[Federal Register Volume 75, Number 228 (Monday, November 29, 2010)]
[Rules and Regulations]
[Pages 73170-73860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27969]



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Part II





Department of Health and Human Services





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Center for Medicare & Medicaid Services



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42 CFR Parts 405, 409, 410 et al.



Medicare Program; Payment Policies Under the Physician Fee Schedule and 
Other Revisions to Part B for CY 2011; Final Rule

Federal Register / Vol. 75, No. 228 / Monday, November 29, 2010 / 
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 409, 410, 411, 413, 414, 415, and 424

[CMS-1503-FC]
RIN 0938-AP79


Medicare Program; Payment Policies Under the Physician Fee 
Schedule and Other Revisions to Part B for CY 2011

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule with comment period.

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SUMMARY: This final rule with comment period addresses changes to the 
physician fee schedule and other Medicare Part B payment policies to 
ensure that our payment systems are updated to reflect changes in 
medical practice and the relative value of services. It finalizes the 
calendar year (CY) 2010 interim relative value units (RVUs) and issues 
interim RVUs for new and revised procedure codes for CY 2011. It also 
addresses, implements, or discusses certain provisions of both the 
Affordable Care Act (ACA) and the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA). In addition, this final rule with 
comment period discusses payments under the Ambulance Fee Schedule 
(AFS), the Ambulatory Surgical Center (ASC) payment system, and the 
Clinical Laboratory Fee Schedule (CLFS), payments to end-stage renal 
disease (ESRD) facilities, and payments for Part B drugs. Finally, this 
final rule with comment period also includes a discussion regarding the 
Chiropractic Services Demonstration program, the Competitive Bidding 
Program for durable medical equipment, prosthetics, orthotics, and 
supplies (CBP DMEPOS), and provider and supplier enrollment issues 
associated with air ambulances.

DATES: Effective date: These regulations are effective on January 1, 
2011. Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on January 3, 2011.

ADDRESSES: In commenting, please refer to file code CMS-1503-FC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions for 
``submitting a comment.''
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1503-FC, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1503-FC, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses: a. For delivery in Washington, 
DC--Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue, SW., Washington, DC 20201
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.

FOR FURTHER INFORMATION CONTACT:

Sara Vitolo, (410) 786-5714, for issues related to malpractice RVUs.
Erin Smith, (410) 786-0763, for issues related to end-stage renal 
disease-related services for home dialysis.
Michael Moore, (410) 786-6830, for issues related to geographic 
practice cost indices.
Ken Marsalek, (410) 786-4502, for issues related to the physician 
practice information survey, the multiple procedure payment reduction, 
and payment for the technical component of pathology services.
Regina Walker-Wren, (410) 786-9160, for issues related to outpatient 
mental health add-on provision and increased payment for certified 
nurse-midwife services.
Elizabeth Truong, (410) 786-6005, or Sara Vitolo, (410) 786-5714, for 
issues related to potentially misvalued services.
Elizabeth Truong, (410) 786-6005, for issues related to the sustainable 
growth rate or anesthesia or physician fee schedule conversion factors.
Dorothy Shannon, (410) 786-3396, for issues related to outpatient 
therapy services.
Pamela West, (410) 786-2302, for issues related to payment for diabetes 
self-management training programs and kidney disease education 
services.
Ryan Howe, (410) 786-3355, for issues related to direct practice 
expense inputs and telehealth services.
Sara Vitolo, (410) 786-5714, for issues related to pulmonary 
rehabilitation services, application of skin substitutes, canalith 
repositioning, intranasal/oral immunization, and the refinement panel.
Roberta Epps, (410) 786-4503, for issues related to portable x-ray and 
bone density tests.
Chava Sheffield, (410) 786-2298, for issues related to equipment 
utilization rate assumption for advanced imaging services.
Chava Sheffield, (410) 786-2298, or Larry Chan, (410) 786-6864, for 
issues related the physician fee schedule practice expense methodology.
Stephanie Frilling, (410) 786-4507, or Erin Smith, (410) 786-0763, for 
issues related to the incentive payment programs for primary care and 
general surgery services, and payment for the annual wellness visit and 
preventive services.
Cheryl Gilbreath, (410) 786-5919, for issues related to payment for 
covered outpatient drugs and biologicals.
Roechel Kujawa, (410) 786-9111, for issues related to ambulance 
services.
Glenn McGuirk, (410) 786-5723, for clinical laboratory issues.
Randall Ricktor, (410) 786-4632, for Federally Qualified Health Center 
Issues.
Pauline Lapin, (410) 786-6883, for issues related to the chiropractic 
services demonstration BN issue.
Troy Barsky, (410) 786-8873, or Kristin Bohl, (410) 786-8680, for 
issues related to physician self-referral.

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Troy Barsky, (410) 786-8873, or Fred Grabau (410) 786-0206, for issues 
related to timely filing rules.
Henry Richter, (410) 786-4562, or Lisa Hubbard, (410) 786-5472, for 
issues related to renal dialysis provisions and payments for end-stage 
renal disease facilities.
Diane Stern, (410) 786-1133, for issues related to the physician 
quality reporting initiative and incentives for e-prescribing.
Sheila Roman, (410) 786-6004, or Pamela Cheetham, 410-786-2259, for 
issues related to the Physician Resource Use Feedback Program and 
value-based purchasing.
Joel Kaiser, (410) 786-4499, for issues related to the DME provisions.
Sandra Bastinelli, (410) 786-3630, for issues related to provider and 
supplier enrollment issues.
Rebecca Cole, (410) 786-4497, for issues related to physician payment 
not identified above.

SUPPLEMENTARY INFORMATION: Comment Subject Areas: We will consider 
comments on the following subject areas discussed in this final rule 
with comment period that are received by the date and time indicated in 
the DATES section of this final rule with comment period:
    (1) The interim final work, practice expense, and malpractice RVUs 
(including the direct practice expense (PE) inputs and the equipment 
utilization rate assumption, and the applicability of a multiple 
procedure payment reduction (MPPR)), for new and revised CY 2011 HCPCS 
codes. These codes and their CY 2011 interim final RVUs are listed in 
Addendum C to this final rule with comment period.
    (2) The physician self-referral designated health services codes 
listed in Tables 98 and 99.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Table of Contents

    To assist readers in referencing sections contained in this 
preamble, we are providing a 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 
(CFR). Information on the regulations impact appears throughout the 
preamble and, therefore, is not discussed exclusively in section XI. of 
this final rule with comment period.
I. Background
    A. Development of the Relative Value System
    1. Work RVUs
    2. Practice Expense Relative Value Units (PE RVUs)
    3. Resource-Based Malpractice (MP) RVUs
    4. Refinements to the RVUs
    5. Adjustments to RVUs Are Budget Neutral
    B. Components of the Fee Schedule Payment Amounts
    C. Most Recent Changes to Fee Schedule
    D. Public Comments Received in Response to the CY 2011 PFS 
Proposed Rule
II. Provisions of the Final Rule for the Physician Fee Schedule
    A. Resource-Based Practice Expense (PE) Relative Value Units 
(RVUs)
    1. Overview
    2. Practice Expense Methodology
    a. Direct Practice Expense
    b. Indirect Practice Expense per Hour Data
    c. Allocation of PE to Services
    (i) Direct costs
    (ii) Indirect costs
    d. Facility and Nonfacility Costs
    e. Services with Technical Components (TCs) and Professional 
Components (PCs)
    f. Alternative Data Sources and Public Comments on Final Rule 
for 2010
    g. PE RVU Methodology
    (1) Setup File
    (2) Calculate the Direct Cost PE RVUs
    (3) Create the Indirect Cost PE RVUs
    (4) Calculate the Final PE RVUs
    (5) Setup File Information
    (6) Equipment Cost per Minute
    3. PE Revisions for CY 2011
    a. Equipment Utilization Rate
    b. HCPCS Code-Specific PE Issues
    (1) Biohazard Bags
    (2) PE Inputs for Professional Component (PC) Only and Technical 
Component (TC) Only Codes Summing to Global Only Codes
    (3) Equipment Time Inputs for Certain Diagnostic Tests
    (4) Cobalt-57 Flood Source
    (5) Venom Immunotherapy
    (6) Equipment Redundancy
    (7) Equipment Duplication
    (8) Establishing Overall Direct PE Supply Price Inputs Based on 
Unit Prices and Quantities
    c. AMA RUC Recommendations in CY 2010 for Changes to Direct PE 
Inputs
    (1) Electrogastrography and Esophageal Function Test
    (2) 64-Slice CT Scanner and Software
    (3) Breath Hydrogen Test
    (4) Radiographic Fluoroscopic Room
    (5) Cystometrogram
    d. Referral of Existing CPT Codes for AMA RUC Review
    e. Updating Equipment and Supply Price Inputs for Existing Codes
    f. Other Issues
    B. Malpractice Relative Value Units (RVUs)
    1. Background
    2. Malpractice RVUs for New and Revised Services Effective 
Before the Next 5-Year Review
    3. Revised Malpractice RVUs for Selected Disc Arthroplasty 
Services
    C. Potentially Misvalued Services Under the Physician Fee 
Schedule
    1. Valuing Services Under the PFS
    2. Identifying, Reviewing, and Validating the RVUs of 
Potentially Misvalued Services Under the PFS
    a. Background
    b. Progress in Identifying and Reviewing Potentially Misvalued 
Codes
    c. Validating RVUs of Potentially Misvalued Codes
    3. CY 2011 Identification and Review of Potentially Misvalued 
Services
    a. Codes on the Multispecialty Points of Comparison List
    b. Codes with Low Work RVUs Commonly Billed in Multiple Units 
Per Single Encounter
    c. Codes with High Volume and Low Work RVUs
    d. Codes with Site-of-Service-Anomalies
    e. Codes with ``23-hour'' Stays
    4. Expanding the Multiple Procedure Payment Reduction (MPPR) 
Policy to Additional Nonsurgical Services
    a. Background
    b. CY 2011 Expansion of the Imaging Technical Component MPPR 
Policy to Additional Combinations of Imaging Services
    c. CY 2011 Expansion of the MPPR Policy to Therapy Services
    5. High Cost Supplies
    a. Background
    b. Future Updates to the Prices of High-Cost Supplies
    D. Geographic Practice Cost Indices (GPCIs)
    1. Background
    2. GPCI Update
    a. Physician Work GPCIs
    b. Practice Expense GPCIs
    (1) The Affordable Care Act Requirements for PE GPCIs
    (A) General Methodology for the CY 2011 GPCIs
    (B) Phase-In of PE GPCIs
    (C) Data Analysis
    (D) Determining the PE GPCI Cost Share Weights
    (E) PE GPCI Floor for Frontier States
    (2) Summary of CY 2011 PE GPCIs
    c. Malpractice GPCIs
    d. Public Comments and CMS Responses on the Proposed 6th GPCI 
Update
    e. Summary of Final CY 2011 GPCIs

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    3. Payment Localities
    E. PFS Update for CY 2010: Rebasing and Revising of the Medicare 
Economic Index (MEI)
    1. Background
    2. Use of More Current Data
    3. Rebasing and Revising Expense Categories in the MEI
    a. Developing the Weights for Use in the MEI
    b. Physician's Own Time
    c. Physician's Practice Expenses
    (1) Nonphysician Employee Compensation
    (2) Office Expenses
    (3) Professional Liability Insurance (PLI) Expense
    (4) Medical Equipment Expenses
    (5) Medical Supplies Expenses
    (6) Other Professional Expenses
    4. Selection of Price Proxies for Use in the MEI
    a. Cost (Expense) Categories in the MEI
    (1) Physician's Own Time (Physician Compensation)
    (2) Nonphysician Employee Compensation
    (3) Utilities
    (4) Chemicals
    (5) Paper
    (6) Rubber and Plastics
    (7) Telephone
    (8) Postage
    (9) All Other Services
    (10) All Other Products
    (11) Fixed Capital
    (12) Moveable Capital
    (13) Professional Liability Insurance (PLI)
    (14) Medical Equipment
    (15) Medical Materials and Supplies
    (16) Other Professional Expenses
    (b) Productivity Adjustment to the MEI
    5. Results of Rebasing
    6. Medicare Economic Index Technical Advisory Panel
    7. Summaries of Comments and the Associated Responses
    a. Timing of Rebasing and Revising the MEI
    b. PPIS Data
    c. Office Expenses
    d. Purpose of the MEI
    e. Technical Panel
    f. Other
    8. Adjustments to the RVU Shares To Match the Proposed Rebased 
MEI Weights
    F. Allowed Expenditures for Physicians' Services and the 
Sustainable Growth Rate
    1. Medicare Sustainable Growth Rate
    2. Physicians' Services
    3. Preliminary Estimate of the SGR for 2011
    4. Revised Sustainable Growth Rate for 2010
    5. Final Sustainable Growth Rate for 2009
    6. Calculation of 2011, 2010, and 2009 Sustainable Growth Rates
    a. Detail on the CY 2011 SGR
    (1) Factor 1 Changes in Fees for Physicians' Services (Before 
Applying Legislative Adjustments) for CY 2011
    (2) Factor 2 The Percentage Change in the Average Number of Part 
B Enrollees From CY 2010 to CY 2011
    (3) Factor 3 Estimated Real Gross Domestic Product Per Capita 
Growth in 2011
    (4) Factor 4 Percentage Change in Expenditures for Physicians' 
Services Resulting From Changes in Statute or Regulations in CY 2011 
Compared With CY 2010
    b. Detail on the CY 2010 SGR
    (1) Factor 1 Changes in Fees for Physicians' Services (Before 
Applying Legislative Adjustments) for 2010
    (2) Factor 2 The Percentage Change in the Average Number of Part 
B Enrollees from CY 2009 to CY 2010
    (3) Factor 3 Estimated Real Gross Domestic Product Per Capita 
Growth in CY 2010
    (4) Factor 4 Percentage Change in Expenditures for Physicians' 
Services Resulting From Changes in Statute or Regulations in CY 2010 
Compared With CY 2009
    c. Detail on the CY 2009 SGR
    (1) Factor 1 Changes in Fees for Physicians' Services (Before 
Applying Legislative Adjustments) for 2009
    (2) Factor 2 The Percentage Change in the Average Number of Part 
B Enrollees from CY 2008 to CY 2009
    (3) Factor 3 Estimated Real Gross Domestic Product Per Capita 
Growth in CY 2009
    (4) Factor 4 Percentage Change in Expenditures for Physicians' 
Services Resulting From Changes in Statute or Regulations in CY 2009 
Compared With CY 2008
    G. The Update Adjustment Factor (UAF)
    1. Calculation under Current Law
    H. Physician and Anesthesia Fee Schedule Conversion Factors for 
CY 2011
    1. Physician Fee Schedule Update and Conversion Factor
    a. CY 2011 PFS Update
    b. CY 2011 PFS Conversion Factor
    2. Anesthesia Conversion Factor
III. Code-Specific Issues for the PFS
    A. Therapy Services
    1. Outpatient Therapy Caps for CY 2011
    2. Alternatives to Therapy Caps
    a. Background
    b. Current Activities
    c. Potential Short-Term Approaches to Therapy Caps
    B. Diabetes Self-Management Training (DSMT) Services (HCPCS 
Codes G0108 and G0109)
    1. Background
    2. Payment for DSMT Services
    C. End-Stage Renal Disease Related Services for Home Dialysis 
(CPT code 90963, 90964, 90965, and 90966)
    1. End-Stage Renal Disease Home Dialysis Monthly Capitation 
Payment Services (CPT codes 90963, 90964, 90965, and 90966)
    2. Daily and Monthly ESRD-Related Services (CPT Codes 90951 
through 90970)
    D. Portable X-Ray Set-Up (HCPCS code Q0092)
    E. Pulmonary Rehabilitation Services (HCPCS Code G0424)
    F. Application of Tissue Cultured Skin Substitutes to Lower 
Extremities (HCPCS Codes G0440 and G0441)
    G. Canalith Repositioning (CPT code 95992)
    H. Intranasal/Oral Immunization Codes (CPT codes 90467, 90468, 
90473, and 90474)
    I. Refinement Panel Process
    J. Remote Cardiac Monitoring Services (CPT codes 93012, 93229, 
93268, and 93271)
IV. Medicare Telehealth Services for the Physician Fee Schedule
    A. Billing and Payment for Telehealth Services
    1. History
    2. Current Telehealth Billing and Payment Policies
    B. Requests for Adding Services to the List of Medicare 
Telehealth Services
    C. Submitted Requests for Addition to the List of Telehealth 
Services for CY 2011
    1. Individual KDE Services
    2. Individual DSMT Services
    3. Group KDE, MNT, DSMT, and HBAI Services
    4. Initial, Subsequent, and Discharge Day Management Hospital 
Care Services
    5. Initial, Subsequent, Discharge Day Management, and Other 
Nursing Facility Care Services
    6. Neuropsychological Testing Services
    7. Speech-Language Pathology Services
    8. Home Wound Care Services
    9. Other Issues
    D. Summary of CY 2011 Telehealth Policies
    E. Telehealth Originating Site Facility Fee Payment Amount 
Update
V. Addressing Interim Final Relative Value Units from CY 2010 and 
Establishing Interim Relative Value Units for CY 2011
    A. Background
    B. Addressing Interim Final RVUs from CY 2010
    1. CY 2010 Interim Final Work RVUs Referred to the Refinement 
Panel
    2. CY 2010 Interim Final RVUs for which Public Comments Were 
Received
    a. Insertion of Breast Prosthesis (CPT code 19340)
    b. Computed Tomographic Colonography (CPT code 74261)
    c. Myocardial Perfusion Imaging (CPT codes 78451, 78452, 78453, 
and 78454)
    d. Nerve Conduction Test (CPT code 95905)
    e. Kidney Disease Education Services (HCPCS codes G0420 and 
G0421)
    f. Excision of Soft Tissue and Bone Tumors (CPT codes 21011 
through 21016, 21552, 21554 through 21558, 21930 through 21933, 
21395, 21936, 22900 through 22905, 23071, 23073, 23075 through 
23078, 23200, 23210, 23220, 24071, 24073, 24075 through 24077, 
24079, 24150 through 24153, 25071, 25073, 25075 through 25078, 
25170, 26111, 26113, 26115 through 26118, 26250, 26255, 26260, 
26262, 27043, 27045, 27047 through 27049, 27059, 27075 through 
27078, 27327 through 27329, 27337, 27339, 27364, 27365, 27615, 
27616, 27618, 27619, 27632, 27634, 27619, 27645 through 27647, 
28039, 28041, 28043, 28045 through 28047, 28171, 28173, and 28175)
    g. Cryoablation of Prostate (CPT code 55873)
    h. Urodynamics Studies (CPT Codes 51728 and 51729)
    i. Coronary Computed Tomographic Angiography (CPT codes 75571, 
75572, 75573, and 75574)

