[Federal Register Volume 62, Number 211 (Friday, October 31, 1997)]
[Proposed Rules]
[Pages 59267-59269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29029]



Federal Register / Vol. 62, No. 211 / Friday, October 31, 1997 / 
Proposed Rules

[[Page 59267]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 414

[BPD-901-NC]
RIN 0938-AI33


Medicare Program; Delay in Implementing the Adjustments to the 
Practice Expense Relative Value Units Under the Physician Fee Schedule 
for Calendar Year 1998

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Notice of intent to regulate.

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SUMMARY: This notice identifies provisions in the Medicare physician 
fee schedule regulations that are affected by enactment of the Balanced 
Budget Act of 1997 (BBA 1997). Section 4505 of the BBA 1997 postpones 
implementation of a resource-based practice expense relative value unit 
system until January 1, 1999 and provides for a 4-year transition. In 
addition, it provides for an adjustment for practice expense relative 
value units for 1998. It also requires publication of a new proposed 
rule for practice expense by May 1, 1998, thus requiring significant 
revision of our proposal contained in the proposed rule published June 
18, 1997 (62 FR 33158).

DATES: Comment Date: Comments will be considered if we receive them at 
the appropriate address, as provided below, no later than 5 p.m. on 
December 30, 1997.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: BPD-901-NC, P.O. Box 26688, 
Baltimore, MD 21207-0488.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code BPD-901-NC. Comments received timely will be available for 
public inspection as they are received, beginning approximately 3 weeks 
after publication of the document, in Room 309-G of the Department's 
offices at 200 Independence Avenue, SW., Washington, DC, on Monday 
through Friday of each week from 8:30 a.m. to 5 p.m. (phone: (202) 690-
7890).

FOR FURTHER INFORMATION CONTACT: Stanley Weintraub, (410) 786-4498.

SUPPLEMENTARY INFORMATION:

I. Legislative History

    Since January 1, 1992, Medicare has paid for physician services 
under section 1848 of the Social Security Act (the Act), ``Payment for 
Physicians' Services.'' This section contains three major elements: (1) 
A fee schedule for the payment of physician services; (2) a method to 
control the rates of increase in Medicare expenditures for physician 
services; and (3) limits on the amounts that nonparticipating 
physicians can charge beneficiaries. Title XVIII of the Act requires 
that payments under the fee schedule be based on national uniform 
relative value units (RVUs) based on 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 because of changes resulting from a review of those 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 this tolerance is exceeded, we must make adjustments to the 
conversion factor to preserve budget neutrality.

II. Published Changes to the Fee Schedule

    We published a final rule on November 25, 1991 (56 FR 59502) to 
implement section 1848 of the Act by establishing a fee schedule for 
physician services furnished on or after January 1, 1992. In the 
November 1991 final rule (56 FR 59511), we stated our intention to 
update RVUs for new and revised codes in the American Medical 
Association's (AMA's) Physicians' Current Procedural Terminology (CPT) 
through an ``interim RVU'' process every year. The latest update to the 
RVUs and fee schedule was published on November 22, 1996, as a final 
rule with comment period (61 FR 59490).
    In addition, on June 18, 1997, we issued a proposed rule (62 FR 
33158) to revise various policies relating to physician services and 
included in that proposal a chronology of all regulations that updated 
the fee schedule and related policies.

III. Implementation of Section 4505 of the Balanced Budget Act of 
1997

    Under the law in effect at the time that the June 18, 1997 
physician fee schedule proposed rule was published, we were required to 
develop a resource-based system for determining practice expense RVUs 
effective January 1, 1998. The BBA 1997 (Pub. L. 105-33), enacted on 
August 5, 1997, provides for several revisions in the requirement to 
change from charge-based practice expense RVUs to a resource-based 
method.
    Specifically, the BBA 1997 provides for the following:
    <bullet> One-year delay.
    Section 4505(a) of the BBA 1997 provides that the implementation of 
the requirement to move from the current charge-based practice expense 
RVUs to resource-based practice expense RVUs be delayed from January 1, 
1998 to January 1, 1999.
    <bullet> Phased-in implementation.
    Instead of paying for all services entirely under a resource-based 
system in 1999, section 4505(b) of the BBA 1997 provides for a 4-year 
transition period. Practice expense RVUs for 1998 will be based on the 
adjustments described below. The practice expense RVUs for the year 
1999 will be determined as the product of 75 percent of the previous 
year's RVUs (1998) and 25 percent of the resource-based RVUs. For the 
year 2000, the percentages will be 50 percent charge-based and 50 
percent resource-based. For the year 2001, the percentages will be 25 
percent charge-based and 75 percent resource-based. For subsequent 
years, the RVUs will be totally resource-based.
    <bullet> Review by Comptroller General. Section 4505(c) of the BBA 
1997 requires the Comptroller General to review and evaluate our 
proposed rule and report to the Congress within 6 months of the date of 
enactment of the BBA 1997 (that is, by February 5, 1998). The review is 
to include an analysis of (1) the adequacy of the data used in 
preparing the rule, (2) categories of allowable costs, (3) methods for 
allocating direct and indirect expenses, (4) the potential impact of 
the rule on beneficiary access to services, and (5) any other matters 
related to the appropriateness of resource-based methodology for 
practice expenses. The Comptroller General is to consult with 
representatives of physicians' organizations with respect to matters of 
both data and methodology.
    <bullet> Adjustment for practice expense RVUs for 1998.
    Section 4505(e) of the BBA 1997 provides that, for 1998, the 
practice expense RVUs will be adjusted for

