34614 Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 405, 410, and 415

[BPD–852–P]

RIN 0938–AH40

Medicare Program; Revisions to

Payment Policies Under the Physician

Fee Schedule for Calendar Year 1997

AGENCY: Health Care Financing

Administration (HCFA), HHS.

ACTION: Proposed rule.

SUMMARY: This proposed rule discusses

several policy changes affecting

Medicare payment for physician

services including payment for

diagnostic services and transportation in

connection with furnishing diagnostic

tests. The proposed rule also discusses

comprehensive locality changes and

changes in the procedure status codes

for a variety of services.

DATES: Comments will be considered if

we receive them at the appropriate

address, as provided below, no later

than 5 p.m. on September 3, 1996.

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–

852–P, 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–852–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 comments that relate to

information collection requirements,

mail a copy of the comments to: Allison

Herron Eydt, HCFA Desk Officer, Office

of Information and Regulatory Affairs,

Room 10235, New Executive Office

Building, Washington, DC 20530.

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your request to: New Orders,

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Specify the date of the issue requested

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For general information about GPO

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Friday, except for Federal holidays.

FOR FURTHER INFORMATION CONTACT:

Shana Olshan, (410) 786–5714.

SUPPLEMENTARY INFORMATION: To assist

readers in referencing sections

contained in this preamble, we are

providing the following table of

contents. Some of the issues discussed

in this preamble affect the payment

policies but do not require changes to

the regulations in the Code of Federal

Regulations.

Table of Contents

I. Background

A. Legislative History

B. Published Changes to the Fee Schedule

II. Specific Proposals for Calendar Year 1997

A. Payment Area (Locality) and

Corresponding Geographic Practice Cost

Index Changes

1. Background

2. Locality Study

3. Nonselected Options

4. Proposal

a. Proposed Variant of Option 1 (Option 1i,

5–Percent Threshold)

b. Proposed Option 1i, 5-Percent

Threshold, with Subcounty Payment

Area Restructuring

c. Effects of Proposed Option 1i, 5–Percent

Threshold, with Subcounty FSA

Restructuring

B. Special Rules for the Payment of

Diagnostic Tests, Including Diagnostic

Radiologic Procedures

1. Background

2. Proposal

3. Chiropractor Exception

4. Non-Physician Practitioners

C. Transportation in Connection with

Furnishing Diagnostic Tests

D. Bundled Services

1. Hot or Cold Packs

2. Dermatology Procedures

a. Bundling of Repair Codes into Excision

Codes

b. Skin Lesion Destruction Codes

E. Change in Coverage Status for Screening

and Obsolete Procedures

1. Vital Capacity Testing

2. Certain Cardiovascular Procedures

F. Payments for Supervising Physicians in

Teaching Settings

1. Definition of Approved Graduate

Medical Education Programs

2. Evaluation and Management Services

Furnished in Certain Settings

G. Change in Global Periods for Four

Percutaneous Biliary Procedures

III. Collection of Information Requirements

IV. Response to Comments

V. Regulatory Impact Analysis

A. Regulatory Flexibility Act

B. Payment Area (Locality) and

Corresponding Geographic Practice Cost

Index Changes

C. Special Rules for the Payment of

Diagnostic Tests, Including Diagnostic

Radiologic Procedures

D. Transportation in Connection with

Furnishing Diagnostic Tests

E. Bundled Services

1. Hot or Cold Packs

2. Dermatology Procedures

a. Bundling of Repair Codes into Excision

Codes

b. Skin Lesion Destruction Codes

F. Change in Coverage Status for Screening

and Obsolete Procedures

1. Vital Capacity Testing

2. Certain Cardiovascular Procedures

G. Payments for Supervising Physicians in

Teaching Settings

H. Change in Global Periods for Four

Percutaneous Biliary Procedures

I. Rural Hospital Impact Statement

Addendum A—1996 Geographic Adjustment

Factors (GAFs) by Medicare Payment

Locality/Locality Part for January 1, 1996

Localities and Proposed Option, Fee

Schedule Areas (FSAs), in Descending

Order of Difference

Addendum B—Medicare Fee Schedule Areas

(Localities) and 1996 Geographic
Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules 34615

Adjustment Factors (GAFs), Current and

Proposed Option by State and County/

County Part

In addition, because of the many

organizations and terms to which we

refer by acronym in this final rule, we

are listing these acronyms and their

corresponding terms in alphabetical

order below:

AMA American Medical Association

CFR Code of Federal Regulations

CPT [Physicians’] Current Procedural

Terminology [4th Edition, 1996,

copyrighted by the American

Medical Association]

CY Calendar year

EKG Electrocardiogram

FSA Fee Schedule Area

FY Fiscal year

GAF Geographic adjustment factor

GPCI Geographic practice cost index

HCFA Health Care Financing Administration

HCPAC Health Care Professional Advisory

Council

HCPCS HCFA Common Procedure Coding

System

HHS [Department of] Health and

Human Services

MEI Medicare Economic Index

MSA Metropolitan Statistical Area

OBRA Omnibus Budget Reconciliation

Act

OMB Office of Management and Budget

PMSA Primary Metropolitan Statistical

Area

RVU Relative Value Unit

TC Technical Component

I. Background

A. Legislative History

The Medicare program was

established in 1965 by the addition of

title XVIII to the Social Security Act (the

Act). Since January 1, 1992, Medicare

pays for physician services under

section 1848 of the Act, ‘‘Payment for

Physicians’ Services.’’ This section

contains three major elements: (1) A fee

schedule for the payment of physician

services; (2) a Medicare volume

performance standard for the rates of

increase in Medicare expenditures for

physician services; and (3) limits on the

amounts that nonparticipating

physicians can charge beneficiaries. 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 factors to

preserve budget neutrality.

B. 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 updates to the RVUs

and fee schedule policies follow:

• November 25, 1992, as a final notice

with comment period on new and

revised RVUs only (57 FR 55914).

• December 2, 1993, as a final rule

with comment period (58 FR 63626) to

revise the refinement process used to

establish physician work RVUs and to

revise payment policies for specific

physician services and supplies. (We

solicited comments on new and revised

RVUs only.)

• December 8, 1994, as a final rule

with comment period (59 FR 63410) to

revise the geographic adjustment factor

(GAF) values, fee schedule payment

areas, and payment policies for specific

physician services. The final rule also

discussed the process for periodic

review and adjustment of RVUs not less

frequently than every 5 years as

required by section 1848(c)(2)(B)(i) of

the Act.

• December 8, 1995, as a final rule

with comment period (60 FR 63124) to

revise various policies affecting

payment for physician services

including Medicare payment for

physician services in teaching settings,

the RVUs for certain existing procedure

codes, and to establish interim RVUs for

new and revised procedure codes. The

rule also included the final revised 1996

geographic practice cost indices.

This proposed rule would affect the

regulations set forth at 42 CFR part 405,

which encompasses regulations on

Federal health insurance for the aged

and disabled; part 410, which consists

of regulations on supplementary

medical insurance benefits and part 415,

which contains regulations on services

of physicians in provider settings,

supervising physicians in teaching

settings, and residents in certain

settings.

II. Specific Proposals for Calendar Year

1997

A. Payment Area (Locality) and

Corresponding Geographic Practice Cost

Index Changes

1. Background

From the inception of Medicare in

1966 until 1992, Medicare payments for

physicians’ services were made under

the reasonable charge system. Under the

reasonable charge system, Medicare

payment localities for physicians’

services were set by local Medicare

carriers based on their knowledge of

local physician charging patterns. As

such, payment areas have had no

consistent geographic basis. In general,

localities tended to be geographic or

political subdivisions such as States,

counties, or cities, or designations such

as urban and rural. Most of the localities

changed little between 1966 and 1992.

There were about 240 localities,

including 16 States with statewide

localities, under the reasonable charge

system.

Section 1848 of the Act replaced the

reasonable charge system of paying for

physician services under section

1842(b) of the Act, with the physician

fee schedule effective January 1, 1992.

Section 1848(j)(2) of the Act defines a

physician fee schedule payment area as

the locality existing under section

1842(b) of the Act for purposes of

computing payment amounts for

physician services. Section 1848 did

not, however, delete section 1842 of the

Act, which gives the Secretary the

authority to set localities. We believe

the Congress enacted section 1848(j)(2)

to allow us to retain existing localities

to facilitate the statutory transition to

the physician fee schedule, but not to

preclude us from making locality

changes if warranted. All locality

changes are now made by HCFA

through the rulemaking process.

Medicare carriers are not allowed to set

or revise physician fee schedule

payment localities.

In the June 5, 1991 proposed rule for

the physician fee schedule (56 FR

25832), we acknowledged the lack of

consistency among localities and the

significant demographic and economic

changes that had occurred since

localities were originally established.

We also stated that we planned no largescale locality changes until we

evaluated the various studies on

localities being done within HCFA and

by outside groups such as the Physician

Payment Review Commission and until

after the statutory transition from the

reasonable charge system to the fee

schedule was completed in 1996. We
34616 Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules

stated that until we decide on ultimate

large-scale changes, the only locality

changes we would consider would be

requests for converting individual States

with multiple localities to a single

statewide locality if ‘‘* * *

overwhelming support from the

physician community for the changes

can be demonstrated.’’ This position

was repeated in the November 1991

final rule on the physician fee schedule

(56 FR 59514). This willingness to

consider applications from physicians

in a State for conversion to a statewide

locality, if overwhelming support on the

part of winning and losing physicians

has been demonstrated, reflects our

belief that statewide localities generally

are preferable to the present Medicare

localities because they simplify program

administration and encourage

physicians to practice in rural areas by

reducing urban/rural payment

differentials.

We received inquiries from a number

of State medical societies concerning

conversions to a statewide payment

area. Under the law, payments vary

among physician fee schedule areas

only to the extent that resource costs

vary as measured by the Geographic

Practice Cost Index (GPCI). The GPCI is

an index developed to measure resource

cost differences among areas in the three

components of the physician fee

schedule—physician work, practice

expenses, and malpractice expenses.

