[Federal Register Volume 63, Number 119 (Monday, June 22, 1998)]
[Proposed Rules]
[Pages 33882-33890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16278]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 410 and 414

[HCFA-1906-P]
RIN 0938-AI44


Medicare Program; Payment for Teleconsultations in Rural Health 
Professional Shortage Areas

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement parts of section 4206 of 
the Balanced Budget Act of 1997 by amending our regulations to provide 
for payment for professional consultation by a physician and certain 
other practitioners via interactive telecommunication systems. Payment 
may be made if the physician or other practitioner is furnishing a 
service for which payment may be made under Medicare to a beneficiary 
residing in a rural area that is designated as a health professional 
shortage area.
    This proposed rule would also establish a methodology for 
determining the amount of payments made for the consultation.

DATES: Comments will be considered if we receive them at the 
appropriate address, as provided below, no later than 5 p.m. on August 
21, 1998.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: HCFA-1906-P, P.O. Box 26676, 
Baltimore, MD 21207-0519.
    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 HCFA-1906-P. Comments received timely will be available 
for public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a 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: Craig Dobyski, (410) 786-4584.

SUPPLEMENTARY INFORMATION:

I. Background

A. General

    Telemedicine is the use of telecommunications to furnish medical 
information and services. Generally, two different kinds of technology 
are in use in telemedicine. One technology is two-way interactive 
video. This technology is used, for example, when a consultation 
involving the patient, the primary care giver, and a specialist is 
necessary. The videoconferencing equipment at two (or more) locations 
permits a ``real-time'' or ``live'' consultation to take place, 
providing for two-way exchange of information between the locations 
during the examination. We refer to this process as 
``teleconsultation.'' Teleconsultation typically involves a primary 
care practitioner with a patient at a remote, rural (spoke) site and a 
medical specialist (consultant) at an urban or referral center (hub) 
facility, with the primary care practitioner seeking advice from the 
consultant concerning the patient's condition or course of treatment.
    The other technology, called ``store and forward,'' is used to 
transfer video images from one location to another. A camera or similar 
device records (stores) an image(s) that is then sent (forwarded) via 
telecommunications media to another location for later viewing. The 
sending of x-rays, computed tomography scans, or magnetic resonance 
images are common store-and-forward applications. The original image 
may be recorded and/or forwarded in digital or analog format and may 
include video ``clips'' such as ultrasound examinations, where the 
series of images that are sent may show full motion when reviewed at 
the receiving location.
    Currently, Medicare allows payment for those telemedicine 
applications in which, under conventional health care delivery, the 
medical service does not require face-to-face ``hands on'' contact 
between patient and physician. For example, Medicare permits coverage 
of teleradiology, which is the most widely used and reimbursed form of 
telemedicine, as well as physician interpretation of electrocardiogram 
and electroencephalogram readings that are transmitted electronically. 
In contrast, Medicare does not cover other physicians services 
delivered through telecommunications systems because,

[[Page 33883]]

under the conventional delivery of medicine, those services are 
furnished in person.

B. Legislation

    In section 4206 of the Balanced Budget Act of 1997 (BBA)(Public Law 
105-33), the Congress required that, not later than January 1, 1999, 
Medicare Part B (Supplementary Medical Insurance) pay for professional 
consultation via telecommunications systems. Under section 4206(a), the 
provision applies to consultations with a physician or with certain 
other practitioners (identified below) furnishing a service for which 
payment may be made under Part B, provided the service is furnished to 
a beneficiary who resides in a county in a rural area that is 
designated as a health professional shortage area, and notwithstanding 
that the physician or other practitioner furnishing the consultation is 
not at the same location as the physician or other practitioner 
furnishing the service to the beneficiary.
    The practitioners listed in section 4206(a) are physicians (as 
defined in section 1861(r) of the Social Security Act (the Act)) and 
those practitioners described in section 1842(b)(18)(C) of the Act. The 
practitioners described in 1842(b)(18)(C) include: physician 
assistants, nurse practitioners, clinical nurse specialists, certified 
registered nurse anesthetists, anesthesiologist's assistants, nurse-
midwives, clinical social workers, and clinical psychologists.
    Section 4206(b) requires that the Secretary establish a methodology 
for determining the amount of payments made for a consultation, within 
the following parameters:
    <bullet> The payment is to be shared between the referring 
practitioner and the consulting practitioner. The amount of the payment 
is not to exceed the current fee schedule amount that would be paid to 
the consulting practitioner.
    <bullet> The payment is not to include any reimbursement for any 
telephone line charges or any facility fees, and a beneficiary may not 
be billed for these charges or fees.
    <bullet> The payment is to be subject to the coinsurance and 
deductible requirements under section 1833(a)(1) and (b) of the Act.
    <bullet> The payment differential of section 1848(a)(3) of the Act 
is to be applied to services furnished by nonparticipating physicians. 
(Section 1848(a)(3) specifies that, in the case of physicians services 
furnished by a nonparticipating physician, the payment basis is 95 
percent of what it would have been had the service been furnished by a 
participating physician.)
    <bullet> The provisions of sections 1848(g) and 1842(b)(18) of the 
Act are to apply. (Section 1848(g) provides a limitation on charges to 
beneficiaries and provides sanctions if a physician, supplier, or other 
person knowingly and willfully repeatedly bills or collects for 
services in violation on the limitation. It also provides for sanctions 
if a physician, supplier, or other person fails (1) to timely correct 
excess charges by reducing the actual charge billed for the service to 
an amount that does not exceed the limiting charge for the service, or 
(2) to timely refund excess collections. In addition, it requires that 
physicians and suppliers submit claims, for services they furnished to 
a beneficiary, to a carrier on behalf of the beneficiary using a 
standard claim form specified by the Secretary. The statute imposes a 
penalty for failure to so submit the claim. In addition, section 
1848(g) prohibits imposing any charge relating to completing and 
submitting the claim. Section 1842(b)(18) provides that services 
furnished by a physician assistant, nurse practitioner, clinical nurse 
specialist, certified registered nurse anesthetist, anesthesiologist's 
assistant, certified nurse-midwife, clinical social worker, or clinical 
psychologist for which payment may be made on a reasonable charge or 
fee schedule basis may be made only on an assignment-related basis. It 
also limits the beneficiary's liability to any applicable deductible 
and coinsurance amounts. It further provides for sanctions against a 
practitioner who knowingly and willfully bills (or collects an amount) 
in violation of the limitation.)
    <bullet> Further, payment for the consultation service is to be 
increased annually by the update factor for physicians services 
determined under section 1848(d) of the Act.
    In addition, the statute directs that, in establishing the 
methodology for determining the amount of payment, the Secretary take 
into account the findings of the report required by section 192 of the 
Health Insurance Portability and Accountability Act of 1996 (Public Law 
104-191), the findings of the report required by section 4206(c) of the 
BBA, and any other findings related to clinical efficacy and cost-
effectiveness of telehealth applications.

