account in determining the update 

adjustment factor for future years. 

We are using figures from Table 23 in 

the statutory formula illustrated below:

UAF = Update Adjustment Factor 

Target04 = Allowed Expenditures for 

2004 or $77.1 billion 

Actual04 = Estimated Actual 

Expenditures for 2004 = $84.9 

billion 

Target 4/96–12/04 = Allowed Expenditures 

from 4/1/1996–12/31/2004 = $531.8 

billion 

Actual 4/96–12/04 = Estimated Actual 

Expenditures from 4/1/1996–12/31/

2003 = $545.5 billion 

SGR05 = 4.3 percent (1.043)

Section 1848(d)(4)(D) of the Act 

indicates that the UAF determined 

under section 1848(d)(4)(B) of the Act 

for a year may not be less than ¥0.070 

or greater than 0.03. Since ¥0.120 is 

less than ¥0.070, the UAF for 2005 will 

be ¥0.070. 

Section 1848(d)(4)(A)(ii) of the Act 

indicates that 1 should be added to the 

UAF determined under section 

1848(d)(4)(B) of the Act. Thus, adding 1 

to ¥0.070 makes the update adjustment 

factor equal to 0.930. 

IX. Allowed Expenditures for 

Physicians’ Services and the 

Sustainable Growth Rate 

A. Medicare Sustainable Growth Rate 

The SGR is an annual growth rate that 

applies to physicians’ services paid by 

Medicare. The use of the SGR is 

intended to control growth in aggregate 

Medicare expenditures for physicians’

services. Payments for services are not 

withheld if the percentage increase in 

actual expenditures exceeds the SGR. 

Rather, the physician fee schedule 

update, as specified in section 

1848(d)(4) of the Act, is adjusted based 

on a comparison of allowed 

expenditures (determined using the 

SGR) and actual expenditures. If actual 

expenditures exceed allowed 

expenditures, the update is reduced. If 

actual expenditures are less than 

allowed expenditures, the update is 

increased. 

Section 1848(f)(2) of the Act specifies 

that the SGR for a year (beginning with 

2001) is equal to the product of the 

following four factors: 

(1) The estimated change in fees for 

physicians’ services. 

(2) The estimated change in the 

average number of Medicare fee-forservice beneficiaries. 

(3) The estimated projected growth in 

real GDP per capita. 

(4) The estimated change in 

expenditures due to changes in law or 

regulations. 

In general, section 1848(f)(3) of the 

Act requires us to publish SGRs for 3 

different time periods, no later than 

November 1 of each year, using the best 

data available as of September 1 of each 

year. Under section 1848(f)(3)(C)(i) of 

the Act, the SGR is estimated and 

subsequently revised twice (beginning 

with the FY and CY 2000 SGRs) based 

on later data. (There were also 

provisions in the Act to adjust the FY 

1998 and FY 1999 SGRs. See the 

February 28, 2003 Federal Register (68 

FR 9567) for a discussion of these 

SGRs). Under section 1848(f)(3)(C)(ii) of 

the Act, there are no further revisions to 

the SGR once it has been estimated and 

subsequently revised in each of the 2 

years following the preliminary 

estimate. In this final rule, we are 

making our preliminary estimate of the 

2005 SGR, a revision to the 2004 SGR, 

and our final revision to the 2003 SGR. 

B. Physicians’ Services 

Section 1848(f)(4)(A) of the Act 

defines the scope of physicians’ services 

covered by the SGR. The statute 

indicates that ‘‘the term ‘‘physicians’

services’’ includes other items and 

services (such as clinical diagnostic 

laboratory tests and radiology services), 

specified by the Secretary, that are 

commonly performed or furnished by a 

physician or in a physician’s office, but 

does not include services furnished to a 

Medicare+Choice plan enrollee.’’ We 

published a definition of physicians’

services for use in the SGR in the 

Federal Register (66 FR 55316) on 

November 1, 2001. We defined 

physicians’ services to include many of 

the medical and other health services 

listed in section 1861(s) of the Act. For 

purposes of determining allowed 

expenditures, actual expenditures, and 

SGRs through December 31, 2002, we 

have specified that physicians’ services 

include the following medical and other 

health services if bills for the items and 

services are processed and paid by 

Medicare carriers (and those paid 

through intermediaries where 

specified): 

• Physicians’ services. 

• Services and supplies furnished 

incident to physicians’ services. 

• Outpatient PT services and 

outpatient OT services. 

• Antigens prepared by, or under the 

direct supervision of, a physician. 

• Services of PAs, certified registered 

nurse anesthetists, CNMs, clinical 

psychologists, clinical social workers, 

NPs, and CNSs. 

• Screening tests for prostate cancer, 

colorectal cancer, and glaucoma. 

• Screening mammography, 

screening pap smears, and screening 

pelvic exams. 

• Diabetes outpatient selfmanagement training services. 

• Medical nutrition therapy services.

• Diagnostic x-ray tests, diagnostic 

laboratory tests, and other diagnostic 

tests (including outpatient diagnostic 

laboratory tests paid through 

intermediaries). 

• X-ray, radium, and radioactive 

isotope therapy. 

• Surgical dressings, splints, casts, 

and other devices used for the reduction 

of fractures and dislocations. 

• Bone mass measurements. 

Sections 611 through 613 of the 

MMA, respectively, modified section 

1861(s) of the Act to add Medicare 

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CV screening blood tests, and diabetes 

screening tests. We believe that these 

services are commonly performed or 

furnished by a physician or in a 

physician’s office and are including 

them in the definition of physicians’

services for purposes of the SGR. 

Comment: We received a number of 

comments requesting that we use our 

administrative authority to remove 

drugs from the SGR. According to one 

of these comments, drugs are not 

physicians’ services and should never 

have been included in the SGR. One of 

these comments indicated that the SGR 

‘‘is a seriously flawed formula that will 

continue to require frequent 

Congressional intervention to avoid 

payment cuts * * *’’ According to this 

comment, ‘‘the Administration should 

reduce the price tag and help pave the 

way for an appropriate long-term 

solution by removing drugs from the 

SGR pool.’’ We also received a number 

of comments suggesting that we use our 

administrative authority to adjust the 

SGR for changes in spending associated 

with national coverage determinations 

(NCDs). 

Response: We remain concerned 

about forecasts of reductions in 

physician fees and will carefully 

consider the issues raised by the 

comments when we make changes to 

the physician fee schedule for 2006. We 

believe that the physician payment 

system should be structured to control 

costs and achieve predictable and stable 

changes to Medicare’s rates while being 

equitable to physicians. We note that 

administrative changes affecting the 

SGR would have significant long-term 

cost implications but will not have an 

impact on the update for 2006 or the 

subsequent few years. Therefore, 

without a statutory change, there will 

still be a reduction in physicians’ fee 

schedule rates for 2006 and subsequent 

years. Towards those goals, we have 

already taken several actions that will 

improve Medicare’s physician payment 

system: 

• Using multifactor productivity in 

place of labor productivity in the MEI 

beginning in 2003. This change 

increased the physician fee schedule 

update by 0.7 percentage points for 2003 

and was estimated to increase Medicare 

spending by $14.5 billion over 10 years.

• Increasing the weight of malpractice 

costs in the MEI from 3.2 to 3.9 percent, 

a 21 percent increase beginning in 2004. 

• Incorporating an increase in 

malpractice premiums of 16.9 percent 

into the 2004 MEI and 23.9 percent into 

the 2005 MEI. The increased weight for 

malpractice in the MEI makes the index 

a more accurate representation of 

inflation in physician office costs. 

C. Preliminary Estimate of the SGR for 

2005 

Our preliminary estimate of the 2005 

SGR is 4.3 percent. We first estimated 

the 2005 SGR in March and made the 

estimate available to the Medicare 

Payment Advisory Commission and on 

our Web site. Table 24 shows that 

March 2004 and our current estimates of 

the factors included in the 2005 SGR.

Note: Consistent with section 1848(f)(2) of 

the Act, the statutory factors are multiplied, 

not added, to produce the total (that is, 1.013 

× 0.997 × 1.022 × 1.010 = 1.37). A more 

detailed explanation of each figure is 

provided below in section H.1.

D. Revised Sustainable Growth Rate for 

2004 

Our current estimate of the 2004 SGR 

is 7.0 percent. Table 25 shows our 

preliminary estimate of the 2004 SGR 

that was published in the Federal 

Register on November 7, 2003 (68 FR 

63249) and our current estimate.

A more detailed explanation of each 

figure is provided below in section H.2. 

E. Final Sustainable Growth Rate for 

2003 

The SGR for 2003 is 7.3 percent. Table 

26 shows our preliminary estimate of 

the SGR published in the Federal 

Register on December 31, 2002 (67 FR 

80027), our revised estimate published 

in the Federal Register on November 7, 

2003 (67 FR 63249) and the final figures 


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determined using the latest available 

data.

A more detailed explanation of each 

figure is provided below in section H.2. 

F. Calculation of 2005, 2004, and 2003 

Sustainable Growth Rates 

1. Detail on the 2005 SGR 

All of the figures used to determine 

the 2005 SGR are estimates that will be 

revised based on subsequent data. Any 

differences between these estimates and 

the actual measurement of these figures 

will be included in future revisions of 

the SGR and allowed expenditures and 

incorporated into subsequent physician 

fee schedule updates. 

Factor 1—Changes in Fees for 

Physicians’ Services (Before Applying 

Legislative Adjustments) for CY 2005 

This factor is calculated as a weighted 

average of the 2005 fee increases for the 

different types of services included in 

the definition of physicians’ services for 

the SGR. Medical and other health 

services paid using the physician fee 

schedule are estimated to account for 

approximately 83.9 percent of total 

allowed charges included in the SGR in 

2005 and are updated using the MEI. 

The MEI for 2005 is 3.1 percent. 

Diagnostic laboratory tests are estimated 

to represent approximately 7.1 percent 

of Medicare allowed charges included 

in the SGR for 2005. Medicare payments 

for these tests are updated by the 

Consumer Price Index for Urban Areas 

(CPI–U). However, section 629 of the 

MMA specifies that diagnostic 

laboratory services will receive an 

update of 0.0 percent from 2004 through 

2008. 

Drugs are estimated to represent 9.0 

percent of Medicare allowed charges 

included in the SGR in 2005. As 

indicated earlier in this final rule, 

sections 303 and 304 of the MMA 

require Medicare to pay for most drugs 

at 106 percent of ASP beginning January 

1, 2005. We estimated a weighted 

average change in fees for drugs 

included in the SGR using the ASP plus 

6 percent pricing methodology of ¥14.7 

percent for 2005. Table 27 shows the 

weighted average of the MEI, laboratory 

and drug price changes for 2005.

We estimate that the weighted-average 

increase in fees for physicians’ services 

in 2005 under the SGR (before applying 

any legislative adjustments) will be 1.3 

percent. 

Factor 2—The Percentage Change in the 

Average Number of Part B Enrollees 

From 2004 to 2005 

This factor is our estimate of the 

percent change in the average number of 

fee-for-service enrollees from 2004 to 

2005. Services provided to 

Medicare+Choice (M+C) plan enrollees 

are outside the scope of the SGR and are 

excluded from this estimate. OACT 

estimates that the average number of 

Medicare Part B fee-for-service enrollees 

will decrease by 0.3 percent from 2004 

to 2005. Table 28 illustrates how this 

figure was determined.


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An important factor affecting fee-forservice enrollment is beneficiary 

enrollment in M+C plans. Because it is 

difficult to estimate the size of the M+C 

enrollee population before the start of a 

calendar year, at this time we do not 

know how actual enrollment in M+C 

plans will compare to current estimates. 

For this reason, the estimate may change 

substantially as actual Medicare fee-forservice enrollment for 2005 becomes 

known. 

Factor 3—Estimated Real Gross 

Domestic Product Per Capita Growth in 

2005 

We estimate that the growth in real 

per capita GDP from 2004 to 2005 will 

be 2.2 percent. Our past experience 

indicates that there have also been large 

changes in estimates of real per capita 

GDP growth made before the year begins 

and the actual change in GDP computed 

after the year is complete. Thus, it is 

likely that this figure will change as 

actual information on economic 

performance becomes available to us in 

2005. 

Factor 4—Percentage Change in 

Expenditures for Physicians’ Services 

Resulting From Changes in Law or 

Regulations in CY 2005 Compared With 

CY 2004 

There are a number of statutory 

provisions that will affect the 2005 SGR. 

As indicated above, sections 303 and 

304 of the MMA changed Medicare 

payment for drugs. These provisions 

also changed Medicare payments for the 

administration of drugs. Section 

303(a)(1) amended section 1848(c)(2) of 

the Act to require the Secretary to make 

a number of changes that increased 

Medicare payment for drug 

administration beginning January 1, 

2004. These changes permanently 

increased Medicare payments for drug 

administration by a weighted average of 

110 percent. Section 303(a)(4) of the 

MMA required an additional 

transitional adjustment (temporary 

increase) to Medicare’s payment for 

drug administration of 32 percent for 

2004 and 3 percent for 2005. The change 

in the transitional adjustment of 32 

percent for 2004 to 3 percent for 2005 

would reduce Medicare payments for 

drug administration between 2004 and 

2005. However, some of this reduction 

will be lessened because we are also 

adopting changes to the codes and 

payment amounts for drug 

administration based on 

recommendations from the AMA’s CPT 

Editorial Panel and Relative Value 

Update Committee (RUC), under the 

authority of section 1848(c)(2)(J) of the 

Act. We are further increasing physician 

fee schedule payments by paying 

separately for injections provided on the 

same day as another physician fee 

schedule service. We are further 

increasing physician fee schedule 

payments by paying separately for 

injections provided on the same day as 

another physician fee schedule service. 

We estimate that changes to our policy 

on injections and the changes to our 

drug administration payments taken 

together will increase physician 

spending by 0.2 percent.

We are also adjusting the SGR to 

account for OACT’s assumptions about 

predicted physician behavior in 

response to the payment reductions. 

OACT assumes that reduced fees are 

likely to be met by a combination of an 

increase in volume and a shift in the 

mix or intensity of services furnished to 

Medicare beneficiaries so as to offset 30 

percent of the payment reduction that 

would otherwise occur. Because OACT 

assumes that physicians will offset some 

of the loss in payments that will occur 

from changes in Medicare payments for 

drugs (as described earlier) and drug 

administration and the change in 

payment can be attributed to a change 

in law, we are increasing the SGR by 0.4 

percent for this factor. (Discussion may 

change based on recent decisions.) 

There are several other statutory 

provisions that are estimated to increase 

Medicare spending for physicians’

services under the SGR. Section 413(a) 

of the MMA establishes a 5 percent 

increase in the physician fee schedule 

payment for services provided in 

physician scarcity areas. Section 413(b) 

improves the procedures for paying the 

10 percent physician fee schedule bonus 

payment for services provided in health 

professional shortage areas. We estimate 

that the provisions of section 413 will 

increase Medicare physician fee 

schedule payments by 0.1 percent. 

Sections 611 through 613 of the 

MMA, respectively, provide Medicare 

coverage for an initial preventive 

physical examination, CV and diabetes 

screening tests. We estimate that new 

Medicare coverage for these preventive 

services will increase spending for 

physicians’ services under the SGR by 

0.3 percent. Taken together, we estimate 

that all of the statutory provisions for 

2005 will increase Medicare spending 

for physicians’ services by 0.5 percent. 

Comment: We received comments 

concerned that we will underestimate 

the costs associated with the initial 

preventive physical examination. These 

comments suggested that we should 

account for ‘‘both spending due to use 

of the new or expanded benefit, as well 

as additional services triggered by 

implementation of the new benefit.’’ We 

received other comments concerned that 

we will underestimate the cost of CV 

and diabetes screening tests because we 

will use the national coverage 

determination (NCD) process to decide 

if any additional tests may be eligible 

for coverage. The commenters have this 

concern because we do not adjust the 

SGR for NCDs. 

Response: Our estimates of the costs 

of the initial preventive physical exam 

and the CV and diabetes screening tests 

account for utilization of other Medicare 

services (preventive and nonpreventive) 

that may result from coverage of the 

new preventive services. We also note 

that our current estimates of the initial 

preventive examination and CV and 

diabetes screening tests are based only 

on our projections without any data on 

actual use of the benefits. The statute 

requires us to revise our current 

estimate of the 2005 SGR no later than 

November 1, 2005 and to make a final 

revision to our estimate no later than 

November 1, 2006. At the time we make 

the final revision to the 2005 SGR, we 

will have complete data on use of the 

new preventive services that will enable 

us to more accurately reflect these costs 

in the SGR. 

With respect to the comments about 

use of the NCD process to establish 

additional CV and diabetes screening 

tests that will be eligible for Medicare 

coverage, the regulation lists the 

common types of tests that are currently 


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used to screen patients for these 

conditions. Our adjustment to the SGR 

will cover all of the costs associated 

with these new Medicare covered 

screening tests. However, if we use the 

NCD process to cover additional tests, 

we will consider this issue further. 

2. Detail on the 2004 SGR

A more detailed discussion of our 

revised estimates of the four elements of 

the 2004 SGR follows. 

Factor 1—Changes in Fees for 

Physicians’ Services (Before Applying 

Legislative Adjustments) for 2004 

This factor was calculated as a 

weighted average of the 2004 fee 

increases that apply for the different 

types of services included in the 

definition of physicians’ services for the 

SGR. 

We estimate that services paid using 

the physician fee schedule account for 

approximately 83.7 percent of total 

allowed charges included in the SGR in 

2004. These services were updated 

using the 2004 MEI of 2.9 percent. We 

estimate that diagnostic laboratory tests 

represent approximately 7.1 percent of 

total allowed charges included in the 

SGR in 2004. Medicare payments for 

these tests are updated by the CPI–U. 

However, section 629 of the MMA 

specifies that diagnostic laboratory 

services will receive an update of 0.0 

percent from 2004 through 2008. We 

estimate that drugs represent 9.2 percent 

of Medicare allowed charges included 

in the SGR in 2004. Historically, 

Medicare paid for drugs under section 

1842(o) of the Act at 95 percent of 

average wholesale price (AWP). 

However, with some exceptions, 

sections 303 and 304 of the MMA 

generally require Medicare to pay for 

drugs at 85 percent of the AWP 

determined as of April 1, 2003 or a 

specified percentage of AWP based on 

studies by the Government 

Accountability Office and the Office of 

the Inspector General in 2004. (We 

implemented section 303 and 304 of the 

MMA in an interim final rule published 

in the Federal Register on January 7, 

2004 (see 69 FR 1086). Taking sections 

303 and 304 of the MMA into account, 

we estimate a weighted average change 

in fees for drugs included in the SGR of 

¥11.7 percent for 2004. Table 29 shows 

the weighted average of the MEI, 

laboratory and drug price changes for 

2004.

After taking into account the elements 

described in Table 29, we estimate that 

the weighted-average increase in fees for 

physicians’ services in 2004 under the 

SGR (before applying any legislative 

adjustments) will be 1.4 percent. Our 

November 7, 2003 estimate of this factor 

was 2.7 percent. The reduction from 2.7 

percent to our current estimate of 1.4 

percent is primarily due to application 

of the drug pricing changes required by 

sections 303 and 304 of the MMA.

Factor 2—The Percentage Change in the 

Average Number of Part B Enrollees 

From 2003 to 2004 

OACT estimates that the average 

number of Medicare Part B fee-forservice enrollees (excluding 

beneficiaries enrolled in M+C plans) 

increased by 1.7 percent in 2004. Table 

30 illustrates how we determined this 

figure.