Area geographic adjustment factors

(GAFs) are weighted composites of the

area GPCIs and are useful in comparing

overall resource cost and payment level

differences among areas. (A

comprehensive explanation of the GPCIs

and GAFs can be found in the June 24,

1994 proposed rule (59 FR 32756)).

We explained to the States inquiring

about conversions to a statewide

payment area that these conversions

involve taking a weighted average of the

existing locality GPCIs to form a new

statewide GPCI. This means that there

may be ‘‘losing’’ (usually urban) areas,

as well as ‘‘winning’’ (usually rural)

areas within a State if a conversion is

made. We further informed the States

that a simple resolution passed by the

State medical society is not sufficient

proof of overwhelming support among

both rural and urban physicians for the

change. To assist States in deciding

whether to convert to a statewide

payment area, we published an

informational list of projected statewide

GPCIs in the June 1991 proposed rule

(56 FR 25972). A slightly revised list of

projected statewide GPCIs was

published in the December 1993 final

rule (58 FR 63638). The revisions were

made to ensure that any change to a

statewide payment area would be done

on a budget-neutral basis. That is, that

the same amount of payments would be

made within a State after the conversion

to a statewide payment area as would

have been made had the conversion not

been made. A comprehensive revision

of all GPCIs was made in 1995. A list

of revised projected statewide GPCIs

was published at Addendum E of the

June 1994 proposed rule (59 FR 32789).

In most cases, States have been unable

to generate the support of the losing

physicians for the change. However,

three States—Minnesota, Nebraska, and

Oklahoma—were converted to statewide

payment areas in 1992. (These

conversions were announced in the

November 1991 final rule (56 FR

59514).) Two additional States—North

Carolina and Ohio—were converted to

statewide payment areas in 1994. (These

conversions were announced in the

December 1993 final rule (58 FR

63638).) Iowa was converted to a

statewide payment area in 1995. (This

conversion was announced in the

December 1994 final rule (59 FR

63416).) There are currently 210

payment areas under the physician fee

schedule: 22 States with single payment

areas; the District of Columbia (with

surrounding Maryland and Virginia

suburbs), Puerto Rico, and the Virgin

Islands are 3 more single payment areas;

and 28 multiple-locality States

containing 185 payment areas. Table 1

summarizes existing physician fee

schedule payment areas.

TABLE 1.—1996 MEDICARE PHYSICIAN

FEE SCHEDULE PAYMENT LOCALITIES BY STATE AND OTHER

State Localities

Single locality States:

Alaska ............................................ 1

Arkansas ....................................... 1

Colorado ........................................ 1

Delaware ....................................... 1

Hawaii/Guam ................................. 1

Iowa ............................................... 1

Minnesota ...................................... 1

Montana ........................................ 1

Nebraska ....................................... 1

New Hampshire ............................. 1

New Mexico ................................... 1

North Carolina ............................... 1

North Dakota ................................. 1

Ohio ............................................... 1

Oklahoma ...................................... 1

Rhode Island ................................. 1

South Carolina .............................. 1

South Dakota ................................ 1

Tennessee ..................................... 1

Utah ............................................... 1

Vermont ......................................... 1

Wyoming ....................................... 1

TABLE 1.—1996 MEDICARE PHYSICIAN

FEE SCHEDULE PAYMENT LOCALITIES BY STATE AND OTHER—Continued

State Localities

22 States ................................... 22

Other:

Wash. D.C ..................................... 1

Puerto Rico ................................... 1

Virgin Islands ................................. 1

3 Other ....................................... 3

Multiple locality States:

Alabama ............................................ 6

Arizona .............................................. 6

California ........................................... 28

Connecticut ....................................... 4

Florida ............................................... 4

Georgia ............................................. 4

Idaho ................................................. 2

Illinois ................................................ 16

Indiana .............................................. 3

Kansas .............................................. 3

Kentucky ........................................... 3

Louisiana ........................................... 8

Maine ................................................ 3

*Maryland .......................................... 3

Massachusetts .................................. 2

Michigan ............................................ 2

Mississippi ......................................... 2

Missouri ............................................. 7

Nevada .............................................. 4

New Jersey ....................................... 3

New York .......................................... 8

Oregon .............................................. 5

Pennsylvania ..................................... 4

Texas ................................................ 32

*Virginia ............................................. 4

Washington ....................................... 3

West Virginia ..................................... 5

Wisconsin .......................................... 11

28 States ................................... 185

Total 1996 Physician Fee Schedule Payment Localities=210.

*The Maryland and Virginia localities do not

include the parts of Maryland (Prince Georges

and Montgomery Counties) and Virginia (Fairfax and Arlington Counties and the city of Alexandria) included in the Washington, D.C. locality.

2. Locality Study

There are numerous possibilities for

realigning payment localities. After

considerable internal discussion, we

narrowed the possibilities to four

general options. A major goal in

selecting these options is to continue to

reduce the number of areas, leading to

greater simplicity, understandability,

ease of administration, reduction in

urban/rural payment differences,

reduction in payment differences among

adjacent areas, and stability of payment

updates resulting from the periodic

GPCI revisions. Larger payment areas

would mean larger data samples thereby

leading to less volatile changes in the

statutory periodic GPCI revisions. We

contracted with Health Economics
Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules 34617

Research, Inc. to conduct an analysis of

these options. The four general fee

schedule area (FSA) options are briefly

summarized as follows:

• Option 1: Use current localities as

building blocks. The 22 States currently

with single localities would remain

statewide FSAs. Statewide FSAs would

be created in the 28 remaining States,

except for current localities whose GAF

exceeds the State GAF by a specified

percentage threshold (for example, 5

percent).

• Option 2: Use metropolitan areas

(Metropolitan Statistical Areas (MSAs),

Primary Metropolitan Statistical Areas

(PMSAs), and New England County

Metropolitan Areas) as building blocks.

The 22 States currently with single

localities would remain statewide FSAs.

Statewide FSAs would be created in the

28 remaining States, except for

metropolitan areas whose GAF exceeds

the State GAF by a specified percentage

threshold.

• Option 3: Use metropolitan areas as

building blocks. The 22 States currently

with single localities would remain

statewide FSAs. Each of the 28

remaining States would be divided into

2 to 5 FSAs based on metropolitan area

population size: greater than 3 million;

1 to 3 million; .25 to 1 million; less than

.25 million; nonmetropolitan.

• Option 4: Use metropolitan areas as

building blocks. Designate five

nationwide FSAs based on metropolitan

area population size: greater than 3

million; 1 to 3 million; .25 to 1 million;

less than .25 million; nonmetropolitan.

We also asked Health Economics

Research, Inc. for any suggestions for

variations on these options that might

improve them. We specifically

requested that it recommend

restructuring FSAs in the 11 States that

have subcounty localities. These

subcounty configurations, usually cities

or zip codes, create unnecessary

complexity and administrative burden.

Health Economics Research, Inc.

issued its final report to us on

November 1, 1995. The report consists

of three volumes and can be obtained by

requesting the following titles from the

National Technical Information Service

by calling 1–800–553–NTIS, or (703)

487–4650 in Springfield, Virginia:

• ‘‘Assessment and Redesign of

Medicare Fee Schedule Areas

(Localities),’’ Volume I: Text, NTIS

PB96–118815.

• ‘‘Assessment and Redesign of

Medicare Fee Schedule Areas

(Localities),’’ Volume II: Appendix

Tables, NTIS PB96–118823.

• ‘‘Assessment and Redesign of

Medicare Fee Schedule Areas

(Localities),’’ Volume III: Maps. NTIS

PB96–118187.

3. Nonselected Options

While we began with four basic

options, numerous variations are

possible merely depending on which

threshold GAF difference is selected.

For example, Option 1 is based on the

difference between the existing FSA

GAF and the State GAF. Many variants

on this option are available merely

depending upon what threshold GAF

difference between the FSAs and the

State is selected, for example, 1 percent,

3 percent, 5 percent, 10 percent.

Likewise, Option 2 produces many

variations depending on the selected

threshold GAF difference between the

metropolitan area GAF and the State

GAF. The major goal of revising FSAs is

to simplify the payment areas and

reduce payment differences among

geographic areas while maintaining

accuracy in tracking input price

differences among areas. All options

involve a certain trade-off between

simplicity and understandability and

accuracy of tracking of input prices.

Many of the variations will produce a

similar number of FSAs, but some do so

at the expense of producing undesirable

payment differences at boundaries or

inaccuracies in tracking input prices.

After careful examination of all

options and their variants, we believe

that a variant of Option 1 is clearly the

best choice. Before discussing, in depth,

our reasons for selecting this option, the

following is a brief discussion of why

we eliminated Options 2, 3, and 4, in

order of the least promising option. A

more detailed discussion of these

options with tables and maps can be

found in the Health Economics

Research, Inc. report.

Option 4 is the least promising

approach to constructing FSAs. While it

has the smallest number of FSAs, five

nationwide, it is unacceptably

inaccurate in tracking input price

differences and creates too many large

and inappropriate GAF differences

across FSA boundaries. Grouping all

metropolitan areas of the same size into

a single category, regardless of

geographic location, would substantially

underpay some areas while overpaying

others.

For example, the following large

metropolitan areas would be

substantially underpaid under Option 4

(Option 4 GAF/actual GAF is indicated

in parenthesis): San Francisco (1.024/

1.141); New York City (1.102/1.176);

Nassau-Suffolk, New York (1.024/

1.199); and Miami (1.024/1.116).

Conversely, the following large cites

would be overpaid under Option 4:

Houston (1.102/1.030); Chicago (1.102/

1.061); and Philadelphia (1.102/1.066).