C. HCFA Telemedicine Demonstration Program

    In October 1996, we began a demonstration of Medicare fee-for-
service payment for teleconsultation services. The demonstration is 
expected to run through fiscal year 2001. Under the demonstration, 
providers at selected sites in Iowa, Georgia, North Carolina, and West 
Virginia have been furnishing teleconsultation services. These sites 
were selected as a result of proposals submitted during our 1993 and 
1994 general research solicitations and a subsequent expansion request 
in 1998. Special data collection plans are in place for those health 
care providers participating in the demonstration. The demonstration is 
being independently evaluated through a cooperative agreement with the 
Center for Health Policy Research in Denver.
    In this demonstration, we are experimenting with a variety of 
payment options beyond that proposed under this rule. Since relatively 
little is known at present about either the process or content of 
telemedicine service delivery, we expect to learn from the 
demonstration about the general characteristics and practice patterns 
of telemedicine practitioners. After completion of the demonstration, 
we will compare the results to operations under the reimbursement 
strategy that would be established under this proposed rule, and we may 
propose adjustments, as appropriate.

II. Provisions of This Proposed Rule

    This rule proposes to establish policies for implementing the 
provisions of section 4206 of the BBA that address Medicare 
reimbursement for telehealth services.

A. Professional Consultation Services Via Telecommunications Systems

    The title of section 4206 of the BBA refers to telehealth services, 
although the text specifically refers to professional consultation 
services via telecommunications systems. In this document, we will 
refer to professional consultation services via telecommunications 
systems as teleconsultations.
    A consultation is a type of service provided by a physician (or, 
under section 4206, certain other health care practitioners) ``whose 
opinion or advice regarding evaluation and/or management of a specific 
problem is requested by another physician or other appropriate source. 
A [physician] consultant may initiate diagnostic and/or therapeutic 
services. The request for a consultation from the attending physician 
or other appropriate source and the need for consultation must be 
documented in the patient's medical record. The consultant's opinion 
and any services that were ordered or performed must also be documented 
in the patient's medical record and

[[Page 33884]]

communicated to the requesting physician or other appropriate source.'' 
<SUP>1</SUP> We do not consider a teleconsultation to be a new medical 
service; rather, we consider it to be a new way or process of 
delivering a consultation.
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    \1\ [Physicians'] Current Procedural Terminology (4th Edition, 
1998, copyrighted by the American Medical Association), p. 20.
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    Earlier in this document we included a discussion of the two 
general technologies used in telemedicine, that is, store and forward, 
and interactive video. We believe that, although asynchronous 
transmission may be sufficient for diagnostic interpretation of images 
(such as radiological images), a teleconsultation is equivalent to a 
traditional, face-to-face consultation only if it permits the 
consultant to control the examination of the patient as the examination 
is taking place. With store-and-forward technology, the consultant is 
reviewing an examination that has already occurred and is limited to 
whatever information was recorded at that time.
    We believe that a teleconsultation instead must be an interactive 
patient encounter. The teleconsultation must meet the criteria included 
in the descriptor quoted above for a given consultation service and 
include--
    <bullet> Clinical assessment via medical examination directed by 
the consultant (specialist);
    <bullet> The use of multimedia communications equipment that 
includes, at a minimum, audio-video equipment permitting two-way real 
time communication;
    <bullet> Participation of the referring practitioner as appropriate 
to the medical needs of the patient and as needed to provide 
information to and at the direction of the consultant; and
    <bullet> Feedback of the consultation assessment to the referring 
practitioner.
    Note that, to qualify for Medicare payment, the patient must be 
present and the telecommunications technology must allow the consulting 
practitioner to control an interactive medical examination of the 
patient. Store and forward technologies would not allow a medical 
examination of the patient but would allow only a review of a prior 
examination, test, or diagnostic procedure, which would be outside the 
scope of this proposed rule. By requiring an interactive communications 
system, however, we are not mandating full motion video, but are 
requiring interactive real time audio-video communication. We recognize 
that full motion video requires large bandwidth that may be physically 
and/or financially unavailable to many health care entities in rural 
areas. This rule would not prohibit the use of lower end interactive 
video technology in which less than full motion video is sufficient for 
the consulting practitioner to control an examination of the patient. 
As such, we would encourage the use of the simplest and least expensive 
equipment that meets the real time requirement proposed under this 
rule.
    The [Physicians'] Current Procedural Terminology (CPT) is a 
systematic listing of descriptive terms and identifying codes for 
reporting medical services and procedures performed by physicians and 
other medical practitioners. We propose to cover as teleconsultation 
services the following categories of services listed as consultant 
services in the 1998 CPT:
    Office or Other Outpatient Consultations--CPT codes 99241 through 
99245;
    Initial Inpatient Consultations--CPT codes 99251 through 99255;
    Follow-up Inpatient Consultations--CPT codes 99261 through 99263; 
and
    Confirmatory Consultations--CPT codes 99271 through 99275.
Proposed Regulatory Provisions
    Based on the above, we would specify, in paragraph (a) of proposed 
Sec. 410.75 (Consultations via telecommunication systems), that 
Medicare Part B pays for professional consultations furnished by means 
of interactive telecommunications systems if the following conditions, 
and others discussed later in this preamble, are met:
    <bullet> The medical examination of the beneficiary is under the 
control of the consultant practitioner.
    <bullet> The consultation involves the participation of the 
referring practitioner, as appropriate to the medical needs of the 
patient and as needed to provide information to and at the direction of 
the consultant.
    <bullet> The consultation results in a written report that is 
furnished to the referring practitioner.
    In addition, at paragraph (b) of Sec. 410.75, we would define 
``interactive telecommunications systems'' as multimedia communications 
equipment that includes, at a minimum, audio-video equipment permitting 
two-way, real time consultation among the patient, consulting 
practitioner, and referring practitioner as appropriate to the medical 
needs of the patient and as needed to provide information to and at the 
direction of the consulting practitioner. We would also specify that 
telephones, facsimile machines, and electronic mail systems do not meet 
the definition of interactive telecommunications systems.