OACT’s estimate of the 1.7 percent 

change in the number of fee-for-service 

enrollees, net of M+C enrollment for 

2004 compared to 2003, is the same as 

our original estimate published in the 

November 7, 2003 final rule (68 FR 

63250). While our current projection 

based on data from 8 months of 2004 is 

the same as our original estimate when 

we had no data, it is still possible that 

our final estimate of this figure will be 

different once we have complete 

information on 2004 fee-for-service 

enrollment. 

Factor 3—Estimated Real Gross 

Domestic Product Per Capita Growth in 

2004 

We estimate that the growth in real 

per capita GDP will be 2.2 percent for 

2004. Our past experience indicates that 

there have also been large differences 

between our estimates of real per capita 

GDP growth made prior to the year’s 

end and the actual change in this factor. 

Thus, it is likely that this figure will 

change further as complete actual 

information on 2004 economic 

performance becomes available to us in 

2005. 


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Factor 4—Percentage Change in 

Expenditures for Physicians’ Services 

Resulting From Changes in Law or 

Regulations in 2004 Compared With 

2003 

There are four statutory provisions 

that are increasing 2004 Medicare 

spending relative to 2003. Section 412 

of the MMA established a floor of 1.0 on 

adjustments to the physician work 

relative value unit for the geographic 

practice cost index (GPCI) for the years 

2004 through 2006. Section 602 of the 

MMA increases the GPCIs for work, 

practice expense, and malpractice in 

Alaska to 1.67. Because these provisions 

increase the work GPCIs that are below 

1.0 to 1.0 and, for services in Alaska, we 

estimate that sections 412 and 602 of the 

MMA are increasing 2004 Medicare 

spending included in the SGR by 0.6 

percent. Sections 303 and 304 of the 

MMA increased Medicare’s payments 

for drug administration in 2004. It 

further exempted the increases in 

payment from the budget neutrality 

provisions of section 1848(c)(2) of the 

Act. We estimate the section 303 and 

304 provisions will increase spending 

for physicians’ services by 0.8 percent 

in 2004. Taken together, we estimate 

that statutory provisions are increasing 

2004 spending for physicians’ services 

by 1.5 percent (after accounting for 

rounding). 

3. Detail on the 2003 SGR 

A more detailed discussion of our 

revised estimates of the four elements of 

the 2003 SGR follows. 

Factor 1—Changes in Fees for 

Physicians’ Services (Before Applying 

Legislative Adjustments) for 2003 

This factor was calculated as a 

weighted average of the 2003 fee 

increases that apply for the different 

types of services included in the 

definition of physicians’ services for the 

SGR. 

Services paid using the physician fee 

schedule accounted for approximately 

83.0 percent of total Medicare allowed 

charges included in the SGR for 2003 

and are updated using the MEI. The MEI 

for 2003 was 3.0 percent. Diagnostic 

laboratory tests represent approximately 

7.2 percent of total Medicare allowed 

charges included in the SGR and are 

updated by the CPI–U. The CPI–U 

applied to payments for laboratory 

services for 2003 was 1.1 percent. Drugs 

represented approximately 9.8 percent 

of total Medicare allowed charges 

included in the SGR for 2003. 

According to section 1842(o) of the Act, 

Medicare pays for drugs based on 95 

percent of AWP. Using wholesale 

pricing information and Medicare 

utilization for drugs included in the 

SGR, we estimate a weighted average fee 

increase for drugs of 1.9 percent for 

2003. Table 31 shows the weighted 

average of the MEI, laboratory, and drug 

price increases for 2003.

After taking into account the elements 

described in Table 31, we estimate that 

the weighted-average increase in fees for 

physicians’ services in 2003 under the 

SGR (before applying any legislative 

adjustments) was 2.8 percent. 

Factor 2—The Percentage Change in the 

Average Number of Part B Enrollees 

From 2002 to 2003 

We estimate the increase in the 

number of fee-for-service enrollees 

(excluding beneficiaries enrolled in 

M+C plans) from 2002 to 2003 was 2.3 

percent. Our calculation of this factor is 

based on complete data from 2003. 

Table 32 illustrates the calculation of 

this factor.

Factor 3—Estimated Real Gross 

Domestic Product Per Capita Growth in 

2003 

We estimate that the growth in real 

per capita GDP was 2.0 percent in 2003. 

This figure is a final one based on 

complete data for 2003. 

Factor 4—Percentage Change in 

Expenditures for Physicians’ Services 

Resulting From Changes in Law or 

Regulations in 2003 Compared With 

2002 

There are no statutory or regulatory 

changes that affect Medicare 

expenditures for services included in 

the SGR in 2003. 

X. Anesthesia and Physician Fee 

Schedule Conversion Factors (CF) for 

Calendar Year 2005 

The 2005 physician fee schedule CF 

will be $37.8975. The 2005 national 

average anesthesia conversion factor is 

$17.7594. 


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Physician Fee Schedule Conversion 

Factor 

Under section 1848(d)(1)(A) of the 

Act, the physician fee schedule CF is 

equal to the CF for the previous year 

multiplied by the update determined 

under section 1848(d)(4) of the Act. 

Using this formula would result in a 3.3 

percent reduction to the physician fee 

schedule CF for 2005. However, section 

601 of the MMA amended section 

1848(d) of the Act to specify that the 

update to the single CF for 2004 and 

2005 will not be less than 1.5 percent. 

Because the statutory formula will yield 

a 3.3 percent reduction to the 2005 

physician fee schedule CF and the 

amendments to the statute indicate that 

the update for 2005 cannot be less than 

1.5 percent, we are increasing the 

physician fee schedule conversion 

factor by 1.5 percent. 

We illustrate the calculation for the 

2005 physician fee schedule CF in Table 

33 below.

• Anesthesia Fee Schedule Conversion 

Factor 

Anesthesia services do not have RVUs 

like other physician fee schedule 

services. Therefore, we account for any 

necessary RVU adjustments through an 

adjustment to the anesthesia fee 

schedule CF. The only adjustment we 

are applying to the anesthesia fee 

schedule CF for 2005 is the physician 

fee schedule update. We used the 

following figures to determine the 

anesthesia fee schedule CF (see Table 

34).

XI. Telehealth Originating Site Facility 

Fee Payment Amount Update 

Section 1834(m) of the Act establishes 

the payment amount for the Medicare 

telehealth originating site facility fee for 

telehealth services provided from 

October 1, 2001 through December 31, 

2002, at $20. For telehealth services 

provided on or after January 1 of each 

subsequent calendar year, the telehealth 

originating site facility fee is increased 

by the percentage increase in the MEI as 

defined in section 1842(i)(3) of the Act. 

The MEI increase for 2005 is 3.1 

percent. 

Therefore, for CY 2005, the payment 

amount for HCPCS code ‘‘Q3014, 

telehealth originating site facility fee’’ is 

80 percent of the lesser of the actual 

charge or $21.86. The Medicare 

telehealth originating site facility fee 

and MEI increase by the applicable time 

period is shown in Table 35.

XII. Provisions of the Final Rule 

The provisions of this final rule 

restate the provisions of the August 

2004 proposed rule, except as noted 

elsewhere in the preamble. 

XIII. Waiver of Proposed Rulemaking 

We ordinarily publish a notice of 

proposed rulemaking in the Federal 

Register and invite public comment on 

the proposed rule. The notice of 

proposed rulemaking includes a 

reference to the legal authority under 

which the rule is proposed, and the 

terms and substances of the proposed 

rule or a description of the subjects and 

issues involved. This procedure can be 

waived, however, if an agency finds 


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good cause that a notice-and-comment 

procedure is impracticable, 

unnecessary, or contrary to the public 

interest and incorporates a statement of 

the finding and its reasons in the rule 

issued. 

We believe that providing a notice 

and comment procedure with regard to 

the RNHCI home benefit would be 

contrary to the public interest. The 

RNHCI home benefit provisions were 

added by the Congress to get a RNHCI 

benefit to those beneficiaries who are 

confined to the home. We believe that 

the Congress intended to provide the 

benefit to the homebound RNHCI 

beneficiaries as means of providing a 

similar home option as is offered to the 

general Medicare population. However, 

this expanded benefit is, by statute, a 

time limited benefit. Any delay in 

implementation could prevent 

beneficiaries from utilizing this 

expanded benefit at all or could 

seriously impinge on the amount of time 

they can use the benefit. Therefore, we 

find good cause to waive notice and 

comment procedures as contrary to the 

public interest with regard to the RNHCI 

home benefit. We are, however, 

providing a 60-day period for public 

comment. 

XIV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA), we are required to 

provide 60-day notice in the Federal 

Register and solicit public comment 

before a collection of information 

requirement is submitted to the Office of 

Management and Budget (OMB) for 

review and approval. In order to fairly 

evaluate whether OMB should approve 

an information collection, section 

3506(c)(2)(A) of the PRA requires that 

we solicit comment on the following 

issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

Section 403.766 Requirements for 

Coverage/Payment of Home Services 

In summary, § 403.766 states the 

RNHCI provider must submit a written 

letter of intent to us if they choose to 

participate in offering the home service 

benefit. 

The burden associated with this 

requirement is the time and effort of the 

RNHCI provider to prepare and submit 

a letter of intention. It is estimated that 

this two-sentence letter should take no 

longer than 15 minutes to prepare and 

submit. There are currently 16 RNHCI 

providers and, if all elected to 

participate, it would result in a one-time 

burden of 4 hours. 

We have submitted a copy of this final 

rule with comment to OMB for its 

review of the information collection 

requirements described above. These 

requirements are not effective until they 

have been approved by OMB. 

Section 410.16 Initial Preventive 

Physical Examination: Conditions for 

Limitations on Coverage 

In summary, § 410.16 requires the 

furnishing of education, counseling and 

referral services as part of an initial 

preventive physical examination, a 

written plan for obtaining the 

appropriate screening and other 

preventive services which are also 

covered as separate Medicare B Part 

services. 

The burden associated with this 

requirement is the time required of the 

physician or practitioner to provide 

beneficiaries with education, 

counseling, and referral services and to 

develop and provide a written plan for 

obtaining screening and other 

preventive services.

While these requirements are subject 

to the PRA; we believe the burden 

associated with these requirements to be 

usual and customary business practice; 

therefore, the burden for this collection 

requirement is exempt under 5 CFR 

1320.3(b)(2)&(3). 

Section 411.404 Criteria for 

Determining That a Beneficiary Knew 

That Services Were Excluded From 

Coverage as Custodial Care or as Not 

Reasonable and Necessary 

In summary, § 411.404 requires that 

written notice must be given to a 

beneficiary, or someone acting on his or 

her behalf, that the services were not 

covered because they did not meet 

Medicare coverage guidelines. 

Although this section is subject to the 

PRA, the burden associated with this 

requirement is currently captured and 

accounted for in two currently approved 

information collections under OMB 

numbers 0938–0566 and 0938–0781. 

Section 418.205 Special Requirements 

for Hospice Pre-Election Evaluations 

and Counseling Services 

In summary, § 418.205 states that 

written documentation is required and 

must be maintained for referral requests 

and services furnished. 

While these information collection 

requirements are subject to the PRA, the 

burden associated with them is exempt 

as defined in 5 CFR 1320.3(b)(2). 

If you comment on these information 

collection and recordkeeping 

requirements, please mail copies 

directly to the following: Centers for 

Medicare & Medicaid Services Office of 

Strategic Operations and Regulatory 

Affairs, Attn: Melissa Musotto (CMS–

1429–FC) Room C5–13–28, 7500 

Security Boulevard, Baltimore, MD 

21244–1850; and Office of Information 

and Regulatory Affairs, Office of 

Management and Budget, Room 10235, 

New Executive Office Building, 

Washington, DC 20503, Attn: 

Christopher Martin, CMS Desk Officer 

(CMS–1429–P), Christopher 

Martin@omb.eop.gov. FAX (202) 395–

6974. 

XV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the ‘‘DATES’’ section 

of this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

XVI. Regulatory Impact Analysis 

We have examined the impact of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 16, 

1980 Pub. L. 96–354), section 1102(b) of 

the Social Security Act, the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), and Executive Order 13132. 

Executive Order 12866 (as amended 

by Executive Order 13258, which 

merely reassigns responsibilities of 

duties) directs agencies to assess all 

costs and benefits of available regulatory 

alternatives and, when regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). A regulatory impact analysis 

must be prepared for final rules with 

economically significant effects (that is, 

a final rule that would have an annual 

effect on the economy of $100 million 

or more in any 1 year, or would 

adversely affect in a material way the 

economy, a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local, or tribal governments or 

communities). 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66393

As indicated in more detail below, we 

expect that the physician fee schedule 

provisions included in this final rule 

will redistribute more than $100 million 

in 1 year. We also anticipate that the 

combined effect of several provisions of 

the MMA implemented in this final rule 

will increase spending by more than 

$100 million. Other MMA provisions 

implemented in this final rule are 

expected to reduce spending by more 

than $100 million. We are considering 

this final rule to be economically 

significant because its provisions are 

expected to result in an increase, 

decrease or aggregate redistribution of 

Medicare spending that will exceed 

$100 million. Therefore, this final rule 

is a major rule and we have prepared a 

regulatory impact analysis. 

The RFA requires that we analyze 

regulatory options for small businesses 

and other entities. We prepare a 

regulatory flexibility analysis unless we 

certify that a rule would not have a 

significant economic impact on a 

substantial number of small entities. 

The analysis must include a justification 

concerning the reason action is being 

taken, the kinds and number of small 

entities the rule affects, and an 

explanation of any meaningful options 

that achieve the objectives with less 

significant adverse economic impact on 

the small entities.

Section 1102(b) of the Act requires us 

to prepare a regulatory impact analysis 

for any final rule that may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside a 

Metropolitan Statistical Area and has 

fewer than 100 beds. We have 

determined that this final rule would 

have minimal impact on small hospitals 

located in rural areas. Of 517 hospitalbased ESRD facilities located in rural 

areas, only 40 are affiliated with 

hospitals with fewer than 100 beds. 

For purposes of the RFA, physicians, 

nonphysician practitioners, and 

suppliers are considered small 

businesses if they generate revenues of 

$6 million or less. Approximately 95 

percent of physicians are considered to 

be small entities. There are about 

875,000 physicians, other practitioners 

and medical suppliers that receive 

Medicare payment under the physician 

fee schedule. There are in excess of 

20,000 physicians and other 

practitioners that receive Medicare 

payment for drugs. As noted previously 

in this final rule and described further 

below, we are implementing significant 

changes to the payments for drugs.) The 

20,000 physicians that receive payments 

for drugs are generally concentrated in 

the specialties of oncology, urology, 

rheumatology and infectious disease. Of 

the physicians in these specialties, 

approximately 40 percent are in 

oncology and 45 percent in urology. 

For purposes of the RFA, 

approximately 98 percent of suppliers of 

durable medical equipment (DME) and 

prosthetic devices are considered small 

businesses according to the Small 

Business Administration’s (SBA) size 

standards. We estimate that 106,000 

entities bill Medicare for durable 

medical equipment, prosthetics, 

orthotics, and supplies (DMEPOS) each 

year. Total annual estimated Medicare 

revenues for DME suppliers exceed 

approximately $4.0 billion. Of this 

amount, approximately $1.6 billion are 

for DME drugs. These suppliers will be 

affected by the payment changes being 

made in this final rule for drugs. 

In addition, most ESRD facilities are 

considered small entities, either based 

on nonprofit status, or by having 

revenues of $29 million or less in any 

year. We consider a substantial number 

of entities to be affected if the rule is 

estimated to impact more than 5 percent 

of the total number of small entities. 

Based on our analysis of the 785 

nonprofit ESRD facilities considered 

small entities in accordance with the 

above definitions, we estimate that the 

combined impact of the changes to 

payment for renal dialysis services 

included in this rule would have a 1.6 

percent increase in payments relative to 

current composite rate payments. 

The analysis and discussion provided 

in this section, as well as elsewhere in 

this final rule, complies with the RFA 

requirements. Section 202 of the 

Unfunded Mandates Reform Act of 1995 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule that may result in 

expenditures in any year by State, local, 

or tribal governments, in the aggregate, 

or by the private sector, of $110 million. 

Medicare beneficiaries are considered to 

be part of the private sector for this 

purpose. The net impact of the 

provisions of this rule, including those 

related to the MMA, are estimated to 

result in a savings to beneficiaries of 

nearly $485 million for FY 2005. 

However, we note that this savings 

figure compares FY 2005 beneficiary 

costs occurring as a result of provisions 

of this final rule to FY 2005 estimated 

beneficiary costs in the absence of final 

rule implementation (that is, the savings 

figure compare beneficiary costs with 

implementation of the ASP drug 

payment provisions to continuing the 

AWP drug payment methodology). The 

specific effects of the provisions being 

implemented in this final rule are 

explained in greater detail below. 

We have examined this final rule in 

accordance with Executive Order 13132 

and have determined that this 

regulation would not have any 

significant impact on the rights, roles, or 

responsibilities of State, local, or tribal 

governments. 

We have prepared the following 

analysis, which, together with the 

information provided in the rest of this 

preamble, meets all assessment 

requirements. It explains the rationale 

for and purposes of the rule; details the 

costs and benefits of the rule; analyzes 

alternatives; and presents the measures 

we use to minimize the burden on small 

entities. As indicated elsewhere in this 

final rule, we are refining resourcebased practice expense RVUs and 

making a variety of other changes to our 

regulations, payments, or payment 

policy to ensure that our payment 

systems are updated to reflect changes 

in medical practice and the relative 

value of services. We are also 

implementing several changes resulting 

from the MMA, including changes to 

Medicare payment rates for outpatient 

drugs, changes to the payment for renal 

dialysis services, creating new 

preventive health care benefits and 

creating incentive payment program 

improvements for physician scarcity.

We are providing information for each 

of the policy changes in the relevant 

sections of this final rule. We are 

unaware of any relevant Federal rules 

that duplicate, overlap or conflict with 

this final rule. The relevant sections of 

this final rule contain a description of 

significant alternatives if applicable. 

A. Resource-Based Practice Expense 

and Malpractice Relative Value Units 

Under section 1848(c)(2) of the Act, 

adjustments to RVUs may not cause the 

amount of expenditures to differ by 

more than $20 million from the amount 

of expenditures that would have 

resulted without such adjustments. We 

are implementing several changes that 

would result in a change in 

expenditures that would exceed $20 

million if we made no offsetting 

adjustments to either the conversion 

factor or RVUs. 

With respect to practice expense 

RVUs, our policy has been to meet the 

budget-neutrality requirements in the 

statute by incorporating a rescaling 

adjustment in the practice expense 

methodologies. That is, we estimate the 

aggregate number of practice expense 

RVUs that will be paid under current 

and revised policy in CY 2005. We 

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apply a uniform adjustment factor to 

make the aggregate number of revised 

practice expense RVUs equal the 

number estimated that would be paid 

under current policy. While we are 

continuing to apply this policy for 

general changes in coding and RVUs, we 

are increasing aggregate physician fee 

schedule payments to account for the 

higher payments for drug 

administration. These increases in 

payment are being made under the 

authority of section 1848(c)(2)(J) of the 

Act that exempts the changes in 

payments for drug administration from 

the budget neutrality requirements of 

section 1848(c)(2)(B)(iv) of the Act. 