In addition to these inaccuracies,

Option 4 creates some severe boundary

problems. For example, the HoustonGalveston, Texas difference under

Option 4 is 1.102 versus 0.937, a nearly

20 percentage point difference, versus

an actual area GAF cost difference of

1.030 versus 1.001. Other examples may

be found in the tables and maps in the

Health Economics Research, Inc. report.

In short, State-specific and

metropolitan-area-specific factors,

which Option 4 ignores, appear to be

important influences on input prices.

These factors are not captured by

nationwide average inputs based on

population size. While New York and

Houston are in the same metropolitan

area size classification of greater than 3

million, they have less in common with

each other in terms of practice costs

than they do with neighboring

metropolitan areas of smaller size.

Option 3, we believe, is also

unpromising. It creates the largest

number of FSAs of any option and is

geographically more complex than

either Option 1 or Option 2. This option

suffers from inadequate tracking of

input price variations and inappropriate

differences across boundaries, which are

caused, as in Option 4, by grouping

metropolitan areas by population class.

Under this option, within a State, a

metropolitan area’s costliness is

assumed to be dependent only on its

population. This is not always an

accurate assumption. A small

metropolitan area that is a component of

a major metropolitan region (for

example, a PMSA) may have much

higher input prices than a small

freestanding metropolitan area

surrounded by nonmetropolitan

counties. Grouping these types of

metropolitan areas together can lead to

inaccurate GAFs and inappropriate

differences at FSA boundaries. For

example, Houston is the only Texas

metropolitan area in the highest

population category of 3 million or

more, and has a GAF under Option 3 of

1.030. The contiguous Galveston PMSA

is in the smallest population class of

under 250,000. Its actual GAF is 1.001,

but under Option 3 it is averaged with

other small Texas metropolitan areas

and is assigned a GAF of 0.926. Option

3, thus, underpays Galveston and

creates a much larger GAF difference at

the Houston-Galveston boundary than is

warranted by the actual difference in

input prices. Expensive Miami and Fort

Lauderdale (with GAFs of 1.116 and

1.100) are grouped with lower-price

Orlando and Tampa-St. Petersburg (with
34618 Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules

GAFs of 1.008 and 0.992) under this

option.

Option 2 is more promising than

Options 3 and 4, but less promising than

Option 1. While producing similar types

and numbers of FSAs in some instances,

depending on the threshold used,

Option 1 has some advantages over

Option 2. First, Option 1 is less

disruptive because it uses existing

localities as building blocks. Second,

the urban payment localities in Option

1 tend to be smaller and more focused

on high-cost urban counties and track

input price variations better than the

larger metropolitan area definitions

used in Option 2. The metropolitan

areas (MSAs, PMSAs, and New England

County Metropolitan Statistical Areas)

used as building blocks in this option

are based on commuting patterns and

are generally much larger than the

current urban localities used in Option

1. Examples are the Washington, D.C.

locality versus the Washington, D.C.

PMSA; the Dallas locality versus the

Dallas PMSA; the Chicago locality

versus the Chicago PMSA; and the

Houston locality versus the Houston

PMSA. Input prices in the suburban

counties in these PMSAs may be

significantly lower than in the urban

core and more similar to prices in other

parts of the State. This may be

especially true of some rural counties on

the fringes of metropolitan areas that are

categorized as part of the metropolitan

area based on commuting patterns. For

example, the Washington, D.C. PMSA

includes portions of rural West Virginia.

Under Option 2, this FSA would have

a GAF of 1.090, compared to the actual

GAF of Washington, D.C. of 1.122, and

the actual GAF of the West Virginia

counties included in the Washington,

D.C. PMSA of 0.950. Input prices in the

parts of rural West Virginia included in

the Washington, D.C. PMSA have little

in common with input prices in the

Washington, D.C. urban core. Also,

Option 2 presents significant problems

in handling metropolitan areas that

cross State boundaries.

4. Proposal

a. Proposed Variant of Option 1 (Option

1i, 5–Percent Threshold)

Under standard Option 1, the 22

States with a single FSA would remain

statewide FSAs. Option 1 then

presumes for the remaining 28 States

that FSAs should be statewide for each

State unless a sub-State payment

locality has sufficiently higher input

prices (as measured by its GAF) than the

average input prices of its State (as

measured by the State GAF) to meet a

threshold difference. If the percentage

difference between the locality’s GAF

and the State GAF exceeds a specified

threshold, that locality would remain a

distinct FSA. Otherwise, the locality

would be merged into a residual FSA for

that State. If no sub-State locality had

sufficiently higher prices than the State

average to meet the threshold difference,

the State would become a single

statewide locality. For example,

Alabama currently has six localities.

The GAFs range from a high of 0.957 for

Locality 05, Birmingham, to a low of

0.902 for Locality 06, rest of Alabama.

The State GAF is 0.932. Using a

threshold of 5 percent, Alabama

becomes a statewide locality as the

Birmingham GAF exceeds the State GAF

by only 2.68 percent. Using a threshold

of 2.5 percent, Birmingham would

remain a distinct FSA, while the other

five localities would become one

residual FSA as none of the other

current localities exceed the State GAF

by 2.5 percent.

Option 1 has several advantages over

Options 2, 3, and 4. By using the current

localities as building blocks, it is the

most conservative of the options, is

likely to be the least disruptive to

physicians, and imposes the least

administrative burden on HCFA and the

Medicare carriers. GAFs for the largest,

highest priced cities and metropolitan

areas will not change under this option.

Neither will the GAFs of current single

locality States change. Many smaller

cities and rural areas are combined into

residual State areas, eliminating GAF

differences among these areas and,

thereby, increasing payments in rural

areas and substantially reducing the

number of localities. Since these areas

usually have the smallest price input

differences, combining them reduces the

number of FSAs at the smallest loss in

accuracy of input price tracking. In

summation, Option 1 tends to divide

States with large variation in input

prices among localities into multiple

FSAs, albeit significantly fewer than

now exist in these States, while

combining localities in States with little

price variation into a single statewide

locality.

However, the standard version of

Option 1 has two shortcomings. First,

some mid-sized metropolitan areas in

large States such as California and Texas

do not remain distinct FSAs despite

their considerably higher input prices

than in the rural and small city areas of

their States with which they would be

combined into a single residual area.

Second, some large metropolitan areas

in small States, such as Baltimore,

Maryland, do not remain distinct FSAs.

This is because the State GAF to which

all locality GAFs are compared contains

the high cost area GAFs. This makes it

difficult for the mid-sized areas in large

States to exceed the State GAF, even

though their own GAFs may

substantially exceed the GAF of all

other localities in the residual area to

which they would be assigned under

Option 1. In large States with a wide

range of GAFs, the mid-sized cities and

metropolitan areas tend to be combined

with the residual rest-of-State area.

Their GAFs are sharply reduced,

lessening the accuracy of input price

tracking and creating large boundary

differences in GAFs between large and

mid-sized cities and at rural State

boundaries that are not reflective of true

input price differences.

For example, with the current

payment localities, the contiguous

California counties of Los Angeles and

Ventura have 1996 GAFs of 1.103 and

1.079, respectively, a 2.4 percentage

point difference. Under Option 1, with

a 2.5-percent threshold, Ventura

becomes part of the residual State area.

Its GAF is reduced to 1.012, while Los

Angeles’s GAF remains at 1.103, a

difference of 9.1 percentage points.

Other examples of this large boundary

effect, all assuming a 2.5-percent

threshold, are: San Francisco versus

Marin, California (1.153/1.063 currently

versus 1.153/1.012 under Option 1);

Dallas versus Fort Worth, Texas (1.006/

0.977 currently versus 1.006/0.934

under Option 1). In the case of

Baltimore, its GAF of 1.032 is primarily

responsible for bringing the State GAF

up to 1.016. Under Option 1, with a 2.5-

percent threshold, it becomes part of a

single statewide locality (excluding

Maryland counties in the Washington,

D.C. locality) with a GAF of 1.016, when

in reality it is much more expensive

than the rest of the State, which has a

combined GAF excluding Baltimore of

0.964.

These problems are addressed in our

proposed option, Option 1i, 5-percent

threshold, a variant of Option 1. In this

variant, the GAF of a locality is

compared to the average GAF of lowerprice localities in the State, rather than

to the statewide average. (Like standard

Option 1, the 22 States currently having

single statewide localities remain

statewide localities.) If this difference

exceeds a percentage threshold, 5

percent in our proposal, the locality

remains a distinct FSA. Otherwise, it

becomes part of a statewide or rest-ofState residual FSA. Specifically, a

State’s localities are ranked from the

highest to the lowest GAF. The GAF of

the highest-price locality is compared to

the weighted average GAF of all lowerprice localities. If the percentage

difference exceeds a specified threshold,
Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules 34619

the highest-price locality remains a

distinct FSA. If not, the State becomes

a single statewide locality. If the

highest-price locality remains a distinct

FSA, the process is repeated (iterated,

hence the designation Option 1i) for the

second-highest-price locality. Its GAF is

compared to the statewide average GAF

excluding the two highest-price

localities. If this difference exceeds the

threshold, the second-highest-price

locality remains a distinct FSA. The

logic is repeated (iterated), moving

down the ranking of localities by

costliness, until the highest-price

locality does not exceed the threshold

and does not remain a distinct FSA. No

further comparisons are made, and the

remaining localities become a residual

rest-of-State FSA. The GAF of a locality

always is compared only to the average

GAF of all lower-price localities. This

ensures that the statewide or residual

State FSA has relatively homogeneous

input prices.

Option 1i, thus, has all of the

advantages of Option 1, while

addressing the problems inherent in

Option 1: unwarranted boundary

differences and large higher-price areas

not being separate FSAs in small States.

In comparison to Option 1, Option 1i

breaks out more payment areas in large

States containing a wide range of GAFs

by defining more mid-sized cities/areas

as distinct FSAs; it more consistently

defines homogeneous residual State

FSAs; and reduces unwarranted

boundary differences.