B. Coverage and Eligibility Provisions

    In addition to limiting telemedicine coverage to consultation 
services, section 4206 of the BBA limits coverage of teleconsultations 
to services furnished to Medicare beneficiaries residing in a ``county 
in a rural area * * * that is designated as a health professional 
shortage area under section 332(a)(1)(A) of the Public Health Service 
Act * * *.'' Section 332 of the Public Health Service Act authorizes 
the Secretary to designate health professional shortage areas (HPSAs) 
based on criteria established by regulation. HPSAs are defined in 
section 332 to include geographic areas, population groups, and 
facilities with shortages of health professionals. Section 332(a)(1)(A) 
speaks to geographic HPSAs.
    We found the language ``a county in a rural area * * * that is 
designated as a health professional shortage area'' to be somewhat 
ambiguous. We considered that the Congress may have intended that the 
benefit apply only to county-wide HPSAs (an entire county that is 
designated as an HPSA), but have rejected that construction of the law. 
First, it would seem illogical to restrict coverage of 
teleconsultations to county-wide HPSAs. The purpose of this provision 
is to provide access to health care for beneficiaries who now may face 
barriers to that care because they reside in rural areas where there is 
a shortage of medical professionals. We do not believe the Congress 
intended that only beneficiaries in the largest HPSAs be entitled to 
the telemedicine benefit. We note that an existing statutory provision 
related to HPSAs, that is, the 10 percent incentive payment for 
physician services furnished in HPSAs, does not make a distinction 
between county-wide HPSAs and other HPSAs. Second, we found that, by 
limiting coverage of teleconsultations to county-wide HPSAs, we would 
perpetuate barriers to care because many HPSAs would be excluded. From 
a random review of HPSA listings, we found that beneficiaries in at 
least one eastern State would not be entitled to telemedicine coverage 
because there are no county-wide HPSAs in that State. In several 
western States, we found that between 50 percent and 95 percent of 
rural HPSAs would be excluded as sites for the telehealth benefit. 
Therefore, for purposes of this section, we would specify that 
teleconsultations are covered only in rural HPSAs as defined in the 
Public Health Service Act.

[[Page 33885]]