[[Page 59268]]

certain services in anticipation of the implementation of resource-
based practice expenses beginning in 1999. Practice expense RVUs for 
office visits will increase, while practice expense RVUs for certain 
other services will be reduced according to a formula included in 
section 4505(e) of the BBA 1997. The formula requires that services 
that were proposed to be reduced in the June 18, 1997 proposed rule, 
and were not performed at least 75 percent of the time in an office 
setting, would get a uniform percentage reduction. The reduced RVUs for 
practice expense would be calculated to be equivalent to 110 percent of 
the work RVUs for the service. However, the total of the reductions 
cannot exceed $390 million. The procedure codes affected and the final 
RVUs for 1998 are being published in the physician fee schedule final 
rule.
    <bullet> Requirements for new resource-based practice expense RVUs.
    Section 4505(d)(3) of the BBA 1997 requires that the Secretary 
transmit a Report to the Congress by March 1, 1998 including a 
presentation of data to be used in developing the practice expense RVUs 
and an explanation of the methodology. Section 4505(d)(3) requires that 
a proposed rule be published by May 1, 1998, with a 90-day comment 
period. In order for the transition to begin on January 1, 1999, a 
final rule would need to be published by October 31, 1998.
    In the May 1, 1998 proposed rule, we are required to develop new 
resource-based practice expense RVUs. In developing new practice 
expense RVUs, section 4505(d)(3) requires us to: (1) utilize, to the 
maximum extent practicable, generally accepted cost accounting 
principles that recognize all staff, equipment, supplies, and expenses, 
not solely those that can be linked to specific procedures, and use 
actual data on equipment utilization and other key assumptions; (2) 
consult with organizations representing physicians regarding 
methodology and data to be used; and (3) develop a refinement process 
to be used during each of the 4 years of the transition period.
    To assist us in developing the new RVUs using the data the BBA 1997 
requires, we are requesting that any physicians, physician 
organizations, or others provide us with the following information:
    <bullet> Generally accepted cost accounting principles--We are 
requesting comments on generally accepted cost accounting principles 
that recognize all staff, equipment, supplies, and expenses, not just 
those that can be tied to specific procedures. We particularly solicit 
comments on aspects of the cost accounting methodology used in the June 
18, 1997 proposed rule that were not consistent with the statutory 
guidance.
    We understand from various representatives of physicians and 
physician groups that special studies were conducted to develop or 
validate resource-based RVUs for physicians' services. We believe that 
the information collected from these studies could be helpful in 
allowing us to evaluate the consistency of our methodology with 
generally accepted cost accounting principles that recognize all 
resources, not just those that can be tied to specific procedures. 
Those studies would also provide a valuable source of information to 
develop the new set of proposed RVUs. Therefore, we are requesting that 
completed copies of studies of resource-based RVUs be submitted during 
the comment period for this notice. We are requesting any underlying 
surveys supporting those studies, including copies of the actual survey 
instrument, sample design, general and item response rates, and 
characteristics of non-response bias.
    <bullet> Equipment utilization--We are requesting complete copies 
of any studies or other data showing the actual utilization of 
equipment by physician practices. The data should be related to 
specific pieces of equipment used in medical, surgical, and diagnostic 
(including radiology) services and should be identified as being used 
in the provision of specific procedure codes. In providing the 
information, the methodology used to determine the actual equipment 
utilization should be provided. If a survey was used to obtain the 
information, pertinent details about the survey (for example, the 
number and type of surveyed entities and general and item response 
rates, and assessment of the characteristics of non-response bias) 
should be provided, as well as a complete copy of the report describing 
the sampling design, methodology, directions, and definitions.
    <bullet> Other assumptions--During the development of the proposed 
practice expense RVUs published in our June 18, 1997 proposed rule, we 
made a number of assumptions about pricing and other information 
needed. We would like any actual data that would assist us in reviewing 
or revising our assumptions for the following:
    + Useful life of equipment--We utilized manufacturer and other 
estimates of the useful life of equipment. We would like information on 
the actual useful life of equipment used in providing services. That 
is, we would like information about the time equipment is in service 
from the time it is purchased until it is disposed of. This information 
should be for equipment used by physician practices in furnishing 
specific procedures.
    + Direct and indirect costs--We would like actual data describing 
the amount and percentage of direct practice costs versus the amount 
and percentage of indirect practice costs by specialty. Indirect costs 
are generally being defined as those costs not directly allocable to 
individual services, such as rent, utilities, maintenance, phones, 
general clerical staff, and office equipment. We would also like 
summary information by specialty for these major types of indirect 
costs. Costs attributable to billing, procedure-specific equipment 
maintenance, and other direct expenses should not be included since 
they were captured by the clinical practice expert panels or through 
other means. The methodology commenters use to gather this information 
should be provided. If a survey was used, the details of the survey 
methodology, including the general and item response rates, and 
characteristics of non-response bias, should be provided, as well as a 
complete copy of the report describing the sampling design, 
methodology, directions, and definitions.
    Site-of-service assumptions--In our June 18, 1997 proposed rule, we 
did not publish a practice expense RVU for a site-of-service (in-office 
or out-of-office) if the service, according to our data, was not 
performed in that site. We indicated ``NA'' (not applicable) in the 
column describing that site in Addendum C (Relative Value Units (RVUs) 
and Related Information) of the June 1997 proposed rule. We invite 
comments about whether services where an ``NA'' indicator was shown can 
be done safely at that site. Conversely, we invite comments about the 
safety of services furnished at a site where we show an RVU for a 
practice expense for a service.
    (A copy of the entire June 1997 proposed rule, including the 
addenda, is available through the Internet at the following address: 
http://www.access.gpo.gov/su__docs/, by using local WAIS client 
software, or by telnet to swais.access.gpo.gov, then login as guest (no 
password required).)
    <bullet> Use of physician-employed staff in hospitals and other 
facility settings.
    We have been informed by physicians and others that it is a common 
and widespread practice for a physician's employees, for example, 
nurses, to accompany the physician to the hospital, ambulatory surgical 
center, and other facilities. It has been