As with Option 1 and Option 2,

numerous variants of Option 1i are

possible depending on the GAF

threshold difference selected. We are

proposing Option 1i with a 5-percent

threshold. We believe that this option

would attain the goal of simplifying the

payment areas and reducing payment

differences among areas while

maintaining accuracy in tracking input

prices.

A summary measure of an FSA

option’s accuracy in tracking input

prices is the average percentage

difference between the county GAF and

the GAF of the payment locality to

which that county is assigned. These

differences are weighted by total

physician services RVUs in each county

so that inaccuracies in areas where more

services are provided are emphasized. A

summary measure of payment

differences among adjacent geographic

areas in an FSA option is the average

difference of the GAFs between unique

pairs of contiguous counties, weighted

by the sum of the RVUs of the two

counties. Table 2 shows these summary

measures of input price accuracy and

small area payment differences for

proposed Option 1i, 5-percent

threshold, compared to the current

localities, statewide localities, and the

extremes of a national fee schedule (the

same payment everywhere for a specific

service) and separate FSAs for all 3,223

counties.

TABLE 2.—PAYMENT ACCURACY AND SMALL AREA PAYMENT DIFFERENCE

Fee schedule area Number of

FSAs

Average

county/FSA

input price

difference*

(percent)

Average

county

boundary

difference*

(percent)

National .................................................................................................................................................... 1 6.86 0.00

States ....................................................................................................................................................... **53 4.06 0.73

Option 1i, 5% Threshold .......................................................................................................................... 87 2.09 1.78

1996 Localities ......................................................................................................................................... 210 1.67 2.30

Counties ................................................................................................................................................... 3223 0.00 3.18

* Weighted by total physician services RVUs.

**Includes Washington D.C., Puerto Rico, and the Virgin Islands.

Note: Input price accuracy is measured by the average absolute difference (weighted by total county RVUs) between the county GAF and the

FSA GAF. Boundary differences are measured by the average absolute difference in county GAFs between all unique, contiguous county pairs,

weighted by the sum of total RVUs of the contiguous counties.

At one extreme is a single national

FSA with no geographic adjustments.

Lack of a GAF obviously does not track

input prices at all, resulting in an

average payment error of 6.86 percent,

but also avoids any payment boundary

differences. At the other extreme is an

FSA for each of the 3,223 counties,

which perfectly tracks county input

prices, but has the largest number of,

and largest average difference across,

payment boundaries. These two

extremes highlight the tradeoff between

tracking input price variations and

avoiding differences among nearby

areas.

The current payment localities result

in an average payment error of 1.67

percent, with an average difference

across boundaries of 2.30 percent. Our

proposed Option 1i, 5-percent

threshold, by itself, without the

subcounty payment restructuring

discussed below, would significantly

reduce the number of payment areas

from 210 to 87. It would reduce the

average county boundary difference

from 2.30 percent to 1.78 percent while

increasing the average county input

price error by only 0.42 percentage

points from 1.67 percent to 2.09 percent.

b. Proposed Option 1i, 5–Percent

Threshold, with Subcounty Payment

Area Restructuring

We further propose to refine payment

areas by combining with proposed

Option 1i, 5-percent threshold, an

additional restructuring of localities in

the 11 States that currently have

subcounty localities. Three of these

States—California, Mississippi, and

Pennsylvania—define subcounty

localities by zip code. Eight States—

Arizona, Connecticut, Kentucky,

Massachusetts, Missouri, Nevada, New

York, and Oregon employ city/town

limits to define localities. The use of

subcounty localities creates unnecessary

complexity and administrative burden.

One of the most compelling reasons to

eliminate subcounty payment areas

from payment localities is to reduce the

administrative work required to

maintain zip-code-to-locality

crosswalks. Many States employ a zipcode-to-locality crosswalk when

processing claims, but the continuous

creation, deactivation, and redefinition

of U.S. Postal Codes poses a significant

obstacle in the maintenance of accurate

locality definitions. Town boundaries

can also be ambiguous. Since county

boundaries are unambiguous and rarely

change, aggregating subcounty parts to

the county level would minimize the

administrative burden of maintaining

crosswalks.
34620 Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules

Another reason to eliminate

subcounty localities is simplicity. By

aggregating subcounty areas to the

county level, a uniform fee schedule

system with no area smaller than a

county can be introduced nationwide.

Furthermore, since the input price data

for GPCIs, and ultimately GAF values,

are not available at a subcounty level,

the subcounty areas provide no

additional accuracy in measuring

practice input price variations. More

often, subcounty localities

unnecessarily complicate the

calculation of GAF values by requiring

laborious tracking by zip code of the

subcounty parts. The obvious method

for eliminating subcounty localities is to

expand a current locality’s city/town or

zip code boundaries to the surrounding

county borders. In exploring this option,

we defined ‘‘County Equivalent

Localities’’ based on the following

criteria:

• For a current locality that includes

multiple cities/towns in noncontiguous

counties, all counties with any areas in

the current locality are incorporated

into the new County Equivalent Locality

definition.

• Counties currently divided between

two localities are assigned to the locality

where the largest portion of physician

fee schedule services (RVUs) are

provided.

The County Equivalent Option may be

applied to the 11 subcounty locality

States independent of our proposed

basic Option 1i, indeed independent of

any other changes in payment localities.

When adopted with our basic Option 1i,

5-percent threshold, changes are made

automatically or easily in 8 of the 11

States:

• Five States—Arizona, Connecticut,

Kentucky, Mississippi, and Nevada

become statewide payment areas.

• California currently has eight

subcounty areas, all of which are in Los

Angeles County. These areas have the

same GAF and payment level and can

be aggregated into a single FSA. (These

eight localities were kept separate from

1992 to 1995 to facilitate the statutory

fee schedule transition period.)

• In New York, existing subcounty

areas are included in the residual restof-State area.

• In Oregon, the current town-based

‘‘Portland’’ locality, which includes

parts of Clackamas, Multnomah, and

Washington counties, can be redefined

to encompass the boundaries of these

three counties.

Because of their unique

circumstances, we believe the remaining

three subcounty FSA States of

Massachusetts, Missouri, and

Pennsylvania require simple

fundamental payment area

reconfigurations.

Massachusetts—Massachusetts

currently has two noncontiguous

payment areas: ‘‘Urban’’ and

‘‘Suburban.’’ Under Option 1i, 5–

Percent Threshold, Massachusetts

would become a single statewide

locality. The shortcoming of both the

current localities and Option 1i, 5–

Percent Threshold, is that the high cost

Boston area, comprised of parts of

Suffolk, Norfolk, and Middlesex

counties, is not separated from lowercost central and western Massachusetts.

The problem is caused by the

composition of the current ‘‘Urban

Massachusetts’’ locality, which groups

the Worcester, Springfield, and

Pittsfield areas with the substantially

higher-cost Boston area. We, therefore,

propose to change Massachusetts to two

new localities: 01—Boston Metropolitan

Area (comprised of Suffolk, Norfolk,

and Middlesex counties) and 02—rest of

Massachusetts.

Missouri—Missouri currently has

seven noncontiguous payment areas:

Northern Kansas City; Kansas City; St.

Louis/large East Cities; St Joseph; Rural

Northwest counties; small East Cities;

and rest of Missouri. Under our

proposed Option 1i, 5–Percent

Threshold, Missouri would become a

statewide payment area. This result

would fail to recognize the significant

price differences between the Kansas

City and St. Louis metropolitan areas

and the rest of the State and would

result in significant payment area input

price difference tracking inaccuracies.

To correct this problem, we propose to

change Missouri to three payment areas:

01—Kansas City Metropolitan Area

(Platte, Clay, and Jackson counties);

02—St Louis Metropolitan Area (St

Louis City, St. Louis, Jefferson, and St

Charles counties); and 03—rest of

Missouri (all other counties).

Pennsylvania—Pennsylvania

currently has four noncontiguous

payment localities: 01—Philadelphia/

Pittsburgh medical schools; 02—large

Pennsylvania Cities; 03—smaller

Pennsylvania Cities; and 04—rest of

Pennsylvania. Under proposed Option

1i, 5–Percent Threshold, areas 03 and 04

are combined into a residual rest-ofState area. The problem is that the high

cost Philadelphia area is split into two

areas, parts of 01 and 02, and is not

clearly distinguished from the lowercost Pittsburgh area and the rest of area

02. The five counties comprising the

Philadelphia MSA are the most costly in

Pennsylvania and clearly belong

together in a ‘‘Philadelphia

Metropolitan Area’’ locality. Allegheny

County, which contains Pittsburgh and,

therefore, part of which is grouped with

part of Philadelphia in locality 01, is

much less expensive than the

Philadelphia area and does not belong

in the same locality, either cost-wise or

geographically. Thus, we propose that

Pennsylvania be divided into two

localities: 01—Philadelphia

Metropolitan Area (Montgomery,

Philadelphia, Delaware, Bucks, and

Chester counties); and 02—rest of

Pennsylvania (all other counties).

c. Effects of Proposed Option 1i, 5–

Percent Threshold, with Subcounty FSA

Restructuring

We believe that our proposed

restructuring of Medicare payment areas

meets the major goal of simplifying

payment areas and reducing payment

differences among adjacent geographic

areas while maintaining accuracy in

tracking input prices among areas. It

significantly reduces the number of

FSAs from 210 to 89, and increases the

number of statewide payment areas

from 22 to 34, thereby simplifying

program administration. It also provides

a more rational and understandable

basis for localities, reduces urban/rural

payment differences, and maintains

separate payment areas for relatively

high-priced large and mid-sized cities in

large States. It decreases the number of

payment areas by almost 60 percent,

while at the same time reducing average

county boundary payment differences,

yet reduces average county input price

accuracy by only 0.42 percent.