Table 36 shows the specialty level 

impact on payment of the practice 

expense and malpractice RVU changes 

being implemented for CY 2005. Our 

estimates of changes in Medicare 

revenues for physician fee schedule 

services compare payment rates for 2005 

with payment rates for 2004 using 2003 

Medicare utilization for both years. We 

are using 2003 Medicare claims 

processed and paid through June 30, 

2004, that we estimate are 98.5 percent 

complete, and have adjusted the figures 

to reflect a full year of data. Thus, 

because we are using a single year of 

utilization, the estimated changes in 

revenues reflect payment changes only 

between 2004 and 2005. To the extent 

that there are year-to-year changes in the 

volume and mix of services provided by 

physicians, the actual impact on total 

Medicare revenues will be different than 

those shown here. The payment impacts 

reflect averages for each specialty based 

on Medicare utilization. The payment 

impact for an individual physician 

would be different from the average, 

based on the mix of services the 

physician provides. The average change 

in total revenues would be less than the 

impact displayed here because 

physicians furnish services to both 

Medicare and non-Medicare patients 

and specialties may receive substantial 

Medicare revenues for services that are 

not paid under the physician fee 

schedule. For instance, independent 

laboratories receive approximately 80 

percent of their Medicare revenues from 

clinical laboratory services that are not 

paid under the physician fee schedule. 

The table shows only the payment 

impact on physician fee schedule 

services. 

The column labeled ‘‘NPRM Impacts’’

shows the effect of the changes in 

payment attributable to practice expense 

and malpractice RVUs from the 

proposed rule. (See 69 FR 47556 

through 47559 for a complete 

description of the payment changes 

shown in this column). We have also 

made some additional changes to the 

practice expense and malpractice RVUs 

since the proposed rule in response to 

comments and additional information 

that became available to us during the 

comment period. The additional 

changes in payment based on further 

refinements of the practice expense 

RVUs generally have no specialty level 

impact. The 1 percent increase in 

payment for vascular surgery shown in 

the practice expense refinements 

column is attributed to substitution of a 

vascular ultrasound room for a general 

ultrasound room in the equipment 

resources for CPT code 93880. 

Similarly, the increase in practice 

expense RVUs for diagnostic testing 

facilities is also attributable to the 

increase in payment for 93880 and 

93925 due to the substitution of a 

vascular ultrasound room for a general 

ultrasound room in the equipment 

resources. 

The column labeled ‘‘Additional 

Malpractice RVU Refinements’’ show 

the additional impact of changes in the 

malpractice expense RVUs since the 

proposed rule on total payment for 

physician fee schedule services. As 

explained earlier, we are making several 

changes to malpractice RVUs that will 

change the impacts we illustrated in the 

proposed rule. We are removing 

assistants-at-surgery from the Medicare 

utilization that goes into determining 

the malpractice RVUs. Relative to the 

proposed rule, this change will increase 

total payments to neurosurgeons by 

nearly 1 percent. We also increased the 

ISO risk classification for the all 

physician crosswalk used for podiatry 

increasing their payments by 1 percent 

relative to the proposed rule. Several 

specialty groups, including dermatology 

commented that the major surgery risk 

factor should not be used for the 

dermatology codes. Relative to the 

proposed rule, payments to 

dermatologists will decrease by 

approximately 1 percent as a result of 

this change. The changes also increase 

payment to the specialty of allergy/

immunology by nearly 1 percent relative 

to the proposed rule. This increase 

occurs because we are setting a 

minimum value of 0.01 malpractice 

RVUs. In the proposed rule, we did 

show malpractice RVUs in Addendum B 

if the rounded RVU equaled 0.0. 

The column labeled ‘‘Immunizations/

Injections’’ shows the impact of making 

separate payment for injections 

provided on the same day as another 

physician fee schedule service and the 

increase in payment for immunizations. 

These changes generally benefit those 

specialties that provide injections and 

immunizations in their offices. The 

provision is estimated to increase 

payment by 2 percent to family practice 

and by 1 percent to general practice, 

geriatrics, internal medicine and 

pediatrics. The column labeled ‘‘Total’’

shows the combined percentage change 

in payments resulting from the practice 

expense and malpractice RVU changes 

including those that were described in 

the proposed rule and the additional 

changes we are making in this final rule.

As explained in the proposed rule, the 

practice expense refinements will 

reduce payments to audiologists by 

approximately 4 percent. Virtually all of 

the reduction in payment is due to the 

refinement of procedure code 92547. We 

accepted the PEAC recommendation to 

reduce the clinical staff time of the 

audiologist involved in this service from 

71 minutes to 1 minute. The refinement 

of clinical staff and equipment resulted 

in a reduction from 1.15 to 0.08 practice 

expense RVUs producing the 4 percent 

reduction in payments shown in table 

37. However, this impact assumes no 

change in how frequently these services 

are performed. While we received 

comments suggesting that the code was 

valued based on only one occurrence of 

the service, the commenter asserted that 

it is typically performed more than once 

per day. Currently, CPT allows it only 

to be billed once per day. If CPT were 

to change its policy and the service was 

billed more frequently, the impact 

shown in table 37 would be less than 

shown here. 

In the proposed rule, we estimated 

that payments to vascular surgeons 

would increase by 3 percent as a result 

of the repricing of medical equipment 

used in performing noninvasive 

vascular diagnostic tests. As indicated 

above, the total increase in payments 

including the additional refinements we 

made to equipment will make the total 

increase in payment from RVU changes 

equal to 4 percent. We originally 

estimated that payments to 

interventional radiology would increase 

by 2 percent due practice expense 

refinements and the establishment of 

nonfacility pricing for procedure codes 

35470 to 35476. Due to additional 

practice expense RVU refinements, we 

are now estimating that the total 

increase in payments will be 3 percent. 

We are estimating slightly less than a 

3.5 percent increase in payment to oral 

and maxillofacial surgeons from the 

refinement of medical supplies for 

procedure codes 21210 and 21215. The 

estimated impact for this specialty is 

slightly less than we were estimating for 

the proposed rule. As we indicated in 

the proposed rule, the 1 percent 

decrease in payment to nurse 

practitioners and geriatricians is 

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attributed to the refinement of the 

nonfacility practice expense RVUs for 

nursing facility visits (procedure codes 

99301 through 99316). These impacts 

are unchanged from the proposed rule. 

As we indicated in the proposed rule, 

the increases for pathology and 

independent laboratories result from use 

of a practice expense survey provided 

by the College of American Pathology 

(CAP). The increases in the final rule are 

similar to the figures we estimated for 

the proposed rule. We further note that 

independent laboratories receive 

approximately 20 percent of their total 

Medicare revenues from physician fee 

schedule services. The remaining 80 

percent of their Medicare revenues are 

from clinical diagnostic laboratory 

services that will be unchanged by use 

of the CAP survey data. Thus, total 

Medicare revenues to independent 

laboratories as a result of using the CAP 

survey will increase by slightly more 

than 1 percent (or 20 percent of the 6 

percent increase in physician fee 

schedule revenues). There will be little 

or no impact on all other specialties 

from use of the CAP survey. 

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As discussed in section II.C of this 

rule, we are making changes to the 

malpractice RVUs based on more 

current malpractice premium data. As 

anticipated from past revisions to the 

malpractice RVUs, use of more current 

malpractice premium data results in 

minimal impacts on the specialty level 

payments. The table below shows the 

impact on total physician fee schedule 

revenues from the changes to the 

malpractice RVUs, the additional 

changes resulting from this final rule 

and the total impact. See Table 37, 

‘‘Impact of Malpractice RVU Changes 

Proposed Rule and Final Rule’’, for a 

breakdown of the impacts of these 

revisions on individual specialties. As 

described above, policies we are 

adopting in this final rule will increase 

payments for allergy, neurosurgery and 

podiatry and decrease payments for 

dermatology relative to the proposed 

rule. These changes will also slightly 

increase payments to cardiac surgery, 

orthopedic surgery, thoracic surgery and 

result in a smaller increase in payment 

for vascular surgery.


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Section 1848(d) and (f) of the Act 

requires the Secretary to set the 

physician fee schedule update under the 

sustainable growth rate (SGR) system. 

For 2004 and 2005, the statute requires 

the update to be no less than 1.5 

percent. Using the statutory formula in 

section 1848(d)(4) will produce an 

update of less than 1.5 percent for 2005. 

Therefore, the physician fee schedule 

update for 2005 will be 1.5 percent. We 

have included a complete discussion of 

our methodology for calculating the 

SGR and physician fee schedule update 

in another section of this final rule. 

Table 38 below shows the estimated 

change in average payments by specialty 

resulting from changes to the practice 

expense and malpractice RVUs and the 

2005 physician fee schedule update. 

(Please note that the table does not 

include the specialties of Hematology/

Oncology, Urology, Rheumatology, 

Obstetrics/Gynecology and Infectious 

Disease. There are unique issues related 

to drug administration that will further 

affect these specialties that are 

presented in detail below).


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Table 39 shows the impact on 

payments for selected high-volume 

procedures of all of the changes 

previously discussed. We selected these 

procedures because they are the most 

commonly provided procedures by a 

broad spectrum of physician specialties, 

or they are of particular interest to the 

physician community (for example, the 

initial preventive physical exam and 

EKG, codes G0344, G0366, G0367 and 

G0368). We note that the table below 

shows Medicare payment for the 

administration of an influenza vaccine, 

G0008, increasing from $8.21 to $18.57, 

or 126 percent. As explained earlier, we 

are establishing the same RVUs for the 

administration of a vaccine and an 

injection. For 2005 only, we will pay 3 

percent more for the injection ($19.13) 

because of the transitional adjustment 

required by section 303. After 2005, the 

payment for the administration of a 

vaccine and an injection will be the 

same. This table shows the combined 

impact of the change in the practice 

expense and malpractice RVUs and the 

estimated physician fee schedule update 

on total payment for the procedure. 

There are separate columns that show 

the change in the facility rates and the 

nonfacility rates. For an explanation of 

facility and nonfacility practice expense 

RVUs refer to § 414.22(b)(5)(i). The table 

shows the estimated change in payment 

rates based on provisions of this final 

rule and the estimated physician fee 

schedule update. 

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BILLING CODE 4120–01–C 

Section 303(a)(1) of the MMA 

amended section 1848(c)(2) of the Act to 

require increased work and practice 

expense RVUs for drug administration 

services. Section 303(a)(4) of the MMA 

required an additional temporary 

increase in payment to specific drug 

administration services of 32 percent for 

2004 and 3 percent for 2005. Table 41 

shows the payment amounts for selected 

high-volume drug administration CPT 

codes from 2002 to 2006 including the 

effect of the transition adjustment of 32 

percent required for 2004 and 3 percent 

for 2005. Because we may also pay an 

additional $130 per encounter under the 

national demonstration project in 2005, 

we are also including the effect of this 

additional payment where applicable. 

Table 42 that follows table 41 shows the 

payment amount for 2004 and 2005 

without the additional transition 

adjustment required by the MMA and 

national demonstration payment 

amount. By showing the payment 

amounts without the transition and 

demonstration, we can isolate the 

permanent change in the payment 

amounts that is occurring as a result of 

the MMA, the CPT/RUC review and the 

physician fee schedule update. The 

amounts shown in the table include the 

effect of the 1.5 percent update for 2004 

and 2005. As described above, the CPT 

and RUC have recommended changes to 

the coding and payment for drug 

administration services. The CPT/RUC 

review was undertaken at our request 

under the authority of section 

1848(c)(2)(J) of the Act that requires the 

Secretary to promptly evaluate existing 

drug administration codes using 

existing processes. While this review 

was completed expeditiously, CPT did 

not have sufficient time to adopt the 

coding recommendations into the 2005 

version of CPT. For this reason, we are 

establishing new G-codes for 2005 that 

correspond with the new CPT codes that 

will become active in 2006. 

Tables 41 and 42 show the payment 

amounts for the most frequently 

performed drug administration services 

from 2002 to 2004 under the CPT codes 

and payment for the comparable service 

in 2005 using the G code. For instance, 

a therapeutic injection was previously 

billed under the CPT code 90782. This 

same service will now be billed using 

HCPCS code G0351. As a result of the 

RUC review, our acceptance of their 

recommendations for refinements to the 

practice expense inputs, our policy of 

pooling the utilization for the injection 

with vaccine administration, and the 

required reduction in the transitional 

adjustment, payment for this service 

will be reduced from $24.64 in 2004 to 

$19.13 in 2005. However, the 2004 

transition adjustment largely accounts 

for the decline. If the transitional 

adjustment of 32 percent for 2004 and 

3 percent for 2005 were not applied, 

payment for the injection would be 

virtually the same in 2005 as in 2004, 

a decline of $0.10 from $18.67 to $18.57. 

This table shows the permanent large 

increase in payment for this code from 

2002 to 2005. The payment for a 

therapeutic injection increased from 

$3.98 in 2002 to $19.13 in 2005, a 381 


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percent increase (or $18.57 if the 

transitional adjustment were not 

applied, a 367 percent increase).

CPT is also recommending separate 

codes for the administration of 

hormonal anti-neoplastic subcutaneous/

intramuscular (SC/IM) injections from 

other anti-neoplastic injections. Under 

the current CPT codes, all antineoplastics administered SC/IM are 

billed using CPT code 96400. HCPCS 

code G0356 will be used for the 

administration of hormonal antineoplastic injections. CPT code 96400 is 

currently paid $64.07. Its comparable 

code for 2005 (G0356) will be paid 

$36.69 or a reduction of 43 percent. 

Without the transition, payment for the 

code would have been reduced from 

$48.54 to $35.62 or 27 percent between 

2004 and 2005. However, payment for 

this code increased from $5.07 to $35.62 

(without the transition) between 2002 

and 2005 or by 603 percent. 

There is currently one CPT code for 

anti-neoplastic drugs administered by 

intravenous (IV) push (96408). In 2004, 

physicians are receiving $154.76 for 

CPT code 96408. Payment in 2005 for 

G0351 (the comparable code) will be 

$125.69. In addition, Medicare may also 

pay an additional $130.00 per encounter 

under the demonstration increasing the 

total payment to $255.69 or an increase 

of 65 percent between 2004 and 2005. 

Without the transitional adjustments or 

the demonstration, payment for this 

service would have increased from 

$117.24 in 2004 to $122.03 in 2003 or 

by 4 percent. From 2002 to 2005, 

payment will have increased from 

$35.11 to $122.03 (without the 

transition), or a 248 percent increase. 

CPT will be creating new codes that 

distinguish between the first and 

subsequent administration of a drug by 

IV push to the same patient on the same 

day. The RUC is recommending fewer 

inputs for the subsequent 

administration of a drug by IV push 

than the initial drug. We are creating 

code G0358 for each subsequent drug 

administered by IV push for 2005. 

Before the enactment of the MMA, 

Medicare allowed CPT code 96408 to be 

paid only once per patient per day. 

However, as a result of the MMA, we 

changed our policy and allowed 

physicians to bill and be paid for more 

than one administration of a 

chemotherapy drug by IV push to the 

same patient on a single day (see 69 FR 

1094–1095). Thus, because separate 

codes do not currently exist for the 

multiple administrations of 

chemotherapy drugs by IV push on a 

single day, physicians currently are paid 

at the rate for 96408 (or $154.76) for 

each subsequent administration. Using 

the CPT’s and RUC recommendations, 

we will pay $72.99 for subsequent drugs 

administered by IV push using HCPCS 

code G0358. While the payment is less 

in 2005 and 2004, payment remains 

higher in 2005 than in 2003 and prior 

years when Medicare provided no 

payment for the subsequent 

administration of a drug by IV push. 

We are creating HCPCS codes G0359 

and G0360 for the initial and 

subsequent hour respectively of 

chemotherapy drugs administered by IV 

infusion. As described in the drug 

administration section, CPT has 

changed its definition of chemotherapy 

to include infusion of substances such 

as monoclonal antibody agents or other 

biologic response modifiers in addition 

to anti-neoplastic drugs. Thus, services 

previously billed under the CPT code 

90780 (initial hour) and 90781 (each 

additional hour) that meet this new 

definition of chemotherapy will now be 

billed under CPT code G0359 (initial 

hour) and G0360 (each additional hour). 

Payment for the infusion of substances 

such as monoclonal antibody agents or 

other biologic response modifiers paid 

under CPT code 90780 will be 

increasing from $117.79 in 2004 to 

$177.61 in 2005 using HCPCS code 

G0359, a 51 percent increase. Without 

including the transition adjustment, 

payment for these services will have 

increased by 93 percent from $89.24 in 

2004 to $172.43 in 2005 or by 325 

percent from the 2002 rate of $40.54. 

Payment for the subsequent hour 

infusion under CPT code 90781 will 

increase from $33.02 in 2004 to $40.21 

in 2005 under HCPCS code G0360 or by 

22 percent. Without including the 

transition adjustment, payment for the 

subsequent hour infusion will have 

increased 56 percent from $25.02 in 

2004 to $39.03 in 2005 or 93 percent 

from its 2002 rate of $20.27. 

Anti-neoplastic agents that were 

previously billed under CPT code 96410 

(initial hour) and 96412 (each additional 

hour) will also be billed under codes 

G0359 and G0360. We have listed codes 

G0359 and G0360 twice to reflect that 

Medicare payment for each respective 

code is paid under two different CPT 

codes for services rendered prior to 

January 1, 2005. Payment for the initial 

hour of an anti-neoplastic agent 

administered by infusion under CPT 

code 96410 will be going from $217.35 

in 2004 to $177.61 in 2005. Including 

the $130.00 per encounter 

demonstration payment in this amount 

brings the total payment to $307.61, an 

increase of 65 percent. Without 

including the transition adjustment, 

payment for these services will have 

increased by 5 percent from $164.66 in 

2004 to $172.43 in 2005 or by 209 

percent from the 2002 rate of $55.75. 

Payment for the subsequent hour 

infusion under CPT code 96412 will 

decrease from $48.30 in 2004 to $40.21 

in 2005 under HCPCS code G0360 or by 

17 percent. Without including the 

transition adjustment, payment for the 

subsequent hour infusion will have 

increased 7 percent from $36.59 in 2004 

to $39.03 in 2005. Payment for the 

subsequent hour infusion of an antineoplastic agent has been reduced by 6 

percent from its 2002 rate of $41.63. The 

reduction in payment is occurring 

because resource-based pricing replaced 

the use of charge-based RVUs when the 

services were removed from the 

nonphysician work pool in 2004. 

The CPT is also recommending a new 

code for the initial hour of a subsequent 

chemotherapy drug administered by 

infusion. The new code would 

recognize that there are higher resources 

associated with the first hour of infusion 

of a subsequent drug than there are in 

the subsequent hour of the initial drug. 

Under current CPT coding, the first hour 

of a subsequent drug administered by IV 

infusion is paid under CPT code 96412. 

In 2004, Medicare pays $48.30 for this 

service. In 2005, we will pay $86.66 or 

79 percent more for HCPCS code G0362 

that will be used for the initial hour of 

a subsequent drug administered by IV 

infusion. Without including the 

transition adjustment, payment for this 

service will have increased 130 percent 

from $36.59 in 2004 to $84.13 in 2005 

or 102 percent from the 2002 rate of 

$41.63.

The volume-weighted average 

permanent increase in payment among 

all drug administration services is 

approximately 117 percent from 2003 to 

2005 including the effect of the CPT/

RUC recommendations but excluding 

the effect of the transition adjustment. 

Including the effect of the transition (but 

not the demonstration payment) makes 

the volume-weighted increase in 

payment for these codes more than 120 

percent from 2003 to 2005. 

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BILLING CODE 4120–01–C 

Table 42 below shows the impact of 

physician fee schedule changes for 

selected specialties that receive a 

significant portion of their total 

Medicare revenues from drugs. Table 43 

that follows table 42 shows the 

combined impact of the physician fee 

schedule and drug payment changes on 

total Medicare revenues. Our estimates 

of changes in Medicare revenues for 

drugs and physician fee schedule 

services compare payment rates for 2005 

with payment rates for 2004 using 2003 

Medicare utilization for both years. For 

physician fee schedule services, we 

mapped the 2003 Medicare utilization 

to the code set in use for 2005 based on 

assumptions about how the new drug 

administration codes will be billed. 