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    j. Adjacent Tissue Transfer or Rearrangement (CPT codes 14301 
and 14302)
    k. Insertion of a Temporary Prostatic Urethral Stent (CPT code 
53855)
    l. High Dose Rate Brachytherapy (CPT codes 77785, 77786, and 
77787)
    m. Injection of Facet Joint (CPT codes 64490, 64491, 64492, 
64493, 64494, and 64495)
    n. Knee Arthroscopy (CPT code 29870)
    3. Status of Interim Final Work RVUs for Potentially Misvalued 
Site-of-Service Anomaly Codes from CY 2009 and CY 2010
    4. Other New, Revised, or Potentially Misvalued Codes with CY 
2010 Interim Final RVUs Not Specifically Discussed in the CY 2011 
Final Rule with Comment Period
    C. Establishment of Interim Final RVUs for CY 2011
    1. Establishment of Interim Final Work RVUs for CY 2011
    a. Background
    b. CY 2011 Interim Final Work RVUs for New and Revised Codes
    (i) CY 2011 New and Revised Codes that Do Not Represent Major 
New Comprehensive Services
    (1) Excision and Debridement (CPT codes 11010, 11011, 11012, 
11042, 11043, 11044, 11045, 11046, 11047, and 97598)
    (2) Arthrodesis Including Discectomy (CPT code 22551)
    (3) Strapping Lower Extremity (CPT codes 29540 and 29550)
    (4) Paraesophageal Hernia Procedures (CPT codes 43333 and 43335)
    (5) Vaginal Radiation Afterloading Apparatus for Clinical 
Brachytherapy (CPT codes 57155 and 57156)
    (6) Vagus Nerve Stimulator (CPT codes 61885, 64568, 64569, and 
64570)
    (7) Ultrasound of Extremity (CPT codes 76881 and 76882)
    (8) Evaluation of Fine Needle Aspirate (CPT code 88172)
    (9) Immunization Administration (CPT code 90460 and 90461)
    (10) Diabetic Retinopathy Imaging (CPT code 92228)
    (11) Speech-Language Pathology Services (CPT codes 92508 and 
92606)
    (12) Sleep Testing (CPT codes 95806 and 95807)
    (13) Subsequent Hospital Observation Care
    (ii) Comprehensive Codes for a Bundle of Existing Component 
Services
    (iii) Work Budget Neutrality for Clinical Categories of CPT 
Codes
    c. CY 2011 Interim Final Work RVUs for Potentially Misvalued 
Codes
    (1) Excision and Debridement (CPT codes 11043 and 11044)
    (2) Strapping Lower Extremity (CPT code 29540)
    (3) Control Nasal Hemorrhage (CPT code 30901)
    (4) Cystourethroscopy (CPT codes 52281 and 52332)
    (5) Vaginal Radiation Afterloading Apparatus for Clinical 
Brachytherapy (CPT code 51755)
    (6) Obstetrical Care Codes (CPT codes 59440, 59410, 59510, 
59515, 59610, 59614, 59618, and 59622)
    (7) Vagus Nerve Stimulator (CPT code 61885)
    (8) Transforaminal Epidural Injection (CPT code 64483)
    (9) CT Thorax (CPT code 71250)
    (10) CT Spine (CPT code 72125)
    (11) CT Upper and CT Lower Extremity (CPT code 73200 and 73700)
    (12) Radiation Treatment Management (CPT code 77427)
    2. Establishment of Interim Final Direct PE Inputs for CY 2011
    a. Background
    b. CY 2011 Interim Final Direct PE Inputs for New, Revised, and 
Potentially Misvalued Codes
    (1) General Equipment Time
    (2) Equipment Time and Clinical Labor for Conscious Sedation
    (3) Equipment Time for Add-On Codes
    (4) Changes in Standard Uses of Certain Supplies
    (5) New Supply and Equipment Items
    (6) Endovascular Revascularization Stents
    (7) Nasal/Sinus Endoscopy Supply and Equipment Items
    3. Establishment of Interim Final Malpractice RVUs for CY 2011
VI. Provisions of the Affordable Care Act
    A. Section 3002: Improvements to the Physician Quality Reporting 
System
    B. Section 3003: Improvements to the Physician Feedback Program 
and Section 3007: Value-based payment modifier under the physician 
fee schedule
    1. Background
    2. Effect of the ACA of 2010 on the Program
    3. Phase II Proposed Changes
    4. Implementation of Sections 3003 and 3007 of ACA
    5. Comments Sought on Specific Statistical Issues Related to ACA 
Sections 3003 and 3007
    a. Risk Adjustment
    b. Attribution
    c. Benchmarking and Peer Groups
    d. Cost and Quality Measures and Compositing Methods
    C. Section 3102: Extension of the Work Geographic Index Floor 
and Revisions to the Practice Expense Geographic Adjustment under 
the Medicare Physician Fee Schedule, and Protections for Frontier 
States as amended by Section 10324
    D. Section 3103: Extension of Exceptions Process for Medicare 
Therapy Caps
    E. Section 3104: Extension of Payment for Technical Component of 
Certain Physician Pathology Services
    F. Section 3105 and 10311: Extension of Ambulance Add-Ons
    1. Amendment to Section 1834(l)(13) of the Act
    2. Amendment to Section 146(b)(1) of MIPAA
    3. Amendment to Section 1834(l)(12) of the Act
    G. Section 3107: Extension of Physician Fee Schedule Mental 
Health Add-On
    H. Section 3108: Permitting Physician Assistants to Order Post-
Hospital Extended Care Services
    I. Section 3111: Payment for Bone Density Tests
    J. Section 3114: Improved Access for Certified Nurse-Midwife 
Services
    K. Section 3122: Extension of Medicare Reasonable Costs Payments 
for Certain Clinical Diagnostic Laboratory Tests Furnished to 
Hospital Patients in Certain Rural Areas
    L. Section 3134: Misvalued Codes Under the Physician Fee 
Schedule
    M. Section 3135: Modification of Equipment Utilization Factor 
for Advanced Imaging Services
    1. Adjustment in Practice Expense to Reflect Higher Presumed 
Utilization
    2. Adjustment in Technical Component ``Discount'' on Single-
Session Imaging to Consecutive Body Parts
    N. Section 3136: Revision for Payment for Power-Driven 
Wheelchairs
    1. Payment Rules for Power Wheelchairs
    2. Revision of Payment Amounts for Power Wheelchairs
    3. Elimination of Lump Sum Payment for Standard Power 
Wheelchairs
    O. Section 3139: Payment for Biosimilar Biological Products
    P. Section 3401: Revision of Certain Market Basket Updates and 
Incorporation of Productivity Improvements into Market Basket 
Updates That Do Not Already Incorporate Such Improvements
    1. ESRD Market Basket Discussion
    2. Productivity Adjustment regarding Ambulatory Surgical Center, 
Ambulance, Clinical Laboratory and DMEPOS Fee Schedules
    a. Ambulatory Surgery Centers (ASCs)
    b. Ambulance Fee Schedule (AFS)
    c. Clinical Lab Fee Schedule
    d. DMEPOS Fee Schedule
    Q. Section 4103: Medicare Coverage of Annual Wellness Visit 
Providing a Personalized Prevention Plan
    1. Background and Statutory Authority
    a. Medicare Coverage of Preventive Physical Examinations and 
Routine Checkups
    b. Requirements for Coverage of an Annual Wellness Visit
    2. Regulatory Revisions--Summary of Proposed Rule and Comments
    a. Revisions to Sec.  411.15, Particular Services Excluded from 
Coverage
    b. Revisions to Part 410, Subpart B--Medical and Other Health 
Services
    (1) Definitions
    (2) Requirements of the First Annual Wellness Visit Providing 
Personalized Prevention Plan Services
    (3) Requirements of Subsequent Annual Wellness Visits Providing 
Personalized Prevention Plan Services
    3. Payment for the Annual Wellness Visit Providing Personalized 
Prevention Plan Services (PPPS)
    R. Section 4104: Removal of Barriers to Preventive Services in 
Medicare
    1. Definition of ``Preventive Services''
    2. Deductible and Coinsurance for Preventive Services
    3. Extension of Waiver of Deductible to Services Furnished in 
Connection With or in Relation to a Colorectal Cancer Screening Test 
that Becomes Diagnostic or Therapeutic

[[Page 73174]]

    S. Section 5501: Expanding Access to Primary Care Services and 
General Surgery Services
    1. Section 5501(a): Incentive Payment Program for Primary Care 
Services
    a. Background
    b. Primary Care Incentive Payment Program (PCIP)
    (1) Primary Specialty Designation
    (2) Primary Care Percentage Calculation
    (3) Period of Claims Data for Primary Care Percentage 
Calculation
    (4) PCIP Payment
    (5) Summary of Final PCIP Policies
    2. Section 5501(b): Incentive Payment Program for Major Surgical 
Procedures Furnished in Health Professional Shortage Areas
    a. Background
    b. HPSA Surgical Incentive Payment Program (HSIP)
    3. Sections 5501(a) and (b) of the Affordable Care Act and 
Payment for Critical Access Hospital Professional Services Under the 
Optional Method
    T. Section 6003: Disclosure Requirements for In-Office Ancillary 
Services Exception to the Prohibition on Physician Self-Referral for 
Certain Imaging Services
    1. Background
    2. Disclosure Requirement
    a. Services the Trigger the Disclosure Requirement
    b. General Disclosure Requirements
    c. List of Alternate Suppliers
    d. Documentation of Disclosure
    e. Effective Date
    f. Other comments
    U. Section 6404: Maximum Period for Submission of Medicare 
Claims Reduced to Not More than 12 Months
    1. Background
    2. Provisions of ACA
    V. Section 6410 of the Affordable Care Act and Section 154 of 
MIPPA: Adjustments to the Metropolitan Statistical Areas (MSA) for 
Medicare Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies Competitive Acquisition Program
    1. Background
    2. Subdividing Large MSAs under Round 2
    3. Exclusions of Certain Areas after Round 2 and Prior to 2015
    4. Expansion of Round 2
    W. Section 10501(i)(3): Collection of HCPCS data for Development 
and Implementation of a Prospective Payment System for the Medicare 
Federally Qualified Health Center Program
VII. Other Provisions of the Final Rule
    A. Part B Drug Payment: Average Sales Price (ASP) Issues
    1. ``Carry Over'' ASP
    2. Partial Quarter ASP Data
    3. Determining the Payment Amount for Drugs and Biologicals 
Which Include Intentional Overfill
    4. WAMP/AMP
    5. AMP Threshold and Price Substitutions
    6. Out of Scope Comments
    B. Ambulance Fee Schedule: Policy for Reporting Units when 
Billing for Ambulance Fractional Mileage
    1. History of Medicare Ambulance Services
    a. Statutory Coverage of Ambulance Services
    b. Medicare Regulations for Ambulance Services
    2. Mileage Reporting--Summary of the Provisions of the CY 2011 
Proposed Rule
    a. Background and Current Process for Reporting Ambulance 
Mileage
    b. Concerns Regarding the Potential for Inaccuracies in 
Reporting Units and Associated Considerations
    c. Billing of Fractional Units for Mileage
    3. Analysis of and Responses to Public Comments
    a. Basis for Reconsideration of the Ambulance Mileage Reporting 
Requirements
    b. Appropriateness of Fractional Mileage Reporting Policy
    (1) Financial Impact of Fractional Mileage Policy
    c. Administrative Impact
    (2) Technical and Other Considerations
    (A) Ability to Measure Fractional Miles
    (B) Ambulance Provider versus Supplier Billing
    (C) Billing Software
    (D) Enforcement and Compliance
    (E) Air Ambulance
    (F) Miscellaneous Comments
    4. Applicability of the Fractional Billing Policy to Other 
Services
    5. Final Fractional Mileage Billing Policy
    C. Clinical Laboratory Fee Schedule: Signature on Requisition
    D. Discussion of Budget Neutrality for the Chiropractic Services 
Demonstration
    E. Provisions Related to Payment for Renal Dialysis Services 
Furnished by End-Stage Renal Disease (ESRD) Facilities
    (1) Update to the Drug Add-on Adjustment to the Composite Rate
    (2) Estimating Per Patient Growth
    (3) Update to the Drug Add-on Adjustment
    (4) Update to the Geographic Adjustments to the Composite Rate
    (5) Updates to Core-Based Statistical Area (CBSA) Definitions
    (6) Updated Wage Index Values
    (7) Wage index Values for Areas With No Hospital Data
    (8) Reduction to the ESRD Wage Index Floor
    (9) Budget Neutrality Adjustment
    (10) ESRD Wage Index Tables
    F. Issues Related to the Medicare Improvements for Patients and 
Providers Act of 2008 (MIPPA)
    1. Section 131: Physician Payment, Efficiency, and Quality 
Improvements--Physician Quality Reporting System
    a. Program Background and Statutory Authority
    b. Incentive Payments for the 2011 Physician Quality Reporting 
System
    c. 2011 Reporting Periods for Individual Eligible Professionals
    d. 2011 Physician Quality Reporting System Reporting Mechanisms 
for Individual Eligible Professionals
    (1) Final Requirements for Individual Eligible Professionals Who 
Choose the Claims-based Reporting Mechanism
    (2) Final Requirements for Individual Eligible Professionals Who 
Choose the Registry-based Reporting Mechanism
    (3) Final Requirements for Individual Eligible Professionals Who 
Choose the EHR based Reporting Mechanism
    (4) Final Qualification Requirements for Registries
    (5) Final Qualification Requirements for EHR Vendors and Their 
Products
    e. Criteria for Satisfactory Reporting of Individual Quality 
Measures for Individual Eligible Professionals
    f. Criteria for Satisfactory Reporting Measures Groups for 
Individual Eligible Professionals
    g. Reporting Option for Satisfactory Reporting on Quality 
Measures by Group Practices
    (1) Background and Authority
    (2) Definition of ``Group Practice''
    (3) Process for Physician Group Practices to Participate as 
Group Practices and Criteria for Satisfactory Reporting
    A. Group Practice Reporting Option for Physician Group Practices 
with 200 or More NPIs GPRO I
    B. Group Practice Reporting Option for Group Practices of 2-199 
NPIs--GPRO-II
    h. Statutory Requirements and Other Considerations for 2011 
Physician Quality Reporting System Measures
    (1) Statutory Requirements for 2011 Physician Quality Reporting 
System Measures
    (2) Other Considerations for 2011 Physician Quality Reporting 
System Measures
    (3) Summary of Comments and Responses
    i. The Final 2011 Physician Quality Reporting System Quality 
Measures for Individual Eligible Professionals
    (1) 2011 Individual Quality Measures Selected From the 2010 
Physician Quality Reporting System Quality Measures Set Available 
for Claims based Reporting and Registry-based Reporting
    (2) 2011 Individual Quality Measures Selected From the 2010 
Physician Quality Reporting System Quality Measures Set Available 
for Registry-based Reporting Only
    (3) New Individual Quality Measures for 2011
    (4) 2011 Measures Available for EHR-based Reporting
    (5) Measures Proposed for Inclusion in 2011 Measures Groups
    j. 2011 Physician Quality Reporting System Quality Measures for 
Group Practices Selected to Participate in the Group Practice 
Reporting Option (GPRO I)
    k. Public Reporting of Physician Quality Reporting System Data
    l. Other Relevant ACA Provisions
    (1) Section 3002 (b)--Incentive Payment Adjustment for Quality 
Reporting
    (2) Section 3002(c)--Maintenance of Certification Programs and 
Section 10327 Improvements to the Physician Quality Reporting System
    (3) Section 3002(d)--Integration of Physician Quality Reporting 
and EHR Reporting
    (4) Section 3002(e)--Feedback
    (5) Section 3002(f)--Appeals
    2. Section 132: Incentives for Electronic Prescribing (eRx)- The 
Electronic Prescribing Incentive Program