The GPCIs, and, therefore, the GAFs,

for the proposed new payment areas

would be budget neutral within each

State. That is, an adjustment would be

made to them later in the year (to

incorporate the most recent data into the

adjustments) to yield the same total

physician fee schedule payments within

that State that would have been made

had the payment areas not been

changed. We are anticipating the

adjustments to be minor. While some

current individual payment areas will

experience slight increases in payments

and some areas will experience slight

decreases in payments under our

proposed FSA changes, the effects on

the overwhelming majority of areas will

be minimal. Of the total current areas in

the 28 States currently having multiple

FSAs, 82 percent change less than 3

percent, 93 percent change less than 4

percent, and 96 percent change less than

5 percent. Forty-three percent of the

areas will experience increases in

payments, 33 percent will experience

decreases, and 24 percent will

experience no change. Addendum A,

‘‘1996 Geographic Adjustment Factors

(GAFs) by Medicare Payment Locality/
Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules 34621

Locality Part for January 1, 1996

Localities and Proposed Option, Fee

Schedule Areas (FSAs) in Descending

Order of Difference’’ shows the effects

for each of the current localities in

multiple FSA States (as previously

mentioned, the 22 States currently

having a single statewide locality

remain statewide localities) of our

proposed locality reconfiguration by

comparing existing GAFs to the GAFs

for the new localities. Because our

proposal eliminates subcounty areas, we

are also publishing Addendum B,

‘‘Medicare Fee Schedule Areas

(Localities) and 1996 Geographic

Adjustment Factors (GAFs), Current and

Proposed Option by State and County/

County Part’’ that shows, alphabetically

by State and county, the current locality

and GAF and the proposed locality and

GAF for each county.

As can be seen from Addendum A,

only four areas will lose more than 4

percent under our proposal:

Pennsylvania area 01, Philadelphia/

Pittsburgh Medical Schools;

Pennsylvania area 02, large

Pennsylvania Cities; Missouri area 01,

St. Louis/large Eastern Cities; and

Massachusetts area 01, Urban

Massachusetts. These are unique

situations and require explanation. As

the asterisks on these areas indicate,

these losing areas are only part of an

existing locality and are in States in

which we are recommending

fundamental restructuring of FSAs

because of existing subcounty FSAs and

the current combining of areas with

widely different input prices into a

single area. In actuality, only part of the

existing area will lose. As Addendum A

shows, the remaining part of the area

will win under our proposal. For

example, the largest projected loser,

Pennsylvania area 01, is in reality only

the part of Pittsburgh that is currently

included in area 01. The Philadelphia

portion of Pennsylvania area 01 is a

projected winner under our proposal.

As mentioned earlier, while Pittsburgh

is in Allegheny County, which has

considerably lower input prices than the

Philadelphia area, part of Pittsburgh is

included with part of Philadelphia in

area 01. This has the effect of

overpaying the Pittsburgh part of area 01

and underpaying the Philadelphia part

of area 01. Our proposal remedies this

situation by grouping Philadelphia with

similar priced counties in the

Philadelphia MSA, while grouping

Pittsburgh with similar priced areas in

the rest of Pennsylvania. This also

explains why Pennsylvania area 02

shows up as both one of the four largest

losers and as the largest winner. Under

our proposal, the part of area 02

comprised of larger cities outside of the

Philadelphia MSA is no longer included

with the higher priced counties in the

Philadelphia MSA, but is included in

the residual Pennsylvania FSA. This

lowers their GAFs, while increasing the

GAFs of the higher priced counties in

the Philadelphia MSA that now become

part of the Philadelphia FSA.

The same logic holds true for

Massachusetts and Missouri. The losing

parts of current Massachusetts locality

01 are the Worcester, Springfield, and

Pittsfield areas which, while having

substantially lower costs than Boston,

are currently included in the same

locality. The winning part of

Massachusetts locality 01 is the highercost Boston metropolitan area. In

Missouri, the losing parts of locality 01,

St. Louis/large East Cities, are the lowercost Columbia, Springfield, and

Jefferson City areas that are currently

included with higher-cost St. Louis. The

winning part of this locality is the St.

Louis metropolitan area. These four

largest losing areas then result from our

correcting the current anomalous

situation created by including low-cost

and high-cost areas in a single locality

by reconfiguring the localities to more

accurately reflect input price variations.

We welcome comments on our

proposed payment area changes. Our

proposal is based on the application of

statistical criteria to aggregate localities

within a State that are not significantly

different as indicated by current GAFs.

We would welcome alternative rationale

and criteria for exceptions to this

statistically based methodology. While

we are open to considering exceptions

to this statistically based realignment,

commenters suggesting variations on

our proposal should submit an analysis

of why their variation is preferable. For

example, commenters suggesting that

their particular area, which would

become part of a residual rest-of-state

area under our proposal, should be

retained as a separate payment area

should submit data to show that their

area costs exceed the costs of the other

areas in the residual payment area by

the 5-percent threshold.

As mentioned earlier, the great

majority of existing FSAs would

experience only very minor changes in

payment levels under the proposed new

payment area configuration. We are

concerned, however, about the few areas

estimated to experience the largest

reductions in payments. To lessen the

impact on these areas, we propose

phasing in the effect of the proposed

new payment areas over a 2-year period

in States containing a locality that is

estimated to experience a decrease in

payments that exceeds a certain

threshold. We selected a 2-year period

because when we implement the GPCI

revisions required by law every 3 years,

the law provides for a 2-year transition

period. Revising localities requires

calculating GPCIs to correspond to the

revised localities.

A transition period, however, adds

another element to the changes to the

physician fee schedule. For example,

the law requires that the conversion

factor be updated each year. In addition,

we annually add new RVUs for new and

revised services. In 1997, we will

implement the comprehensive changes

in work RVUs required by law. In 1998,

the law requires us to implement new

resource-based practice expense RVUs.

In 1998 and 1999, we will implement

new GPCIs as required by law. A

transition period for our locality

changes would add one more payment

change to these other changes. Since

most payment areas would experience

very minor changes, we believe that

transitioning these areas would

unnecessarily add another change.

Since the purpose of the proposed

phase-in is to limit the effect on the

areas estimated to experience the largest

decrease in payments because of our

proposed payment area revisions, we

propose that no area be allowed to lose

more than 4 percent in the first year. We

selected the 4-percent threshold because

that is about one-half of the largest

estimated area payment decrease. The

proposed payment area changes would

be fully effective in 1997 in all States

not containing an area whose payments

are estimated to decrease by more than

4 percent under our proposal. Under

this phase-in, only two States,

Pennsylvania and Missouri, would be

transitioned as they are the only States

with areas that would experience a

decrease of more than 4 percent. In

these States, areas estimated to lose

more than 4 percent would be assigned

1997 GPCIs whose values would limit

the loss to 4 percent. Since the proposed

new payment area changes would be

budget-neutral within a State, all areas

within a State would be subject to the

2-year phase-in if the State contained an

area whose payment level is estimated

to decrease by more than 4 percent. This

means that areas estimated to receive

increases in payments in these States

would receive only part of the increase

in 1997 as transitional 1997 GPCIs

would be calculated to maintain budget

neutrality within the State. In 1998, all

areas in these transitioned States would

be totally incorporated into their new

localities and be assigned the fully

implemented new locality GPCIs. We

have designed this transition approach
34622 Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules

to cushion the effect of the change for

the localities that would be

experiencing the greatest losses. We

invite comments on this transition

proposal and are open to suggestions

about alternative transition approaches.

Our proposal would leave 16 States

with multiple payment areas. We

believe our proposal justifies multiple

areas in these States because of input

price differences within these States.

However, as stated earlier in the

background discussion on this issue, we

are generally in favor of statewide

payment areas as they simplify program

administration and encourage

physicians to practice in rural areas by

eliminating urban/rural payment

differentials within the State. Therefore,

to continue to be responsive to the

physician community, even if our

proposed payment area reconfiguration

is adopted, we will continue to consider

converting any of the remaining

multiple payment area States into a

single statewide payment area if

overwhelming support among

physicians in both winning and losing

areas can be demonstrated. This

proposed policy change does not require

a change to the regulations set forth in

§ 414.4 (‘‘Fee schedule areas’’).

B. Special Rules for the Payment of

Diagnostic Tests, Including Diagnostic

Radiologic Procedures

1. Background

The payment for diagnostic

procedures, including diagnostic

radiologic procedures, under the

Medicare program is made under two

statutory benefits. Section 1861(s)(1) of

the Act describes physician services as

part of the medical and other health

services benefit. This paragraph

describes the professional component of

a diagnostic test, which is the

interpretation of the test. Under the

physician fee schedule and the

Medicare carrier payment systems, these

services are coded with the CPT

modifier ‘‘26.’’

Payment for taking a test is made

under section 1861(s)(3) of the Act. We

have termed the taking of a test the

technical component of the test, and it

is indicated under the physician fee

schedule with the ‘‘TC’’ modifier.

Section 2070.1 of the Medicare

Carriers Manual provides that for a

diagnostic test to be covered, the service

must be related to a patient’s illness or

injury (or symptom or complaint) and

ordered by a physician. This instruction

was intended to relate a diagnostic test

to a patient’s illness or injury, symptom,

or complaint. The results of the test

were to be used to treat the patient or

refer him or her for treatment. It has

come to our attention from various

sources, including carrier medical

directors, that, in some cases, the intent

of this instruction has been frustrated.

We have heard of instances in which a

physician is employed for the sole

purpose of ordering tests. This

physician has no relationship to the

beneficiary, and it is highly likely that

tests by this physician would not be

medically necessary. We believe this

practice generates unnecessary

diagnostic tests and places Medicare

beneficiaries at needless risk both

medically and financially. We propose

to further clarify this long-standing

manual instruction requirement that

tests be ordered by a physician by

specifying that the physician ordering

the test must be the physician treating

the patient. This proposed policy would

link the ordering of the diagnostic test

to the physician who will use the test

results to treat the patient.