These assumptions are based on our 

consultations with the American 

Society of Clinical Oncology and other 

physician specialty societies that 

participated in the CPT’s Drug 

Administration workgroup. We are 

using 2003 Medicare claims processed 

and paid through June 30, 2004 that we 


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estimate are 98.5 complete and have 

adjusted the figures to reflect a full year 

of data. Thus, because we are using a 

single year of utilization, the estimated 

changes in revenues reflect payment 

changes only between 2004 and 2005. 

To the extent that there are year-to-year 

changes in the volume and mix of drugs 

and physician fee schedule services 

provided by physicians, the actual 

impact on total Medicare revenues will 

be different than those shown here. 

The column labeled ‘‘NPRM Impacts’’

shows the impact of the practice 

expense and malpractice RVU changes 

described earlier. The refinements of the 

practice expense RVUs and 5-year 

review of malpractice will have little or 

no impact on physician fee schedule 

payments for the 5 specialties shown. 

The column labeled ‘‘Coding and RVU 

Changes’’ shows the impact of our 

adoption of the CPT/RUC recommended 

revisions to the codes and payment 

amount for drug administration 

services. We estimate that the changes 

from the CPT/RUC process will increase 

physician fee schedule payments for 

oncologists by 5 percent. This impact is 

generally attributable to higher 

permanent increases in payment for the 

administration of drugs by IV push 

(G0357), infusion (G0359 and G0360) 

and the ability to be paid at a higher rate 

for the initial hour of infusion of a 

subsequent drug administered. We 

estimate that the changes from the CPT/

RUC process will increase payments to 

rheumatologists by 4 percent. This 

impact is due to the change in the 

definition of the chemotherapy that will 

allow rheumatologists to bill substances 

such as monoclonal antibody agents or 

other biologic response modifiers using 

the chemotherapy administration codes. 

The CPT/RUC changes will have little or 

no specialty level impact on other 

specialties that administer drugs. 

The next column shows the effect of 

the drug administration transition on 

Medicare physician fee schedule 

revenues for the specialties shown. As 

explained earlier, section 303(a)(4) 

requires that the transition adjustment 

percentage be reduced from 32 percent 

in 2004 to 3 percent in 2005. The 

change to the transition payment 

percentage will reduce payments for the 

specialties that provide drug 

administration services. The reduction 

has a larger impact on oncologists than 

the other physician specialties shown 

because drug administration services 

represent a larger proportion of their 

physician fee schedule revenues. 

The column labeled ‘‘Additional 

Payments for Injections’’ shows the 

effect of paying for injections (as well as 

non-chemotherapy drugs administered 

by IV push) provided on the same day 

as other physician fee schedule services. 

We estimate that this policy change will 

increase payment an estimated 3 

percent for oncologists and 1 percent for 

other specialties. This policy change 

will also modestly increase payment to 

other specialties that provide injections 

(primarily family practitioners and 

internists) and has been incorporated 

into the earlier impact tables.

The next column shows the impact of 

the 1.5 percent physician fee schedule 

update. The column labeled ‘‘One-Year 

Demonstration Project’’ shows the 

impact of our plan to establish a 

national demonstration project that will 

pay oncologists $130 for providing 

specific services to their patients and 

reporting patient quality data. If 

oncologists participate in this 

demonstration project and provide the 

required services and requested 

information, we estimate that their 

payments will increase by 15 percent. 

Taken together, we estimate that the 

coding and RVU changes, the change to 

the transition amount for drug 

administration, the additional payments 

for injections, the physician fee 

schedule update and the national 

demonstration project will increase 

physician fee schedule payments to 

oncologists by 10 percent. The 

combined impact of these factors (other 

than the national demonstration project) 

will increase physician fee schedule 

payments by 1 percent urologists, 5 

percent for rheumatologists, 1 percent 

for obstetrics/gynecologists and 0 

percent for infectious disease. 

Table 43 shows the combined impact 

of changes we are making to Medicare 

drug and physician fee schedule 

payments for the same specialties 

shown in table 42. The payment impacts 

for drugs are based on the 2nd quarter 

ASP submissions from drug 

manufacturer’s and reflect 3⁄4 of an 

annualized increase in drug prices 

between the 2nd quarter of 2004 and the 

1st quarter of 2005 of 3.39 percent or 

2.54 percent. The drug payment impacts 

are based on ASP prices for drugs 

accounting for approximately 94 percent 

of Medicare’s total drug payments. Of 

Medicare’s total payments for drugs, at 

least 4 percent are paid under ‘‘not 

otherwise classified (NOC)’’ codes (i.e.

J3490 and J0999). Thus, we based our 

impacts on ASP prices for drugs 

accounting for approximately 98 percent 

of Medicare revenues that are not in the 

NOC category. 

The column labeled ‘‘% of Total 

Medicare Revenues from Fee Schedule’’ 

shows the proportion of total Medicare 

revenues received from physician fee 

schedule services. The following 

column shows the physician fee 

schedule payment impact. All of the 

payment impacts are the same as those 

shown in Table 43. The following 

column shows the proportion of total 

Medicare revenues received from drugs, 

while the next column shows the 

payment impact from adoption of the 

ASP drug payment methodology. The 

next 3 columns show combined 

Medicare revenues from all sources and 

the combined Medicare payment impact 

from the earlier described changes being 

adopted for 2005. 

Our estimates of changes in Medicare 

revenues for both drugs and drug 

administration services compare 

payment rates for 2005 with payment 

rates for 2004 using the same utilization 

in both years. We used 2003 utilization 

for these comparative impacts since 

they are the latest data available. Thus, 

the estimated changes in revenues 

reflect purely price changes between 

2004 and 2005. We note that these 

impacts and percentages represent 

averages for each specialty or supplier. 

The percentages and impacts for any 

individual physician are dependent on 

the mix of drugs and physician fee 

schedule services they provide to 

Medicare beneficiaries. For this 

analysis, we are also supplementing the 

data showing the change in revenues 

with volume growth based on historical 

trends. 

As indicated in Table 43, physician 

fee schedule services account for 

approximately 28 percent of oncology’s 

2004 Medicare revenues. The changes 

we are adopting in this final rule are 

estimated to increase Medicare 

payments for physician fee schedule 

services by 10 percent from 2004 to 

2005. We estimate that approximately 

69 percent of total 2004 Medicare 

revenues for oncologists are attributed 

to drugs and the adoption of the ASP 

pricing methodology will reduce these 

revenues by 13 percent. We based our 

analysis on drugs accounting for 

approximately 92 percent of total 

oncology drug revenues (and 99 percent 

of oncology drug revenues not paid 

under NOC codes). The actual impact 

on oncologists’ total Medicare revenues 

will be different from these estimated 

impacts to the extent that utilization of 

drugs and drug administration services 

does increase. In recent years, 

increasing utilization, for example, drug 

spending growth in excess of 20 percent 

per year, has occurred. The weighted 

average of the drug and physician fee 

schedule changes assuming no change 

in utilization would decrease Medicare 

revenues to oncology by 6 percent. 

However, if the volume of drugs and 

physician fee schedule services 

66408 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

increased at historical rates, total 

Medicare revenues for oncologists are 

estimated to increase by 4 percent 

between 2004 and 2005, excluding the 

demonstration project. If we include the 

demonstration project, Medicare 

revenues to oncologists are estimated to 

increase by 8 percent between 2004 and 

2005. We note that our actuaries’

estimates of section 303 with the drug 

prices and policy changes in this final 

rule match earlier estimates of the FY 

2005 and 10-year savings figures. 

We estimate that urology receives 

approximately 57 percent of their 2004 

total revenues from physician fee 

schedule services and 35 percent from 

drugs. We estimate that physician fee 

schedule revenues for urologists will 

increase by approximately 1 percent 

from 2004 to 2005. Based on ASP prices 

for drugs accounting for 100 percent of 

urologists’ drug revenues, we estimate a 

40 percent reduction assuming no 

growth in the volume of services 

provided. In this scenario, combined 

Medicare payments to urologists would 

decline approximately 14 percent. 

However, if the volume of physician fee 

schedule services and drugs were to 

grow at historical rates, we estimate that 

Medicare revenues to urologists would 

decline by 8 percent. 

We estimate that physician fee 

schedule revenues account for 

approximately 49 percent of 

rheumatology’s total revenues. Drugs 

account for approximately 44 percent 

rheumatology’s total revenues. 

Physician fee schedule revenues are 

estimated to increase 5 percent for 

rheumatology and revenues from drugs 

are estimated to decline by 8 percent. 

Assuming no growth in utilization, the 

combined reduction in rheumatologists’

revenues would be 1 percent. If the 

volume of drugs and physician fee 

schedule services grew at historical 

rates, rheumatologists’ revenues from 

Medicare would increase by 9 percent.

We estimate that physician fee 

schedule revenues account for 

approximately 87 percent of total 

revenues for obstetrics/gynecology. 

These revenues are anticipated to 

increase by 1 percent. Drug revenues 

represent 13 percent of total Medicare 

revenues for obstetrics/gynecology and 

are estimated to decline by 21 percent. 

Assuming no growth in utilization, we 

estimated that obstetrics/gynecology’s 

combined Medicare revenues would 

decline by 2 percent. Using the 

historical projected rates of growth for 

the volume of drugs and physician fee 

schedule services would make the 

estimated change in revenues equal an 

increase of 4 percent. 

We estimate that physician fee 

schedule revenues account for 

approximately 94 percent of total 

revenues for infectious disease 

physicians. These payments are not 

estimated to change. The remainder of 

Medicare revenues for infectious disease 

physicians can be attributed to drugs. 

These payments are expected to decline 

by 25 percent. The weighted average 

change in infectious disease revenues 

from the changes we are adopting in this 

final rule is ¥2 percent assuming no 

growth in the volume of drugs and 

physician fee schedule services. If 

future growth in the volume of drugs 

and physician fee schedule services 

were to grow at historical rates, 

revenues to infectious disease 

physicians would increase would 

increase 7 percent. 

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BILLING CODE 4120–01–C 

B. Geographic Practice Cost Indices 

As discussed in section II.B, in this 

rule, we are proposing changes to the 

work and practice expense GPCIs based 

on new census data. The resulting 

geographic redistributions would not 

result in an overall increase in the 

current geographic adjustment indices 

by more than 3.5 percent or a decrease 

by more than 1.6 percent for any given 

locality in 2005. These geographic 

redistributions would not result in an 

overall increase in the current 

geographic adjustment indices by more 

than 7 percent or a decrease by more 

than 3.5 percent for any given locality 

in 2006. Addenda F and G illustrate the 


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locality specific overall impact of this 

proposal. The GAF, as displayed in 

Addenda F and G is a weighted 

composite index of the individual 

revisions to the work, practice expense, 

and malpractice expense GPCIs, 

respectively. The malpractice GPCI was 

updated as part of the November 7, 2003 

final rule, and the MMA provisions 

were addressed in the final rule 

published on January 7, 2004. 

C. Coding Issues 

1. Additions to the List of Medicare 

Telehealth Services 

In section II.D, we are adding end 

stage renal disease (ESRD) services, as 

represented by HCPCS codes G0308, 

G0309, G0311, G0312, G0314, G0315, 

G0317, G03178 to the list of telehealth 

services. We believe that this change 

will have little effect on Medicare 

expenditures. 

2. National Pricing of G0238/G0239 

(Respiratory Therapy Service Codes) 

As discussed earlier in the preamble, 

we are using the nonphysician 

workpool to value two respiratory 

therapy service codes (G0238 and 

G0239) that are currently carrier priced. 

We believe that this change will 

eliminate the uncertainty surrounding 

payment of these codes when performed 

in comprehensive outpatient 

rehabilitation facilities that are paid 

under the physician fee schedule 

through fiscal intermediaries. We do not 

anticipate that nationally pricing these 

services will have a significant impact 

on Medicare expenditures. 

3. New HCPCS Code for Bone Marrow 

Aspiration 

We are implementing a new HCPCS 

add-on code, GO367 for instances when 

a bone marrow aspiration and a bone 

marrow biopsy are performed on the 

same day through a single incision. 

While this coding change will allow for 

a small additional payment for the 

second procedure performed through a 

single incision on the same day, we 

anticipate that the costs will be 

insignificant. 

4. New HCPCS Code for Venous 

Mapping

As stated earlier in the preamble, we 

are implementing a new HCPCS code 

G0365, for mapping of vessels for 

hemodialysis access. Payment for this 

code will be crosswalked by CPT code 

93990, Doppler Flow Testing. We 

anticipate that the costs of this change 

will be minor and may result in 

improved care to Medicare beneficiaries 

and less long-term costs to Medicare. 

D. MMA Provisions 

1. Section 611—Preventive Physical 

Examination 

As discussed earlier in this preamble, 

the MMA authorizes coverage of an 

initial preventive physical examination 

effective January 1, 2005, subject to 

certain eligibility and other limitations. 

This new benefit will result in an 

increase in Medicare expenditures for 

new payments made to physicians and 

other practitioners who provide these 

examinations and for any medically 

necessary follow-up tests, counseling, or 

treatment that may be required as a 

result of the coverage of these 

examinations. The impact of this 

provision is shown in the following 

table.

2. Section 613—Diabetes Screening 

Section 613 of the MMA adds 

subsection (yy) to section 1861 of the 

Social Security Act and mandates 

coverage of diabetes screening tests, 

effective on or after January 1, 2005. We 

expect that this change in coverage for 

certain beneficiaries will result in an 

increase in Medicare payments. These 

payments will be made to physicians’

office laboratories and other laboratory 

suppliers who perform these tests as a 

result of the increased frequency of 

coverage of these tests. The impact of 

this provision is shown in Table 45 that 

follows. 

3. Section 612—Cardiovascular 

Screening 

Section 612 of the MMA provides for 

Medicare coverage for cholesterol and 

other lipid or triglyceride levels of 

cardiovascular screening blood tests for 

the early detection of abnormalities 

associated with an elevated risk for such 

diseases effective on or after January 1, 

2005. We estimate that this change in 

coverage for certain beneficiaries will 

result in an increase in Medicare 

payments. These payments will be made 

to physician office laboratories and 

other laboratory suppliers who perform 

these tests as a result of the increased 

frequency of coverage of these tests. 

Increased Medicare program 

expenditures for this provision are 

shown in Table 45 below.


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4. Section 413—Incentive Payment for 

Physician Scarcity 

a. Physician Scarcity Areas 

Section 413(a) of the MMA provides 

a new 5-percent incentive payment to 

physicians who furnish services in 

physician scarcity areas. The MMA 

provides for paying primary care 

physicians furnishing services in a 

primary care scarcity area, and specialty 

physicians furnishing services in a 

specialist care scarcity county, an 

additional amount equal to 5 percent of 

the amount paid for their professional 

services under the fee schedule from 

January 1, 2005 to December 31, 2007. 

We estimate that this new incentive 

payment for physicians’ services will 

result in an increase in Medicare 

payments that are shown in Table 46. 

b. Improvement to Medicare HPSA 

Incentive Payment Program 

Section 413(b) of the MMA amended 

section 1833(m) of the Act to mandate 

that we automate payment of the 10 

percent HPSA incentive payment to 

eligible physicians. Since the inception 

of the HPSA incentive payment 

program, physicians have been required 

to determine their eligibility and 

correctly code their Medicare claims 

using modifiers. We estimate that this 

change to the HPSA incentive payment 

program to provide for automation of 

payment will result in an increase in 

Medicare payments because many 

eligible physicians are not applying for 

bonuses due to the burden of verifying 

eligibility. The impact of this provision 

is shown in Table 46.

5. Sections 303–304—Payment for 

Covered Outpatient Drugs and 

Biologicals and Section 305—Payment 

for Inhalation Drugs 

Sections 303 and 304 of the MMA 

make changes to Medicare payment for 

covered outpatient drugs and biologicals 

and changes to the administration of 

those drugs. Section 305 makes changes 

to payment for inhalation drugs. We 

implemented provisions of sections 303 

through 305 changing payments in 2004 

for drugs and their administration in the 

January 7, 2004 Federal Register (69 FR 

1084). In this final rule, we are making 

further changes to Medicare’s payment 

for drugs and drug administration for 

2005 required by sections 303 through 

305 of the MMA. As indicated earlier in 

this final rule, we are revising the codes 

and payments for drug administration 

based on recommendations of the CPT 

Editorial Board and the Relative Value 

Update Committee. Consistent with 

section 1848(c)(2)(J) of the Act (as 

amended by section 303(a) of the 

MMA), the increase in payment 

resulting from this review are exempt 

from the budget neutrality requirements 

that apply to changes in RVUs. We are 

further increasing payments to 

physicians that treat patients with 

cancer who participate in a national 

demonstration project. In addition, we 

are also paying a supplying fee of $50 

per month for the first month and $24 

for each subsequent month for Medicare 

Part B oral drug prescriptions. We are 

also proposing to pay a furnishing fee of 

$0.14 per unit of clotting factor and a 

dispensing fee of $57 per month for 

inhalation drugs. Taking all of these 

provisions into account, we estimate 

Medicare savings for section 303–305 as 

follows:


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6. Section 952—Reassignment 

The reassignment provisions 

discussed in section III.F is currently 

estimated to have no significant impact 

on Medicare expenditures. 

7. Section 623—Payment for Renal 

Dialysis Services 

a. Effects on the Medicare Program 

(Budgetary Effect) 

Because the basic case mix adjusted 

composite payment rate and the revised 

payment for ESRD drugs must be budget 

neutral in accordance with section 

623(d)(1) of the MMA, except for the 

statutorily required 1.6 percent increase 

set forth in section 623(a), we estimate 

that there would be no budgetary impact 

for the Medicare program beyond this 

increase. The impact of this provision 

(net of beneficiary liability) is shown in 

the following table:

b. Impact on ESRD Providers 

To understand the impact of the 

changes affecting payments to ESRD 

facilities that result from enactment of 

the MMA on different categories of 

ESRD facilities, it is necessary to 

compare estimated payments under the 

current payment system (current 

payments) to estimated payments under 

the revisions to the composite rate 

payment system as set forth in this final 

rule (MMA payments). To estimate the 

impact among various classes of ESRD 

facilities, it is imperative that the 

estimates of current payments and 

MMA payments contain similar inputs. 

Therefore, we simulated MMA 

payments only for those ESRD facilities 

for which we are able to calculate both 

current payment and MMA payment. 

Due to data limitations, we are unable 

estimate current and MMA payments for 

461 facilities that bill for ESRD drugs. 

ESRD providers were grouped into the 

categories based on characteristics 

provided in the Online Survey and 

Certification and Reporting (OSCAR) 

file and the most recent cost report data 

from HCRIS. We also used the June 2004 

update of CY 2003 Standard Analytical 

File (SAF) claims as a basis for Medicare 

dialysis treatments and separately 

billable drugs and biologicals. As we 

stated in the proposed rule, this final 

rule impact on providers uses updated 

OSCAR, cost report and claims data. 

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BILLING CODE 4120–01–C

Table 49 shows the impact of MMA 

Section 623 on hospital based and 

independent facilities. We have 

included both composite rate payments 

as well as payments for separately 

billable drugs and biologicals because 

both are effected by section 623 of the 

MMA. The first column of Table 49 

identifies the type of ESRD provider, the 

second column indicates the number of 

ESRD facilities for each type, and the 

third column indicates the number of 

dialysis treatments. 