[[Page 73175]]

    a. Program Background and Statutory Authority
    b. The 2011 eRx Incentive
    (1) The 2011 Reporting Period for the eRx Incentive Program
    (2) Criteria for Determination of Successful Electronic 
Prescriber for Eligible Professionals
    (A) Reporting the Electronic Prescribing Measure
    (B) The Reporting Denominator for the Electronic Prescribing 
Measure
    (C) Qualified Electronic Prescribing System--Required 
Functionalities and Part D eRx Standards
    (D) The Reporting Numerator for the Electronic Prescribing 
Measure
    (E) Criteria for Successful Reporting of the Electronic 
Prescribing Measure
    (3) Determination of the 2011 Incentive Payment Amount for 
Individual Eligible Professionals Who Are Successful Electronic 
Prescribers
    (4) Reporting Option for Satisfactory Reporting of the 
Electronic Prescribing Measure by Group Practices
    (A) Definition of ``Group Practice''
    (B) Process for Group Practices to Participate as Group 
Practices and Criteria for Successful Reporting of the Electronic 
Prescribing Measure by Group Practices
    c. The 2012 eRx Payment Adjustment
    (1) The eRx Payment Adjustment Reporting Period
    (2) Criteria for Determining Applicability of the 2012 eRx 
Payment Adjustment to Individual Eligible Professionals
    (3) Criteria for Determining Applicability of the 2012 eRx 
Payment Adjustment to Group Practices
    (4) Significant Hardship Exemption
    d. The 2013 eRx Payment Adjustment
    e. Public Reporting of Names of Successful Electronic 
Prescribers
    G. DMEPOS Provisions
    1. Medicare Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies (DMEPOS) Competitive Bidding Program (CBP)
    a. Legislative and Regulatory History of DMEPOS CBP
    b. Implementation of a National Mail Order DMEPOS Competitive 
Bidding Program (CBP) for Diabetic Testing Supplies
    (1) Future Competitions for Diabetic Testing Supplies
    (2) Definition of Mail Order Item
    (3) Special Rule in Case of Competition for Diabetic Testing 
Strips
    (4) Anti-switching Rule in Case of Competition for Diabetic Test 
Strips
    c. Off-the-Shelf (OTS) Orthotics Exemption
    d. Grandfathering Rules Resulting in Additional Payments to 
Contract Suppliers under the DMEPOS Competitive Bidding Program 
(CBP)
    e. Appeals Process
    (1) Purpose and Definitions: (Sec.  414.402)
    (2) Applicability
    (3) Contract Termination
    (4) Notice of Termination
    (5) Corrective Action Plan
    (6) Right to Request a Hearing by the CBIC Hearing Officer (HO)
    (7) Scheduling of the Hearing
    (8) Burden of Proof
    (9) Role of the Hearing Officer (HO)
    (10) CMS's Final Determination
    (11) Effective Date of the Contract Termination
    (12) Effect of Contract Termination
    2. Changes to Payment Rules for Oxygen and Oxygen Equipment
    a. Background
    b. Furnishing Oxygen Equipment after the 36-Month Rental Period 
(CAP)
    c. Furnishing Oxygen Equipment during the 36-Month Rental Period 
(CAP)
    H. Provider and Supplier Enrollment Issue: Air Ambulance 
Provision
    I. Technical Corrections
    1. Physical Therapy, Occupational Therapy and Speech-language 
Pathology
    2. Scope of Benefits
    J. Physician Self-Referral Prohibition: Annual Update to the 
List of CPT/HCPCS Codes
    1. General
    2. Annual Update to the Code List
    a. Background
    b. Response to Comments
    c. Revisions Effective for 2011
VIII. Waiver of Proposed Rulemaking and Delay in Effective Date
IX. Collection of Information Requirements
    A. ICRs Regarding Diagnostic X-ray Tests, Diagnostic Laboratory 
Tests, and Other Diagnostic Tests: Conditions (Sec.  410.32)
    B. ICRs Regarding General Exceptions to the Referral Prohibition 
Related to Both Ownership/Investment and Compensation (Sec.  
411.355)
    C. ICRs Regarding Appeals Process for Termination of Competitive 
Bidding Contract (Sec.  414.423)
    D. ICRs Regarding Additional Provider and Supplier Requirements 
for Enrolling and Maintaining Active Enrollment status in the 
Medicare Program (Sec.  424.516)
    E. Additional Information Collection Requirements
    1. Part B Drug Payment
    2. Physician Quality Reporting Initiative (PQRI)
    3. Electronic Prescribing (eRx) Incentive Program
X. Response to Comments
XI. Regulatory Impact Analysis
    A. RVU Impacts
    1. Resource Based Work, PE, and Malpractice RVUs
    2. CY 2011 PFS Impact Discussion
    a. Changes in RVUs
    b. Combined Impact
    B. Geographic Practice Cost Indices (GPCIs)
    C. Rebasing and Revising of the MEI
    D. The Affordable Care Act Provisions
    1. Section 3002: Improvements to the Physician Quality Reporting 
System
    2. Sections 3003 and 3007: Improvements to the Physician 
Feedback Program and Value-Based Payment Under the Physician Fee 
Schedule
    2. Section 3103: Extension of Exceptions Process for Medicare 
Therapy Caps
    3. Section 3102: Extension of the Work Geographic Index Floor 
and Revisions to the Practice Expense Geographic Adjustment under 
the Medicare Physician Fee Schedule, and Protections for Frontier 
States as amended by Section 10324
    4. Section 3103: Extension of Exceptions Process for Medicare 
Therapy Caps
    5. Section 3104: Extension of Payment for Technical Component of 
Certain Physician Pathology Services
    6. Sections 3105 and 10311: Extension of Ambulance Add-Ons
    7. Section 3107: Extension of Physician Fee Schedule Mental 
Health Add-On
    8. Section 3108: Permitting Physician Assistants to Order Post-
Hospital Extended Care Services
    9. Section 3111: Payment for Bone Density Tests
    10. Section 3114: Improved Access for Certified Nurse-Midwife 
Services
    11. Section 3122: Extension of Medicare Reasonable Costs 
Payments for Certain Clinical Diagnostic Laboratory Tests Furnished 
to Hospital Patients in Certain Rural Areas
    12. Section 3134: Misvalued Codes Under the PFS
    13. Section 3135: Modification of Equipment Utilization Factor 
For Advanced Imaging Services
    14. Section 3136: Revisions in Payments for Power Wheelchairs
    15. Section 3139: Payment for Biosimilar Biological Products
    16. Section 3401: Revisions of Certain Market Basket Updates and 
Incorporation of Productivity Adjustments
    17. Section 4103: Medicare Coverage of Annual Wellness Visit 
Providing a Personalized Prevention Plan
    18. Section 4104: Removal of Barriers to Preventive Services in 
Medicare
    19. Section 5501: Expanding Access to Primary Care Services and 
General Surgery Services
    20. Section 6003: Disclosure Requirements for In-office 
Ancillary Services Exception to the Prohibition of Physician Self-
referral for Certain Imaging Services
    21. Section 6404: Maximum Period for Submission of Medicare 
Claims Reduced to Not More Than 12 Months
    22. Section 6410 of Patient Accountability and Affordable Care 
Act and Section 154 of MIPPA: Adjustments to the Metropolitan 
Statistical Areas (MSA) for Medicare Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies Competitive Acquisition Program
    23. Section 10501(i)(3): Collection of HCPCS Data for the 
Development and Implementation of a Prospective Payment System for 
the Medicare FQHC Program
    E. Other Provisions of the Proposed Regulation
    1. Part B Drug Payment: ASP Issues
    2. Ambulance Fee Schedule: Proposed Policy for Reporting Units 
when Billing for Ambulance Fractional Mileage
    3. Chiropractic Services Demonstration
    4. Renal Dialysis Services Furnished by ESRD Facilities
    5. Section 131(b) of the MIPPA: Physician Payment, Efficiency, 
and Quality Improvements--Physician Quality Reporting System
    6. Section 132 of the MIPPA: Incentives for Electronic 
Prescribing (eRx)--The eRx Incentive Program

[[Page 73176]]

    7. Durable Medical Equipment-Related Issues
    a. Off-the-Shelf (OTS) Orthotics Exemption
    b. Changes to Payment for Oxygen Equipment
    c. Diabetic Testing Supplies
    d. Metropolitan Statistical Areas
    8. Air Ambulance
    F. Alternatives Considered
    G. Impact on Beneficiaries
    H. Accounting Statement

Regulations Text

Addendum A--Explanation and Use of Addendum B
Addendum B--Relative Value Units and Related Information Used In 
Determining Medicare Payments for CY 2011
Addendum C--Codes With Interim RVUS
Addendum D--Final 2011 Geographic Adjustment Factors (GAFS)
Addendum E--Final 2011****Geographic Practice Cost Indicies (GPCIS) 
By State and Medicare Locality
Addendum F--CY 2011 Diagnostic Imaging Services Subject To The 
Multiple Procedure Payment Reduction
Addendum G--CPT/HCPCS Imaging Codes Defined By Section 5102(B) of 
the DRA
Addendum H--CY 2011 ``Always Therapy'' Services* Subject to the 
Multiple Procedure Payment Reduction
Addendum I--[Reserved]
Addendum J--List of CPT1/HCPCS Codes Used to Define Certain 
Designated Health Service Categories \2\ Under Section 1877 of the 
Social Security Act Effective January 1, 2011
Addendum K--CY 2011 ESRD Wage Index For Urban Areas Based On CBSA 
Labor Market Areas
Addendum L-- CY 2011 Wage Index For Rural Areas Based On CBSA Labor 
Market Areas

Acronyms

    In addition, because of the many organizations and terms to which 
we refer by acronym in this proposed rule, we are listing these 
acronyms and their corresponding terms in alphabetical order below:

AA Anesthesiologist assistant
AACVPR American Association of Cardiovascular and Pulmonary 
Rehabilitation
AANA American Association of Nurse Anesthetists
ABMS American Board of Medical Specialties
ABN Advanced Beneficiary Notice
ACA ``Affordable Care Act''
ACC American College of Cardiology
ACGME Accreditation Council on Graduate Medical Education
ACLS Advanced cardiac life support
ACP American College of Physicians
ACR American College of Radiology
ACS American Community Survey
AED Automated external defibrillator
AFROC Association of Freestanding Radiation Oncology Centers
AFS Ambulance Fee Schedule
AHA American Heart Association
AHFS-DI American Hospital Formulary Service-Drug Information
AHRQ [HHS] Agency for Healthcare Research and Quality
AMA American Medical Association
AMA-DE American Medical Association Drug Evaluations
AACE American Association of Clinical Endocrinologists
AADE American Association of Diabetes Educators
AMP Average manufacturer price
AO Accreditation organization
AOA American Osteopathic Association
APA American Psychological Association
APC Administrative Procedures Act
APTA American Physical Therapy Association
ARRA American Recovery and Reinvestment Act (Pub. L. 111-5)
ASC Ambulatory surgical center
ASP Average sales price
ASRT American Society of Radiologic Technologists
ASTRO American Society for Therapeutic Radiology and Oncology
ATA American Telemedicine Association
AWP Average wholesale price
AWV Annual Wellness Visit
BBA Balanced Budget Act of 1997 (Pub. L. 105-33)
BBRA [Medicare, Medicaid and State Child Health Insurance Program] 
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)
BPM Benefit Policy Manual
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection 
Act of 2000 (Pub. L. 106-554)
BLS Bureau of Labor Statistics
BN Budget neutrality
BPM Benefit Policy Manual
CABG Coronary artery bypass graft
CAD Coronary artery disease
CAH Critical access hospital
CAHEA Committee on Allied Health Education and Accreditation
CAP Competitive acquisition program
CARE Continuity Assessment Record and Evaluation
CBIC Competitive Bidding Implementation Contractor
CBP Competitive Bidding Program
CBSA Core-Based Statistical Area
CDC Centers for Disease Control and Prevention
CEM Cardiac Event Monitoring
CF Conversion factor
CFC Conditions for Coverage
CFR Code of Federal Regulations
CKD Chronic kidney disease
CLFS Clinical laboratory fee schedule
CMA California Medical Association
CMD Contractor Medical Director
CMHC Community mental health center
CMP Civil money penalty
CMS Centers for Medicare & Medicaid Services
CNS Clinical nurse specialist
CoP Condition of participation
COPD Chronic obstructive pulmonary disease
CORF Comprehensive Outpatient Rehabilitation Facility
COS Cost of service
CPEP Clinical Practice Expert Panel
CPI Consumer Price Index
CPI-U Consumer price index for urban consumers
CPR Cardiopulmonary resuscitation
CPT [Physicians] Current Procedural Terminology (4th Edition, 2002, 
copyrighted by the American Medical Association)
CR Cardiac rehabilitation
CRNA Certified registered nurse anesthetist
CRP Canalith repositioning
CRT Certified respiratory therapist
CSW Clinical social worker
CT Computed Tomography
CTA Computed Tomography Angography
CSC Computer Sciences Corporation
CWF Common Working File
CY Calendar year
DEA Drug Enforcement Agency
DOTPA Development of Outpatient Therapy Alternatives
DHS Designated health services
DHHS Department of Health and Human Services
DME Durable medical equipment
DMEPOS Durable medical equipment, prosthetics, orthotics, and 
supplies
DOQ Doctors Office Quality
DOS Date of service
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
DSMT Diabetes self-management training
EGC Electrocardiogram
E/M Evaluation and management
EDI Electronic data interchange
EEG Electroencephalogram
EHR Electronic health record
EKG Electrocardiogram
EMG Electromyogram
EMTALA Emergency Medical Treatment and Active Labor Act
EOG Electro-oculogram
EPO Erythopoeitin
eRx Electronic Prescribing
ESO Endoscopy Supplies
ESRD End-stage renal disease
FAA Federal Aviation Administration
FAX Facsimile
 FDA Food and Drug Administration (HHS)
 FFS Fee-for-service
 FOTO Focus On Therapeutic Outcomes
 FQHC Federally Qualified Health Center
 FR Federal Register
 GAF Geographic adjustment factor
 GAO General Accounting Office
 GEM Generating Medicare [Physician Quality Performance Measurement 
Results]
 GFR Glomerular filtration rate
 GPRO Group Practice Reporting Option
 GPO Group purchasing organization
 GPCI Geographic practice cost index
 GPS Geographic Positioning System
 GSA General Services Administration
 HAC Hospital-acquired conditions
 HBAI Health and behavior assessment and intervention
 HCC Hierarchal Condition Category
 HCPAC Health Care Professional Advisory Committee
 HCPCS Healthcare Common Procedure Coding System
 HCRIS Healthcare Cost Report Information System
 HEMS Helicopter Emergency Medical Services
 HDRT High dose radiation therapy

[[Page 73177]]