2. Proposal

We propose that for diagnostic tests,

including diagnostic radiologic

procedures, to be covered, they must be

ordered by the physician who treats the

beneficiary. The physician who treats

the beneficiary is the physician

responsible for the treatment of the

patient and who orders the test or

radiologic procedure to use the results

in the management of the beneficiary’s

specific medical problem(s). (Physicians

can order tests while they are consulting

for another physician.) We believe this

requirement is fundamental for coverage

and payment of diagnostic tests and,

therefore, are including it in the

regulations at § 410.32 (‘‘Diagnostic Xray tests, diagnostic laboratory tests, and

other diagnostic tests: Conditions’’).

3. Chiropractor Exception

A physician who orders the x-ray that

is used by a chiropractor to demonstrate

the subluxation of the spine in a

beneficiary who is receiving manual

manipulation treatments would be

exempted from this rule. Because no

payment can be made for a diagnostic

test ordered by a chiropractor under

§ 410.22(b)(2), we propose to allow

payment for the x-ray when ordered by

a physician who will not be treating the

patient for subluxation of the spine.

Otherwise, beneficiaries would always

have to pay out-of-pocket for these xrays, which would frustrate their use of

the chiropractic benefit.

4. Non-Physician Practitioners

Certain non-physician practitioners

who provide services that would be

physician services if furnished by a

physician under a specific enumerated

benefit in the statute would be

considered as the physician treating the

beneficiary for the purpose of this

section. Non-physician practitioners

who meet this definition are physician

assistants (section 1861(s)(2)(K)(i) of the

Act); and nurse practitioners and

clinical nurse specialists (sections

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

the Act), operating within the scope of

their State licenses.

C. Transportation in Connection with

Furnishing Diagnostic Tests

Section 1861(s)(3) of the Act

establishes coverage for diagnostic xrays furnished in a place of residence

used as the patient’s home if the

performance of the tests meets health

and safety conditions established by the

Secretary. This provision is the basis for

payment of x-ray services furnished by

approved portable suppliers to

beneficiaries in their homes and in

nursing facilities.

Although the Congress did not

explicitly so state, we determined that,

because of the increased costs in

transporting the x-ray equipment to the

beneficiary, the Congress intended that

we pay an additional amount for

transportation expenses. Therefore, we

established HCFA Common Procedure

Coding System (HCPCS) codes R0070

and R0075 (for single-patient and

multiple-patient trips, respectively) to

pay approved portable x-ray suppliers a

transportation ‘‘component’’ when they

furnish the services listed in section

2070.4.C of the Medicare Carriers

Manual.

We later added the taking of an

electrocardiogram (EKG) tracing to the

list of services approved suppliers of

portable x-ray services may furnish

(section 2070.4.F of the Medicare

Carriers Manual) and established

HCPCS code R0076 to pay for the

transportation of EKG equipment. In the

December 1995 final rule (60 FR 63149),

we published our revised policy of

precluding separate payment for the

transportation of diagnostic equipment

except under certain circumstances.

These circumstances include standard

EKG procedures furnished by an

approved supplier of portable x-ray

services or by an independent

physiological laboratory (section

2070.1.G of the Medicare Carriers

Manual) under HCPCS code R0076 in

connection with the provision of CPT

codes 93000 (Electrocardiogram,

complete) or 93005 (Electrocardiogram,

tracing).

After further review of this policy, we

have decided that the exceptions are

inconsistent with the law and legislative
Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules 34623

history regarding the payment for

transportation of EKG equipment.

Section 1861(s)(3) discusses only the

coverage of x-rays furnished in a

beneficiary’s place of residence. Because

there is no mention in the statute about

the coverage of EKGs furnished in a

beneficiary’s place of residence, we are

returning to our original interpretation

of the law.

We propose allowing separate

payment only for the transportation of

x-ray equipment furnished by approved

suppliers of portable x-ray services. As

a result, we would not allow separate

payment for the transportation of EKG

equipment furnished by any supplier.

Therefore, we propose to eliminate

HCPCS code R0076. Payment for CPT

codes 93000 and 93005 will not change,

nor will the coverage of these services

change. This proposed policy change is

not explicitly addressed in our

regulations.

D. Bundled Services

1. Hot or Cold Packs

The application of hot or cold packs

to one or more areas is billed using CPT

code 97010. These modalities (that is,

physical agents applied to produce

therapeutic change to biologic tissue)

are primarily used in conjunction with

therapeutic procedures to provide

analgesia, relieve muscle spasm, or

reduce inflammation and edema.

Generally, hot packs are used for

subacute or chronic conditions, while

cold packs are used for acute and

chronic conditions.

The results of a comprehensive

analysis of Medicare claims data

indicate that CPT code 97010 is being

used extensively with a wide variety of

services such as office visits and

physical medicine and rehabilitative

services. Therefore, we are proposing to

bundle payment for CPT code 97010

into the payment for all other services

including, but not limited to, those with

which it historically has been billed

with the greatest frequency (such as

office visits and physical therapy).

We believe that our proposal to

bundle payment and, thus, to preclude

separate payment for the application of

hot and cold packs is justified for three

reasons:

• As a therapy, hot and cold packs are

easily self-administered. Generally, we

do not cover procedures that are

basically self-administered; hot and cold

packs, by their nature, do not require

the level of professional involvement as

do the other physical medicine and

rehabilitation modalities.

• Although we acknowledge that

professional judgment is involved in the

use of hot and cold packs, much less

judgment is demanded for them than for

other modalities. These packs are

commonly used in the home, and, thus,

require a minimal level of professional

attention.

• The application of hot and cold

packs is usually a precursor to other

interventions and, as such, is

appropriately used in combination with

other procedures. Our data analysis

supports this conclusion because the

majority of claims for CPT code 97010

occurred in conjunction with claims for

other services performed on the same

day.

We propose to change the status

indicator for CPT code 97010 to ‘‘B’’ to

indicate that the service is covered

under Medicare but payment for it is

bundled into the payment for other

services. Separate payment for CPT code

97010 would not be permitted under

this proposed change. This change

would be implemented in a budget

neutral manner across all other

procedures. Because the RVUs for this

procedure would be redistributed across

all physician fee schedule services,

there would be no measurable impact.

This proposed policy change is not

explicitly addressed in our regulations.

2. Dermatology Procedures

a. Bundling of Repair Codes into

Excision Codes

Currently, the RVUs for the

dermatology excision codes (CPT codes

11400 through 11446 and 11600 through

11646) include services described by the

simple repair codes (CPT codes 12001

through 12018). The dermatologist can

bill separately for the intermediate or

complex repair (closure) codes (CPT

codes 12031 through 12057 and 13100

through 13152, respectively) in addition

to the excision codes. We do not allow

separate billing for closure for any other

surgical procedure. The closure is

included in the comprehensive

procedure. We believe that applying the

same standard to dermatologists is

appropriate.

Therefore, we propose to cease paying

separately for the repair codes when

billed in conjunction with the excision

codes. We are proposing to bundle the

RVUs for the intermediate and complex

repair codes (CPT codes 12031 through

12057 and CPT codes 13100 through

13152, respectively) into both the

benign and malignant skin lesion

excision codes (CPT codes 11400

through 11446 and 11600 through

11646, respectively). Under our

proposal, we would redistribute the

RVUs for the repair codes across CPT

codes 11400 through 11446 and 11600

through 11646. We would base the

number of RVUs for redistribution on

the frequency with which the repair

codes are billed with the excision codes.

We are not proposing to assign these

repair codes a ‘‘B’’ status indicator

because we acknowledge that these

codes are not used exclusively with

excision services. Instead, we would

implement this proposed policy change

through our correct coding initiative.

This proposed change would

standardize our policy for payment for

wound closure. This proposed policy

change is not explicitly addressed in our

regulations.

b. Skin Lesion Destruction Codes

There are several CPT codes that

describe the destruction of various

benign or premalignant lesions. Within

this group of codes, the reporting

methods vary. Sometimes the code

describes the destruction of a single

lesion but requires reporting multiple

codes for the destruction of several

lesions; other times it describes

destruction of as many as 15 lesions.

Thus, it is sometimes not clear how

many codes to report. The codes are

specific to particular areas of the body

or particular types of lesions. Because

these categories are not mutually

exclusive, the coding system provides

the opportunity to report the destruction

of a given lesion in more than one way.

Finally, this complicated coding

structure has produced anomalies in

work relative values. We propose to

simplify the reporting of and payment

for the destruction of benign or

premalignant skin lesions.

We propose to assign a ‘‘G’’ status

indicator to CPT codes 11050 through

11052, 11200 and 11201, 17000 through

17105, 17110, and 17200 and 17201 to

indicate that these CPT codes are not

valid for Medicare purposes and that

there is another code to use for the

reporting of and payment for these

services.

To report the destruction of benign

and premalignant skin lesions, we

propose to create two HCPCS codes. The

first code would describe the

destruction of up to and including 15

lesions. The second code would

describe destruction of each additional

10 lesions. To assign RVUs to these

codes, we propose to take a weighted

average of the RVUs assigned to CPT

codes 11050 through 11052, 11200 and

11201, 17000 through 17105, 17110, and

17200 and 17201 based on the billing

frequencies and the code descriptors.

This proposed policy change is not

explicitly addressed in our regulations.
34624 Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules

E. Change in Coverage Status for

Screening and Obsolete Procedures

1. Vital Capacity Testing

CPT code 94150 (Vital capacity, total)

is a screening measure. It is typically

performed on patients who are

asymptomatic. Because these tests are

performed on patients who do not have

symptoms of breathing problems, they

represent preventive services that are,

by statute, not covered by Medicare.

Some Medicare carriers do not cover

this code at present. However, we

inadvertently failed to identify CPT

code 94150 as noncovered by Medicare

on a national basis. Therefore, we

propose changing the status indicator

for CPT code 94150 from ‘‘A’’ to ‘‘N’’ to

represent its noncovered status. This

policy change is not specifically

addressed in our regulations. It would

be reflected in the Medicare physician

fee schedule database and in Addendum

B (Relative Value Units and Related

Information) of the physician fee

schedule final rule, which will be

published later this year.