    We had a number of concerns about the statutory language that ties 
coverage of teleconsultations to services furnished to a beneficiary 
``residing in a county in a rural area * * *.'' [emphasis supplied]. 
Medicare claims processing systems are not geared to making such 
eligibility determinations. Therefore, such a provision would add 
another ``gatekeeping'' responsibility to the presenting practitioner 
by requiring him or her to screen the beneficiary's address for 
eligibility for the teleconsultation benefit. To do this, the 
practitioner would need to develop and maintain a list of HPSAs for all 
areas covering the entire population base from which he or she would 
potentially draw patients. Moreover, the centralized beneficiary file, 
which contains the beneficiary's address and is maintained by us, would 
also have to contain a list of HPSAs nationwide against which the 
beneficiary's address would be compared. We note that, if an 
eligibility error were made, it would not be detected until a claim is 
submitted, which occurs only after the service has been furnished. At 
that point, Medicare payment on the claim would be denied, and the 
beneficiary would be liable for the full charges for the 
teleconsultation service. We believe that the Congress did not intend 
to expose Medicare beneficiaries to this financial risk. Therefore, we 
propose to use the location of the presenting practitioner at the time 
of the service, that is, where the beneficiary is receiving care, as 
proxy for the beneficiary's residence. If the location of the 
presenting practitioner is in a rural HPSA (as defined above), we 
believe it can be reasonably presumed that the beneficiary resides in a 
rural HPSA. However, if a beneficiary can demonstrate that he or she 
lives in a rural HPSA, we would allow payment for the teleconsultation 
without regard to the location of the originating facility (site of 
presentation).
    Section 4206(a) of the BBA specifically requires that Medicare make 
payments for professional consultation via telecommunications systems 
with a physician or ``a practitioner (described in section 
1842(b)(18)(C) of the Act.'' Nonphysician practitioners who may provide 
a teleconsultation include physician assistants, nurse practitioners, 
clinical nurse specialists, certified registered nurse anesthetists or 
anesthesiologists' assistants, certified nurse midwives, clinical 
social workers, and clinical psychologists. However, for consultation 
services delivered via traditional face-to-face ``hands on'' methods, 
current Medicare policy does not permit certified registered nurse 
anesthetists, anesthesiologist's assistants, clinical social workers, 
or clinical psychologists to bill for these services. We note that, 
although section 4206 of the BBA provides for coverage of 
teleconsultations furnished by certain health practitioners other than 
physicians, this provision does not change current Medicare coverage 
policy for consultation services delivered in person.
Proposed Regulatory Provisions
    Based on the above, we would provide at Sec. 410.75 that, as a 
condition for Medicare Part B payment for the teleconsultation--
    <bullet> The referring and consultant practitioner must be any of 
the following:
    + A physician as described in existing Sec. 410.20.
    + A physician assistant as defined in existing Sec. 491.2.
    + A nurse practitioner as defined in existing Sec. 491.2.
    + A clinical nurse specialist as described in existing 
Sec. 424.11(e)(6).
    + A certified registered nurse anesthetist or anesthesiologist's 
assistant as defined in existing Sec. 410.69.
    + A certified nurse-midwife as defined in existing Sec. 405.2401.
    + A clinical social worker as defined in existing Sec. 410.73(a).
    + A clinical psychologist as described in existing Sec. 410.71(d).
    <bullet> The services must be furnished to a beneficiary residing 
in a rural area as defined in section 1886(d)(2)(D) of the Act that is 
designated as an HPSA under section 332(a)(1)(A) of the Public Health 
Service Act. We would further specify that for purposes of this 
requirement, the beneficiary is deemed to be residing in such an area 
if the teleconsultation presentation takes place in such an area.

C. Payment Provisions

General Payment
    Section 4206 of the BBA provides that payment for a 
teleconsultation may not exceed the amount in the current fee schedule 
for the consulting practitioner. Medicare payment for physicians 
services is made, under section 1848 of the Act, on the resource-based 
fee schedule. Payment to the other health care practitioners listed 
earlier, authorized under section 1833 of the Act, is based on a 
percentage of the physician fee schedule. Therefore, we would pay for 
teleconsultation services furnished by physicians at 80 percent of the 
lower of the actual charge or the fee schedule amount for physicians 
services, and those furnished by other practitioners at 80 percent of 
the lower of the actual charge or that practitioner's respective 
percentage of the physician fee schedule (that is, the fee schedule for 
clinical psychologists would be 100 percent of the physician fee 
schedule; for clinical social workers, the fee schedule would be 75 
percent of the clinical psychologist fee schedule; and for all other 
eligible health care practitioners, the fee schedule would be 85 
percent of the physician fee schedule).
Site of Service
    We recognize that the consulting and presenting practitioners will 
likely be located a significant distance apart, raising the issue of 
where the service is being furnished. The site of service determines 
the pricing locality to be used for Medicare payment. In our view, the 
use of telecommunications to furnish a medical service effectively 
transports the patient to the consultant (a concept analogous to the 
traditional delivery of health care, in which the patient travels to 
the consultant's office). Therefore, we believe that the site of 
service for a teleconsultation is the location of the practitioner 
providing the consultation. We thus would designate the location of the 
consultant at the time of the service as the applicable pricing 
locality for teleconsultation claims. As a result, the fee schedule for 
the consultation will reflect the geographic adjustment factor 
applicable to the consulting practitioner.
    We considered designating the location of the beneficiary as the 
site of service (and pricing locality) but rejected this option because 
this alternative would likely result in lower payment levels than the 
consultant would have otherwise received if the beneficiary had 
traveled to his or her office for a consultation. This would probably 
occur because the consulting practitioner, who is a medical specialist, 
is usually affiliated with a ``hub'' facility, which is typically a 
major medical center located in an urban or metropolitan area. The 
referring practitioner is located at the ``spoke'' facility, which is 
typically a primary care facility and, under the provisions of section 
4206 of the BBA, is in a rural HPSA area. In the majority of cases, we 
would expect that the different geographic adjustment factors used to 
adjust the relative value units (RVUs) under the physician fee schedule 
are somewhat higher for urban areas than for rural areas because the 
cost of operating a medical practice in an urban area is generally 
higher.
    We also considered using a neutral site of service, which would be 
neither