 HH PPS Home Health Prospective Payment System
 HHA Home health agency
 HHRG Home health resource group
 HHS [Department of] Health and Human Services
 HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191)
 HIT Health information technology
 HITECH Health Information Technology for Economic and Clinical 
Health Act (Title IV of Division B of the Recovery Act, together 
with Title XIII of Division A of the Recovery Act)
 HITSP Healthcare Information Technology Standards Panel
 HIV Human immunodeficiency virus
 HOPD Hospital outpatient department
 HPSA Health Professional Shortage Area
 HRA Health Risk Assessment
 HRSA Health Resources Services Administration (HHS)
 HSIP HPSA Surgical Incentive Program
 HUD Housing and Urban Development
 IACS Individuals Access to CMS Systems
 ICD International Classification of Diseases
 ICF Intermediate care facilities
 ICF International Classification of Functioning, Disability and 
Health
 ICR Intensive cardiac rehabilitation
 ICR Information collection requirement
 IDTF Independent diagnostic testing facility
 IGI IHS Global Insight, Inc.
 IFC Interim final rule with comment period
 IMRT Intensity-Modulated Radiation Therapy
 IOM Internet Only Manual
 IPCI indirect practice cost index
 IPPE Initial preventive physical examination
 IPPS Inpatient prospective payment system
 IRS Internal Revenue Service
 ISO Insurance services office
 IVD Ischemic Vascular Disease
 IVIG Intravenous immune globulin
 IWPUT Intra-service work per unit of time
 TJC Joint Commission
 JRCERT Joint Review Committee on Education in Radiologic Technology
 KDE Kidney disease education
 LCD Local coverage determination
 MA Medicare Advantage
 MA-PD Medicare Advantage-Prescription Drug Plans
 MAC Medicare Administrative Contractor
 MAV Measure Applicability Validation
 MCMP Medicare Care Management Performance
 MCP Monthly Capitation Payment
 MDRD Modification of Diet in Renal Disease
 MedCAC Medicare Evidence Development and Coverage Advisory 
Committee (formerly the Medicare Coverage Advisory Committee (MCAC))
 MedPAC Medicare Payment Advisory Commission
 MGMA Medical Group Management Association
 MEI Medicare Economic Index
 MIEA-TRHCA Medicare Improvements and Extension Act of 2006 (that 
is, Division B of the Tax Relief and Health Care Act of 2006 (TRHCA) 
(Pub. L. 109-432)
 MIPPA Medicare Improvements for Patients and Providers Act of 2008 
(Pub. L. 110-275)
 MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Pub. L. 108-173)
 MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 
110-173)
 MNT Medical nutrition therapy
 MOC Maintenance of certification
 MP Malpractice
 MPC Mulitspecialty Points of Comparison
 MPPR Multiple procedure payment reduction
 MQSA Mammography Quality Standards Act of 1992 (Pub. L. 102-539)
 MRA Magnetic Resonance Angiography
 MRI Magnetic Resonance Imaging
 MSA Metropolitan Statistical Area
 MSP Medicare Secondary Payer
 MUE Medically Unlikely Edit
 NCCI National Correct Coding Initiative
 NCD National Coverage Determination
 NCQA National Committee for Quality Assurance
 NCQDIS National Coalition of Quality Diagnostic Imaging Services
 NDC National drug code
 NF Nursing facility
 NISTA National Institute of Standards and Technology Act
 NP Nurse practitioner
 NPI National Provider Identifier
 NPP Nonphysician practitioner
 NQF National Quality Forum
 NBRC National Board for Respiratory Care
 NRC Nuclear Regulatory Commission
 NTSB National Transportation Safety Board
 NUBC National Uniform Billing Committee
 OACT [CMS] Office of the Actuary
 OBRA Omnibus Budget Reconciliation Act
 OCR Optical Character Recognition
 ODF Open door forum
 OES Occupational Employment Statistics
 OGPE Oxygen generating portable equipment
 OIG Office of Inspector General
 OMB Office of Management and Budget
 ONC [HHS] Office of the National Coordinator for Health IT
 OPPS Outpatient prospective payment system
 OSCAR Online Survey and Certification and Reporting
 PA Physician assistant
 PACE Program of All-inclusive Care for the Elderly
 PAT Performance assessment tool
 PC Professional component
 PCI Percutaneous coronary intervention
 PCIP Primary Care Incentive Payment Program
 PDP Prescription drug plan
 PE Practice expense
 PE/HR Practice expense per hour
 PEAC Practice Expense Advisory Committee
 PECOS Provider Enrollment Chain and Ownership System
 PERC Practice Expense Review Committee
 PFS Physician Fee Schedule
 PGP [Medicare] Physician Group Practice
 PHI Protected health information
 PHP Partial hospitalization program
 PIM [Medicare] Program Integrity Manual
PLI Professional liability insurance
POA Present on admission
POC Plan of care
PPI Producer price index
PPIS Physician Practice Information Survey
PPPS Personalized Prevention Plan Services
PPS Prospective payment system
PPTA Plasma Protein Therapeutics Association
PQRI Physician Quality Reporting Initiative
PR Pulmonary rehabilitation
PRA Paperwork Reduction Act
PSA Physician scarcity areas
PT Physical therapy
PTCA Percutaneous transluminal coronary angioplasty
PTA Physical therapy assistant
PVBP Physician and Other Health Professional Value-Based Purchasing 
Workgroup
QDCs (Physician Quality Reporting System) Quality Data Codes
RA Radiology assistant
RAC Medicare Recovery Audit Contractor
RBMA Radiology Business Management Association
RFA Regulatory Flexibility Act
RHC Rural health clinic
RHQDAPU Reporting Hospital Quality Data Annual Payment Update 
Program
RIA Regulatory impact analysis
RN Registered nurse
RNAC Reasonable net acquisition cost
RPA Radiology practitioner assistant
RRT Registered respiratory therapist
RUC [AMAs Specialty Society] Relative (Value) Update Committee
RVRBS Resource-Based Relative Value Scale
RVU Relative value unit
SBA Small Business Administration
SCHIP State Children's Health Insurance Programs
SDW Special Disability Workload
SGR Sustainable growth rate
STATS Short Term Alternatives for Therapy Services
SLP Speech-language pathology
SMS [AMAs] Socioeconomic Monitoring System
SNF Skilled nursing facility
SOR System of record
SRS Stereotactic radiosurgery
SSA Social Security Administration
SSI Social Security Income
STARS Services Tracking and Reporting System
STATS Short Term Alternative Therapy Services
TC Technical Component
TIN Tax identification number
TRHCA Tax Relief and Health Care Act of 2006 (Pub. L. 109-432)
TTO Transtracheal oxygen
UAF Update Adjustment Factor
UPMC University of Pittsburgh Medical Center
URAC Utilization Review Accreditation Committee
USDE United States Department of Education
USP-DI United States Pharmacopoeia-Drug Information
VA Veterans Administration
VBP Value-based purchasing
WAC Wholesale Acquisition Cost

[[Page 73178]]

WAMP Widely available market price
WHO World Health Organization

CPT (Current Procedural Terminology) Copyright Notice

    Throughout this final rule with comment period, we use CPT codes 
and descriptions to refer to a variety of services. We note that CPT 
codes and descriptions are copyright 2010 American Medical Association. 
All Rights Reserved. CPT is a registered trademark of the American 
Medical Association (AMA). Applicable FARS/DFARS apply.

I. Background

    Since January 1, 1992, Medicare has paid for physicians' services 
under section 1848 of the Social Security Act (the Act), ``Payment for 
Physicians' Services.'' The Act requires that payments under the 
physician fee schedule (PFS) are based on national uniform relative 
value units (RVUs) based on the relative resources used in furnishing a 
service. Section 1848(c) of the Act requires that national RVUs be 
established for physician work, practice expense (PE), and malpractice 
expense. Before the establishment of the resource-based relative value 
system, Medicare payment for physicians' services was based on 
reasonable charges. We note that throughout this final rule with 
comment period, unless otherwise noted, the term ``practitioner'' is 
used to describe both physicians and eligible nonphysician 
practitioners (such as physician assistants, nurse practitioners, 
clinical nurse specialists, certified nurse-midwives, psychologists, or 
social workers) that are permitted to furnish and bill Medicare under 
the PFS for the services under discussion.

A. Development of the Relative Value System

1. Work RVUs
    The concepts and methodology underlying the PFS were enacted as 
part of the Omnibus Budget Reconciliation Act (OBRA) of 1989 (Pub. L. 
101-239), and OBRA 1990, (Pub. L. 101-508). The final rule, published 
on November 25, 1991 (56 FR 59502), set forth the fee schedule for 
payment for physicians' services beginning January 1, 1992. Initially, 
only the physician work RVUs were resource-based, and the PE and 
malpractice RVUs were based on average allowable charges.
    The physician work RVUs established for the implementation of the 
fee schedule in January 1992 were developed with extensive input from 
the physician community. A research team at the Harvard School of 
Public Health developed the original physician work RVUs for most codes 
in a cooperative agreement with the Department of Health and Human 
Services (DHHS). In constructing the code-specific vignettes for the 
original physician work RVUs, Harvard worked with panels of experts, 
both inside and outside the Federal government, and obtained input from 
numerous physician specialty groups.
    Section 1848(b)(2)(B) of the Act specifies that the RVUs for 
anesthesia services are based on RVUs from a uniform relative value 
guide, with appropriate adjustment of the conversion factor (CF), in a 
manner to assure that fee schedule amounts for anesthesia services are 
consistent with those for other services of comparable value. We 
established a separate CF for anesthesia services, and we continue to 
utilize time units as a factor in determining payment for these 
services. As a result, there is a separate payment methodology for 
anesthesia services.
    We establish physician work RVUs for new and revised codes based on 
our review of recommendations received from the American Medical 
Association's (AMA) Specialty Society Relative Value Update Committee 
(RUC).
2. Practice Expense Relative Value Units (PE RVUs)
    Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 
103-432), enacted on October 31, 1994, amended section 
1848(c)(2)(C)(ii) of the Act and required us to develop resource-based 
PE RVUs for each physicians' service beginning in 1998. We were to 
consider general categories of expenses (such as office rent and wages 
of personnel, but excluding malpractice expenses) comprising PEs.
    Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 
105-33), amended section 1848(c)(2)(C)(ii) of the Act to delay 
implementation of the resource-based PE RVU system until January 1, 
1999. In addition, section 4505(b) of the BBA provided for a 4-year 
transition period from charge-based PE RVUs to resource-based RVUs.
    We established the resource-based PE RVUs for each physicians' 
service in a final rule, published November 2, 1998 (63 FR 58814), 
effective for services furnished in 1999. Based on the requirement to 
transition to a resource-based system for PE over a 4-year period, 
resource-based PE RVUs did not become fully effective until 2002.
    This resource-based system was based on two significant sources of 
actual PE data: the Clinical Practice Expert Panel (CPEP) data; and the 
AMA's Socioeconomic Monitoring System (SMS) data. The CPEP data were 
collected from panels of physicians, practice administrators, and 
nonphysicians (for example, registered nurses (RNs)) nominated by 
physician specialty societies and other groups. The CPEP panels 
identified the direct inputs required for each physicians' service in 
both the office setting and out-of-office setting. We have since 
refined and revised these inputs based on recommendations from the RUC. 
The AMA's SMS data provided aggregate specialty-specific information on 
hours worked and PEs.
    Separate PE RVUs are established for procedures that can be 
performed in both a nonfacility setting, such as a physician's office, 
and a facility setting, such as a hospital outpatient department 
(HOPD). The difference between the facility and nonfacility RVUs 
reflects the fact that a facility typically receives separate payment 
from Medicare for its costs of providing the service, apart from 
payment under the PFS. The nonfacility RVUs reflect all of the direct 
and indirect PEs of providing a particular service.
    Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113) directed the Secretary of Health and Human Services 
(the Secretary) to establish a process under which we accept and use, 
to the maximum extent practicable and consistent with sound data 
practices, data collected or developed by entities and organizations to 
supplement the data we normally collect in determining the PE 
component. On May 3, 2000, we published the interim final rule (65 FR 
25664) that set forth the criteria for the submission of these 
supplemental PE survey data. The criteria were modified in response to 
comments received, and published in the Federal Register (65 FR 65376) 
as part of a November 1, 2000 final rule. The PFS final rules published 
in 2001 and 2003, respectively, (66 FR 55246 and 68 FR 63196) extended 
the period during which we would accept these supplemental data through 
March 1, 2005.
    In the calendar year (CY) 2007 PFS final rule with comment period 
(71 FR 69624), we revised the methodology for calculating direct PE 
RVUs from the top-down to the bottom-up methodology beginning in CY 
2007 and provided for a 4-year transition for the new PE RVUs under 
this new methodology. This transition ended in CY 2010 and direct PE 
RVUs are calculated in CY 2011 using this methodology, unless otherwise 
noted.
    In the CY 2010 PFS final rule with comment period, we updated the 
PE/hour (HR) data that are used in the

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calculation of PE RVUs for most specialties (74 FR 61749). For this 
update, we used the Physician Practice Information Survey (PPIS) 
conducted by the AMA. The PPIS is a multispecialty, nationally 
representative, PE survey of both physicians and nonphysician 
practitioners (NPPs) using a survey instrument and methods highly 
consistent with those of the SMS and the supplemental surveys used 
prior to CY 2010. We note that in CY 2010, for oncology, clinical 
laboratories, and independent diagnostic testing facilities (IDTFs), we 
continued to use the supplemental survey data to determine PE/HR values 
(74 FR 61752).
3. Resource-Based Malpractice (MP) RVUs
    Section 4505(f) of the BBA amended section 1848(c) of the Act 
requiring us to implement resource-based malpractice (MP) RVUs for 
services furnished on or after CY 2000. The resource-based MP RVUs were 
implemented in the PFS final rule published November 2, 1999 (64 FR 
59380). The MP RVUs were based on malpractice insurance premium data 
collected from commercial and physician-owned insurers from all the 
States, the District of Columbia, and Puerto Rico.
4. Refinements to the RVUs
    Section 1848(c)(2)(B)(i) of the Act requires that we review all 
RVUs no less often than every 5 years. The first Five-Year Review of 
the physician work RVUs was published on November 22, 1996 (61 FR 
59489) and was effective in 1997. The second Five-Year Review was 
published in the CY 2002 PFS final rule with comment period (66 FR 
55246) and was effective in 2002. The third Five-Year Review of 
physician work RVUs was published in the CY 2007 PFS final rule with 
comment period (71 FR 69624) and was effective on January 1, 2007. 
(Note: Additional codes relating to the third Five-Year Review of 
physician work RVUs were addressed in the CY 2008 PFS final rule with 
comment period (72 FR 66360).) The fourth Five-Year Review of physician 
work RVUs was initiated in the CY 2010 PFS final rule with comment 
period where we solicited candidate codes from the public for this 
review (74 FR 61941). Changes due to the fourth Five-Year Review of 
physician work RVUs will be effective January 1, 2012.
    In 1999, the AMA RUC established the Practice Expense Advisory 
Committee (PEAC) for the purpose of refining the direct PE inputs. 
Through March 2004, the PEAC provided recommendations to CMS for over 
7,600 codes (all but a few hundred of the codes currently listed in the 
AMAs Current Procedural Terminology (CPT) codes). As part of the CY 
2007 PFS final rule with comment period (71 FR 69624), we implemented a 
new bottom-up methodology for determining resource-based PE RVUs and 
transitioned the new methodology over a 4-year period. A comprehensive 
review of PE was undertaken prior to the 4-year transition period for 
the new PE methodology from the top-down to the bottom-up methodology, 
and this transition was completed in CY 2010. In CY 2010, we also 
incorporated the new PPIS data to update the specialty-specific PE/HR 
data used to develop PE RVUs. Therefore, the next Five-Year Review of 
PE RVUs will be addressed in CY 2014.
    In the CY 2005 PFS final rule with comment period (69 FR 66236), we 
implemented the first Five-Year Review of the MP RVUs (69 FR 66263). 
Minor modifications to the methodology were addressed in the CY 2006 
PFS final rule with comment period (70 FR 70153). The second Five-Year 
Review and update of resource-based malpractice RVUs was published in 
the CY 2010 PFS final rule with comment period (74 FR 61758) and was 
effective in CY 2010.
5. Adjustments to RVUs Are Budget Neutral
    Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments 
in RVUs for a year may not cause total PFS payments to differ by more 
than $20 million from what they would have been if the adjustments were 
not made. In accordance with section 1848(c)(2)(B)(ii)(II) of the Act, 
if revisions to the RVUs cause expenditures to change by more than $20 
million, we make adjustments to ensure that expenditures do not 
increase or decrease by more than $20 million.
    For CY 2010, we adopted a number of new payment policies for which 
we estimated the potential for a redistributive effect under the PFS, 
including the use of the new PPIS data to develop the specialty-
specific PE/HR used for the PE RVUs (74 FR 61749 through 61752) and the 
elimination of the reporting of all CPT consultation codes in order to 
allow for correct and consistent coding and appropriate payment for 
evaluation and management services under the PFS (74 FR 61767 through 
61775). In the CY 2011 PFS proposed rule (75 FR 40047), we acknowledged 
that clinical experience with these new PFS policies has been growing 
over the first 6 months of CY 2010 and noted that as we seek to improve 
future PFS payment accuracy for services, we were interested in public 
comments on the perspectives of physicians and nonphysician 
practitioners caring for Medicare beneficiaries under the current PFS 
coding and payment methodologies for physicians' services.
    Comment: Many commenters expressed various concerns regarding new 
Medicare coding and payment methodologies adopted for CY 2010 and 
continuing in CY 2011. Some commenters indicated that the effects of 
using PPIS data to develop the specialty-specific practice expense per 
hour (PE/HR) significantly reduced the payment for certain services and 
procedures. Commenters were concerned that the reductions in practice 
costs reflected in the PPIS data were inaccurate and that CMS reliance 
on the PPIS data caused undue hardship to certain specialties. Some 
commenters requested that CMS utilize new PE survey data for specific 
specialties.
    A number of commenters were also particularly concerned with the 
decision by CMS to no longer recognize the CPT consultation codes for 
Part B payment of evaluation and management (E/M) services beginning in 
CY 2010. Many commenters recommended resuming payment for consultation 
codes under the PFS to recognize the unique physician work and practice 
expenses when consultation services are furnished at the request of 
other practitioners. Several commenters argued that consultation 
services were especially important to ensuring high-quality, 
coordinated care for complex patients and to prevent unnecessary, 
expensive tests. Based on findings from a survey of affected 
specialties, these commenters expressed concern that CMS policy 
decision to no longer recognize the CPT consultation codes for PFS 
payment purposes resulted in: (1) A reduction in the number of new 
Medicare patients seen by specialists; (2) a reduction in overall 
specialist time spent with individual Medicare patients; (3) a 
reduction in the number of consultations provided to hospital 
inpatients; (4) diminished continuity and coordination of care; and (5) 
the elimination of physicians' office staff and postponement of 
physicians purchasing new equipment because of practice cost concerns. 
Finally, other commenters requested that, in the absence of recognition 
of the CPT consultation codes for PFS payment, CMS should revise the 
current prolonged services and new patient definitions in order to 
allow for higher payments for services that, prior to CY 2010, would 
have been billed using the CPT consultation codes. Specifically,