The fourth column shows the effect of 

the changes in drug payments to ESRD 


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providers. The overall effect of changes 

in drug payments is budget-neutral as 

required by MMA. The drug add-on 

adjustment is designed to result in the 

same aggregate amount of expenditures 

as would have been made without the 

statutory policy change. 

Current payments for drugs represent 

2005 Medicare reimbursement using 95 

percent of AWP prices for the top ten 

drugs. Medicare spending for drugs 

other than EPO is estimated using 2004 

AWP prices updated by a 3 percent 

inflation factor times actual drug 

utilization from 2003 claims. EPO is 

priced $10 per 1000 units (EPO units are 

estimated using payments because the 

units field on bills represents the 

number of EPO administrations rather 

than the number EPO units). Medicare 

spending under the MMA is 2003 

average acquisition cost for the top ten 

drugs updated to 2005 figures (using the 

PPI for prescriptions drugs) times actual 

drug utilization from 2003 claims. These 

inflation factors were 4.81 percent and 

3.72 percent for 2004 and 2005, 

respectively. 

Payment for drugs under MMA also 

includes the 8.7 percent drug add-on to 

the composite rate. This amount is 

computed by multiplying the composite 

rate for each provider (with the 1.6 

percent increase) times dialysis 

treatments from 2003 claims. Column 4 

is computed by comparing spending 

under MMA provisions for drugs 

including the 8.7 percent drug add-on 

amount to spending under current 

payments for drugs. In order to make 

column 4 comparable with rest of Table 

49, current composite rate payments to 

ESRD facilities were included in both 

current and MMA spending 

calculations. 

Column 5 shows the effect of the 1.6 

percent increase to the composite rate 

on total payments to ESRD providers. 

While all ESRD providers will get a 1.6 

percent increase to their composite rate, 

this table shows the net effect of this 

increase on ESRD providers’ total 

Medicare revenues (both drug and 

composite rate payments combined), 

and therefore does not show a 1.6 

percent increase. 

On average, ESRD providers receive 

an average of 39 percent of their total 

revenues from separately billable drugs 

and 61 percent of their total revenues 

from composite rate payment. Since the 

1.6 percent increase is applied to the 61 

percent portion of their total Medicare 

revenues, the 1.6 percent composite rate 

increase is also arithmetically equal to 

a 1.0 percent increase in ESRD 

providers’ total Medicare revenues. 

Column 5 is computed by combining 

MMA payment for drugs (including the 

8.7 percent drug add-on amount) with: 

(1) current composite rate times dialysis 

treatments from 2003 claims or (2) 

composite rate with 1.6 percent increase 

times dialysis treatments from 2003 

claims. The difference between these 

two combinations is the net effect of the 

1.6 percent increase on total payments 

to ESRD providers. In order to isolate 

the effect of the 1.6 percent increase, the 

computation in Column 5 assumes that 

drug payments to ESRD providers 

remain constant. 

Column 6 shows the impact of the 

case-mix adjustments as described 

earlier in this preamble of this final rule. 

Because MMA requires this adjustment 

to be budget-neutral in the aggregate, 

there is no overall impact on ESRD 

providers as a whole. While the casemix adjustment will have an impact 

within the various provider types, 

Column 6 shows that the effect between 

provider groupings is minimal. Column 

6 is computed as the difference between 

payments to ESRD providers with the 

case-mix adjustments compared to 

payments to providers without the casemix adjustments. As described earlier in 

this preamble, we developed a case-mix 

budget neutrality factor to meet the 

MMA requirement that payment be 

budget-neutral with respect to aggregate 

payments. Therefore, there is no change 

for ESRD providers in the aggregate. We 

note that when applying the case-mix 

adjustments, we did so at the facility 

level. 

Column 7 shows the overall effect of 

all changes in drug and composite rate 

payments to ESRD providers. The 

overall effect of payments to ESRD 

facilities is measured as the difference 

between payment with and without 

application of MMA section 623 as 

described in this final rule and current 

payment. MMA payment is computed 

by multiplying the composite rate for 

each provider (with both 1.6 percent 

increase and the 8.7 percent add-on) 

times dialysis treatments from 2003 

claims times the appropriate case-mix 

adjustment by provider. In addition, 

MMA payment includes payments for 

separately billable drugs under the 

revised pricing methodology as 

described in this preamble. Current 

payment is the current composite rate 

for each provider times dialysis 

treatments from 2003 claims plus 

current drug payments for separately 

billable drugs.

The overall impact to ESRD providers 

in aggregate is 1.0 percent. Among the 

three separately shown effects, the effect 

of changes in drug payments has the 

most variation among provider type and 

contributes most to the overall effect. 

Separately billable ESRD drugs are paid 

differently to hospital-based and 

independent ESRD providers. As 

discussed earlier in this preamble, we 

are using a single drug add-on to the 

composite rates for both hospital based 

and independent facilities. The 6.6 

percent increase in payments to 

hospital-based providers is largely due 

to the single drug add-on to the 

composite rate. 

8. Section 731—Coverage of Routine 

Costs for Category A Clinical Trials 

The coverage of routine costs 

associated with certain Category A 

clinical trials as discussed in MMA 

section 731(b) will have no significant 

impact on Medicare expenditures. 

9. Section 629—Part B Deductible 

As explained earlier in the preamble, 

section 629 of the MMA provides for 

annual updates to the Medicare Part B 

deductible. The MMA stipulates that the 

Medicare Part B deductible will be $110 

for calendar year 2005, and, for 

subsequent years, the deductible will be 

the previous year’s deductible increased 

by the annual percentage increase in the 

monthly actuarial rate under section 

1839(a)(1) of the Act, ending with that 

subsequent year (rounded to the nearest 

dollar). We note that while this MMA 

provision results in a savings to the 

Medicare program, it also increases 

beneficiary costs by an equal amount 

and was implemented in a Federal 

Register notice published on September 

9, 2004 (69 FR 54675).

TABLE 50: ESTIMATED MEDICARE SAVINGS FOR MMA PROVISION 629 

[in millions] 

MMA provision FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 

Sec. 629 ................................................................................................... 110 290 440 590 770 

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10. Section 512—Hospice Consultation 

Service 

As explained in section III.K of this 

preamble, effective January 1, 2005, 

section 512 of the MMA provides for 

payment to be made to a hospice for 

specified services furnished by a 

physician who is either the medical 

director of, or an employee of, a hospice 

agency. We estimate that this MMA 

provision will increase Medicare 

expenditures by $10 million per year 

beginning in 2005. 

11. Section 706 Coverage of Religious 

Nonmedical Health Care Institution 

(RNHCI) Services Furnished in the 

Home 

We anticipate that the time limited 

RNHCI home benefit will either meet or 

fall short of the annual $700,000 per 

calendar year statutory spending limit 

and therefore will not have a significant 

financial impact on the Medicare 

program. 

E. Other Issues 

1. Outpatient Therapy Services 

Performed ‘‘Incident To’’ Physicians’

Services 

As discussed in section IV.A, we are 

amending the regulations to include the 

statutory requirement that only 

individuals meeting the existing 

qualification and training standards for 

therapists (with the exception of 

licensure) consistent with § 484.4 

qualify to provide therapy services 

incident to physicians’ services. We 

believe that while this will have little 

impact on Medicare expenditures, it 

will assist in ensuring the quality of 

services provided to beneficiaries. 

2. Supervision Requirements for 

Therapy Assistants in Private Practice 

As discussed earlier in section IV.A, 

we are revising the regulations at 

§ 410.59 and § 410.60 to replace a 

requirement to provide personal 

supervision and instead require direct 

supervision of physical therapist 

assistants and occupational therapy 

assistants when therapy services are 

provided by physical therapists or 

occupational therapists in private 

practice. This policy change will 

provide beneficiaries access to 

medically necessary therapy services, 

under a physician-certified plan of care. 

We believe that this change could result 

in a 5 percent increase in therapy billing 

in therapy private practice settings with 

an estimated cost of $9 million for FY 

2005. Projected costs for FY 2006 are 

$17 million while each subsequent year 

would only increase by $1 million each 

year, assuming the therapy caps are 

applied. 

3. Low Osmolar Contrast Media 

As discussed earlier in the preamble, 

we are revising the regulations at 

§ 414.38 to eliminate the restrictive 

criteria for the payment of LOCM. This 

regulation will make payment for LOCM 

consistent across Medicare payment 

systems. Shown in the following table 

are estimates of program costs due to the 

removal of the restrictive criteria for 

administering LOCM, assuming 

increased utilization and removal of the 

8 percent reduction. Without current 

ASP data, we could not include the 

additional impact of the change in 

payment for LOCM to ASP plus 6 

percent, effective April 1, 2005. 

Contrast-enhanced procedures that most 

commonly use LOCM, the typical ranges 

of LOCM amounts used by modality, 

and the cost ranges for LOCM in the 

marketplace were considered in valuing 

the additional program costs.

4. Payments for Physicians and 

Practitioners Managing Patients on 

Dialysis 

We believe that the proposals with 

respect to ESRD-related services 

furnished to patients in observation 

settings and payment for outpatient 

ESRD-related services for partial month 

scenarios discussed earlier in section xx 

provide clarification of current policy 

surrounding these issues. We do not 

believe these proposals will have a 

significant impact on Medicare 

expenditures. 

5. Supervision of Clinical Psychological 

Testing 

We are changing the supervision 

requirements regarding who can 

supervise diagnostic psychological 

testing services. As previously 

discussed, having ancillary staff 

supervised by clinical psychologists 

will enable these practitioners with a 

higher level of expertise to oversee 

psychological testing and potentially 

relieve burdens on physicians and 

healthcare facilities. 

Additionally, in rural areas, we 

anticipate that permitting psychologists 

to supervise diagnostic psychological 

testing services will reduce delays in 

testing, diagnosis, and treatment that 

could result from the unavailability of 

physicians to supervise the tests. We 

believe that this revision to the 

supervision requirements will have 

little impact on Medicare expenditures. 

6. Care Plan Oversight 

As discussed earlier in the preamble, 

we are revising § 414.39 to clarify that 

NPPs can perform home health care 

plan oversight even though they cannot 

certify a patient for home health 

services and sign the plan of care. We 

do not expect that this change will have 

an impact on Medicare expenditures, 

since it is primarily a clarification in 

policy. 

7. Assignment of Medicare Claims 

The changes with respect to 

assignment of Medicare claims are 

currently estimated to have no 

significant impact on Medicare 

expenditures. However, as stated earlier 

in this preamble at section IV.G, we 

believe the changes will reduce the 

paperwork burden on beneficiaries and 

suppliers. 

F. Alternatives Considered 

This final rule contains a range of 

policies, including proposals related to 

specific MMA provisions. The preamble 

provides descriptions of the statutory 

provisions that are addressed, identifies 

those policies when discretion has been 

exercised and presents rationale for our 

decisions and, when possible, 

alternatives that were considered. 

G. Impact on Beneficiaries 

There are a number of changes made 

in this rule that would have an effect on 


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beneficiaries. In general, we believe 

these changes will improve beneficiary 

access to services that are currently 

covered or will expand the Medicare 

benefit package to include new services. 

As explained in more detail below, the 

MMA or regulatory provisions may 

increase beneficiary liability in some 

cases. Any changes in aggregate 

beneficiary liability from a particular 

provision will be a function of the 

coinsurance (20 percent if applicable for 

the particular provision after the 

beneficiary has met the deductible) and 

the effect of the aggregate cost (savings) 

of the provision on the calculation of 

the Medicare Part B premium rate 

(generally 25 percent of the provision’s 

cost or savings). 

The MMA provisions that expand 

Medicare benefits include: Section 611, 

adding an initial preventive physical 

exam for newly eligible Medicare 

beneficiaries; section 612 providing 

coverage of cardiovascular screening 

blood tests; and section 613, providing 

coverage for diabetes screening tests for 

Medicare beneficiaries at risk for 

diabetes. While the initial preventive 

physical examination for newly eligible 

Medicare beneficiaries is subject to 

deductible and coinsurance, we believe 

Medicare beneficiaries will continue to 

benefit from expanded coverage for this 

service. We believe many beneficiaries 

have supplemental insurance coverage 

or Medicaid that pays the Medicare 

deductible on their behalf and there will 

be no immediate additional out-ofpocket cost. Further, even if a 

beneficiary pays nearly all of the costs 

of this new benefit, the preventive office 

visit will substitute for another service 

a beneficiary may need to meet the 

annual deductible and the beneficiary 

will receive more covered benefits at 

little additional cost. There are no outof-pocket costs to the beneficiary for the 

cardiovascular screening blood tests and 

diabetes screening tests. 

Other proposals in this rule related to 

the MMA will also impact beneficiary 

liability, with the most significant 

related to indexing of the part B 

deductible (section 629 of the MMA) 

and the drug administration payment 

changes (sections 303 and 305 of the 

MMA). MMA provisions that improve 

administration of the 10 percent HPSA 

bonus and provide an additional 5 

percent bonus payment to physicians in 

Medicare scarcity areas will have no 

impact on beneficiary liability because 

the bonus payments are applied to the 

amount Medicare pays the physician net 

of beneficiary liability. These provisions 

will also improve access for Medicare 

beneficiaries by increasing payments to 

physicians in areas that traditionally 

have had a low ratio of physicians to 

population. 

We are summarizing the impact of all 

of the changes we are adopting in this 

rule in table 52. We note that Medicare 

savings estimates are relative to 

projected expenditures that would occur 

if the provisions of the MMA and this 

final regulation were not implemented. 

Thus, the savings figures are reductions 

in beneficiary liability relative to the 

amounts they otherwise would have 

paid. The figures do not necessarily 

mean that we are estimating that 

beneficiaries will have lower out-ofpocket costs in 2005 than 2004.

The implementation of MMA 

provisions related to drugs and drug 

administration will reduce Medicare 

beneficiary liability for Medicare 

covered services even after including 

the additional increases in payment for 

drug administration and establishing a 

supplying fee for immunosuppressive 

drugs, a furnishing fee for the clotting 

factor and a dispensing fee for 

immunosuppressive drugs. We do not 

believe that the drug and drug 

administration payment changes 

required by the MMA are intended to 

lessen beneficiary access to care. As 

indicated earlier, the changes we are 

making to Medicare payments for the 

administration of drugs are permanently 

increasing them by a weighted average 

of more than 117 percent between 2003 

and 2005 and they are being increased 

by an additional 3 percent for 2005 

only. While payments for drugs are 

being reduced between 2004 and 2005, 

the statute requires Medicare to pay for 

them at 6 percent more than their 

average sales price or the price they are 

purchased at in the market after taking 

into account rebates and discounts. 

Nevertheless, we acknowledge that 

there is a concern among physicians and 

others that the large changes in 

Medicare’s payments may affect their 

ability or willingness to continue 

making drugs and related services 

available. CMS’ Office of Research 


ER15NO04.564</GPH>
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Demonstrations and Information is 

analyzing Medicare utilization for drugs 

and drug administration beginning in 

2002 and plans to continue to analyze 

the data for shifts or changes in 

utilization patterns as the information 

becomes available to us. To date, we 

have no evidence that beneficiaries are 

having any problems with access to 

drugs. While we do not believe the 

payment changes for drugs and drug 

administration will result in access 

problems, we plan to continue studying 

this issue. We also note that the MMA 

requires the Medicare Payment 

Advisory Commission (MedPAC) to 

study related issues. Specifically, 

section 303(a)(5) of the MMA requires 

MedPAC to study items and services 

furnished by oncologists and drug 

administration services furnished by 

other specialists. 

We are also undertaking several 

changes using our administrative 

authority that will affect Medicare 

beneficiaries. Our proposal to remove 

restrictions that limit Medicare payment 

for use of low osmolar contrast material 

to specific indications would update 

Medicare’s payment policy to be 

consistent with the standard practice of 

medicine and will improve the quality 

of care for beneficiaries. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget.

List of Subjects 

42 CFR Part 403 

Grant programs-health, Health 

insurance, Hospitals, Intergovernmental 

relations, Medicare, Reporting and 

recordkeeping requirements. 

42 CFR Part 405 

Administrative practice and 

procedure, Health facilities, Health 

professions, Kidney diseases, Medical 

devices, Medicare, Reporting and 

recordkeeping requirements, Rural 

areas, X-rays. 

42 CFR Part 410 

Health facilities, Health professions, 

Kidney diseases, Laboratories, 

Medicare, Reporting and recordkeeping 

requirements, Rural areas, X-rays. 

42 CFR Part 411 

Kidney diseases, Medicare, Reporting 

and recordkeeping requirements. 

42 CFR Part 414 

Administrative practice and 

procedure, Health facilities, Health 

professions, Kidney diseases, Medicare, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 418 

Health facilities, Hospice care, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 424 

Emergency medical services, Health 

facilities, Health professions, Medicare, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 484 

Health facilities, Health professions, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 486 

Grant programs-health, Health 

facilities, Medicare, Reporting and 

recordkeeping requirements, X-rays.

■ For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as follows:

PART 403—SPECIAL PROGRAMS AND 

PROJECTS

Subpart G—Religious Nonmedical 

Health Care Institutions—Benefits, 

Conditions of Participation, and 

Payment

■ 1. The authority citation for part 403 

continues to read as follows:

Authority: 42 U.S.C. 1359b–3 and secs 

1102 and 1871 of the Social Security act (42 

U.S.C. 1302 and 1395hh).

■ 2. Section 403.746 is amended by 

adding a new paragraph (c) to read as 

follows:

§ 403.746 Condition of participation: 

Utilization review.

* * * * *

(c) Standard: Utilization review 

committee role in RNHCI home services.

In addition to the requirements in 

paragraphs (a) and (b) of this section, 

the utilization review committee is 

responsible for: 

(1) The admission, and at least every 

30 days, the continued care review of 

each patient in the RHNCI home 

services program. 

(2) Oversight and monitoring of the 

home services program, including the 

purchase and utilization of designated 

durable medical equipment items for 

beneficiaries in the program.

■ 3. In subpart G, § 403.764 through 

§ 403.770 are added to read as follows:

§ 403.764 Basis and purpose of religious 

nonmedical health care institutions 

providing home service. 

(a) Basis. This subpart implements 

sections 1821, 1861, 1861(e), 1861(m), 

1861(y), 1861(ss) and 1861(aaa), 1869 

and 1878 of the Act regarding Medicare 

payment for items and services 

provided in the home setting furnished 

to eligible beneficiaries by religious 

nonmedical health care institutions 

(RNHCIs). 

(b) Purpose. The home benefit 

provides for limited durable medical 

equipment (DME) items and RNHCI 

services in the home setting that are 

fiscally limited to $700,000 per calendar 

year, with an expiration date of 

December 31, 2006, or the date on 

which the 2006 spending limit is 

reached.

§ 403.766 Requirements for coverage and 

payment of RNHCI home services. 

(a) Medicare Part B pays for RNHCI 

home services if the RNHCI provider 

does the following: 

(1) Submit a notice of intent to CMS 

to exercise the option of providing home 

service.

(2) Provide RNHCI services to eligible 

beneficiaries, 

(3) Arrange with suppliers to furnish 

appropriate DME items as required to 

meet documented eligible beneficiary 

needs. 

(4) Arrange for RNHCI nurse home 

visits to eligible beneficiaries. 

(5) Have a utilization committee that 

assumes the additional responsibility 

for the oversight and monitoring of the 

items and RNHCI nursing services 

provided under the home benefit. 

(6) Meet all applicable requirements 

set forth in subpart G of this part. 

(b) To be an eligible beneficiary to 

RNHCI home services the beneficiary 

must: 

(1) Have an effective election in place. 