[[Page 33886]]

practitioner's respective location. This option was based on the 
proposition that the service is furnished in ``cyber space'' rather 
than at a fixed location. Under this approach, payment would have been 
based on the RVUs for the service, with no geographic adjustment factor 
applied. As a result, payment would be the same nationwide, regardless 
of the practitioners' geographic locations. We rejected this option 
because the use of unadjusted national RVUs could result in a payment 
amount that exceeds the amount the consulting practitioner would have 
otherwise received, thereby exceeding the payment ceiling imposed by 
section 4206 of the BBA. Conversely, use of unadjusted national RVUs 
could result in a lower payment amount than the consulting practitioner 
would have otherwise received, thereby creating a disincentive for 
specialists to furnish teleconsultations.
Payment Allocation
    Section 4206 further provides that payment be shared between the 
referring and consulting practitioners. We propose to allocate the 
payment in the following manner: the consulting practitioner will 
receive 75 percent of the applicable amount, and the presenting 
practitioner will receive the remaining 25 percent of the applicable 
amount. Using a hypothetical consultation payment of $100, this would 
result in a payment of $75 to the consultant and $25 to the presenting 
practitioner.
    We arrived at these percentages by developing a mean 
teleconsultation RVU to simulate the level of intensity for both a 
consulting practitioner and a presenting practitioner. In determining 
the mean RVUs for the consulting practitioner, we used fiscal year (FY) 
1997 RVUs applicable to the proposed covered consultation services 
(that is, CPT codes 99241-99245, 99251-99255, 99261-99263, and 99271-
99275). In determining the mean RVUs for the presenting practitioner, 
we used FY 1997 RVUs applicable to office/inpatient visit services for 
established patients (that is, CPT codes 99211-99215, 99221-99223, and 
99231-99233). We decided to use established visit codes to represent 
the presenting practitioner's role in the teleconsultation to reflect 
the fact that a primary care practitioner has already seen the patient 
to have determined that a consultation is necessary. RVUs were weighted 
by the frequency of 1997 national allowed services attributed to each 
CPT code. The weighted mean RVUs for both consulting and presenting 
practitioner were calculated as a percentage of the total simulated 
weighted mean teleconsultation RVUs. A summary of this process is shown 
in the following table.

                                      Practitioner Allocation Summary Table                                     
----------------------------------------------------------------------------------------------------------------
                                   Model #1 w/50% work  expense reduction                                       
                                         to  presentation component                 Model #2 w/full RVUs        
----------------------------------------------------------------------------------------------------------------
Intensity Simulation: *                                                                                         
    Mean Consultation RVU........  3.21..................................  3.21                                 
    Mean Established Office/       0.91..................................  1.35                                 
     Inpatient Visit RVU.                                                                                       
                                  ------------------------------------------------------------------------------
        Total RVU................  4.12..................................  4.56                                 
Percentage Allocation: **                                                                                       
    Consulting Practitioner......  80%...................................  70%                                  
                                   (3.21 + 4.12 = 77.91%)................  (3.21 <divide> 4.56 = 70.39%)        
                                   Rounded to 80%........................  Rounded to 70%                       
    Presenting Practitioner......  20%...................................  30%                                  
                                   (0.91 + 4.12 = 22.09%)................  (1.35 <divide> 4.56 = 29.60%)        
                                   Rounded to 20%........................  Rounded to 30%                       
Mid Point of Rounded Allocations:                                                                               
    Consultant 75%; Presenter                                                                                   
     25%.                                                                                                       
----------------------------------------------------------------------------------------------------------------
*FY 1997 National mean RVU weighted by FY 1997 national allowed services.                                       
Consultation component includes CPT codes: 99241-99245; 99251-99255; 99261-99263; 99271-99275.                  
Presentation component includes CPT codes 99211-99215; 99221-99223; 99231-99233.                                
**Allocations rounded to nearest 5 percent.                                                                     

    The table illustrates two models. In the first model, the work RVUs 
for outpatient/inpatient evaluation and management (E&M) services were 
reduced by 50 percent to account for the fact that the presenting 
practitioner is performing no ``new'' work. This reduction factor is 
used under the current Medicare telemedicine demonstration project. 
Under the demonstration, the work expense for the primary care 
practitioner is reduced by 50 percent to reflect the fact that the 
practitioner would have already billed for an initial E&M service prior 
to initiating the teleconsultation. This model results in a payment 
allocation in which the consulting practitioner would receive 80 
percent of the payment and the presenting practitioner would receive 20 
percent of the payment.
    In the second model, we did not use a 50 percent reduction in 
developing the allocation methodology, on the theory that there may be 
instances in which the medical needs of the patient require a greater 
amount of work on the part of the presenting practitioner. This model 
resulted in an allocation in which the consulting practitioner would 
receive 70 percent and the presenting practitioner would receive 30 
percent of the total payment. Because of our lack of information about 
likely teleconsultation scenarios, we believe that it is reasonable to 
set the allocations at the midpoint of the values resulting from the 
two models, that is, a 75 percent allocation for the consulting 
practitioner and a 25 percent allocation for the presenting 
practitioner.
    We considered reducing the presenting practitioner's share in cases 
in which the presenting practitioner is a nonphysician practitioner. 
Thus, if a patient had been presented to a physician by a physician 
assistant (PA), for example, we considered applying the PA payment rule 
to the PA's allocation; that is, we would have used 85 percent of the 
proposed 25 percent allocation as the payment basis for the presenting 
practitioner. Using a hypothetical physician fee schedule amount of 
$100, this would result in the following allocation for the consulting

[[Page 33887]]

practitioner and presenting practitioner (physician assistant):

Physician fee schedule for teleconsultation..................    $100.00
Less 75 percent consultant allocation........................     -75.00
                                                              ----------
Balance......................................................     $25.00
PA percent of physician fee schedule.........................     x  .85
                                                              ----------
PA allocation................................................     $21.25
                                                                        

    We rejected this option because we believe that only one service is 
being furnished and that service is a consultation; there is no 
``presentation'' payable under the Medicare physician fee schedule. In 
teleconsultation, the resenting practitioner is acting as directed by 
the consultant. Therefore, in our view, he or she is acting as a 
surrogate for the consultant rather than as a nonphysician 
practitioner, and we decided that the payment rule for practitioners 
should not apply. Thus, the following payment allocation would apply 
for the consulting physician and a nonphysician presentation 
practitioner (using the hypothetical fee schedule amount of $100):