[[Page 73180]]

the commenters believe that CMS should adopt the current CPT policy of 
identifying patients seen by physicians in a different subspecialty 
within a group practice as ``new'' patients, rather than continuing to 
use the same physician specialty as the decision point. In addition, 
some commenters encouraged CMS to adopt the CPT inpatient setting 
guidelines for determining whether a service meets the prolonged 
service criteria, which allow physicians to include time spent on a 
patients floor or unit performing tasked related to the patients care, 
rather than just face-to-face time as specified under current CMS 
policy.
    Response: We appreciate the concerns of the commenters regarding 
current PFS coding and payment methodologies. We welcome the 
perspective of physicians and nonphysician practitioners caring for 
Medicare beneficiaries. We understand that in some cases, recent policy 
changes under the PFS reduced payments for certain professional 
services, albeit with the goal of providing payment for services that 
appropriately reflects their relative value in the context of PFS 
payment for all other services. It is in the nature of any budget 
neutral payment system for changes, such as the use of PPIS data and 
the elimination of PFS payment for the CPT consultation codes, to have 
a somewhat differential impact on various groups of physicians and/or 
nonphysician practitioners. Furthermore, we note that all physicians 
benefited from the budget neutral increase in the payment levels for 
the other evaluation and management (E/M) CPT codes that resulted from 
the consultation code policy change.
    For CY 2010, we adopted the PPIS data for developing the PE RVUs as 
the most recent data on physicians office practice expenses that used a 
consistent survey instrument across all specialty and healthcare 
professional groups. The PPIS was a nationally representative survey 
providing the most up-to-date and comprehensive data available from 51 
specialties, using a survey instrument that was carefully designed, 
tested, and implemented. As discussed in the CY 2010 PFS final rule 
with comment period (75 FR 61751), because we recognized that some 
specialties would likely experience significant payment reductions with 
the use of the PPIS data, we adopted a 4-year transition from the 
previous PE RVUs to the PE RVUs developed using the new PPIS data in 
order to allow physicians and others time to adjust to the payment 
changes. We note that CY 2010 was the first year of the transition, 
with payment based upon 75 percent of the previous PE RVUs and 25 
percent of the PE RVUs using the new PPIS data. This blend will move to 
50/50 in CY 2011, and we intend to continue to closely monitor Medicare 
PFS utilization data to detect any emerging issues that may be of 
concern during this transition period, such as access problems for 
Medicare beneficiaries. To date, we have identified no specific 
problems that would warrant our proposal of a change with respect to 
the final CY 2010 policy regarding development of the PE RVUs based on 
the PPIS data. Going forward, as discussed further in section II.A.2.f. 
of this final rule with comment period, we remain interested in the 
thoughts of stakeholders regarding the MedPAC comment that ``CMS should 
consider alternatives to collecting specialty-specific cost data or 
options to decrease the reliance on such data.'' We encourage 
interested parties to contact us at any time if they have information 
to share or discuss in this regard.
    In response to extensive public comment on the CY 2010 PFS proposal 
to eliminate payment for the CPT consultation codes, we explained our 
rationale in detail in the CY 2010 PFS final rule with comment period 
(75 FR 61767 through 61775). Prior to the CY 2010 PFS rulemaking cycle, 
we had made numerous attempts to resolve issues related to the 
reporting of the CPT consultation codes, including developing and 
implementing relevant guidance and educating physicians regarding 
documentation, transfer of care, and consultation policy. Despite these 
efforts, there was still substantial disagreement and inconsistency 
within the physician community regarding these issues. In addition, we 
believe that in most cases there is no substantial difference in 
physician work between E/M visits and services that would otherwise be 
reported with CPT consultation codes. Therefore, we continue to believe 
that E/M services that could previously have been reported using the 
CPT consultation codes may now be appropriately reported and paid using 
other E/M codes, specifically office and other outpatient, initial 
hospital and nursing facility care, and subsequent hospital and nursing 
facility care E/M codes. This policy allows for correct and consistent 
coding for E/M services furnished by physicians and nonphysician 
practitioners, as well as provides for appropriate payment for the 
specific services that were previously billed using the CPT 
consultation codes.
    While we continue to believe that promoting effective coordination 
of care must be an essential goal of our payment systems, we are 
currently not aware of any evidence that the CY 2010 policy change to 
no longer recognize the CPT consultation codes is creating problems 
regarding care coordination and communication among physicians that 
negatively impact the health of Medicare beneficiaries. As we stated in 
the CY 2010 PFS final rule with comment period in response to similar 
hypothetical concerns expressed by some commenters (75 FR 61774), if we 
become aware of such evidence in the future, we would certainly 
consider whether there is an appropriate policy response to promote 
more effective coordination of care. However, we continue to believe it 
is premature to consider what the appropriate responses might be unless 
specific evidence of an issue affecting the health of Medicare 
beneficiaries comes to our attention. We will continue to be attentive 
to any concerns that develop about the effects of the policy on the 
goal of promoting effective coordination of care.
    In the CY 2010 PFS final rule with comment period (75 FR 61772), we 
explained that, although we estimated that there would be 
redistributional effects among specialties, we did not believe the 
estimated impacts of the change in consultation code policy were 
disproportionate to the goals we sought to achieve in finalizing the 
proposal. While we understand that commenters are concerned with the 
effects of this policy change and that these comments were submitted 
after only a half year's experience with the revised policy, the 
commenters on the CY 2011 proposed rule did not fundamentally address 
the underlying issues that led to our decision to no longer recognize 
the consultation codes for PFS payment purposes.
    We appreciate the suggestions of the commenters regarding policy 
changes to the definitions of new patients and prolonged services. 
Regarding the definition of ``new'' patient, we note that we continue 
to consider requests on an ongoing basis for new Medicare physician 
specialty codes and may establish new codes upon evaluating the 
submissions based on the criteria listed in the Medicare Claims 
Processing Manual, Pub. 100-04, chapter 26, section 10.8. In fact, we 
have approved four new Medicare physician specialty codes in the past 2 
years. These additions allow more patients of those subspecialties to 
be considered new based on the narrower range of services provided by 
the subspecialty within a broader specialty group practice. We 
encourage interested stakeholders to submit requests for new specialty 
codes

[[Page 73181]]

if they desire a specific code for a different medical specialty or 
subspecialty. We do not believe it is necessary to change our current 
policy to one that would routinely adopt the CPT policy of identifying 
patients seen by physicians in a different subspecialty as ``new'' 
patients because our current criteria for establishing new Medicare 
physician specialty codes already accounts for many of these scenarios. 
Medicare physician specialty codes describe the unique types of 
medicine that physicians practice. Therefore, we believe our current 
definition of ``new'' for reporting office visits to a group practice 
appropriately relies upon the Medicare definition of a different 
specialty so that that the differential physician resources required to 
care for a patient who is truly new to the physician's unique type of 
medical practice are appropriately recognized.
    Finally, we note that our prolonged service criterion that allows 
counting only of face-to-face time for inpatients, as it does for 
outpatients, is longstanding. Given that the highest level initial 
hospital care E/M visit by a physician typically extends for 70 
minutes, in order to report the prolonged physician service CPT code in 
the inpatient setting, a physician would need to spend at least an 
additional 30 minutes caring for the patient. We are uncertain whether 
many inpatient E/M services that would otherwise be reported as CPT 
consultation codes extend beyond 100 minutes, even if we were to 
consider adopting a policy change to allow counting of unit/floor time 
in addition to face-to-face time. If we were to consider such a policy 
change in the counting of physician time, we are also concerned that 
available documentation in the medical record could make evaluating the 
medical necessity of a prolonged service especially problematic. 
Therefore, we do not believe it would be appropriate to modify our 
interpretation of the counting of time for purposes of reporting the 
prolonged service inpatient codes. In most cases, we believe that the 
additional time that may be required for an E/M visit to a hospital 
inpatient that would otherwise be reported by a CPT consultation code 
may be appropriately paid through the Medicare payment for the level of 
initial or subsequent hospital care E/M code that is reported that 
takes into consideration the face-to-face time the consulting physician 
spends with the patient.
    We appreciate the commenters' varied perspectives on caring for 
Medicare beneficiaries under the recent PFS coding and payment changes 
adopted for CY 2010 and continuing in CY 2011. While we did not make CY 
2011 proposals to modify our established policies regarding the use of 
the PPIS data to calculate the PE RVUs or the reporting of E/M visits 
that would otherwise be reported under the CPT consultation codes, and 
we are not modifying them for CY 2011, we will continue to monitor the 
impact of these policies. We look forward to continuing our dialogue 
with stakeholders regarding these and future policy changes under the 
PFS.

B. Components of the Fee Schedule Payment Amounts

    To calculate the payment for every physician's service, the 
components of the fee schedule (physician work, PE, and MP RVUs) are 
adjusted by a geographic practice cost index (GPCI). The GPCIs reflect 
the relative costs of physician work, PE, and malpractice expense in an 
area compared to the national average costs for each component.
    RVUs are converted to dollar amounts through the application of a 
CF, which is calculated by CMS Office of the Actuary (OACT).
    The formula for calculating the Medicare fee schedule payment 
amount for a given service and fee schedule area can be expressed as:

Payment = [(RVU work x GPCI work) + (RVU PE x GPCI PE) + (RVU 
malpractice x GPCI malpractice)] x CF.

C. Most Recent Changes to the Fee Schedule

    The CY 2010 PFS final rule with comment period (74 FR 61738) 
implemented changes to the PFS and other Medicare Part B payment 
policies. It also finalized some of the CY 2009 interim RVUs and 
implemented interim RVUs for new and revised codes for CY 2010 to 
ensure that our payment systems are updated to reflect changes in 
medical practice and the relative value of services. The CY 2010 PFS 
final rule with comment period also addressed other policies, as well 
as certain provisions of the MIPPA.
    As required by the statute at the time of its issuance on October 
30, 2009, the CY 2010 PFS final rule with comment period announced the 
following for CY 2010: The PFS update of -21.2 percent; the initial 
estimate for the sustainable growth rate of -8.8 percent; and the CF of 
$28.4061.
    On December 10, 2009, we published a correction notice (74 FR 
65449) to correct several technical and typographical errors that 
occurred in the CY 2010 PFS final rule with comment period. This 
correction notice announced a revised CF for CY 2010 of $28.3895.
    On December 19, 2009, the Department of Defense Appropriations Act, 
2010 (Pub. L. 111-118) was signed into law. Section 1011 of Public Law 
111-118 provided a 2-month zero percent update to the CY 2010 PFS 
effective only for dates of service from January 1, 2010 through 
February 28, 2010.
    On March 2, 2010, the Temporary Extension Act of 2010 (Pub. L. 111-
144) was signed into law. Section 2 of Public Law 111-144 extended 
through March 31, 2010 the zero percent update to the PFS that was in 
effect for claims with dates of service from January 1, 2010 through 
February 28, 2010.
    In addition, on April 15, 2010, the Continuing Extension Act of 
2010 (Pub. L. 111-157) was signed into law. Section 4 of Public Law 
111-157 extended through May 31, 2010 the zero percent update to the 
PFS that was in effect for claims with dates of services from January 
1, 2010 through March 31, 2010. The provision was retroactive to April 
1, 2010.
    In the May 11, 2010 Federal Register (75 FR 26350), we published a 
subsequent correction notice to correct several technical and 
typographical errors that occurred in the CY 2010 PFS final rule with 
comment period and the December 10, 2009 correction notice. The May 11, 
2010 correction notice announced a revised CF for CY 2010 of $28.3868.
    On June 25, 2010, the Preservation of Access to Care for Medicare 
Beneficiaries and Pension Relief Act of 2010 (Pub. L. 111-192) was 
signed into law. This law required application of a 2.2 percent update 
to the PFS for claims with dates of services from June 1, 2010 through 
November 30, 2010. As a result of this change, the PFS conversion 
factor was revised to $36.8729 for services furnished during this time 
period.
    On March 23, 2010 the Patient Protection and Affordable Care Act 
(Pub. L. 111-148) was signed into law. Shortly thereafter, on March 30, 
2010, the Health Care and Education Reconciliation Act of 2010 (Pub. L. 
111-152) was signed into law. These two laws are discussed in this 
final rule with comment period and are collectively referred to as the 
``Affordable Care Act'' (ACA) throughout this final rule with comment 
period.

[[Page 73182]]

D. Public Comments Received in Response to the CY 2011 PFS Proposed 
Rule

    We received approximately 8,500 timely pieces of correspondence 
containing multiple comments on the CY 2011 PFS proposed rule. We note 
that we received some comments that were outside the scope of the CY 
2011 PFS proposed rule, including public comments on new CY 2011 HCPCS 
codes that were not presented in the CY 2011 PFS proposed rule and 
existing CY 2010 HCPCS codes with final values for which we made no 
proposals for CY 2011. These comments are not addressed in this CY 2011 
PFS final rule with comment period. New and revised CY 2011 HCPCS codes 
and their CY 2011 interim PFS work, malpractice, and PE RVUs are 
displayed in Addendum C to this final rule with comment period, and 
these values are open to public comment on this final rule with comment 
period. Summaries of the public comments that are within the scope of 
the proposals and our responses to those comments are set for the in 
the various sections of this final rule with comment period under the 
appropriate headings.

II. Provisions of the Final Rule for the Physician Fee Schedule

A. Resource-Based Practice Expense (PE) Relative Value Units (RVUs)

1. Overview
    Practice expense (PE) is the portion of the resources used in 
furnishing the service that reflects the general categories of 
physician and practitioner expenses, such as office rent and personnel 
wages but excluding malpractice expenses, as specified in section 
1848(c)(1)(B) of the Act. Section 121 of the Social Security Amendments 
of 1994 (Pub. L. 103-432), enacted on October 31, 1994, required CMS to 
develop a methodology for a resource-based system for determining PE 
RVUs for each physician's service. We develop PE RVUs by looking at the 
direct and indirect physician practice resources involved in furnishing 
each service. Direct expense categories include clinical labor, medical 
supplies, and medical equipment. Indirect expenses include 
administrative labor, office expense, and all other expenses. The 
sections that follow provide more detailed information about the 
methodology for translating the resources involved in furnishing each 
service into service-specific PE RVUs. In addition, we note that 
section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments in 
RVUs for a year may not cause total PFS payments to differ by more than 
$20 million from what they would have been if the adjustments were not 
made. Therefore, if revisions to the RVUs cause expenditures to change 
by more than $20 million, we make adjustments to ensure that 
expenditures do not increase or decrease by more than $20 million. We 
refer readers to the CY 2010 PFS final rule with comment period (74 FR 
61743 through 61748) for a more detailed history of the PE methodology.
2. Practice Expense Methodology
a. Direct Practice Expense
    We use a bottom-up approach to determine the direct PE by adding 
the costs of the resources (that is, the clinical staff, equipment, and 
supplies) typically required to provide each service. The costs of the 
resources are calculated using the refined direct PE inputs assigned to 
each CPT code in our PE database, which are based on our review of 
recommendations received from the American Medical Association's 
(AMA's) Relative Value Update Committee (RUC). For a detailed 
explanation of the bottom-up direct PE methodology, including examples, 
we refer readers to the Five-Year Review of Work Relative Value Units 
Under the PFS and Proposed Changes to the Practice Expense Methodology 
proposed notice (71 FR 37242) and the CY 2007 PFS final rule with 
comment period (71 FR 69629).
b. Indirect Practice Expense per Hour Data
    We use survey data on indirect practice expenses incurred per hour 
worked (PE/HR) in developing the indirect portion of the PE RVUs. Prior 
to CY 2010, we primarily used the practice expense per hour (PE/HR) by 
specialty that was obtained from the AMA's Socioeconomic Monitoring 
Surveys (SMS). These surveys were conducted from 1995 through 1999. For 
several specialties that collected additional PE/HR data through 
supplemental surveys, we incorporated these data in developing the PE/
HR values used annually.
    While the SMS was not specifically designed for the purpose of 
establishing PE RVUs, we found these data to be the best available at 
the time. The SMS was a multispecialty survey effort conducted using a 
consistent survey instrument and method across specialties. The survey 
sample was randomly drawn from the AMA Physician Master file to ensure 
national representativeness. The AMA discontinued the SMS survey in 
1999.
    As required by the Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113), we also established a process by which specialty 
groups could submit supplemental PE data. In the May 3, 2000 Federal 
Register, we issued the Medicare Program; Criteria for Submitting 
Supplemental Practice Expense Survey Data interim final rule (65 FR 
25664) in which we established criteria for acceptance of supplemental 
data. The criteria were modified in the CY 2001 and CY 2003 PFS final 
rules with comment period (65 FR 65380 and 67 FR 79971, respectively). 
In addition to the SMS, we previously used supplemental survey data for 
the following specialties: Cardiology; dermatology; gastroenterology; 
radiology; cardiothoracic surgery; vascular surgery; physical and 
occupational therapy; independent laboratories; allergy/immunology; 
independent diagnostic testing facilities (IDTFs); radiation oncology; 
medical oncology; and urology.
    Because the SMS data and the supplemental survey data were from 
different time periods, we historically inflated them by the Medicare 
Economic Index (MEI) to put them on as comparable a time basis as we 
could when calculating the PE RVUs. This MEI proxy was necessary in the 
past due to the lack of contemporaneous, consistently collected, and 
comprehensive multispecialty survey data.
    The AMA administered a new survey in CY 2007 and CY 2008, the 
Physician Practice Expense Information Survey (PPIS), which was 
expanded (relative to the SMS) to include nonphysician practitioners 
(NPPs) paid under the PFS. The PPIS was designed to update the 
specialty-specific PE/HR data used to develop PE RVUs. The AMA and the 
CMS contractor, The Lewin Group (Lewin), analyzed the PPIS data and 
calculated the PE/HR for physician and nonphysician specialties, 
respectively. The AMA's summary worksheets and Lewin's final report are 
available on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=4&sortOrder=descending&itemID=CMS1223902&intNumPerPage=10. 
(See downloads labeled AMA PPIS Worksheets 1-3 and Physician Practice 
Expense non MDDO Final Report)
    The PPIS is a multispecialty, nationally representative, PE survey 
of both physicians and NPPs using a consistent survey instrument and 
methods highly consistent with those used for the SMS and the 
supplemental surveys. The PPIS gathered information