(2) Be confined to the home, as 

specified in § 409.42(a) of this chapter. 

(3) Have a condition that makes him 

or her eligible to receive services 

covered under Medicare home health. 

(4) Receive home services and DME 

items from a RNHCI. 

(5) Be responsible for deductible and 

coinsurance for DME, as specified in 

§ 409.50 of this chapter.

§ 403.768 Excluded services. 

In addition to items and services 

excluded in § 409.49 of this chapter, 

items and services are also excluded if 

they are provided by: 

(a) A HHA that is not a RNHCI. 

(b) A supplier who is not providing 

RNHCI designated items under 

arrangement with a RNHCI. 

(c) A nurse who is not providing 

RNHCI home nursing services under 

arrangement with a RNHCI.

§ 403.770 Payments for home services. 

(a) The RNHCI nursing visits are paid 

at the modified low utilization payment 

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adjusted (LUPA) rate used under the 

home health prospective payment 

system at § 484.230 of this chapter. 

(b) Appropriate DME items are paid as 

priced by Medicare, minus the 

deductible and coinsurance liability of 

the beneficiary.

PART 405—FEDERAL HEALTH 

INSURANCE FOR THE AGED AND 

DISABLED

■ 4. The authority citation for part 405 

continues to read as follows:

Authority: Secs. 1102, 1861, 1862(a), 1871, 

1874, 1881, and 1886(k) of the Social 

Security Act (42 U.S.C. 1302, 1395x, 

1395y(a), 1395hh, 1395kk, 1395rr, and 

1395ww(k)), and sec. 353 of the Public 

Health Service Act (42 U.S.C. 263a).

■ 5. Section 405.207 is amended by 

revising paragraph (b) to read as follows:

§ 405.207 Services related to a noncovered 

device.

* * * * *

(b) When payment is made. Medicare 

payment may be made for—

(1) Covered services to treat a 

condition or complication that arises 

due to the use of a noncovered device 

or a noncovered device-related service; 

or 

(2) Routine care services related to 

experimental/investigational (Category 

A) devices as defined in § 405.201(b); 

and furnished in conjunction with an 

FDA-approved clinical trial. The trial 

must meet criteria established through 

the national coverage determination 

process; and if the trial is initiated 

before January 1, 2010, the device must 

be determined as intended for use in the 

diagnosis, monitoring or treatment of an 

immediately life-threatening disease or 

condition. 

(3) Routine care services related to a 

non-experimental/investigational 

(Category B) device defined in 

§ 405.201(b) that is furnished in 

conjunction with an FDA-approved 

clinical trial.

■ 6. Section 405.517 is amended by 

adding a new paragraph (a)(3) to read as 

follows:

§ 405.517 Payment for drugs and 

biologicals that are not paid on a cost or 

prospective payment basis. 

(a) Applicability. * * * 

(3) Payment for drugs and biologicals 

on or after January 1, 2005. Effective 

January 1, 2005, payment for drugs and 

biologicals that are not paid on a cost or 

prospective payment basis are paid in 

accordance with part 414, subpart K of 

this chapter.

* * * * *

PART 410—SUPPLEMENTARY 

MEDICAL INSURANCE (SMI) 

BENEFITS

■ 7. The authority citation for part 410 

continues to read as follows:

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh).

■ 8. Section 410.1 is amended by adding 

a new paragraph (a)(6) to read as follows:

§ 410.1 Basis and scope. 

(a) * * * 

(6) Section 1842(o)—Payment for 

drugs and biologicals not paid on a cost 

or prospective payment basis.

* * * * *

■ 9. Section 410.10 is amended by 

adding new paragraph (y) to read as 

follows:

§ 410.10 Medical and other health 

services: Included services.

* * * * *

(y) Intravenous immune globulin 

administered in the home for the 

treatment of primary immune deficiency 

diseases.

■ 10. Section 410.16 is added to read as 

follows:

§ 410.16 Initial preventive physical 

examination: Conditions for and limitations 

on coverage. 

(a) Definitions. As used in this 

section, the following definitions apply: 

Eligible beneficiary means an 

individual who receives his or her 

initial preventive physical examination 

within 6 months after the effective date 

of his or her first Medicare Part B 

coverage period, but only if that first 

Part B coverage period begins on or after 

January 1, 2005. 

Initial preventive physical 

examination means all of the following 

services furnished to an eligible 

beneficiary by a physician or other 

qualified nonphysician practitioner 

with the goal of health promotion and 

disease detection: 

(1) Review of the beneficiary’s 

medical and social history with 

attention to modifiable risk factors for 

disease, as those terms are defined in 

this section. 

(2) Review of the beneficiary’s 

potential (risk factors) for depression, 

including current or past experiences 

with depression or other mood 

disorders, based on the use of an 

appropriate screening instrument for 

persons without a current diagnosis of 

depression, which the physician or 

other qualified nonphysician 

practitioner may select from various 

available standardized screening tests 

designed for this purpose and 

recognized by national professional 

medical organizations. 

(3) Review of the beneficiary’s 

functional ability, and level of safety as 

those terms are defined in this section, 

as described in paragraph (4) of this 

definition, based on the use of 

appropriate screening questions or a 

screening questionnaire, which the 

physician or other qualified 

nonphysician practitioner may select 

from various available screening 

questions or standardized 

questionnaires designed for this purpose 

and recognized by national professional 

medical organizations. 

(4) An examination to include 

measurement of the beneficiary’s height, 

weight, blood pressure, a visual acuity 

screen, and other factors as deemed 

appropriate, based on the beneficiary’s 

medical and social history, and current 

clinical standards. 

(5) Performance and interpretation of 

an electrocardiogram. 

(6) Education, counseling, and 

referral, as deemed appropriate by the 

physician or qualified nonphysician 

practitioner, based on the results of the 

review and evaluation services 

described in this section. 

(7) Education, counseling, and 

referral, including a brief written plan 

such as a checklist provided to the 

beneficiary for obtaining the appropriate 

screening and other preventive services 

that are covered as separate Medicare 

Part B benefits as described in section 

1861(s)(10), section 1861(jj), section 

1861(nn), section 1861(oo), section 

1861(pp), section 1861(qq)(1), section 

1861(rr), section 1861(uu), section 

1861(vv), section 1861(xx)(1), and 

section 1861(yy) of the Act. 

Medical history is defined to include, 

at a minimum, the following: 

(1) Past medical and surgical history, 

including experiences with illnesses, 

hospital stays, operations, allergies, 

injuries, and treatments. 

(2) Current medications and 

supplements, including calcium and 

vitamins. 

(3) Family history, including a review 

of medical events in the beneficiary’s 

family, including diseases that may be 

hereditary or place the individual at 

risk. 

A physician for purposes of this 

section means a doctor of medicine or 

osteopathy (as defined in section 

1861(r)(1) of the Act). 

A qualified nonphysician practitioner

for purposes of this section means a 

physician assistant, nurse practitioner, 

or clinical nurse specialist (as 

authorized under section 

1861(s)(2)((K)(i) and section 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66421

1861(s)(2)((K)(ii) of the Act and defined 

in section 1861(aa)(5) of the Act, or in 

§ 410.74, § 410.75, and § 410.76). 

Review of the beneficiary’s functional 

ability and level of safety must include, 

at a minimum, a review of the following 

areas:

(1) Hearing impairment. 

(2) Activities of daily living. 

(3) Falls risk. 

(4) Home safety

Social history is defined to include, at 

a minimum, the following:

(1) History of alcohol, tobacco, and 

illicit drug use. 

(2) Diet.

(3) Physical activities.

(b) Condition for coverage of an initial 

preventive physical examination.

Medicare Part B pays for an initial 

preventive physical examination 

provided to an eligible beneficiary, as 

described in this section, if it is 

furnished by a physician or other 

qualified nonphysician practitioner, as 

defined in this section. 

(c) Limitations on coverage of initial 

preventive physical examinations.

Payment may not be made for an initial 

preventive physical preventive 

examination that is performed for an 

individual who is not an eligible 

beneficiary as described in this section.

■ 11. A new § 410.17 is added to read as 

follows:

§ 410.17 Cardiovascular disease screening 

tests. 

(a) Definition. For purposes of this 

subpart, the following definition apply: 

Cardiovascular screening blood test

means: 

(1) A lipid panel consisting of a total 

cholesterol, HDL cholesterol, and 

triglyceride. The test is performed after 

a 12-hour fasting period. 

(2) Other blood tests, previously 

recommended by the U.S. Preventive 

Services Task Force (USPSTF), as 

determined by the Secretary through a 

national coverage determination 

process. 

(3) Other non-invasive tests, for 

indications that have a blood test 

recommended by the USPSTF, as 

determined by the Secretary through a 

national coverage determination 

process. 

(b) General conditions of coverage.

Medicare Part B covers cardiovascular 

disease screening tests when ordered by 

the physician who is treating the 

beneficiary (see § 410.32(a)) for the 

purpose of early detection of 

cardiovascular disease in individuals 

without apparent signs or symptoms of 

cardiovascular disease. 

(c) Limitation on coverage of 

cardiovascular screening tests. Payment 

may be made for cardiovascular 

screening tests performed for an 

asymptomatic individual only if the 

individual has not had the screening 

tests paid for by Medicare during the 

preceding 59 months following the 

month in which the last cardiovascular 

screening tests were performed.

■ 12. A new § 410.18 is added to read as 

follows:

§ 410.18 Diabetes screening tests. 

(a) Definitions. For purposes of this 

section, the following definitions apply: 

Diabetes means diabetes mellitus, a 

condition of abnormal glucose 

metabolism diagnosed using the 

following criteria: a fasting blood sugar 

greater than or equal to 126 mg/dL on 

two different occasions; a 2-hour postglucose challenge greater than or equal 

to 200 mg/dL on two different 

occasions; or a random glucose test over 

200 mg/dL for a person with symptoms 

of uncontrolled diabetes. 

Pre-diabetes means a condition of 

abnormal glucose metabolism diagnosed 

using the following criteria: a fasting 

glucose level of 100—125 mg/dL, or a 2-

hour post-glucose challenge of 140—199 

mg/dL. The term pre-diabetes includes 

the following conditions: 

(1) Impaired fasting glucose. 

(2) Impaired glucose tolerance.

(b) General conditions of coverage.

Medicare Part B covers diabetes 

screening tests after a referral from a 

physician or qualified nonphysician 

practitioner to an individual at risk for 

diabetes for the purpose of early 

detection of diabetes. 

(c) Types of tests covered. The 

following tests are covered if all other 

conditions of this subpart are met: 

(1) Fasting blood glucose test. 

(2) Post-glucose challenges including, 

but not limited to, an oral glucose 

tolerance test with a glucose challenge 

of 75 grams of glucose for non-pregnant 

adults, a 2-hour post glucose challenge 

test alone. 

(3) Other tests as determined by the 

Secretary through a national coverage 

determination. 

(d) Amount of testing covered.

Medicare covers the following for 

individuals: 

(1) Diagnosed with pre-diabetes, two 

screening tests per calendar year. 

(2) Previously tested who were not 

diagnosed with pre-diabetes, or who 

were never tested before, one screening 

test per year. 

(e) Eligible risk factors. Individuals 

with the following risk factors are 

eligible to receive the benefit: 

(1) Hypertension. 

(2) Dyslipidemia. 

(3) Obesity, defined as a body mass 

index greater than or equal to 30 kg/m2. 

(4) Prior identification of impaired 

fasting glucose or glucose intolerance. 

(5) Any two of the following 

characteristics: 

(i) Overweight, defined as body mass 

index greater than 25, but less than 30 

kg/m2. 

(ii) A family history of diabetes. 

(iii) 65 years of age or older. 

(iv) A history of gestational diabetes 

mellitus or delivery of a baby weighing 

more than 9 pounds.

■ 13. Section 410.26 is amended by 

revising paragraph (c) to read as follows:

§ 410.26 Services and supplies incident to 

a physician’s professional services: 

Conditions.

* * * * *

(c) Limitations. (1) Drugs and 

biologicals are also subject to the 

limitations specified in § 410.29. 

(2) Physical therapy, occupational 

therapy and speech-language pathology 

services provided incident to a 

physician’s professional services are 

subject to the provisions established in 

§ 410.59(a)(3)(iii), § 410.60(a)(3)(iii), and 

§ 410.62(a)(3)(ii).

■ 14. Section 410.32 is amended by 

revising paragraph (b)(2)(iii) to read as 

follows:

§ 410.32 Diagnostic x-ray tests, diagnostic 

laboratory tests, and other diagnostic tests: 

Conditions.

* * * * *

(b) * * * 

(2) * * * 

(iii) Diagnostic psychological testing 

services when—

(A) Personally furnished by a clinical 

psychologist or an independently 

practicing psychologist as defined in 

program instructions; or 

(B) Furnished under the general 

supervision of a physician or a clinical 

psychologist.

* * * * *

■ 15. Section 410.59 is amended by—

■ A. Revising paragraph (a) introductory 

text and paragraph (a)(3)(ii).

■ B. Adding new paragraph (a)(3)(iii).

■ C. Revising paragraph (b) heading.

■ C. Revising paragraph (c)(2).

■ D. Adding new paragraph (e)(1)(iii).

The additions and revisions read as 

follows:

§ 410.59 Outpatient occupational therapy 

services: Conditions. 

(a) Basic rule. Except as specified in 

paragraph (a)(3)(iii) of this section, 

Medicare Part B pays for outpatient 

occupational therapy services only if 

they are furnished by an individual 

meeting the qualifications in § 484.4 of 

66422 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

this chapter for an occupational 

therapist or by an appropriately 

supervised occupational therapy 

assistant but only under the following 

conditions:

* * * * *

(3) * * * 

(ii) By, or under the direct supervision 

of, an occupational therapist in private 

practice as described in paragraph (c) of 

this section; or

(iii) By, or incident to the service of, 

a physician, physician assistant, clinical 

nurse specialist, or nurse practitioner 

when those professionals may perform 

occupational therapy services within 

the scope of State law. When an 

occupational therapy service is 

provided incident to the service of a 

physician, physician assistant, clinical 

nurse specialist, or nurse practitioner, 

by anyone other than a physician, 

physician assistant, clinical nurse 

specialist, or nurse practitioner, the 

service and the person who furnishes 

the service must meet the standards and 

conditions that apply to occupational 

therapy and occupational therapists, 

except that a license to practice 

occupational therapy in the State is not 

required. 

(b) Conditions for coverage of 

outpatient therapy services furnished to 

certain inpatients of a hospital or a CAH 

or SNF. * * * 

(c) * * * 

(2) Supervision of occupational 

therapy services. Occupational therapy 

services are performed by, or under the 

direct supervision of, an occupational 

therapist in private practice. All services 

not performed personally by the 

therapist must be performed by 

employees of the practice, directly 

supervised by the therapist, and 

included in the fee for the therapist’s 

services.

* * * * *

(e) * * * 

(1) * * * 

(iii) The limitation is not applied for 

services furnished from December 8, 

2003 through December 31, 2005.

* * * * *

■ 16. Section 410.60 is amended by—

■ A. Revising paragraph (a) introductory 

text.

■ B. Revising paragraph (a)(3)(ii).

■ C. Adding new paragraph (a)(3)(iii).

■ D. Revising paragraph (b) heading.

■ E. Revising paragraph (c)(2).

■ F. Adding new paragraph (e)(1)(iii).

The additions and revisions read as 

follows:

§ 410.60 Outpatient physical therapy 

services: Conditions. 

(a) Basic rule. Except as specified in 

paragraph (a)(3)(iii) of this section, 

Medicare Part B pays for outpatient 

physical therapy services only if they 

are furnished by an individual meeting 

the qualifications in § 484.4 of this 

chapter for a physical therapist or by an 

appropriately supervised physical 

therapist assistant but only under the 

following conditions:

* * * * *

(3) * * * 

(ii) By, or under the direct supervision 

of a physical therapist in private 

practice as described in paragraph (c) of 

this section; or 

(iii) By, or incident to the service of, 

a physician, physician assistant, clinical 

nurse specialist, or nurse practitioner 

when those professionals may perform 

physical therapy services under State 

law. When a physical therapy service is 

provided incident to the service of a 

physician, physician’s assistant, clinical 

nurse specialist, or nurse practitioner, 

by anyone other than a physician, 

physician assistant, clinical nurse 

specialist, or nurse practitioner, the 

service and the person who furnishes 

the service must meet the standards and 

conditions that apply to physical 

therapy and physical therapists, except 

that a license to practice physical 

therapy in the State is not required. 

(b) Condition for coverage of 

outpatient physical therapy services 

furnished to certain inpatients of a 

hospital or a CAH or SNF. ***

(c) * * * 

(2) Supervision of physical therapy 

services. Physical therapy services are 

performed by, or under the direct 

supervision of, a physical therapist in 

private practice. All services not 

performed personally by the therapist 

must be performed by employees of the 

practice, directly supervised by the 

therapist, and included in the fee for the 

therapist’s services.

* * * * *

(e) * * *

(1) * * *

(iii) The limitation is not applied for 

services furnished from December 8, 

2003 through December 31, 2005.

* * * * *

■ 17. Section 410.62 is amended by—

■ A. Revising paragraph (a) introductory 

text and (a)(2)(i), (a)(2)(iii) and (a)(3).

■ B. Revising paragraphs (b) and (c).

The revisions read as follows:

§ 410.62 Outpatient speech-language 

pathology services: Conditions and 

exclusions. 

(a) Basic rule. Except as specified in 

paragraph (a)(3)(ii) of this section, 

Medicare Part B pays for outpatient 

speech-language pathology services only 

if they are furnished by an individual 

who meets the qualifications for a 

speech-language pathologist in § 484.4 

of this chapter and only under the 

following conditions:

* * * * *

(2) * * * 

(i) Is established by a physician or, 

effective January 1, 1982, by either a 

physician or the speech-language 

pathologist who provides the services to 

the particular individual; 

(ii) * * * 

(iii) Meets the requirements of 

§ 410.61. 

(3) They are furnished—

(i) By a provider as defined in § 489.2 

of this chapter, or by others under 

arrangements with, and under the 

supervision of, a provider; or 

(ii) By, or incident to the service of, 

a physician, physician assistant, clinical 

nurse specialist, or nurse practitioner 

when those professionals may perform 

speech-language pathology services 

under State law. When a speechlanguage pathology service is provided 

incident to the services of a physician, 

physician assistant, clinical nurse 

specialist, or nurse practitioner, by 

anyone other than a physician, 

physician assistant, clinical nurse 

specialist, or nurse practitioner, the 

service and the person who furnishes 

the service must meet the standards and 

conditions that apply to speechlanguage pathology and speechlanguage pathologists, except that a 

license to practice speech-language 

pathology services in the State is not 

required. 

(b) Condition for coverage of 

outpatient speech-language pathology 

services to certain inpatients of a 

hospital, CAH, or SNF. Medicare Part B 

pays for outpatient speech-language 

pathology services furnished to an 

inpatient of a hospital, CAH, or SNF 

who requires the services but has 

exhausted or is otherwise ineligible for 

benefit days under Medicare Part A. 

(c) Excluded services. No service is 

included as an outpatient speechlanguage pathology service if it is not 

included as an inpatient hospital service 

if furnished to a hospital or CAH 

inpatient.

* * * * *

■ 18. Section 410.63 is amended by—

■ A. Revising paragraph (b) heading.

■ B. Adding a new paragraph (c).

The revision and addition reads as 

follows:

§ 410.63 Hepatitis B vaccine and blood 

clotting factors: Conditions.

* * * * *

(b) Blood clotting factors: Conditions.