Physician fee schedule for teleconsultation..................    $100.00
75 percent consultant allocation.............................      75.00
25 percent presentation allocation...........................      25.00
                                                                        

    However, when a consultation service is furnished by a nonphysician 
practitioner, rather than a physician, the amount of payment will be 
made according to the appropriate percentage of the physician fee 
schedule, which for most nonphysician practitioners is 85 percent. 
Using the same hypothetical physician fee schedule amount as above, the 
payment amounts for a nonphysician consulting practitioner and 
referring practitioner are as follows (when the nonphysician consulting 
practitioner's fee schedule is 85 percent of the physician fee 
schedule):

Physician fee schedule for consultation......................    $100.00
Nonphysician payment rule....................................     x  .85
                                                              ----------
Nonphysician fee schedule amount.............................     $85.00
75 percent consultant allocation.............................     -63.75
                                                              ----------
Presenting practitioner allocation...........................     $21.25
                                                                        

Bundled Payment
    We propose to use a bundled payment approach for teleconsultation 
services; that is, a single Medicare payment for the total amount due 
for the service will be made to the consulting practitioner. Under this 
approach, a claim for a teleconsultation service will be submitted by 
the consulting practitioner to his or her Medicare carrier. The carrier 
will make the full payment to the consultant who, in turn, will remit 
25 percent of the total to the presenting practitioner. The consultant 
will be responsible for billing the beneficiary for coinsurance and 
deductible amounts and also remitting 25 percent of the total to the 
presenting practitioner. This proposal is consistent with our view that 
only one service--a teleconsultation--is being provided. As stated 
earlier, we believe that the presenting practitioner is not providing a 
distinct service, but acting as a surrogate for the consultant. We 
believe, moreover, that this approach is better for Medicare 
beneficiaries because they would receive only one bill for the 
coinsurance and deductible amount.
    Note that the method of payment we have chosen for 
teleconsultations raises some issues under the physician self-referral 
law in section 1877 of the Act. Under this provision, a physician is 
prohibited from referring a Medicare patient to an entity (which can 
include another physician or a nonphysician practitioner) for the 
furnishing of certain designated health services if the physician or a 
member of the physician's immediate family has a financial relationship 
with that entity. Section 1877 defines ``financial relationship'' as an 
ownership or investment interest in the entity or a compensation 
arrangement with the entity. It is the compensation aspect of the self-
referral law that could have a negative impact on teleconsultation 
payments.
    We believe that a presenting physician who refers a case to a 
consulting practitioner has made a referral under the self-referral 
law. Under section 1877(h)(5)(A), a physician's referral is defined, in 
the case of an item or service covered under Part B, as the request by 
a physician for the item or service, including the request for a 
consultation with another physician (and any test or procedure ordered 
by, or to be performed by (or under the supervision of) that other 
physician. These referrals could potentially be prohibited if the 
physician and the providing entity have a financial relationship, such 
as a compensation arrangement. A compensation arrangement is defined in 
the law broadly to include any arrangement involving any remuneration 
between a physician and an entity (other than certain very narrowly 
defined exclusions). ``Remuneration,'' in turn, is defined to include 
any remuneration, paid directly or indirectly, overtly or covertly, in 
cash or in kind. We have further defined the concept of 
``remuneration'' in our regulations covering self-referrals for 
clinical laboratory services in 42 CFR 411.351 to include any payment, 
discount, forgiveness of debt, or other benefit made directly or 
indirectly, overtly or covertly, in cash or in kind, by an entity to a 
referring physician.
    Our payment policy could place a presenting physician in the 
position of violating section 1877 if the presenting physician receives 
payments from the practitioner to whom he or she has referred and the 
services at issue are designated health services. In order to avoid 
such a result, we propose to interpret the payments that the consulting 
practitioner will forward to the presenting physician as falling 
outside of the definition of ``remuneration.'' That is, we will not 
regard the consulting practitioner as actually making a payment to the 
presenting physician, but as simply serving as a ``conduit'' to pass a 
portion of the Medicare payment on to the presenting physician, 
strictly as an administrative convenience to us. We do not believe this 
interpretation violates the purpose of the self-referral law, which was 
specifically designed to prevent entities that furnish certain health 
services from purchasing referrals from physicians.
    We considered requiring both the consulting and presenting 
practitioners to submit separate claims. This alternative was rejected 
because (1) two services are not being furnished; (2) the beneficiary 
would receive two cost sharing bills; and (3) the claims processing 
system would need to link claims from both practitioners to ensure that 
the total payment does not exceed the payment ceiling provided under 
section 4206 of the BBA. It would be difficult and costly to implement 
claims processing systems modifications that would be capable of 
identifying and linking related teleconsultation claims to prevent 
overpayments from occurring. Such an effort would become even more 
complex if two carriers were involved because the practitioners' 
locations fell within separate carrier jurisdictions. Moreover, total 
payment might exceed what the consultant would have otherwise received 
if the presenting practitioner were to submit a claim for a 
consultation at a higher intensity level than the consultant. For 
example, the consulting practitioner might bill for a consultation 
requiring only a detailed examination and low complexity medical 
decisionmaking, whereas the presenting practitioner might bill for a 
consultation with a