[[Page 73183]]

from 3,656 respondents across 51 physician specialty and healthcare 
professional groups.
    We believe the PPIS is the most comprehensive source of PE survey 
information available to date. Therefore, we used the PPIS data to 
update the PE/HR data for almost all of the Medicare-recognized 
specialties that participated in the survey for the CY 2010 PFS. When 
we changed over to the PPIS data beginning in CY 2010, we did not 
change the PE RVU methodology itself or the manner in which the PE/HR 
data are used in that methodology. We only updated the PE/HR data based 
on the new survey. Furthermore, as we explained in the CY 2010 PFS 
final rule with comment period (74 FR 61751), because of the magnitude 
of payment reductions for some specialties resulting from the use of 
the PPIS data, we finalized a 4-year transition (75/25 for CY 2010, 50/
50 for CY 2011, 25/75 for CY 2012, and 0/100 for CY 2013) from the 
previous PE RVUs to the PE RVUs developed using the new PPIS data.
    Section 303 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173) added section 
1848(c)(2)(H)(i) of the Act, which requires us to use the medical 
oncology supplemental survey data submitted in 2003 for oncology drug 
administration services. Therefore, the PE/HR for medical oncology, 
hematology, and hematology/oncology reflects the continued use of these 
supplemental survey data.
    We do not use the PPIS data for reproductive endocrinology, sleep 
medicine, and spine surgery since these specialties are not separately 
recognized by Medicare, and we do not know how to blend these data with 
Medicare-recognized specialty data.
    Supplemental survey data on independent labs, from the College of 
American Pathologists, were implemented for payments in CY 2005. 
Supplemental survey data from the National Coalition of Quality 
Diagnostic Imaging Services (NCQDIS), representing IDTFs, were blended 
with supplementary survey data from the American College of Radiology 
(ACR) and implemented for payments in CY 2007. Neither IDTFs nor 
independent labs participated in the PPIS. Therefore, we continue to 
use the PE/HR that was developed from their supplemental survey data.
    Finally, consistent with our past practice, the previous indirect 
PE/HR values from the supplemental surveys for medical oncology, 
independent laboratories, and IDTFs were updated to CY 2006 using the 
MEI to put them on a comparable basis with the PPIS data. In the CY 
2010 PFS final rule with comment period (74 FR 61753), we miscalculated 
the indirect PE/HR for IDTFs as part of this update process. Therefore, 
for CY 2011, we are using a revised indirect PE/HR of $479.81 for 
IDTFs, consistent with our final policy to update the indirect PE/HR 
values from prior supplemental survey data that we are continuing to 
use in order to put these data on a comparable basis with the PPIS 
data. This revision changes the IDTF indirect percentage from 51 
percent to 50 percent for CY 2011.
    Previously, we had established PE/HR values for various specialties 
without SMS or supplemental survey data by crosswalking them to other 
similar specialties to estimate a proxy PE/HR. For specialties that 
were part of the PPIS for which we previously used a crosswalked PE/HR, 
we instead use the PPIS-based PE/HR. We continue previous crosswalks 
for specialties that did not participate in the PPIS. However, 
beginning in CY 2010 we changed the PE/HR crosswalk for portable x-ray 
suppliers from radiology to IDTF, a more appropriate crosswalk because 
these specialties are more similar to each other with respect to 
physician time.
    In the CY 2010 PFS final rule with comment period (74 FR 61752), we 
agreed that, under the current PE methodology, the PPIS data for 
registered dieticians should not be used in the calculation of PE RVUs 
since these dieticians are paid 85 percent of what a physician would be 
paid for providing the service. To include their survey data in the PE 
calculation would influence the ratesetting by incorporating what the 
services would be paid if performed by registered dieticians and not 
strictly what the payment rates would be if provided by physicians. We 
further stated that we would utilize the ``All Physicians'' PE/HR, as 
derived from the PPIS, in the calculation of resource-based PE RVUs in 
lieu of the PE/HR associated with registered dieticians. In the 
resource-based PE methodology for CY 2010, while we removed the 
specialty of registered dieticians from the ratesetting step we did not 
assign the ``All Physicians'' PE/HR to services furnished by registered 
dieticians. Instead, we allowed the PE/HR for those services to be 
generated by a weighted average of all the physician specialties that 
also furnished the services. This method was consistent with our policy 
to not use the registered dietician PPIS PE/HR in calculating the PE 
RVUs for services furnished by registered dieticians but we did not 
actually crosswalk the specialty of registered dietician to the ``All 
Physicians'' PE/HR data as we had intended according to the final 
policy. Nevertheless, we are affirming for CY 2011 that the final 
resource-based PE RVUs have been calculated in accordance with the 
final policy adopted in the CY 2010 PFS final rule with comment period 
(74 FR 61752) for registered dietician services that crosswalks the 
specialty to the ``All Physicians'' PE/HR data.
    As provided in the CY 2010 PFS final rule with comment period (74 
FR 61751), CY 2011 is the second year of the 4-year transition to the 
PE RVUs calculated using the PPIS data. Therefore, in general, the CY 
2011 PE RVUs are a 50/50 blend of the previous PE RVUs based on the SMS 
and supplemental survey data and the new PE RVUS developed using the 
PPIS data as described above. Note that the reductions in the PE RVUs 
for expensive diagnostic imaging equipment attributable to the change 
to an equipment utilization rate assumption of 75 percent (see 74 FR 
61753 through 61755 and section II.A.3. of this final rule with comment 
period) are not subject to the transition.
    CMS' longstanding policy in a PFS transition payment year is that 
if the CPT Editorial Panel creates a new code for that year, the new 
code would be paid at its fully implemented PFS amount and not at a 
transition rate for that year. Consistent with this policy, all new CY 
2011 CPT codes will not be paid based on transitional PE RVUs in CY 
2011. Instead, we will pay these services based on the fully 
implemented PE RVUs in CY 2011. Additionally, existing CPT codes for 
which the global period has changed in CY 2011 will not be subject to 
the PPIS PE RVU transition. We believe that changing the global period 
of a code results in the CPT code describing a different service to 
which the previous PE RVUs would no longer be relevant when the code is 
reported for a service furnished in CY 2011. The five CY 2011 existing 
CPT codes with global period changes from CY 2010 to CY 2011 are: 11043 
(Debridement, muscle, and/or fascia (includes epidermis, dermis, and 
subcutaneous tissue, if performed); first 20 sq cm or less); 11044 
(Debridement, bone (includes epidermis, dermis, subcutaneous tissue, 
muscle and/or fascia, if performed); first 20 sq cm or less); 57155 
(Insertion of uterine tandems and/or vaginal ovoids for clinical 
brachytherapy); 97597 (Debridement (e.g., high pressure waterjet with/
without suction, sharp selective debridement with scissors,

[[Page 73184]]

scalpel and forceps), open wound, (e.g., fibrin, devitalized epidermis 
and/or dermis, exudate, debris, biofilm), including topical 
application(s), wound assessment, use of a whirlpool, when performed 
and instruction(s) for ongoing care, per session, total wound(s) 
surface area; first 20 square centimeters or less); and 97598 
(Debridement (e.g., high pressure waterjet with/without suction, sharp 
selective debridement with scissors, scalpel and forceps), open wound, 
(e.g., fibrin, devitalized epidermis and/or dermis, exudate, debris, 
biofilm), including topical application(s), wound assessment, use of a 
whirlpool, when performed and instructions(s) for ongoing care, per 
session, total wound(s) surface area; each additional 20 square 
centimeters, or part thereof (List separately in addition to code for 
primary procedure)).
c. Allocation of PE to Services
    To establish PE RVUs for specific services, it is necessary to 
establish the direct and indirect PE associated with each service.
    (i) Direct costs. The relative relationship between the direct cost 
portions of the PE RVUs for any two services is determined by the 
relative relationship between the sum of the direct cost resources 
(that is, the clinical staff, equipment, and supplies) typically 
required to provide the services. The costs of these resources are 
calculated from the refined direct PE inputs in our PE database. For 
example, if one service has a direct cost sum of $400 from our PE 
database and another service has a direct cost sum of $200, the direct 
portion of the PE RVUs of the first service would be twice as much as 
the direct portion of the PE RVUs for the second service.
    (ii) Indirect costs. Section II.A.2.b. of this final rule with 
comment period describes the current data sources for specialty-
specific indirect costs used in our PE calculations. We allocate the 
indirect costs to the code level on the basis of the direct costs 
specifically associated with a code and the greater of either the 
clinical labor costs or the physician work RVUs. We also incorporate 
the survey data described earlier in the PE/HR discussion. The general 
approach to developing the indirect portion of the PE RVUs is described 
below.
    <bullet> For a given service, we use the direct portion of the PE 
RVUs calculated as described above and the average percentage that 
direct costs represent of total costs (based on survey data) across the 
specialties that perform the service to determine an initial indirect 
allocator. For example, if the direct portion of the PE RVUs for a 
given service were 2.00 and direct costs, on average, represented 25 
percent of total costs for the specialties that performed the service, 
the initial indirect allocator would be 6.00 since 2.00 is 25 percent 
of 8.00.
    <bullet> We then add the greater of the work RVUs or clinical labor 
portion of the direct portion of the PE RVUs to this initial indirect 
allocator. In our example, if this service had work RVUs of 4.00 and 
the clinical labor portion of the direct PE RVUs was 1.50, we would add 
6.00 plus 4.00 (since the 4.00 work RVUs are greater than the 1.50 
clinical labor portion) to get an indirect allocator of 10.00. In the 
absence of any further use of the survey data, the relative 
relationship between the indirect cost portions of the PE RVUs for any 
two services would be determined by the relative relationship between 
these indirect cost allocators. For example, if one service had an 
indirect cost allocator of 10.00 and another service had an indirect 
cost allocator of 5.00, the indirect portion of the PE RVUs of the 
first service would be twice as great as the indirect portion of the PE 
RVUs for the second service.
    <bullet> We next incorporate the specialty-specific indirect PE/HR 
data into the calculation. As a relatively extreme example for the sake 
of simplicity, assume in our example above that, based on the survey 
data, the average indirect cost of the specialties performing the first 
service with an allocator of 10.00 was half of the average indirect 
cost of the specialties performing the second service with an indirect 
allocator of 5.00. In this case, the indirect portion of the PE RVUs of 
the first service would be equal to that of the second service.
d. Facility and Nonfacility Costs
    For procedures that can be furnished in a physician's office, as 
well as in a hospital or facility setting, we establish two PE RVUs: 
Facility and nonfacility. The methodology for calculating PE RVUs is 
the same for both the facility and nonfacility RVUs, but is applied 
independently to yield two separate PE RVUs. Because Medicare makes a 
separate payment to the facility for its costs of furnishing a service, 
the facility PE RVUs are generally lower than the nonfacility PE RVUs.
e. Services With Technical Components (TCs) and Professional Components 
(PCs)
    Diagnostic services are generally comprised of two components: A 
professional component (PC) and a technical component (TC), each of 
which may be performed independently or by different providers, or they 
may be performed together as a ``global'' service. When services have 
PC and TC components that can be billed separately, the payment for the 
global component equals the sum of the payment for the TC and PC. This 
is a result of using a weighted average of the ratio of indirect to 
direct costs across all the specialties that furnish the global 
components, TCs, and PCs; that is, we apply the same weighted average 
indirect percentage factor to allocate indirect expenses to the global 
components, PCs, and TCs for a service. (The direct PE RVUs for the TC 
and PC sum to the global under the bottom-up methodology.)
f. Alternative Data Sources and Public Comments on Final Rule for 2010
    In the CY 2010 PFS final rule with comment period (74 FR 61749 
through 61750), we discussed the Medicare Payment Advisory Commission's 
(MedPAC's) comment that in the future, ``CMS should consider 
alternatives to collecting specialty-specific cost data or options to 
decrease the reliance on such data.'' We agreed with MedPAC that it 
would be appropriate to consider the future of the PE RVUs moving 
forward. We sought comments from other stakeholders on the issues 
raised by MedPAC for the future. In particular, we requested public 
comments regarding MedPAC's suggestion that we consider alternatives 
for collecting specialty-specific cost data or options to decrease the 
reliance on such data. We noted MedPAC's comment that, ``CMS should 
consider if Medicare or provider groups should sponsor future data 
collection efforts, if participation should be voluntary (such as 
surveys) or mandatory (such as cost reports), and whether a nationally 
representative sample of practitioners would be sufficient for either a 
survey or cost reports.'' MedPAC also stated that one option for 
decreasing the reliance on specialty-specific cost data would be the 
elimination of the use of indirect PE/HR data in the last step of 
establishing the indirect cost portion of the PE RVUs as described 
previously.
    Almost all of the commenters on the CY 2010 PFS final rule with 
comment period that addressed this issue expressed a general 
willingness to work with CMS on methodological improvements or future 
data collection efforts. Although no commenters detailed a 
comprehensive overall alternative methodology, several commenters did 
provide suggestions regarding future data collection efforts