[[Page 59269]]

suggested that the function of the staff is to assist the physician in 
providing services by acting as assistants-at-surgery or serving as 
scrub nurses.
    There seems to be some question whether this practice is in fact 
common and widespread; therefore, we are requesting comments and 
information about this practice. We seek precise information about the 
extent to which it occurs, including but not limited to the specific 
procedures involved, the specific functions performed by the staff, the 
specific type of staff involved and their training and credentialling, 
the particular types of facilities involved, and the type of diagnosis-
related group to which the service is assigned. We seek comments from 
physicians who are familiar with this practice as well as from 
physicians who are not familiar with it.
    We particularly seek information and data from executives and 
managers of hospitals, ambulatory surgical centers, and other 
facilities about the nature and extent of this practice. Where it 
occurs, we are particularly interested in the specific functions 
performed by the physician's employees and the extent to which they are 
substitutes for hospital employees. This is particularly important 
because action would have to be taken to reduce the Medicare facility 
reimbursement rate since the rate currently covers payment for staff to 
provide functions that are not provided directly by the facility.
    For physicians and others who are providing information about the 
use of their own staff, and for others who are familiar with the 
practice, we would like the details of the arrangements, including the 
name and location of the hospital or facility; whether the facility is 
a teaching or community hospital; whether the hospital is located in an 
urban or rural area; the facility's requirements for credentialing of 
the staff; the specific functions the physician's staff are performing, 
including any limits on duties of the staff by the facility; and any 
compensation arrangements from the facility. In addition, where surveys 
have been conducted to document this practice, we would like to receive 
complete copies of the survey and its results, including the details of 
the survey methodology, the response rates, a description of the survey 
universe and any analysis of non-response bias, the sampling design, 
directions, definitions, survey forms, and correspondence with 
respondents.
    We would like to contact some of these specific institutions in 
order to provide us with a more complete understanding of the specific 
types of staff involved and the specific types of functions provided by 
the staff.
    <bullet> Refinement process--We have concluded the first step in 
the refinement process for resource-based practice expenses. From 
October 6 through October 8, 1997, we conducted 17 validation panels to 
review the raw input data previously accumulated by our contractor, Abt 
Associates, during the clinical practice expert panel process. We 
validated about 325 high-volume procedure codes. The information from 
this validation process, subsequent processes under development, and 
information obtained as a result of this notice will provide a basis 
for the practice expense RVUs to be proposed in our proposed rule in 
1998.
    We expect that refinement will be a continuing process for the 
existing codes and for new codes that come into the system. Since 
section 4505(d)(1)(C) of the BBA 1997 requires that we develop a 
refinement process for each of the 4 years of the transition, we would 
welcome comments on how such a refinement process would operate. In 
particular, we would like comments about the process to refine the 
current codes each year and specific comments about assigning practice 
expense RVUs to new codes. The comments should describe not only the 
process, but who should be involved and how all of the users of the 
physician fee schedule would have access to the process. Commenters 
should consider the amount of time for refinements in 1998 given when 
the comment period will close (July 31, 1998) and when a final rule 
needs to be published (October 31, 1998) allowing sufficient time to 
compile and assemble comments. We will consider the public comments we 
receive in response to this notice to develop our spring 1998 proposed 
rule for resource-based practice expense RVUs.

(Secs. 1102, 1848, and 1871 of the Social Security Act; 42 U.S.C. 
1302, 1395w-4, and 1395hh)

(Catalog of Federal Domestic Assistance Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)

    Dated: October 9, 1997.
Nancy-Ann Min DeParle,
Deputy Administrator, Health Care Financing Administration.

    Dated: October 28, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 97-29029 Filed 10-30-97; 8:45 am]
BILLING CODE 4120-01-P