[[Page 33888]]

comprehensive examination and moderately complex decisionmaking. There 
is a 40 percent difference in the Medicare RVU values between these two 
services. Another overpayment could occur in those rare cases where the 
factor for the pricing locality for the presenting practitioner is 
higher than for the consulting practitioner.
    Because of the difficulty in linking claims, we considered another 
approach that would have involved separate claims, but without linking. 
We considered establishing a new code for the presenting practitioner's 
role and pricing it at 25 percent of the average consultation amount. 
Under this option, the consultant's fee would be based on the 
appropriate fee schedule and adjusted by the geographic practice cost 
index, but would be reduced by the flat, national value paid to the 
presenting practitioner. However, this alternative achieves anomalous 
results; in several cases, the presenting practitioner would receive 
more than the consulting practitioner. Therefore, we rejected this 
option.
    Coding: For teleconsultation coding purposes, we would develop 
modifiers to use in conjunction with existing CPT codes for 
consultation services. The purpose of the modifier is to identify the 
service as a consultation furnished via telecommunications systems. 
This approach conforms with our view that a teleconsultation is simply 
a new way of delivering a consultation, rather than a new service.
    We considered developing a new coding structure for 
teleconsultations. We rejected this option, however, because it is 
administratively cumbersome for both the medical community and the 
Medicare program. First, the practitioner community is already familiar 
with the current codes for consultation. We believe it will be easier 
for practitioners to use a single modifier than an entirely new set of 
codes. Second, separate teleconsultation codes would unnecessarily 
double the number of current codes used for consultation services.
Proposed Regulatory Provisions
    To reflect the above proposals and the payment provisions of 
section 4206 of the BBA, we would add a new Sec. 414.62 (Payment for 
consultations via interactive telecommunication systems) to our 
regulations. We would specify, in paragraph (a), that Medicare total 
payments for a professional consultation conducted via interactive 
telecommunications systems may not exceed the current fee schedule 
amount for the service when furnished by the consulting practitioner. 
We would further specify that the payment (1) may not include any 
reimbursement for any telephone line charges or any facility fees, and 
(2) is subject to the coinsurance and deductible requirements of 
section 1833(a)(1) and (b) of the Act. We would also specify that the 
payment differential of section 1848(a)(3) of the Act applies to 
services furnished by nonparticipating physicians.
    In paragraph (b), we would specify that the beneficiary may not be 
billed for any telephone line charges or any facility fees. In 
paragraph (c), we would provide that payment to nonphysician 
practitioners is made only on an assignment-related basis. Paragraph 
(d) would provide that only the consultant practitioner may bill for 
the consultation, and paragraph (e) would require the consultant 
practitioner to provide the referring practitioner 25 percent of any 
payments, including any applicable deductible or coinsurance amounts, 
he or she received for the consultation.
    Paragraph (f) would specify that a practitioner may be subject to 
the sanctions provided for in 42 CFR chapter V, parts 1001, 1002, and 
1103 if he or she (1) knowingly and willfully bills or collects for 
services in violation of the limitations of Sec. 414.62 on a repeated 
basis, or (2) fails to timely correct excess charges by reducing the 
actual charge billed for the service to an amount that does not exceed 
the limiting charge or fails to timely refund excess collections.

III. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, 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, if we proceed with a subsequent 
document, we will respond to the comments in the preamble to that 
document.

IV. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 and the Regulatory Flexibility Act (RFA) (Public Law 96-
354). Executive Order 12866 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 proposed rules with economically 
significant effects (that is, a proposed rule that would have an annual 
effect on the economy of $100 million or more 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). The benefit changes in 
this proposed rule resulting from the BBA will not result in additional 
Medicare expenditures of $100 million or more for any single FY through 
FY 2003. Therefore, this proposed rule is not considered economically 
significant, and, thus, we have not prepared a regulatory impact 
analysis.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, most hospitals, and most 
other providers, physicians, and health care suppliers are small 
entities, either by nonprofit status or by having revenues of $5 
million or less annually.
    Section 1102(b) of the Social Security Act requires us to prepare a 
regulatory impact analysis for any proposed 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 50 beds.
    We estimate that the cost of providing consultation services in 
accordance with section 4206 of the BBA will be approximately $20 
million in FY 1999 and approximately $90 million by FY 2003. Note that 
the FY 1999 estimate reflects only a partial year estimate, given the 
January 1, 1999 effective date for teleconsultation coverage. We 
estimate that teleconsultation will cost approximately $270 million for 
the first 5 years of coverage, as indicated below:

[[Page 33889]]



                             Medicare Costs                             
                              [In millions]                             
------------------------------------------------------------------------
   FY 1999        FY 2000        FY 2001        FY 2002        FY 2003  
------------------------------------------------------------------------
$19..........           $39            $54            $70           $88 
------------------------------------------------------------------------

    Additionally, this proposed rule would provide for payment 
exclusively for professional consultation with a physician and certain 
other practitioners via interactive telecommunication systems. Section 
4206 of the BBA does not provide for payment for telephone line fees or 
any facility fees associated with teleconsultation that may be incurred 
by hospitals included in the telemedicine network.
    Further, this rule does not mandate that entities provide 
consultation services via telecommunications. Thus, this rule would not 
require entities to purchase telemedicine equipment or to acquire the 
telecommunications infrastructure necessary to deliver consultation 
services via telecommunication systems. Therefore, this rule does not 
impose costs associated with starting and operating a telemedicine 
network.
    For these reasons, we are not preparing analyses for either the RFA 
or section 1102(b) of the Act because we have determined, and we 
certify, that this proposed rule would not have a significant economic 
impact on a substantial number of small entities or a significant 
impact on the operations of a substantial number of small rural 
hospitals.
    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 410

    Health facilities, Health professions, Kidney diseases, 
Laboratories, Medicare, Reporting and recordkeeping requirements, Rural 
areas, X-rays.