[[Page 73185]]

and specific aspects of the current methodology.
    The commenters on the CY 2010 PFS final rule with comment period 
that addressed the issue of surveys supported the use of surveys if 
they yielded accurate PE information. The few commenters that addressed 
the issue of cost reports were opposed to physician cost reports. The 
commenters varied with respect to their opinions regarding whether data 
collection efforts should be led by organized medicine, individual 
specialty societies, or CMS. Several commenters that addressed the 
issue of voluntary versus mandatory data collection efforts supported 
voluntary data collection efforts and opposed mandatory data collection 
efforts.
    Some commenters recommended no changes to the methodology or PE 
data in the near future. Other commenters indicated that the 
methodology and data changes needed to be made for CY 2011. Although 
most commenters did not directly address the use of the indirect PE/HR 
data, those that did predominately opposed the elimination of the use 
of these data.
    Many commenters addressed specifics of the PE methodology (as 
further described in section II.A.2.c. of this final rule with comment 
period). Some were opposed to the scaling factor applied in the 
development of the direct PE portion of the PE RVUs so that in the 
aggregate the direct portion of the PE RVUs do not exceed the 
proportion indicated by the survey data (See Step 4 in g.(ii) below). 
Several of these commenters advocated the elimination of this direct 
scaling factor, while others indicated that the issue should be 
examined more closely.
    A few commenters recommended that physician work not be used as an 
allocator in the development of the indirect portion of the PE RVUs as 
described earlier in this section. A few indicated that physician time, 
but not physician work, should be used in the allocation. Other 
commenters suggested that indirect costs should be allocated solely on 
the basis of direct costs.
    We note that many of the issues raised by commenters on the CY 2010 
PFS final rule with comment period are similar to issues raised in the 
development of the original resource-based PE methodology and in 
subsequent revisions to the methodology, including the adoption of the 
bottom-up methodology. While we did not propose a broad methodological 
change or broad data collection effort in the CY 2011 PFS proposed 
rule, we invited comments on our summary of the issues raised by the 
commenters on the CY 2010 PFS final rule with comment period, as 
discussed in the CY 2011 PFS proposed rule (75 FR 40050). The complete 
public comments on the CY 2010 PFS final rule with comment period are 
available for public review at http://www.regulations.gov by entering 
``CMS-1413-FC'' in the search box on the main page.
    Comment: A number of commenters believe the PPIS data are flawed 
and, therefore, should not be used to set the PE RVUs for all or 
certain categories of PFS services. Other commenters supported the 
adoption of the PPIS data and, whether ultimately favoring the adoption 
of the PPIS data or not, many commenters stated that the 4-year 
transition adopted by CMS is important to physicians and Medicare 
beneficiaries to ensure access to care. The commenters explained that 
the transition gives physician specialty societies the opportunity to 
collect new and more detailed data where appropriate for refinement and 
CMS the opportunity to more carefully analyze the new data and its 
appropriateness. Although once again the commenters did not provide 
specific recommendations on alternatives to a comprehensive survey of 
practice expenses or options to decrease the PFS reliance on specialty-
specific cost data, the commenters offered the following suggestions 
regarding future practice expense data collection.
    <bullet> Select a reputable company with experience in health care 
market research.
    <bullet> Base changes on a comprehensive data source with adequate 
participation rates.
    <bullet> Have data independently reviewed in order to ensure 
accuracy.
    <bullet> Make data publicly available in time to allow for review 
and comment by stakeholders.
    Several commenters emphasized the administrative complexity and 
burden if CMS were to require all physicians to submit cost reports. 
One commenter supported a limited study of practice costs estimated by 
cost reports to determine if the current PE RVUs were appropriately 
paying physicians for the physician's office costs of services. The 
commenter believes that cost reports would be more accurate than the 
PPIS methodology. Finally, several commenters indicated a willingness 
to engage CMS in more detailed discussion about potential refinements 
to the current PE/HR data.
    Response: We appreciate the commenters' recommendations regarding 
factors we should consider in developing future practice expense data 
collection efforts in order to improve the accuracy of the information. 
While we are continuing the transition that was adopted in the CY 2010 
PFS final rule with comment period (74 FR 61751) under the CY 2011 PFS 
to full implementation of the PPIS data for the CY 2013 PFS PE RVUs, we 
continue to remain interested in the thoughts of stakeholders regarding 
the MedPAC comment that ``CMS should consider alternatives to 
collecting specialty-specific cost data or options to decrease the 
reliance on such data.'' More specifically, we encourage stakeholders 
to contact us at any time if they encounter additional information to 
share, develop further ideas or analyses that could inform our ongoing 
consideration of physicians' practice expenses, or otherwise would like 
to discuss this topic further as part of an open dialogue with us. 
While to date, no stakeholders have presented a comprehensive overall 
alternative methodology, we remain interested in potential novel or 
refined approaches. We also continue to welcome more limited 
suggestions for improvements to our current PE methodology or future 
practice expense information collection activities.
g. PE RVU Methodology
    For a more detailed description of the PE RVU methodology, we refer 
readers to the CY 2010 PFS final rule with comment period with comment 
period (74 FR 61745 through 61746).
(1) Setup File
    First, we create a setup file for the PE methodology. The setup 
file contains the direct cost inputs, the utilization for each 
procedure code at the specialty and facility/nonfacility place of 
service level, and the specialty-specific PE/HR data from the surveys.
(2) Calculate the Direct Cost PE RVUs
    Sum the costs of each direct input.
    Step 1: Sum the direct costs of the inputs for each service. Apply 
a scaling adjustment to the direct inputs.
    Step 2: Calculate the current aggregate pool of direct PE costs. 
This is the product of the current aggregate PE (aggregate direct and 
indirect) RVUs, the CF, and the average direct PE percentage from the 
survey data.
    Step 3: Calculate the aggregate pool of direct costs. This is the 
sum of the product of the direct costs for each service from Step 1 and 
the utilization data for that service.
    Step 4: Using the results of Step 2 and Step 3 calculate a direct 
PE scaling adjustment so that the aggregate direct cost pool does not 
exceed the current aggregate direct cost pool and apply it

[[Page 73186]]

to the direct costs from Step 1 for each service.
    Step 5: Convert the results of Step 4 to an RVU scale for each 
service. To do this, divide the results of Step 4 by the CF. Note that 
the actual value of the CF used in this calculation does not influence 
the final direct cost PE RVUs, as long as the same CF is used in Step 2 
and Step 5. Different CFs will result in different direct PE scaling 
factors, but this has no effect on the final direct cost PE RVUs since 
changes in the CFs and changes in the associated direct scaling factors 
offset one another.
(3) Create the Indirect Cost PE RVUs
    Create indirect allocators.
    Step 6: Based on the survey data, calculate direct and indirect PE 
percentages for each physician specialty.
    Step 7: Calculate direct and indirect PE percentages at the service 
level by taking a weighted average of the results of Step 6 for the 
specialties that furnish the service. Note that for services with TCs 
and PCs, the direct and indirect percentages for a given service do not 
vary by the PC, TC, and global components.
    Step 8: Calculate the service level allocators for the indirect PEs 
based on the percentages calculated in Step 7. The indirect PEs are 
allocated based on the three components: The direct PE RVUs, the 
clinical PE RVUs, and the work RVUs.
    For most services the indirect allocator is: Indirect percentage * 
(direct PE RVUs/direct percentage) + work RVUs.
    There are two situations where this formula is modified:
    <bullet> If the service is a global service (that is, a service 
with global, professional, and technical components), then the indirect 
allocator is: Indirect percentage (direct PE RVUs/direct percentage) + 
clinical PE RVUs + work RVUs.
    <bullet> If the clinical labor PE RVUs exceed the work RVUs (and 
the service is not a global service), then the indirect allocator is: 
Indirect percentage (direct PE RVUs/direct percentage) + clinical PE 
RVUs.

    Note: For global services, the indirect allocator is based on 
both the work RVUs and the clinical labor PE RVUs. We do this to 
recognize that, for the PC service, indirect PEs will be allocated 
using the work RVUs, and for the TC service, indirect PEs will be 
allocated using the direct PE RVUs and the clinical labor PE RVUs. 
This also allows the global component RVUs to equal the sum of the 
PC and TC RVUs.)

    For presentation purposes in the examples in Table 2, the formulas 
were divided into two parts for each service.
    <bullet> The first part does not vary by service and is the 
indirect percentage (direct PE RVUs/direct percentage).
    <bullet> The second part is either the work RVUs, clinical PE RVUs, 
or both depending on whether the service is a global service and 
whether the clinical PE RVUs exceed the work RVUs (as described earlier 
in this step).
    Apply a scaling adjustment to the indirect allocators.
    Step 9: Calculate the current aggregate pool of indirect PE RVUs by 
multiplying the current aggregate pool of PE RVUs by the average 
indirect PE percentage from the survey data.
    Step 10: Calculate an aggregate pool of indirect PE RVUs for all 
PFS services by adding the product of the indirect PE allocators for a 
service from Step 8 and the utilization data for that service.
    Step 11: Using the results of Step 9 and Step 10, calculate an 
indirect PE adjustment so that the aggregate indirect allocation does 
not exceed the available aggregate indirect PE RVUs and apply it to 
indirect allocators calculated in Step 8.
    Calculate the indirect practice cost index.
    Step 12: Using the results of Step 11, calculate aggregate pools of 
specialty-specific adjusted indirect PE allocators for all PFS services 
for a specialty by adding the product of the adjusted indirect PE 
allocator for each service and the utilization data for that service.
    Step 13: Using the specialty-specific indirect PE/HR data, 
calculate specialty-specific aggregate pools of indirect PE for all PFS 
services for that specialty by adding the product of the indirect PE/HR 
for the specialty, the physician time for the service, and the 
specialty's utilization for the service across all services performed 
by the specialty.
    Step 14: Using the results of Step 12 and Step 13, calculate the 
specialty-specific indirect PE scaling factors.
    Step 15: Using the results of Step 14, calculate an indirect 
practice cost index at the specialty level by dividing each specialty-
specific indirect scaling factor by the average indirect scaling factor 
for the entire PFS.
    Step 16: Calculate the indirect practice cost index at the service 
level to ensure the capture of all indirect costs. Calculate a weighted 
average of the practice cost index values for the specialties that 
furnish the service. (Note: For services with TCs and PCs, we calculate 
the indirect practice cost index across the global components, PCs, and 
TCs. Under this method, the indirect practice cost index for a given 
service (for example, echocardiogram) does not vary by the PC, TC, and 
global component.)
    Step 17: Apply the service level indirect practice cost index 
calculated in Step 16 to the service level adjusted indirect allocators 
calculated in Step 11 to get the indirect PE RVUs.
(4) Calculate the Final PE RVUs
    Step 18: Add the direct PE RVUs from Step 6 to the indirect PE RVUs 
from Step 17 and apply the final PE budget neutrality (BN) adjustment, 
MEI rebasing adjustment, and multiple procedure payment reduction 
(MPPR) adjustment.
    The final PE BN adjustment is calculated by comparing the results 
of Step 18 (prior to the MEI rebasing and MPPR adjustments) to the 
current pool of PE RVUs. This final BN adjustment is required primarily 
because certain specialties are excluded from the PE RVU calculation 
for ratesetting purposes, but all specialties are included for purposes 
of calculating the final BN adjustment. (See ``Specialties excluded 
from ratesetting calculation'' below in this section.)
    As discussed in section II.E.5. of this final rule with comment 
period, we are rebasing and revising the Medicare Economic Index (MEI) 
for CY 2011. As discussed in section II.C.4. of this final rule with 
comment period, section 1848(c)(2)(K) of the Act (as added by section 
3134 of the ACA) specifies that the Secretary shall identify 
potentially misvalued codes by examining multiple codes that are 
frequently billed in conjunction with furnishing a single service. 
There is inherent duplication in the PE associated with those services 
which are frequently furnished together, so reducing PFS payment for 
the second and subsequent services to account for the efficiencies in 
multiple service sessions may be appropriate. Consistent with this 
provision of the ACA, we are adopting a limited expansion of the 
current MPPR policy for imaging services for CY 2011 and a new MPPR 
policy for therapy services.
(5) Setup File Information
    <bullet> Specialties excluded from ratesetting calculation: For the 
purposes of calculating the PE RVUs, we exclude certain specialties, 
such as certain nonphysician practitioners paid at a percentage of the 
PFS and low-volume specialties, from the calculation. These specialties 
are included for the purposes of calculating the BN adjustment. They 
are displayed in Table 1.

[[Page 73187]]



                           Table 1--Specialties Excluded from Ratesetting Calculation
----------------------------------------------------------------------------------------------------------------
        Specialty code                                       Specialty description
----------------------------------------------------------------------------------------------------------------
42...........................  Certified nurse midwife.
49...........................  Ambulatory surgical center.
50...........................  Nurse practitioner.
51...........................  Medical supply company with certified orthotist.
52...........................  Medical supply company with certified prosthetist.
53...........................  Medical supply company with certified prosthetist-orthotist.
54...........................  Medical supply company not included in 51, 52, or 53.
55...........................  Individual certified orthotist.
56...........................  Individual certified prosthestist.
57...........................  Individual certified prosthetist-orthotist.
58...........................  Individuals not included in 55, 56, or 57.
59...........................  Ambulance service supplier, e.g., private ambulance companies, funeral homes,
                                etc.
60...........................  Public health or welfare agencies.
61...........................  Voluntary health or charitable agencies.
73...........................  Mass immunization roster biller.
74...........................  Radiation therapy centers.
87...........................  All other suppliers (e.g., drug and department stores).
88...........................  Unknown supplier/provider specialty.
89...........................  Certified clinical nurse specialist.
95...........................  Competitive Acquisition Program (CAP) Vendor.
96...........................  Optician.
A0...........................  Hospital.
A1...........................  SNF.
A2...........................  Intermediate care nursing facility.
A3...........................  Nursing facility, other.
A4...........................  HHA.
A5...........................  Pharmacy.
A6...........................  Medical supply company with respiratory therapist.
A7...........................  Department store.
1............................  Supplier of oxygen and/or oxygen related equipment.
2............................  Pedorthic personnel.
3............................  Medical supply company with pedorthic personnel.
----------------------------------------------------------------------------------------------------------------

    <bullet> Crosswalk certain low volume physician specialties: 
Crosswalk the utilization of certain specialties with relatively low 
PFS utilization to the associated specialties.
    <bullet> Physical therapy utilization: Crosswalk the utilization 
associated with all physical therapy services to the specialty of 
physical therapy.
    <bullet> Identify professional and technical services not 
identified under the usual TC and 26 modifiers: Flag the services that 
are PC and TC services, but do not use TC and 26 modifiers (for 
example, electrocardiograms). This flag associates the PC and TC with 
the associated global code for use in creating the indirect PE RVUs. 
For example, the professional service, CPT code 93010 
(Electrocardiogram, routine ECG with at least 12 leads; interpretation 
and report only), is associated with the global service, CPT code 93000 
(Electrocardiogram, routine ECG with at least 12 leads; with 
interpretation and report).
    <bullet> Payment modifiers: Payment modifiers are accounted for in 
the creation of the file. For example, services billed with the 
assistant at surgery modifier are paid 16 percent of the PFS amount for 
that service; therefore, the utilization file is modified to only 
account for 16 percent of any service that contains the assistant at 
surgery modifier.
    <bullet> Work RVUs: The setup file contains the work RVUs from this 
final rule with comment period.
(6) Equipment Cost Per Minute
    The equipment cost per minute is calculated as:

(1/(minutes per year * usage)) * price * ((interest rate/(1-(1/((1 + 
interest rate) [caret] life of equipment)))) + maintenance)

Where:
minutes per year = maximum minutes per year if usage were continuous 
(that is, usage = 1); generally 150,000 minutes.
usage = equipment utilization assumption; 0.75 for certain expensive 
diagnostic imaging equipment (see 74 FR 61753 through 61755 and 
section II.A.3. of this final rule with comment period) and 0.5 for 
others.
price = price of the particular piece of equipment.
interest rate = 0.11.
life of equipment = useful life of the particular piece of 
equipment.
maintenance = factor for maintenance; 0.05.

    Note: The use of any particular conversion factor (CF) in Table 
2 to illustrate the PE calculation has no effect on the resulting 
RVUs.


[[Page 73188]]