2. Certain Cardiovascular Procedures

In the absence of a national Medicare

policy on the following CPT codes, we

currently allow our Medicare carriers

discretion in deciding whether to allow

coverage for these procedures:

CPT

code Descriptor

93201 Phonocardiogram with or without ECG lead; with supervision during recording with interpretation and report (when equipment is supplied by the physician).

93202 Phonocardiogram * * *; tracing only, without interpretation and report (eg, when equipment is supplied by the hospital, clinic).

93204 Phonocardiogram * * *; interpretation and report.

93205 Phonocardiogram with ECG lead, with indirect carotid artery and/or jugular vein tracing, and/or apex cardiogram; with interpretation

and report).

93208 Phonocardiogram * * *; tracing only, without interpretation and report.

93209 Phonocardiogram * * *; interpretation and report only.

93210 Phonocardiogram intracardiac.

93220 Vectorcardiogram (VCG), with or without ECG; with interpretation and report.

93221 Vectorcardiogram * * *; tracing only, without interpretation and report.

93222 Vectorcardiogram * * *; interpretation and report only.

As a result of our request for

comments on the 5-year review of

physician work RVUs in the December

1994 final rule (59 FR 63453), the

American College of Cardiology

commented that these 10

phonocardiography and

vectorcardiography diagnostic tests are

outmoded and of little clinical value.

Our review of Medicare claims data for

these tests supports this contention

because the volume of claims for these

tests has declined significantly in recent

years. Only 17,925 claims were

submitted in calendar year 1994 for all

10 tests.

Based on the American College of

Cardiology’s recommendation, our

review of our recent claims history, and

our consultation with other medical

specialty groups, we propose to

discontinue coverage for these 10

diagnostic tests. The status indicators

for these 10 procedures would be

changed from ‘‘A’’ to ‘‘N’’ to reflect their

noncovered status. This proposed policy

change is not explicitly addressed in our

regulations.

F. Payments for Supervising Physicians

in Teaching Settings

1. Definition of Approved Graduate

Medical Education Programs

Since publication of the December

1995 final rule, we have received

questions about the difference in the

definition of an approved residency

program for purposes of the teaching

physician rules under § 415.152

(‘‘Definitions’’) and the definition used

in the direct medical education rules

under § 413.86(b) (‘‘Direct graduate

medical education payments’’). To be

consistent, we propose to modify

§ 415.152 to match the definition of an

approved graduate medical education

program in § 413.86(b). We would add

a reference to programs that are

recognized as an ‘‘approved medical

residency program’’ under § 413.86(b).

By making this change, the regulations

text would reflect a common definition

of approved graduate medical education

programs for Medicare Part A and Part

B. This is a technical change and would

have no effect on the implementation of

our revised policy regarding the

payment for supervising physicians in

teaching settings that is effective July 1,

1996.

2. Evaluation and Management Services

Furnished in Certain Settings

In the December 1995 final rule (60

FR 63135), we revised our policy

regarding the payment for supervising

physicians in teaching settings. We

eliminated the attending physician

criteria but clarified the physician

presence requirement for services billed

to the Medicare carrier. As part of our

revised policy, we created a limited

exception for residency programs that

are fundamentally incompatible with a

physical presence requirement. The

exception to the physician presence

requirement is for certain evaluation

and management services (CPT codes

99201, 99202, 99203, 99211, 99212, and

99213) furnished in certain ambulatory

care centers within the context of

certain types of residency training

programs. The exception is set forth in

§ 415.174 (‘‘Exception: Evaluation and

management services furnished in

certain centers’’).

As the exception currently reads, one

of the criteria is that ‘‘The range of

services furnished by residents in the

center includes * * * Comprehensive

care not limited by organ system,

diagnosis, or gender.’’

(§ 415.174(a)(4)(iii)). It has come to our

attention that many obstetric and

gynecological residency programs have

been restructured over the years to have

a greater primary care focus. Some of

these programs that otherwise qualify

for an exception might be denied

payment if the gender limitation were

strictly applied.

Contrary to suggestions in

correspondence we received after

publication of the final rule, it was not

our intention to prevent obstetric and

gynecological residency programs or

other residency programs focusing on

women’s health care from qualifying for

the exception solely because of the

patient’s gender. Thus, we propose to

make a technical change to the

regulations text to delete the reference

to gender in § 415.174(a)(4)(iii) and

change the text to ‘‘Comprehensive care

not limited by organ system or

diagnosis.’’ Of course, such programs

must satisfy the otherwise applicable

criteria to qualify for an exception.
Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules 34625

G. Change in Global Periods for Four

Percutaneous Biliary Procedures

The Society of Cardiovascular and

Interventional Radiology advised us that

a 90-day global period is inappropriate

for four percutaneous biliary

procedures. The four procedures are

CPT codes 47490 (percutaneous

cholecystectomy), 47510 (introduction

of percutaneous transhepatic catheter

for biliary drainage), 47511

(introduction of percutaneous

transhepatic stent for internal and

external biliary drainage), and 47630

(biliary duct stone extraction,

percutaneous via T-tube tract, basket, or

snare (for example, Burhenne

technique)). The Society believes that

these four procedures should have a ‘‘0-

day’’ global period. We agree with the

Society’s arguments that a 90-day global

period is contrary to the widespread

practice conventions of percutaneous

biliary intervention and is inconsistent

with other similar interventions in the

biliary tract and urinary tract.

We believe that the global periods for

these four codes should be changed.

Therefore, we are proposing to change

the global periods for these services

from 90 days to 0 days. To make this

change, we would reduce the work

RVUs assigned to these procedures to

reflect the lack of postsurgical work in

the shortened global period. We propose

to reduce the work RVUs for CPT codes

47490, 47510, 47511, and 47630 by 17

percent if we change the global periods.

The 17 percent figure was taken from

the original data developed by the

Harvard School of Public Health

Resource-Based Relative Value Study as

the measure of the postsurgical work

associated with these codes. This

proposed policy change is not explicitly

addressed in our regulations.

III. Collection of Information

Requirements

This document does not impose

information collection and

recordkeeping requirements.

Consequently, it need not be reviewed

by the Office of Management and

Budget under the authority of the

Paperwork Reduction Act of 1995 (44

U.S.C. 3501 et seq.).

IV. 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.

V. Regulatory Impact Analysis

A. Regulatory Flexibility Act

Consistent with the Regulatory

Flexibility Act (5 U.S.C. 601 through

612), we prepare a regulatory flexibility

analysis unless the Secretary certifies

that a rule would not have a significant

economic impact on a substantial

number of small entities. For purposes

of the Regulatory Flexibility Act, all

physicians are considered to be small

entities.

We anticipate that virtually all of the

approximately 500,000 physicians who

furnish covered services to Medicare

beneficiaries would be affected by one

or more provisions of this rule. In

addition, physicians who are paid by

private insurers for non-Medicare

services would be affected to the extent

that they are paid by private insurers

that choose to use the proposed RVUs.

This proposed rule is expected to

have varying effects on the distribution

of Medicare physician payments and

services. With few exceptions, we

expect that the impact would be limited.

Although the proposed rule would not

have a significant economic impact on

a substantial number of small entities,

we are preparing a voluntary regulatory

flexibility analysis.

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

requires that adjustments in a year may

not cause the amount of expenditures

for the year to differ by more than $20

million from the amount of

expenditures that would have been

made if these adjustments had not been

made. If this threshold is exceeded, we

would make adjustments to the

conversion factors to preserve budget

neutrality. The proposals discussed in

sections B through H below would have

no impact on total Medicare

expenditures because the effects of these

changes would be neutralized in the

calculation of the conversion factors for

1997.

B. Payment Area (Locality) and

Corresponding Geographic Practice Cost

Index Changes

As mentioned earlier, our proposal

would reduce existing urban/rural

payment differences. Overall, urban

areas would experience an average

decrease in payments of –0.14 percent,

while rural areas will experience an

increase in payments of 1 percent. We

analyzed the effects of these changes on

physicians by specialty. The changes are

quite small and follow the expected

pattern. We estimate that overall,

physicians in family practice and

general practice will experience modest

increases of about 0.3 percent in

payments, while most medical and

surgical specialties will experience

negligible decreases of about –0.1 to

–0.2 percent. This pattern results from

the tendency of specialists to be

disproportionately concentrated in

urban areas, which are estimated to

experience a slight decrease in

payments under our proposal.

The impact on beneficiaries is

likewise minor. We examined the

impact by beneficiary age, gender, race,

and income level. Roughly 20 percent of

beneficiaries reside in areas in which

payments decrease by less than 5

percent, roughly 50 percent live in areas

that experience no change in payments,

roughly 25 percent live in areas where

payments will increase by less than 5

percent, and about 2 percent live in

areas where payments would rise by 5

to 10 percent.

The distribution of beneficiaries by

age and gender and of Caucasian

beneficiaries are nearly identical to this

overall distribution. Minority

beneficiaries are more heavily

concentrated in areas that experience no

change in payments; a lower proportion

of minority beneficiaries live in both

areas experiencing a loss and areas

experiencing a gain than do Caucasian

beneficiaries. For example, 14.4 percent

of minority beneficiaries live in an area

experiencing a loss compared to 21

percent of all beneficiaries who live in

these areas. Beneficiaries living below

poverty level are less likely than all

beneficiaries to be living in an area

experiencing a payment decrease under

our proposal, 16 percent compared to 21

percent. It does not appear that

vulnerable Medicare groups—

minorities, the very old, or the poor—

would suffer decreases in access

resulting from our proposal.