***

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66423

(c) Blood clotting factors: Furnishing 

Fee.

(1) Effective January 1, 2005, a 

furnishing fee of $0.14 per unit of 

clotting factor is paid to entities that 

furnish blood clotting factors unless the 

costs associated with furnishing the 

clotting factor are paid through another 

payment system, for example, hospitals 

that furnish clotting factor to patients 

during a Part A covered inpatient 

hospital stay. 

(2) The furnishing fee for blood 

clotting factors furnished in 2006 or a 

subsequent year is be equal to the 

furnishing fee paid the previous year 

increased by the percentage increase in 

the consumer price index for medical 

care for the 12-month period ending 

with June of the previous year.

■ 19. Section 410.78 is amended by—

■ A. Revising paragraph (a)(4).

■ B. Revising paragraph (b) introductory 

text. 

The revisions read as follows:

§ 410.78 Telehealth services. 

* * * 

(4) Originating site means the location 

of an eligible Medicare beneficiary at 

the time the service being furnished via 

a telecommunications system occurs. 

For asynchronous store and forward 

telecommunications technologies, the 

only originating sites are Federal 

telemedicine demonstration programs 

conducted in Alaska or Hawaii. 

(b) General rule. Medicare Part B pays 

for office and other outpatient visits, 

professional consultation, psychiatric 

diagnostic interview examination, 

individual psychotherapy, 

pharmacologic management and end 

stage renal disease related services 

included in the monthly capitation 

payment (except for one visit per month 

to examine the access site) furnished by 

an interactive telecommunications 

system if the following conditions are 

met:

* * * * *

■ 20. Section 410.160 is amended by 

revising paragraph (f) to read as follows:

§ 410.160 Part B annual deductible.

* * * * *

(f) Amount of the Part B annual 

deductible. (1) Beginning with expenses 

for services furnished during calendar 

year 2006, and for all succeeding years, 

the annual deductible is the previous 

year’s deductible plus the annual 

percentage increase in the monthly 

actuarial rate for Medicare enrollees age 

65 and over, rounded to the nearest 

dollar. 

(2) For 2005, the deductible is $110.

(3) From 1991 through 2004, the 

deductible was $100. 

(4) From 1982 through 1990, the 

deductible was $75. 

(5) From 1973 through 1981, the 

deductible was $60. 

(6) From 1966 through 1972, the 

deductible was $50.

* * * * *

PART 411—EXCLUSIONS FROM 

MEDICARE AND LIMITATIONS ON 

MEDICARE PAYMENT

■ 21. The authority citation for part 411 

continues to read as follows:

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh).

■ 22. Section 411.15 is amended by—

■ A. Revising paragraph (a)(1).

■ B. Adding paragraph (k)(11).

The revision and addition read as 

follows:

§ 411.15 Particular services excluded from 

coverage.

* * * * *

(a) * * * 

(1) Examinations performed for a 

purpose other than treatment or 

diagnosis of a specific illness, 

symptoms, complaint, or injury, except 

for screening mammography, colorectal 

cancer screening tests, screening pelvic 

exams, prostate cancer screening tests, 

glaucoma screening exams, or initial 

preventive physical examinations that 

meet the criteria specified in paragraphs 

(k)(6) through (k)(11) of this section.

* * * * *

(k) * * * 

(11) In the case of initial preventive 

physical examinations, with the goal of 

health promotion and disease 

prevention, subject to the conditions 

and limitations specified in § 410.16 of 

this chapter.

* * * * *

■ 23. Section 411.404 is amended by 

revising paragraph (b) to read as follows:

§ 411.404 Criteria for determining that a 

beneficiary knew that services were 

excluded from coverage as custodial care 

or as not reasonable and necessary.

* * * * *

(b) Written notice. (1) Written notice 

is given to the beneficiary, or to 

someone acting on his or her behalf, that 

the services were not covered because 

they did not meet Medicare coverage 

guidelines. 

(2) A notice concerning similar or 

reasonably comparable services 

furnished on a previous occasion also 

meets this criterion. 

(3) After a beneficiary is notified that 

there is no Medicare payment for a 

service that is not covered by Medicare, 

he or she is presumed to know that 

there is no Medicare payment for any 

form of subsequent treatment for the 

non-covered condition.

* * * * *

PART 414—PAYMENT FOR PART B 

MEDICAL AND OTHER HEALTH 

SERVICES.

■ 24. The authority citation for part 414 

continues to read as follows:

Authority: Secs. 1102, 1871, and 1881(b)(1) 

of the Social Security Act (42 U.S.C. 1302, 

1395hh, and 1395rr(b)(1)).

§ 414.38 [Removed]

■ 25. Section 414.38 is removed.

■ 26. Section 414.39 is amended by—

■ A. Revising paragraph (a).

■ B. Adding paragraph (c).

The revision and addition read as 

follows:

§ 414.39 Special rules for payment of care 

plan oversight. 

(a) General. Except as specified in 

paragraphs (b) and (c) of this section, 

payment for care plan oversight is 

included in the payment for visits and 

other services under the physician fee 

schedule. For purposes of this section a 

nonphysician practitioner (NPP) is a 

nurse practitioner, clinical nurse 

specialist or physician assistant.

* * * * *

(c) Special rules for payment of care 

plan oversight provided by 

nonphysician practitioners for 

beneficiaries who receive HHA services 

covered by Medicare.

(1) An NPP can furnish physician care 

plan oversight (but may not certify a 

patient as needing home health services) 

if the physician who signs the plan of 

care provides regular ongoing care 

under the same plan of care as does the 

NPP billing for care plan oversight and 

either: 

(i) The physician and NPP are part of 

the same group practice; or 

(ii) If the NPP is a nurse practitioner 

or clinical nurse specialist, the 

physician signing the plan of care also 

has a collaborative agreement with the 

NPP; or 

(iii) If the NPP is a physician 

assistant, the physician signing the plan 

of care is also the physician who 

provides general supervision of 

physician assistant services for the 

practice. 

(2) Payment may be made for care 

plan oversight services furnished by an 

NPP when: 

(i) The NPP providing the care plan 

oversight has seen and examined the 

patient; 

(ii) The NPP providing care plan 

oversight is not functioning as a 

66424 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

consultant whose participation is 

limited to a single medical condition 

rather than multi-disciplinary 

coordination of care; and 

(iii) The NPP providing care plan 

oversight integrates his or her care with 

that of the physician who signed the 

plan of care.

■ 27. Section 414.65 is amended by 

revising paragraph (a)(1) to read as 

follows:

§ 414.65 Payment for telehealth services. 

(a) * * * 

(1) The Medicare payment amount for 

office or other outpatient visits, 

consultation, individual psychotherapy, 

psychiatric diagnostic interview 

examination, pharmacologic 

management and end stage renal disease 

related services included in the monthly 

capitation payment (except for one visit 

per month to examine the access site) 

furnished via an interactive 

telecommunications system is equal to 

the current fee schedule amount 

applicable for the service of the 

physician or practitioner.

* * * * *

■ 28. Section 414.66 is added to subpart 

B to read as follows:

§ 414.66 Incentive payments for physician 

scarcity areas. 

(a) Definition. As used in this section, 

the following definitions apply. 

Physician scarcity area is defined as 

an area with a shortage of primary care 

physicians or specialty physicians to the 

Medicare population in that area. 

Primary care physician is defined as 

a general practitioner, family practice 

practitioner, general internist, 

obstetrician or gynecologist. 

(b) Physicians’ services furnished to a 

beneficiary in a Physician Scarcity Area 

(PSA) for primary or specialist care are 

eligible for a 5 percent incentive 

payment. 

(c) Primary care physicians furnishing 

services in primary care PSAs are 

entitled to an additional 5 percent 

incentive payment above the amount 

paid under the physician fee schedule 

for their professional services furnished 

on or after January 1, 2005 and before 

January 1, 2008. 

(d) Physicians, as defined in section 

1861(r)(1) of the Act, furnishing services 

in specialist care PSAs are entitled to an 

additional 5 percent payment above the 

amount paid under the physician fee 

schedule for their professional services 

furnished on or after January 1, 2005 

and before January 1, 2008.

■ 29. Section 414.67 is added to subpart 

B to read as follows:

§ 414.67 Incentive payments for Health 

Professional Shortage Areas. 

(a) Physicians’ services furnished to a 

beneficiary in a geographic-based Health 

Professional Shortage Area (HPSA) are 

eligible for a 10 percent incentive 

payment above the amount paid for 

their professional services under the 

physician fee schedule. 

(b) Physicians furnishing services in a 

geographic-based primary medical care 

HPSA are entitled to a 10 percent 

incentive payment above the amount 

paid for their professional services 

under the physician fee schedule. 

(c) Psychiatrists furnishing services in 

a mental health HPSA are entitled to a 

10 percent incentive payment above the 

amount paid for their professional 

services under the physician fee 

schedule. (The only physicians eligible 

to receive the 10 percent incentive 

payment in mental health HPSAs that 

do not overlap with primary care HPSAs 

are psychiatrists.)

■ 30. Part 414 is amended by adding a 

new subpart K to read as follows:

Subpart K—Payment for Drugs and 

Biologicals in 2005

Sec. 

414.900 Basis. 

414.902 Definitions. 

414.904 Basis of payment.

Subpart K—Payment for Drugs and 

Biologicals in 2005

§ 414.900 Basis. 

(a) This subpart implements section 

1842(o) of the Act by specifying the 

methodology for determining the 

payment allowance limit for drugs and 

biologicals covered under Medicare Part 

B that are not paid on a cost or 

prospective payment system basis. 

(b) Examples of drugs that are subject 

to the requirements specified in this 

subpart are: 

(1) Drugs furnished incident to a 

physician’s service; durable medical 

equipment (DME) drugs. 

(2) Separately billable drugs at 

independent dialysis facilities not under 

the ESRD composite rate. 

(3) Statutorily covered drugs, for 

example—

(i) Influenza. 

(ii) Pneumococcal and hepatitis 

vaccines. 

(iii) Antigens. 

(iv) Hemophilia blood clotting factor. 

(v) Immunosuppressive drugs. 

(vi) Certain oral anti-cancer drugs.

§ 414.902 Definitions. 

As used in this subpart, unless the 

context indicates otherwise—

Drug means both drugs and 

biologicals. 

Manufacturer’s average sales price

means the price calculated and reported 

by a manufacturer under part 414, 

subpart J of this chapter. 

Multiple source drug means a drug 

described by section 1847A(c)(6)(C) of 

the Act. 

Single source drug means a drug 

described by section 1847A(c)(6)(D) of 

the Act. 

Unit is defined as in part 414, subpart 

J of this chapter. 

Wholesale acquisition cost (WAC)

means the price described by section 

1847A(c)(6)(B) of the Act.

§ 414.904 Basis of payment. 

(a) Method of payment. Payment for a 

drug for calendar year 2005 is based on 

the lesser of—

(1) The actual charge on the claim for 

program benefits; or 

(2) 106 percent of the average sales 

price, subject to the applicable 

limitations specified in paragraph (d) of 

this section or subject to the exceptions 

described in paragraph (e) of this 

section. 

(b) Multiple source drugs. (1) Average 

sales prices. The average sales price for 

all drug products included within the 

same multiple source drug billing and 

payment code is the volume-weighted 

average of the manufacturers’ average 

sales prices for those drug products. 

(2) Calculation of the average sales 

price. The average sales price is 

determined by—

(i) Computing the sum of the products 

(for each National Drug Code assigned 

to the drug products) of the 

manufacturer’s average sales price and 

the total number of units sold; and 

(ii) Dividing that sum by the sum of 

the total number of units sold for all 

NDCs assigned to the drug products. 

(c) Single source drugs. (1) Average 

sales price. The average sales price is 

the volume-weighted average of the 

manufacturers’ average sales prices for 

all National Drug Codes assigned to the 

drug or biological product. 

(2) Calculation of the average sales 

price. The average sales price is 

determined by computing—

(i) The sum of the products (for each 

National Drug Code assigned to the drug 

product) of the manufacturer’s average 

sales price and the total number of units 

sold; and 

(ii) Dividing that sum by the sum of 

the total number of units sold for all 

NDCs assigned to the drug product.

(d) Limitations on the average sales 

price. (1) Wholesale acquisition cost for 

a single source drug. The payment limit 

for a single source drug product is the 

lesser of 106 percent of the average sales 

price for the product or 106 percent of 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66425

the wholesale acquisition cost for the 

product. 

(2) Payment limit for a drug furnished 

to an end-stage renal disease patient. (i) 

Effective for drugs and biologicals 

furnished in 2005, the payment for such 

drugs and biologicals, including 

erythropoietin, furnished to an endstage renal disease patient that is 

separately billed by an end-stage renal 

disease facility and not paid on a cost 

basis is acquisition cost as determined 

by the Inspector General report as 

required by section 623(c) of the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 inflated by the percentage increase 

in the Producer Price Index. 

(ii) Except as provided in paragraph 

(a) of this section, the payment for drugs 

and biologicals, furnished to an endstage renal disease patient that is 

separately billed by an end-stage renal 

disease facility, is based on 106 percent 

of the average sales price. 

(3) Widely available market price and 

average manufacturer price. If the 

Inspector General finds that the average 

sales price exceeds the widely available 

market price or the average 

manufacturer price by 5 percent or more 

in calendar year 2005, the payment limit 

in the quarter following the transmittal 

of this information to the Secretary is 

the lesser of the widely available market 

price or 103 percent of the average 

manufacturer price. 

(e) Exceptions to the average sales 

price. (1) Vaccines. The payment limits 

for hepatitis B vaccine furnished to 

individuals at high or intermediate risk 

of contracting hepatitis B (as determined 

by the Secretary), pneumococcal 

vaccine, and influenza vaccine and are 

calculated using 95 percent of the 

average wholesale price. 

(2) Infusion drugs furnished through a 

covered item of durable medical 

equipment. The payment limit for an 

infusion drug furnished through a 

covered item of durable medical 

equipment is calculated using 95 

percent of the average wholesale price 

in effect on October 1, 2003 and is not 

updated in 2005. 

(3) Blood and blood products. In the 

case of blood and blood products (other 

than blood clotting factors), the payment 

limits are determined in the same 

manner as the payment limits were 

determined on October 1, 2003. 

(4) Payment limit in a case where the 

average sales price during the first 

quarter of sales is unavailable. In the 

case of a drug during an initial period 

(not to exceed a full calendar quarter) in 

which data on the prices for sales of the 

drug are not sufficiently available from 

the manufacturer to compute an average 

sales price for the drug, the payment 

limit is based on the wholesale 

acquisition cost or the applicable 

Medicare Part B drug payment 

methodology in effect on November 1, 

2003. 

(f) Except as otherwise specified (see 

paragraph (e)(2) of this section) for 

infusion drugs, the payment limits are 

updated quarterly. 

(g) The payment limit is computed 

without regard to any special packaging, 

labeling, or identifiers on the dosage 

form or product or package. 

(h) The payment amount is subject to 

applicable deductible and coinsurance.

■ 31. Part 414 is amended by adding a 

new subpart L to read as follows:

Subpart L—Supplying and Dispensing 

Fees

Sec. 

414.1000 Purpose. 

414.1001 Basis of Payment.

§ 414.1000 Purpose. 

This subpart implements section 

1842(o)(2) and section 1842(o)(6) of the 

Act, as added by section 303(e)(2) of the 

MMA, by specifying a supplying fee for 

drugs and biologicals covered under 

Part B of Title XVIII of the Act that are 

described in sections 1861(s)(2)(J), 

1861(s)(2)(Q), and 1861(s)(2)(T) of the 

Act.

§ 414.1001 Basis of payment. 

(a) A supplying fee of $24 shall be 

paid to a pharmacy for each supplied 

prescription of drugs and biologicals 

described in sections 1861(s)(2)(J), 

1861(s)(2)(Q), and 1861(s)(2)(T) of the 

Act. 

(b) A supplying fee of $50 is paid to 

a pharmacy for the initial supplied 

prescription of drugs and biologicals 

described in sections 1861(s)(2)(J) of the 

Act provided to a patient during the first 

month following a transplant. 

(c) During 2005, a dispensing fee of 

$57 is paid to a supplier for each 

dispensed 30-day supply of inhalation 

drugs furnished through durable 

medical equipment covered under 

section 1861(n) of the Act, regardless of 

the number of partial shipments of that 

30-day supply. 

(d) During 2005, a dispensing fee of 

$80 is paid to a supplier for each 

dispensed 90-day supply of inhalation 

drugs furnished through durable 

medical equipment covered under 

section 1861(n) of the Act, regardless of 

the number of partial shipments of that 

90-day supply.

PART 418—HOSPICE CARE

■ 32. The authority citation for part 418 

continues to read as follows:

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh).

■ 33. Section 418.205 is added to subpart 

F to read as follows:

§ 418.205 Special requirements for 

hospice pre-election evaluation and 

counseling services. 

(a) Definition. As used in this section 

the following definition applies. 

Terminal illness has the same 

meaning as defined in § 418.3. 

(b) General. Effective January 1, 2005, 

payment for hospice pre-election 

evaluation and counseling services as 

specified in §418.304(d) may be made to 

a hospice on behalf of a Medicare 

beneficiary if the requirements of this 

section are met. 

(1) The beneficiary. The beneficiary: 

(i) Has been diagnosed as having a 

terminal illness as defined in § 418.3. 

(ii) Has not made a hospice election. 

(iii) Has not previously received 

hospice pre-election evaluation and 

consultation services specified under 

this section. 

(2) Services provided. The hospice 

pre-election services include an 

evaluation of an individual’s need for 

pain and symptom management and 

counseling regarding hospice and other 

care options. In addition, the services 

may include advising the individual 

regarding advanced care planning. 

(3) Provision of pre-election hospice 

services.

(i) The services must be furnished by 

a physician. 

(ii) The physician furnishing these 

services must be an employee or 

medical director of the hospice billing 

for this service. 

(iii) The services cannot be furnished 

by hospice personnel other than 

employed physicians, such as but not 

limited to nurse practitioners, nurses, or 

social workers, physicians under 

contractual arrangements with the 

hospice or by the beneficiary’s 

physician, if that physician is not an 

employee of the hospice. 

(iv) If the beneficiary’s attending 

physician is also the medical director or 

a physician employee of the hospice, 

the attending physician may not provide 

nor may the hospice bill for this service 

because that physician already 

possesses the expertise necessary to 

furnish end-of-life evaluation and 

management, and counseling services. 

(4) Documentation. (i) If the 

individual’s physician initiates the 

request for services of the hospice 

medical director or physician, 

appropriate documentation is required. 

(ii) The request or referral must be in 

writing, and the hospice medical 

66426 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 

director or physician employee is 

expected to provide a written note on 

the patient’s medical record. 

(iii) The hospice agency employing 

the physician providing these services is 

required to maintain a written record of 

the services furnished. 

(iv) If the services are initiated by the 

beneficiary, the hospice agency is 

required to maintain a record of the 

services and documentation that 

communication between the hospice 

medical director or physician and the 

beneficiary’s physician occurs, with the 

beneficiary’s permission, to the extent 

necessary to ensure continuity of care.

■ 34. Section 418.304 is amended by 

adding paragraph (d) to read as follows.

§ 418.304 Payment for physician services.

* * * * *

(d) Payment for hospice pre-election 

evaluation and counseling services. The 

intermediary makes payment to the 

hospice for the services established in 

§ 418.205. Payment for this service is set 

at an amount established under the 

physician fee schedule, for an office or 

other outpatient visit for evaluation and 

management associated with presenting 

problems of moderate severity and 

requiring medical decision-making of 

low complexity other than the portion 

of the amount attributable to the 

practice expense component. Payment 

for this pre-election service does not 

count towards the hospice cap amount.