42 CFR Part 414

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements, Rural areas, X-rays.

    42 CFR chapter IV would be amended as follows:
    A. Part 410.

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

    1. 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).


Sec. 410.1  [Amended]

    2. Section 410.1, paragraph (a) is amended by adding a sentence at 
the end of the paragraph to read ``Section 4206 of the Balanced Budget 
Act of 1997 (42 U.S.C. 1395j) sets forth the conditions for payment for 
professional consultations that take place by means of 
telecommunications systems.''.
    3. A new Sec. 410.75 is added to subpart B to read as follows:


Sec. 410.75  Consultations via telecommunications systems.

    (a) General rule. Medicare Part B pays for professional 
consultations furnished by means of interactive telecommunications 
systems if the following conditions are met:
    (1) Each of the referring and consultant practitioner is any of the 
following:
    (i) A physician as described in Sec. 410.20.
    (ii) A physician assistant as defined in Sec. 491.2 of this 
chapter.
    (iii) A nurse practitioner as defined in Sec. 491.2 of this 
chapter.
    (iv) A clinical nurse specialist as described in Sec. 424.11(e)(6) 
of this chapter.
    (v) A certified registered nurse anesthetist or anesthesiologist's 
assistant as defined in Sec. 410.69.
    (vi) A nurse-midwife as defined in Sec. 405.2401 of this chapter.
    (vii) A clinical social worker as defined in section 1861(hh)(1) of 
the Act.
    (viii) A clinical psychologist as described at Sec. 417.416(d)(2) 
of this chapter.
    (2) The services are furnished to a beneficiary residing in a rural 
area as defined in section 1886(d)(2)(D) of the Act, and the area is 
designated as a health professional shortage area (HPSA) under section 
332(a)(1)(A) of the Public Health Service Act (42 U.S.C. 
254e(a)(1)(A)). For purposes of this requirement, the beneficiary is 
deemed to be residing in such an area if the teleconsultation 
presentation takes place in such an area.
    (3) The medical examination of the beneficiary is under the control 
of the consultant practitioner.
    (4) The consultation involves the participation of the referring 
practitioner, as appropriate to the medical needs of the patient and as 
needed to provide information to and at the direction of the 
consultant.
    (5) The consultation results in a written report that is furnished 
to the referring practitioner.
    (b) Definition. For purposes of this section, interactive 
telecommunications systems means multimedia communications equipment 
that includes, at a minimum, audio-video equipment permitting two-way, 
real time consultation among the patient, consulting practitioner, and 
referring practitioner as appropriate to the medical needs of the 
patient and as needed to provide information to and at the direction of 
the consulting practitioner. Telephones, facsimile machines, and 
electronic mail systems do not meet the definition of interactive 
telecommunications systems.
    B. Part 414.

PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES

    1. 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)).

    2. Section 414.1 is revised to read as follows:


Sec. 414.1  Basis and scope.

    This part implements the following:
    (a) The indicated provisions of the following sections of the Act:

    1833--Rules for payment for most Part B services.
    1834(a) and (h)--Amounts and frequency of payments for durable 
medical equipment and for prosthetic devices and orthotics and 
prosthetics.
    1848--Fee schedule for physician services.
    1881(b)--Rules for payment for services to ESRD beneficiaries.
    1887--Payment of charges for physician services to patients in 
providers.


[[Page 33890]]


    (b) Sections 4206(a) and (b) of the Balanced Budget Act of 1997 (42 
U.S.C. 1395j).
    3. Section 414.62 is added to subpart A, to read as follows:


Sec. 414.62  Payment for consultations via interactive 
telecommunications systems.

    (a) Limitations on payment. Medicare payment for a professional 
consultation conducted via interactive telecommunications systems is 
subject to the following limitations:
    (1) The payment may not exceed the current fee schedule amount of 
the consulting practitioner for the health care services provided.
    (2) The payment may not include any reimbursement for any telephone 
line charges or any facility fees.
    (3) The payment is subject to the coinsurance and deductible 
requirements of section 1833(a)(1) and (b) of the Act.
    (4) The payment differential of section 1848(a)(3) of the Act 
applies to services furnished by nonparticipating physicians.
    (b) Prohibited billing. The beneficiary may not be billed for any 
telephone line charges or any facility fees.
    (c) Assignment required for nonphysician practitioners. Payment to 
nonphysician practitioners is made only on an assignment-related basis.
    (d) Who may bill for the consultation. Only the consultant 
practitioner may bill for the consultation.
    (e) Sharing of payment. The consultant practitioner must provide to 
the referring practitioner 25 percent of any payments, including any 
applicable deductible or coinsurance amounts, he or she received for 
the consultation.
    (f) Sanctions. A practitioner may be subject to the applicable 
sanctions provided for in chapter V, parts 1001, 1002, and 1003 of this 
title if he or she--
    (1) Knowingly and willfully bills or collects for services in 
violation of the limitations of this section on a repeated basis; or
    (2) Fails to timely correct excess charges by reducing the actual 
charge billed for the service to an amount that does not exceed the 
limiting charge for the service or fails to timely refund excess 
collections.

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

    Dated: February 8, 1998.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.

    Dated: April 14, 1998.
Donna E. Shalala,
Secretary.
[FR Doc. 98-16278 Filed 6-19-98; 8:45 am]
BILLING CODE 4120-01-P