C. Special Rules for the Payment of

Diagnostic Tests, Including Diagnostic

Radiologic Procedures

Our proposal would require that, to be

covered under Medicare, diagnostic

tests, including diagnostic radiologic

procedures, must be ordered by the

physician who treats a beneficiary or

furnishes a consultation to the

physician who treats the beneficiary.

We would allow an exception for x-rays

that demonstrate subluxation of the

spine that are ordered for a chiropractor.

Under § 410.22(b)(2), no payment can be

made to a chiropractor who orders

diagnostic tests. We propose to allow

payment for these x-rays when ordered

by a physician who will not be treating

the patient for subluxation of the spine.
34626 Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules

Non-physician practitioners functioning

within the specific benefit would be

considered the physician treating the

beneficiary for the purpose of the

proposal. Putting this requirement in

regulations (§ 410.31 ‘‘Diagnostic x-ray

tests, diagnostic laboratory tests, and

other diagnostic tests: Conditions’’)

would codify our current manual

instruction. This proposed policy may

result in some program savings due to

the denial of payment for tests that may

not be medically necessary because they

were ordered by a physician who was

not treating the beneficiary. However,

we do not have sufficient data to furnish

any reliable estimates of savings.

D. Transportation in Connection with

Furnishing Diagnostic Tests

We propose to eliminate payment for

the transportation of EKG equipment

(HCPCS code R0076) by all billers. In

1994, the last year for which we have

complete data, we allowed 260,686

services and paid $9,192,434. Therefore,

were it not for our budget-neutrality

adjustment, we estimate that this

proposal would result in approximately

a $9.2 million reduction in Medicare

payments.

E. Bundled Services

1. Hot or Cold Packs

We propose to change the status

indicator for CPT code 97010

(Application of a modality to one or

more areas; hot or cold packs) to ‘‘B’’ to

indicate that the service is covered

under Medicare but payment for it is

bundled into payment for other services.

Separate payment for CPT code 97010

will not be permitted under this

proposed change. The annual

expenditures for CPT code 97010 under

our current policy are approximately

$41.2 million. Because the RVUs for this

procedure will be redistributed across

all physician fee schedule services in a

budget neutral manner, there will be no

measurable impact from this proposal.

2. Dermatology Procedures

a. Bundling of Repair Codes into

Excision Codes We propose to cease

paying separately for CPT codes 12031

through 12057 and 13100 through 13152

(intermediate and complex repair codes,

respectively) if these codes are billed in

conjunction with CPT codes 11400

through 11446 and 11600 through 11646

(dermatology excision codes for benign

and malignant lesions, respectively).

Because we would redistribute the

RVUs for the repair codes across the

excision codes, there would be little

budgetary effect from this proposal.

b. Skin Lesion Destruction Codes

We propose to change the way

Medicare pays for the destruction of

benign or premalignant skin lesions.

Currently there are several CPT codes

that describe a variety of ways of

reporting the destruction of skin lesions.

We propose to assign a ‘‘G’’ status code

to CPT codes 11050 through 11052,

11200 and 11201, 17000 through 17105,

17110, and 17200 and 17201 and create

two HCPCS codes to report the

destruction of skin lesions. Because we

will use a weighted average of the

current RVUs assigned to the CPT codes

that describe the destruction of benign

or premalignant skin lesions in valuing

the two proposed codes, this proposal

would have no significant impact on

Medicare expenditures.

F. Change of Coverage Status for

Screening and Obsolete Procedures

1. Vital Capacity Testing

We propose changing the coverage

status for vital capacity tests (CPT code

94150) from ‘‘active’’ to ‘‘noncovered.’’

These vital capacity tests are screening

services. With limited exceptions,

section 1862(a)(1)(A) of the Act

precludes Medicare coverage for

screening procedures. This code is

infrequently billed; in 1994 only

101,150 services were paid for CPT code

94150 for a total Medicare expenditure

of $1,077,600. We do not believe that

the change in coverage status would

have a significant impact on Medicare

expenditures. We would also budget

neutralize the $1 million across all fee

schedule services.

2. Certain Cardiovascular Procedures

We propose changing the coverage

status for certain cardiovascular

procedures (CPT codes 93201, 93202,

93204, 93205, 93208, 93209, 93210,

93220, 93221, and 93222) to

noncovered. Because there has been a

decline in the billing of these services

in recent years and in 1994, we only

allowed a total of 17,925 services with

$690,326 in allowed charges for all 10

diagnostic tests, we do not believe that

the change in coverage status would

have a significant impact on Medicare

expenditures.

G. Payments for Supervising Physicians

in Teaching Settings

This proposed rule would make a

technical change to § 415.152

(‘‘Definitions’’) to make the definition of

an approved graduate medical

education program consistent with the

definition in § 413.86(b) (‘‘Direct

graduate medical education payments’’).

Because this is only a technical change

to standardize almost identical

definitions, it would have no budgetary

impact on Medicare expenditures.

We propose a technical change to

remove the word ‘‘gender’’ from

§ 415.174(a)(4)(iii) (‘‘Exception:

Evaluation and management services

furnished in certain centers’’). We did

not include the reference to gender with

the intention of excluding obstetric and

gynecological or other women’s care

residency programs solely because of

patient gender. This technical change

would make clear that the exception

criteria would not be applied in such a

manner. Because this technical change

merely clarifies our intent with respect

to a policy that has not yet been

implemented, there would be no

budgetary effect.

H. Change in Global Period for Four

Percutaneous Biliary Procedures

To implement our proposal to change

the global periods for four percutaneous

biliary procedures (CPT codes 47490,

47510, 47511, and 47630) from 90 days

to 0 days, we are proposing to reduce

the work RVUs for these procedures by

17 percent. These work RVUs will be

redistributed across all services;

therefore, there is no significant impact.

I. Rural Hospital Impact Statement

Section 1102(b) of the Act requires the

Secretary to prepare a regulatory impact

analysis if a rule 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 Regulatory

Flexibility Act. For purposes of section

1102(b) of the Act, we define a small

rural hospital as a hospital that is

located outside of a Metropolitan

Statistical Area and has fewer than 50

beds.

This proposed rule would have little

direct effect on payments to rural

hospitals since this rule would change

only payments made to physicians and

certain other practitioners under Part B

of the Medicare program and would
Federal Register / Vol. 61, No. 128 / Tuesday, July 2, 1996 / Proposed Rules 34627

make no change in payments to

hospitals under Part A. We do not

believe the changes would have a major,

indirect effect on rural hospitals.

Therefore, we are not preparing an

analysis for section 1102(b) of the Act

since we have determined, and the

Secretary certifies, that this rule would

not have a significant impact on the

operations of a substantial number of

small rural hospitals.

In accordance with the provisions of

Executive Order 12866, this proposed

rule was reviewed by OMB.

List of Subjects

42 CFR Part 410

Health facilities, Health professions,

Kidney diseases, Laboratories,

Medicare, Rural areas, X-rays.

42 CFR Part 415

Health facilities, Health professions,

Medicare, and Reporting and

recordkeeping requirements.

42 CFR chapter IV would be amended

as set forth below:

PART 410—SUPPLEMENTARY

MEDICAL INSURANCE (SMI)

BENEFITS

A. Part 410 is amended as set forth

below:

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), unless otherwise indicated.

2. In § 410.32 paragraphs (a) and (b)

are redesignated as paragraphs (b) and

(c), respectively, and a new paragraph

(a) is added to read as follows:

§ 410.32 Diagnostic x-ray tests, diagnostic

laboratory tests, and other diagnostic tests:

Conditions.

(a) Ordering diagnostic tests. All

diagnostic x-ray tests, diagnostic

laboratory tests, and other diagnostic

tests must be ordered by the physician

who treats the beneficiary, that is, the

physician who is actively furnishing a

consultation or treating a beneficiary for

a specific medical problem(s) and uses

the results in the management of the

beneficiary’s specific medical

problem(s). Physicians who order the xray used by a chiropractor to

demonstrate the subluxation of the

spine in a beneficiary who is receiving

manual manipulation treatments are

exempted from this requirement. Nonphysician practitioners (physician

assistants, nurse practitioners, and

clinical nurse specialists) who provide

services that would be physician

services if furnished by a physician and

who are operating within the scope of

their statutory benefit are considered the

physician treating the beneficiary for the

purpose of this section.

* * * * *

PART 415—SERVICES FURNISHED BY

PHYSICIANS IN PROVIDERS,

SUPERVISING PHYSICIANS IN

TEACHING SETTINGS, AND

RESIDENTS IN CERTAIN SETTINGS

B. Part 415 is amended as set forth

below:

1. The authority citation for part 415

continues to read as follows:

Authority: Secs. 1102 and 1871 of the

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

1395hh).

2. In § 415.152 the introductory text is

republished, and the definition of

‘‘approved graduate medical education

(GME) program’’ is revised to read as

follows:

§ 415.152 Definitions.

As used in this subpart—

Approved graduate medical

education (GME) program means one of

the following:

(1) A residency program approved by

the Accreditation Council for Graduate

Medical Education of the American

Medical Association, by the Committee

on Hospitals of the Bureau of

Professional Education of the American

Osteopathic Association, by the Council

on Dental Education of the American

Dental Association, or by the Council on

Podiatric Medicine Education of the

American Podiatric Medical

Association.

(2) A program otherwise recognized as

an ‘‘approved medical residency

program’’ under § 413.86(b) of this

chapter.

* * * * *

§ 415.174 [Amended]

3. In § 415.174, in paragraph (a)(4)(iii),

the phrase ‘‘system, diagnosis, or

gender’’ is removed, and the phrase

‘‘system or diagnosis’’ is added in its

place.

(Catalog of Federal Domestic Assistance

Program No. 93.774, Medicare—

Supplementary Medical Insurance Program)

Dated: June 21, 1996.

Bruce C. Vladeck,

Administrator, Health Care Financing

Administration.

Dated: June 21, 1996.

Donna E. Shalala,

Secretary.

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[FR Doc. 96–16744 Filed 6–27–96; 9:43 am]

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