PART 424—CONDITIONS FOR 

MEDICARE PAYMENT

■ 35. The authority citation for part 424 

continues to read as follows:

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh).

■ 36. Section 424.55 is amended by 

adding new paragraph (c) to read as 

follows:

§ 424.55 Payment to the supplier.

* * * * *

(c) Exception. In situations when 

payment under the Act can only be 

made on an assignment-related basis or 

when payment is for services furnished 

by a participating physician or supplier, 

the beneficiary (or the person 

authorized to request payment on the 

beneficiary’s behalf) is not required to 

assign the claim to the supplier in order 

for an assignment to be effective.

■ 37. Section 424.71 is amended as 

follows:

■ A. The definition of ‘‘Health care 

delivery system or system’’ is removed.

■ B. The definition of the term ‘‘Entity’’

is added in alphabetical order. 

The addition reads as follows:

§ 424.71 Definitions.

* * * * *

Entity means a person, group, or 

facility that is enrolled in the Medicare 

program.

* * * * *

■ 38. Section 424.80 is amended by—

■ A. Revising paragraph (a).

■ B. Revising paragraph (b)(2).

■ C. Removing paragraph (b)(3).

■ D. Redesignating paragraphs (b)(4) 

through (6) as paragraphs (b)(3) through 

(5), respectively.

■ E. Revising paragraph (c).

■ F. Adding a new paragraph (d).

The revisions and addition read as 

follows:

§ 424.80 Prohibition of reassignment of 

claims by suppliers. 

(a) Basic prohibition. Except as 

specified in paragraph (b) of this 

section, Medicare does not pay amounts 

that are due a supplier under an 

assignment to any other person under 

reassignment, power of attorney, or any 

other direct arrangement. Nothing in 

this section alters a party’s obligations 

under the anti-kickback statute (section 

1128B(b) of the Act), the physician selfreferral prohibition (section 1877 of the 

Act), the rules regarding physician 

billing for purchased diagnostic tests 

(§ 414.50 of this chapter), the rules 

regarding payment for services and 

supplies incident to a physician’s 

professional services (§ 410.26 of this 

chapter), or other laws, rules, and 

regulations. 

(b) * * * 

(1) * * * 

(2) Payment to an entity under a 

contractual arrangement. Medicare may 

pay an entity enrolled in the Medicare 

program if there is a contractual 

arrangement between the entity and the 

supplier under which the entity bills for 

the supplier’s services, subject to the 

provisions of paragraph (d) of this 

section.

* * * * *

(c) Rules applicable to an employer or 

entity. An employer or entity that may 

receive payment under paragraph (b)(1) 

or (b)(2) of this section is considered the 

supplier of those services for purposes 

of subparts C, D, and E of this part, 

subject to the provisions of paragraph 

(d) of this section. 

(d) Reassignment to an entity under a 

contractual arrangement: Conditions 

and limitations. (1) Liability of the 

parties. An entity enrolled in the 

Medicare program that receives 

payment under a contractual 

arrangement under paragraph (b)(2) of 

this section and the supplier that 

otherwise receives payment are jointly 

and severally responsible for any 

Medicare overpayment to that entity. 

(2) Access to records. The supplier 

furnishing the service has unrestricted 

access to claims submitted by an entity 

for services provided by that supplier.

PART 484—HOME HEALTH SERVICES

■ 39. The authority citation for part 484 

continues to read as follows:

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh).

§ 484.4 [Amended]

■ 40. In § 484.4 in the definition of 

physical therapy assistant the term 

‘‘physical therapy assistant’’ is removed 

and the term ‘‘physical therapist 

assistant’’ is added in its place wherever 

it appears.

PART 486—CONDITIONS FOR 

COVERAGE OF SPECIALIZED 

SERVICES FURNISHED BY 

SUPPLIERS

■ 41. The authority citation for part 486 

continues to read as follows:

Authority: Sections 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh).

Subpart D—[Removed and Reserved]

■ 42. Part 486 subpart D, consisting of 

§ 486.150 through § 486.163, is removed 

and reserved.

(Catalog of Federal Domestic Assistance 

Program No. 93.774, Medicare—

Supplementary Medical Insurance Program)

Dated: November 1, 2004. 

Mark B. McClellan, 

Administrator, Centers for Medicare & 

Medicaid Services.

Dated: November 1, 2004. 

Tommy G. Thompson, 

Secretary.

Note: These addenda will not appear in the 

Code of Federal Regulations.

Addendum A—Explanation and Use of 

Addenda B 

The addenda on the following pages 

provide various data pertaining to the 

Medicare fee schedule for physicians’

services furnished in 2005. Addendum B 

contains the RVUs for work, non-facility 

practice expense, facility practice expense, 

and malpractice expense, and other 

information for all services included in the 

physician fee schedule. 

In previous years, we have listed many 

services in Addendum B that are not paid 

under the physician fee schedule. To avoid 

publishing as many pages of codes for these 

services, we are not including clinical 

laboratory codes and most alphanumeric 

Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66427

codes (Healthcare Common Procedure 

Coding System (HCPCS) codes not included 

in CPT) in Addendum B. 

Addendum B—2005 Relative Value Units 

and Related Information Used in 

Determining Medicare Payments for 2005 

This addendum contains the following 

information for each CPT code and 

alphanumeric HCPCS code, except for 

alphanumeric codes beginning with B 

(enteral and parenteral therapy), E (durable 

medical equipment), K (temporary codes for 

nonphysicians’ services or items), or L 

(orthotics), and codes for anesthesiology. 

1. CPT/HCPCS code. This is the CPT or 

alphanumeric HCPCS number for the service. 

Alphanumeric HCPCS codes are included at 

the end of this addendum. 

2. Modifier. A modifier is shown if there 

is a technical component (modifier TC) and 

a professional component (PC) (modifier -26) 

for the service. If there is a PC and a TC for 

the service, Addendum B contains three 

entries for the code: one for the global values 

(both professional and technical); one for 

modifier -26 (PC); and one for modifier TC. 

The global service is not designated by a 

modifier, and physicians must bill using the 

code without a modifier if the physician 

furnishes both the PC and the TC of the 

service. 

Modifier -53 is shown for a discontinued 

procedure. There will be RVUs for the code 

(CPT code 45378) with this modifier. 

3. Status indicator. This indicator shows 

whether the CPT/HCPCS code is included in 

the physician fee schedule and whether it is 

separately payable if the service is covered. 

A = Active code. These codes are 

separately payable under the fee schedule if 

covered. There will be RVUs for codes with 

this status. The presence of an ‘‘A’’ indicator 

does not mean that Medicare has made a 

national decision regarding the coverage of 

the service. Carriers remain responsible for 

coverage decisions in the absence of a 

national Medicare policy. 

B = Bundled code. Payment for covered 

services is always bundled into payment for 

other services not specified. If RVUs are 

shown, they are not used for Medicare 

payment. If these services are covered, 

payment for them is subsumed by the 

payment for the services to which they are 

incident. (An example is a telephone call 

from a hospital nurse regarding care of a 

patient.) 

C = Carrier-priced code. Carriers will 

establish RVUs and payment amounts for 

these services, generally on a case-by-case 

basis following review of documentation, 

such as an operative report. 

E = Excluded from physician fee schedule 

by regulation. These codes are for items or 

services that we chose to exclude from the 

physician fee schedule payment by 

regulation. No RVUs are shown, and no 

payment may be made under the physician 

fee schedule for these codes. Payment for 

them, if they are covered, continues under 

reasonable charge or other payment 

procedures. 

I = Not valid for Medicare purposes. 

Medicare uses another code for the reporting 

of, and the payment for these services. (Code 

not subject to a 90-day grace period.) 

N = Noncovered service. These codes are 

noncovered services. Medicare payment may 

not be made for these codes. If RVUs are 

shown, they are not used for Medicare 

payment. 

P = Bundled or excluded code. There are 

no RVUs for these services. No separate 

payment should be made for them under the 

physician fee schedule.

—If the item or service is covered as incident 

to a physician’s service and is furnished on 

the same day as a physician’s service, 

payment for it is bundled into the payment 

for the physician’s service to which it is 

incident (an example is an elastic bandage 

furnished by a physician incident to a 

physician’s service). 

—If the item or service is covered as other 

than incident to a physician’s service, it is 

excluded from the physician fee schedule 

(for example, colostomy supplies) and is 

paid under the other payment provisions of 

the Act.

R = Restricted coverage. Special coverage 

instructions apply. If the service is covered 

and no RVUs are shown, it is carrier-priced. 

T = Injections. There are RVUs for these 

services, but they are only paid if there are 

no other services payable under the 

physician fee schedule billed on the same 

date by the same provider. If any other 

services payable under the physician fee 

schedule are billed on the same date by the 

same provider, these services are bundled 

into the service(s) for which payment is 

made. 

X = Exclusion by law. These codes 

represent an item or service that is not within 

the definition of ‘‘physicians’ services’’ for 

physician fee schedule payment purposes. 

No RVUs are shown for these codes, and no 

payment may be made under the physician 

fee schedule. (Examples are ambulance 

services and clinical diagnostic laboratory 

services.) 

4. Description of code. This is an 

abbreviated version of the narrative 

description of the code. 

5. Physician work RVUs. These are the 

RVUs for the physician work for this service 

in 2005. Codes that are not used for Medicare 

payment are identified with a ‘‘+.’’

6. Facility practice expense RVUs. These 

are the fully implemented resource-based 

practice expense RVUs for facility settings. 

7. Non-facility practice expense RVUs.

These are the fully implemented resourcebased practice expense RVUs for non-facility 

settings. 

8. Malpractice expense RVUs. These are 

the RVUs for the malpractice expense for the 

service for 2005. 

9. Facility total. This is the sum of the 

work, fully implemented facility practice 

expense, and malpractice expense RVUs. 

10. Non-facility total. This is the sum of the 

work, fully implemented non-facility practice 

expense, and malpractice expense RVUs. 

11. Global period. This indicator shows the 

number of days in the global period for the 

code (0, 10, or 90 days). An explanation of 

the alpha codes follows: 

MMM = The code describes a service 

furnished in uncomplicated maternity cases 

including antepartum care, delivery, and 

postpartum care. The usual global surgical 

concept does not apply. See the 1999 

Physicians’ Current Procedural Terminology 

for specific definitions. 

XXX = The global concept does not apply. 

YYY = The global period is to be set by the 

carrier (for example, unlisted surgery codes). 

ZZZ = Code related to another service that 

is always included in the global period of the 

other service. (Note: Physician work and 

practice expense are associated with intraservice time and in some instances the postservice time.)

BILLING CODE 4120–01–P

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66610 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.748</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66611


ER15NO04.749</GPH>
66612 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.750</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66613


ER15NO04.751</GPH>
66614 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.752</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66615


ER15NO04.753</GPH>
66616 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.754</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66617


ER15NO04.755</GPH>
66618 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.756</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66619


ER15NO04.757</GPH>
66620 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.758</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66621


ER15NO04.759</GPH>
66622 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.760</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66623


ER15NO04.761</GPH>
66624 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.762</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66625


ER15NO04.763</GPH>
66626 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.764</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66627


ER15NO04.765</GPH>
66628 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.766</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66629


ER15NO04.767</GPH>
66630 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.768</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66631


ER15NO04.769</GPH>
66632 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.770</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66633


ER15NO04.771</GPH>
66634 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.772</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66635


ER15NO04.773</GPH>
66636 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.774</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66637


ER15NO04.775</GPH>
66638 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.776</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66639


ER15NO04.777</GPH>
66640 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.778</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66641


ER15NO04.779</GPH>
66642 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.780</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66643


ER15NO04.781</GPH>
66644 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.782</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66645


ER15NO04.783</GPH>
66646 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.784</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66647


ER15NO04.785</GPH>
66648 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.786</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66649


ER15NO04.787</GPH>
66650 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.788</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66651


ER15NO04.789</GPH>
66652 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.790</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66653


ER15NO04.791</GPH>
66654 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.792</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66655


ER15NO04.793</GPH>
66656 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.794</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66657


ER15NO04.795</GPH>
66658 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.796</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66659


ER15NO04.797</GPH>
66660 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.798</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66661


ER15NO04.799</GPH>
66662 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.800</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66663


ER15NO04.801</GPH>
66664 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.802</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66665


ER15NO04.803</GPH>
66666 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.804</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66667


ER15NO04.805</GPH>
66668 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.806</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66669


ER15NO04.807</GPH>
66670 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.808</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66671


ER15NO04.809</GPH>
66672 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.810</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66673


ER15NO04.811</GPH>
66674 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.812</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66675


ER15NO04.813</GPH>
66676 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.814</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66677


ER15NO04.815</GPH>
66678 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.816</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66679


ER15NO04.817</GPH>
66680 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.818</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66681


ER15NO04.819</GPH>
66682 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.820</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66683


ER15NO04.821</GPH>
66684 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.822</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66685


ER15NO04.823</GPH>
66686 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.824</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66687


ER15NO04.825</GPH>
66688 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.826</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66689


ER15NO04.827</GPH>
66690 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.828</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66691


ER15NO04.829</GPH>
66692 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.830</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66693


ER15NO04.831</GPH>
66694 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.832</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66695


ER15NO04.833</GPH>
66696 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.834</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66697


ER15NO04.835</GPH>
66698 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.836</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66699


ER15NO04.837</GPH>
66700 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.838</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66701


ER15NO04.839</GPH>
66702 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.840</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66703


ER15NO04.841</GPH>
66704 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.842</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66705


ER15NO04.843</GPH>
66706 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.844</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66707


ER15NO04.845</GPH>
66708 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.846</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66709


ER15NO04.847</GPH>
66710 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.848</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66711


ER15NO04.849</GPH>
66712 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.850</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66713


ER15NO04.851</GPH>
66714 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.852</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66715


ER15NO04.853</GPH>
66716 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.854</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66717


ER15NO04.855</GPH>
66718 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.856</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66719


ER15NO04.857</GPH>
66720 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.858</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66721


ER15NO04.859</GPH>
66722 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.860</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66723


ER15NO04.861</GPH>
66724 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.862</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66725


ER15NO04.863</GPH>
66726 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.864</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66727


ER15NO04.865</GPH>
66728 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.866</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66729


ER15NO04.867</GPH>
66730 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.868</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66731


ER15NO04.869</GPH>
66732 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.870</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66733


ER15NO04.871</GPH>
66734 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.872</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66735


ER15NO04.873</GPH>
66736 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.874</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66737


ER15NO04.875</GPH>
66738 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.876</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66739


ER15NO04.877</GPH>
66740 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.878</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66741


ER15NO04.879</GPH>
66742 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.880</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66743


ER15NO04.881</GPH>
66744 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.882</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66745


ER15NO04.883</GPH>
66746 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.884</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66747


ER15NO04.885</GPH>
66748 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.886</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66749


ER15NO04.887</GPH>
66750 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.888</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66751


ER15NO04.889</GPH>
66752 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.890</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66753


ER15NO04.891</GPH>
66754 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.892</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66755


ER15NO04.893</GPH>
66756 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.894</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66757


ER15NO04.895</GPH>
66758 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.896</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66759


ER15NO04.897</GPH>
66760 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.898</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66761


ER15NO04.899</GPH>
66762 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.900</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66763


ER15NO04.901</GPH>
66764 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.902</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66765


ER15NO04.903</GPH>
66766 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.904</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66767


ER15NO04.905</GPH>
66768 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.906</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66769


ER15NO04.907</GPH>
66770 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.908</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66771


ER15NO04.909</GPH>
66772 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.910</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66773


ER15NO04.911</GPH>
66774 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.912</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66775


ER15NO04.913</GPH>
66776 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.914</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66777


ER15NO04.915</GPH>
66778 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.916</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66779


ER15NO04.917</GPH>
66780 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.918</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66781


ER15NO04.919</GPH>
66782 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.920</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66783


ER15NO04.921</GPH>
66784 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.922</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66785


ER15NO04.923</GPH>
66786 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.924</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66787


ER15NO04.925</GPH>
66788 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.926</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66789


ER15NO04.927</GPH>
66790 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.928</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66791


ER15NO04.929</GPH>
66792 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.930</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66793


ER15NO04.931</GPH>
66794 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.932</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66795


ER15NO04.933</GPH>
66796 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.934</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66797


ER15NO04.935</GPH>
66798 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.936</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66799


ER15NO04.937</GPH>
66800 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.938</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66801


ER15NO04.939</GPH>
66802 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.940</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66803


ER15NO04.941</GPH>
66804 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.942</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66805


ER15NO04.943</GPH>
66806 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.944</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66807


ER15NO04.945</GPH>
66808 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.946</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66809


ER15NO04.947</GPH>
66810 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.948</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66811


ER15NO04.949</GPH>
66812 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.950</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66813


ER15NO04.951</GPH>
66814 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.952</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66815


ER15NO04.953</GPH>
66816 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.954</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66817


ER15NO04.955</GPH>
66818 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.956</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66819


ER15NO04.957</GPH>
66820 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.958</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66821


ER15NO04.959</GPH>
66822 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.960</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66823


ER15NO04.961</GPH>
66824 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.962</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66825


ER15NO04.963</GPH>
66826 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66827


ER15NO04.965</GPH>
66828 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66829


ER15NO04.967</GPH>
66830 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66831


ER15NO04.969</GPH>
66832 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66833


ER15NO04.971</GPH>
66834 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66835


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66836 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66837


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66838 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66839


ER15NO04.977</GPH>
66840 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66841


ER15NO04.979</GPH>
66842 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66843


ER15NO04.981</GPH>
66844 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66845


ER15NO04.983</GPH>
66846 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66847


ER15NO04.985</GPH>
66848 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.986</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66849


ER15NO04.987</GPH>
66850 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.988</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66851


ER15NO04.989</GPH>
66852 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.990</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66853


ER15NO04.991</GPH>
66854 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.992</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66855


ER15NO04.993</GPH>
66856 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.994</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66857


ER15NO04.995</GPH>
66858 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.996</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66859


ER15NO04.997</GPH>
66860 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


ER15NO04.998</GPH>
Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66861


ER15NO04.999</GPH>
66862 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66863


ER15NO04A.001</GPH>
66864 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66865


ER15NO04A.003</GPH>
66866 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66867


ER15NO04A.005</GPH>
66868 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66869


ER15NO04A.007</GPH>
66870 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66871


ER15NO04A.009</GPH>
66872 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66873


ER15NO04A.011</GPH>
66874 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66875


ER15NO04A.013</GPH>
66876 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66877


ER15NO04A.015</GPH>
66878 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66879


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66880 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66881


ER15NO04A.019</GPH>
66882 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66883


ER15NO04A.021</GPH>
66884 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66885


ER15NO04A.023</GPH>
66886 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66887


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66888 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66889


ER15NO04A.027</GPH>
66890 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66891


ER15NO04A.029</GPH>
66892 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66893


ER15NO04A.031</GPH>
66894 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66895


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66896 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66897


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66898 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66899


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66900 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66901


ER15NO04A.039</GPH>
66902 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66903


ER15NO04A.041</GPH>
66904 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66905


ER15NO04A.043</GPH>
66906 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66907


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66908 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66909


ER15NO04A.047</GPH>
66910 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66911


ER15NO04A.049</GPH>
66912 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66913


ER15NO04A.051</GPH>
66914 Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 


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Federal Register / Vol. 69, No. 219 / Monday, November 15, 2004 / Rules and Regulations 66915

[FR Doc. 04–24758 Filed 11–2–04; 4:45 pm] 

BILLING CODE 4120–01–C


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