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

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 resourcebased 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:

• 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.

• 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 resourcebased. For subsequent years, the RVUs

will be totally resource-based.

• 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.

• 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
59268 Federal Register / Vol. 62, No. 211 / Friday, October 31, 1997 / Proposed Rules

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.

• Requirements for new resourcebased 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 resourcebased 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:

• 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 resourcebased 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.

• 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.

• 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, procedurespecific 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/suldocs/, by

using local WAIS client software, or by

telnet to swais.access.gpo.gov, then

login as guest (no password required).)

• 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
Federal Register / Vol. 62, No. 211 / Friday, October 31, 1997 / Proposed Rules 59269

suggested that the function of the staff

is to assist the physician in providing

services by acting as assistants-atsurgery 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 diagnosisrelated 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.

• 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 highvolume 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