                                                              TABLE 2--Calculation of PE RVUs Under Methodology for Selected Codes
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             99213     33533 CABG,
                                                                                             Office     arterial,   71020 Chest    71020-TC     71020-26    93000 ECG,   93005 ECG,  93010  ECG,
                                      Step               Source              Formula       visit, est     single       x-ray     Chest x-ray  Chest x-ray    complete     tracing       report
                                                                                          Nonfacility    facility   Nonfacility  Nonfacility  Nonfacility  Nonfacility  Nonfacility  Nonfacility
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Labor cost (lab)..........  Step 1.........  AMA...................  ...............        13.32        77.52         5.74         5.74         0.00         6.12         6.12         0.00
(2) Supply cost (sup).........  Step 1.........  AMA...................  ...............         2.98         7.34         3.39         3.39         0.00         1.19         1.19         0.00
(3) Equipment cost (eqp)......  Step 1.........  AMA...................  ...............         0.19         0.65         8.17         8.17         0.00         0.12         0.12         0.00
(4) Direct cost (dir).........  Step 1.........  ......................  =(1) + (2) +           16.50        85.51        17.31        17.31         0.00         7.43         7.43         0.00
                                                                          (3).
(5) Direct adjustment (dir      Steps 2-4......  See footnote*.........  ...............         0.50         0.50         0.50         0.50         0.50         0.50         0.50         0.50
 adj).
(6) Adjusted labor............  Steps 2-4......  =Lab * Dir adj........  =(1)*(5).......         6.68        38.87         2.88         2.88         0.00         3.07         3.07         0.00
(7) Adjusted supplies.........  Steps 2-4......  =Sup * Dir adj........  =(2)*(5).......         1.50         3.68         1.70         1.70         0.00         0.60         0.60         0.00
(8) Adjusted equipment........  Steps 2-4......  =Eqp * Dir adj........  =(3)*(5).......         0.10         0.33         4.10         4.10         0.00         0.06         0.06         0.00
(9) Adjusted direct...........  Steps 2-4......  ......................  =(6) + (7) +            8.27        42.87         8.68         8.68         0.00         3.73         3.73         0.00
                                                                          (8).
(10) Conversion factor (CF)...  Step 5.........  PFS...................  ...............        36.87        36.87        36.87        36.87        36.87        36.87        36.87        36.87
(11) Adj labor cost converted.  Step 5.........  =(Lab * Dir adj)/CF...  =(6)/(10)......         0.18         1.05         0.08         0.08         0.00         0.08         0.08         0.00
(12) Adj supply cost converted  Step 5.........  =(Sup * Dir adj)/CF...  =(7)/(10)......         0.04         0.10         0.05         0.05         0.00         0.02         0.02         0.00
(13) Adj equipment cost         Step 5.........  =(Eqp * Dir adj)/CF...  =(8)/(10)......         0.00         0.01         0.11         0.11         0.00         0.00         0.00         0.00
 converted.
(14) Adj. direct cost           Step 5.........  ......................  =(11) + (12) +          0.22         1.16         0.24         0.24         0.00         0.10         0.10         0.00
 converted.                                                               (13).
(15) Work RVUs................  Setup File.....  PFS...................  ...............         0.97        33.75         0.22         0.00         0.22         0.17         0.00         0.17
(16) Dir pct..................  Steps 6,7......  Surveys...............  ...............         0.26         0.18         0.29         0.29         0.29         0.29         0.29         0.29
(17) Ind pct..................  Steps 6,7......  Surveys...............  ...............         0.74         0.82         0.71         0.71         0.71         0.71         0.71         0.71
(18) Ind alloc formula (1st     Step 8.........  See Step 8............  ...............       ((14)/       ((14)/       ((14)/       ((14)/       ((14)/       ((14)/       ((14)/       ((14)/
 part).                                                                                   (16))* (17)  (16))* (17)  (16))* (17)  (16))* (17)  (16))* (17)  (16))* (17)  (16))* (17)  (16))* (17)
(19) Ind alloc (1st part).....  Step 8.........  ......................  See (18).......         0.65         5.29         0.58         0.58         0.00         0.25         0.25         0.00
(20) Ind alloc formulas (2nd    Step 8.........  See Step 8............  ...............         (15)         (15)  (15) + (11)         (11)         (15)  (15) + (11)         (11)         (15)
 part).
(21) Ind alloc (2nd part).....  Step 8.........  ......................  See (20).......         0.97        33.75         0.30         0.08         0.22         0.25         0.08         0.17
(22) Indirect allocator (1st +  Step 8.........  ......................  =(19) + (21)...         1.62        39.04         0.88         0.66         0.22         0.50         0.33         0.17
 2nd).
                               -----------------------------------------------------------------------------------------------------------------------------------------------------------------
(23) Indirect adjustment (ind   Steps 9-11.....  See footnote**                                  0.37         0.37         0.37         0.37         0.37         0.37         0.37         0.37
 adj).
(24) Adjusted indirect          Steps 9-11.....  =Ind alloc * ind adj                            0.60        14.47         0.33         0.24         0.08         0.19         0.12         0.06
 allocator.
(25) Ind. practice cost index   Steps 12-16....  See Steps 12-16                                 1.11         0.83         0.90         0.90         0.90         0.92         0.92         0.92
 (IPCI).
                               -----------------------------------------------------------------------------------------------------------------------------------------------------------------
(26) Adjusted indirect........  Step 17........  = Adj ind alloc * IPCI  =(24) * (25)...         0.67        12.04         0.29         0.22         0.07         0.17         0.11         0.06
(27) MEI rebasing adjustment..  Step 18........  PFS...................  ...............         1.18         1.18         1.18         1.18         1.18         1.18         1.18         1.18
(28) MPPR adjustments.........  Step 18........  PFS...................  ...............         1.01         1.01         1.01         1.01         1.01         1.01         1.01         1.01
(29) PE RVU...................  Step 18........  =(Adj dir + Adj ind) *  =((14) + (26))          1.06        15.68         0.63         0.54         0.09         0.32         0.25         0.07
                                                  budn * MEI adj * MPPR   * budn * (27)
                                                  adj.                    * (28).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note:
PE RVUs in Table 2, row 29, may not match the values in Addendum B due to rounding.
* The direct adj = [current pe rvus * CF * avg dir pct]/[sum direct inputs] = [Step 2]/[Step 3].
** The indirect adj = [current pe rvus * avg ind pct]/[sum of ind allocators] = [Step 9]/[Step 10].


[[Page 73189]]

3. PE Revisions for CY 2011
a. Equipment Utilization Rate
    As part of the PE methodology associated with the allocation of 
equipment costs for calculating PE RVUs, we currently use an equipment 
utilization rate assumption of 50 percent for most equipment, with the 
exception of expensive diagnostic imaging equipment (which is equipment 
priced at over $1 million, for example, computed tomography (CT) and 
magnetic resonance imaging (MRI) scanners), for which we adopted a 90 
percent utilization rate assumption and provided for a 4-year 
transition beginning in CY 2010 (74 FR 61755). Therefore, CY 2010 is 
the first transitional payment year. Payment is made in CY 2010 for the 
diagnostic services listed in Table 3 (those that include expensive 
diagnostic imaging equipment in their PE inputs) of the CY 2011 PFS 
proposed rule (75 FR 40054) based on 25 percent of the new PE RVUs and 
75 percent of the prior PE RVUs for those services.
    Section 1848(b)(4)(C) of the Act (as added by section 3135(a) of 
the ACA) requires that with respect to fee schedules established for CY 
2011 and subsequent years, in the methodology for determining PE RVUs 
for expensive diagnostic imaging equipment under the CY 2010 PFS final 
rule with comment period, the Secretary shall use a 75 percent 
assumption instead of the utilization rates otherwise established in 
that rule. The provision also requires that the reduced expenditures 
attributable to this change in the utilization rate for CY 2011 and 
subsequent years shall not be taken into account when applying the 
budget neutrality limitation on annual adjustments described in section 
1848(c)(2)(B)(ii)(II) of the Act.
    As a result, the 75 percent equipment utilization rate assumption 
will be applied to expensive diagnostic imaging equipment in a non-
budget neutral manner for CY 2011, and the resulting changes to PE RVUs 
will not be transitioned over a period of years. We will apply the 75 
percent utilization rate assumption in CY 2011 to all of the services 
to which we currently apply the transitional 90 percent equipment 
utilization rate assumption in CY 2010. These services are listed in a 
file on the CMS Web site that is posted under downloads for the CY 2010 
PFS final rule with comment period at http://www.cms.gov/physicianfeesched/downloads/CODES_SUBJECT_TO_90PCT_USAGE_RATE.zip. 
These codes are also displayed in Table 3 at the end of this section.
    Comment: Several commenters argued that the 75 percent utilization 
rate assumption should not be applied because of the imprecise data on 
which the policy was based. The commenters explained that based on an 
independent survey, actual equipment utilization rates are close to 50 
percent. In addition, the commenters postulated that rural imaging 
centers would be adversely affected by the change due to lower 
equipment utilization rates than non-rural centers. The commenters 
requested that CMS base equipment utilization rate assumptions on 
actual utilization data rather than assumptions.
    Several other commenters supported the implementation of the 75 
percent utilization rate assumption, and MedPAC recommended that CMS 
explore increasing the equipment utilization rate assumption for 
diagnostic imaging equipment that costs less than $1 million. Finally, 
several commenters clarified that certain procedures were not subject 
to the provision, including nuclear cardiology services and therapeutic 
interventional radiology.
    Response: Section 1848(b)(4)(C) of the Act (as added by section 
3135(a) of the ACA) requires that with respect to fee schedules 
established for CY 2011 and subsequent years, in the methodology for 
determining PE RVUs for expensive diagnostic imaging equipment under 
the CY 2010 PFS final rule with comment period, the Secretary shall use 
a 75 percent assumption instead of the utilization rates otherwise 
established in that rule. We acknowledge that further data regarding 
actual equipment utilization in the physician's office setting may be 
informative, but our use of such data to set the equipment utilization 
rate assumption for expensive diagnostic imaging equipment at a value 
other than 75 percent would require a statutory change.
    We did not propose to expand the 75 percent equipment utilization 
rate assumption for CY 2011 to other procedures beyond those that use 
CT and MRI scanners as listed in Table 4 of the CY 2011 PFS proposed 
rule (75 FR 40055) and Table 3 at the end of this section. Any future 
changes in equipment utilization rate assumptions, including any 
expansion of the 75 percent equipment utilization rate assumption to 
additional expensive diagnostic imaging equipment, would be made 
through the annual PFS notice and comment rulemaking cycle. 
Furthermore, any changes in equipment utilization rate assumptions for 
less costly diagnostic imaging equipment (less than $1 million) or for 
therapeutic imaging or other equipment would not be subject to the 
statutory provision that specifies a 75 percent assumption. We note 
that we are constantly reassessing our methodology for developing the 
PE RVUs and would propose any changes to the equipment utilization rate 
assumptions for these types of equipment through the annual PFS 
rulemaking cycle if we determine such changes could be appropriate.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal without modification. The 75 percent 
equipment utilization rate assumption will be applied to expensive 
diagnostic imaging equipment in a non-budget neutral manner for CY 
2011, and the changes to the PE RVUs will not be transitioned over a 
period of years. We will apply the 75 percent utilization rate 
assumption in CY 2011 to all of the services to which we currently 
apply the transitional 90 percent utilization rate assumption in CY 
2010. The CY 2011 codes are displayed in Table 3 at the end of this 
section that lists all the codes to which the 75 percent equipment 
utilization rate assumption applies for CY 2011. In addition, the codes 
subject to this policy are posted under the downloads for the CY 2011 
PFS final rule with comment period on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
    Additionally, for CY 2011, we proposed to expand the list of 
services to which the higher equipment utilization rate assumption 
applies to include all other diagnostic imaging services that utilize 
similar expensive CT and MRI scanners. The additional 24 CPT codes 
(listed in Table 4 of the CY 2011 PFS proposed rule (75 FR 40055)) to 
which we proposed to apply the 75 percent equipment utilization rate 
assumption also have expensive diagnostic imaging equipment (priced at 
over $1 million) included in their PE inputs. These services are 
predominantly diagnostic computed tomographic angiography (CTA) and 
magnetic resonance angiography (MRA) procedures that include similar 
expensive CT and MRI scanners in their direct PE inputs. We indicated 
in the CY 2010 PFS final rule with comment period (74 FR 61754) that we 
were persuaded by PPIS data on angiography that the extrapolation of 
MRI and CT data (and their higher equipment utilization rate) may be 
inappropriate. However, this reference was limited to those procedures 
that include an angiography room in the direct PE inputs, such as CPT 
code 93510 (Left heart catheterization, retrograde, from

[[Page 73190]]

the brachial artery, axillary artery or femoral artery; percutaneous). 
In contrast, CTA and MRA procedures include a CT room or MRI room, 
respectively, in the direct PE inputs, and the PPIS data confirm that a 
higher assumed utilization rate than 50 percent would be appropriate. 
The PPIS angiography room data that reflected a 56 percent equipment 
utilization rate would not specifically apply to CTA and MRA 
procedures. Thus, on further review, we believe it is appropriate to 
include CTA and MRA procedures in the list of procedures for which we 
assume a 75 percent equipment utilization rate, and we proposed to do 
so beginning in CY 2011.
    Consistent with section 1848(c)(2)(B)(v)(III) of the Act (as 
amended by section 3135 of the ACA), the reduced expenditures 
attributable to this change in the utilization rate assumption 
applicable to CY 2011 shall not be taken into account when applying the 
budget neutrality limitation on annual adjustments described in section 
1848(c)(2)(B)(ii)(II) of the Act.
    As provided in the CY 2010 PFS final rule with comment period (74 
FR 61751), CY 2011 is the second year of the 4-year transition to the 
PE RVUs calculated using the PPIS data. We note that the reductions in 
the PE RVUs for expensive diagnostic imaging equipment attributable to 
the change to an equipment utilization rate assumption of 75 percent 
for CY 2011 are not subject to the transition.
    Comment: Several commenters urged CMS not to finalize the proposed 
expansion of the list of procedures to which the 75 percent equipment 
utilization rate assumption would apply, pending further evaluation of 
equipment utilization data. While noting the statutory requirement of 
section 1848(b)(4)(C) of the Act (as added by section 3135(a) of the 
ACA), the commenters believe that CMS is not required to add additional 
services to the policy for CY 2011. Other commenters, including MedPAC, 
supported the proposed increase in the equipment utilization rate 
assumption from 50 percent to 75 percent for the 24 additional services 
that use diagnostic imaging equipment priced at over $1 million.
    Response: No commenters presented a rationale for not including the 
proposed 24 additional services to the 75 percent equipment utilization 
rate assumption, when the proposed additions use the same diagnostic CT 
or MRI imaging equipment as the current codes to which the policy 
applies. We note that the 90 percent equipment utilization rate 
assumption that we finalized in the CY 2010 PFS final rule with comment 
period (74 FR 61755) applies to CT and MRI scanners when used as 
diagnostic imaging equipment, one of these two pieces of equipment is 
listed as a direct PE input for the proposed MRA and CTA services, and 
no commenters recommended that we remove the CT or MRI equipment inputs 
from the additional codes. Therefore, we continue to believe that it is 
appropriate to apply the 75 percent equipment utilization rate 
assumption beginning in CY 2011 to MRA and CTA procedures, as we 
proposed.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to include CTA and MRA procedures in 
the 75 percent equipment utilization rate assumption policy because 
they include expensive CT and MRI scanners that cost more than $1 
million as direct PE inputs for these diagnostic imaging procedures. We 
are modifying our proposal, however, and will not include CPT code 
77079 (Computed tomography, bone mineral density study, 1 or more 
sites; appendicular skeleton (peripheral) (e.g., radius, wrist, heel)) 
because, upon further analysis for this final rule with comment period, 
we noted that the procedure does not include a CT room in its direct PE 
inputs.
    For CY 2011, we are also adding to the 75 percent equipment 
utilization rate assumption policy three new CY 2011 CPT codes for 
diagnostic imaging procedures that include a CT room in their direct PE 
inputs, specifically CPT codes 74176 (Computed tomography, abdomen and 
pelvis; without contrast material); 74177 (Computed tomography, abdomen 
and pelvis; with contrast material); and 74178 (Computed tomography, 
abdomen and pelvis; without contrast material in one or both body 
regions, followed by with contrast material(s) and further sections in 
one or both body regions). As new codes for CY 2011, the work, PE, and 
malpractice RVUs for these CPT codes that are displayed in Addendum C 
to this final rule with comment period are interim final values that 
are open to comment. Similarly, the assignment of the 75 percent 
equipment utilization rate assumption to these CPT codes, which 
contributes to the development of their PE RVUs, is being made on an 
interim final basis. We refer readers to section V.C. of this final 
rule with comment period for further discussion of the establishment of 
interim final RVUs for CY 2011 new and revised codes.
    As a result of the CY 2011 changes, the 75 percent equipment 
utilization rate assumption will be applied to all diagnostic imaging 
procedures with nationally established rates under the PFS in CY 2011 
and which include a CT or MRI scanner in their direct PE, consistent 
with the statutory requirement of section 1848(b)(4)(C) of the Act (as 
added by section 3135(a) of the ACA).
    Consistent with section 1848(c)(2)(B)(v)(III) of the Act (as 
amended by section 3135 of the ACA), the reduced expenditures 
attributable to the change in the utilization rate assumption 
applicable to CY 2011 (from the CY 2011 transitional rate for the 90 
percent equipment utilization rate assumption for expensive diagnostic 
imaging equipment costing over $1 million (CT and MRI scanners) that 
would have applied under the final policy established in the CY 2010 
PFS final rule with comment period to the 75 percent rate required 
under section 1848(b)(4)(C) of the Act) shall not be taken into account 
when applying the budget neutrality limitation on annual adjustments 
described in section 1848(c)(2)(B)(ii)(II) of the Act.
    Table 3 below lists the codes to which the 75 percent equipment 
utilization rate assumption applies for CY 2011. The codes subject to 
this policy are also posted under the downloads for the CY 2011 PFS 
final rule with comment period on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.

         Table 3--Final CPT Codes Subject to 75 Percent Equipment Utilization Rate Assumption in CY 2011
----------------------------------------------------------------------------------------------------------------
                    CPT code                                             Short descriptor
----------------------------------------------------------------------------------------------------------------
70336...........................................  Mri, temporomandibular joint(s).
70450...........................................  Ct head/brain w/o dye.
70460...........................................  Ct head/brain w/dye.
70470...........................................  Ct head/brain w/o & w/dye.
70480...........................................  Ct orbit/ear/fossa w/o dye.

[[Page 73191]]

 
70481...........................................  Ct orbit/ear/fossa w/dye.
70482...........................................  Ct orbit/ear/fossa w/o & w/dye.
70486...........................................  Ct maxillofacial w/o dye.
70487...........................................  Ct maxillofacial w/dye.
70488...........................................  Ct maxillofacial w/o & w/dye.
70490...........................................  Ct soft tissue neck w/o dye.
70491...........................................  Ct soft tissue neck w/dye.
70492...........................................  Ct soft tissue neck w/o & w/dye.
70496...........................................  Ct angiography, head.
70498...........................................  Ct angiography, neck.
70540...........................................  Mri orbit/face/neck w/o dye.
70542...........................................  Mri orbit/face/neck w/dye.
70543...........................................  Mri orbit/face/neck w/o & w/dye.
70544...........................................  Mri angiography head w/o dye.
70545...........................................  Mri angiography head w/dye.
70546...........................................  Mri angiography head w/o & w/dye.
70547...........................................  Mri angiography neck w/o dye.
70548...........................................  Mri angiography neck w/dye.
70549...........................................  Mri angiography neck w/o & w/dye.
70551...........................................  Mri brain w/o dye.
70552...........................................  Mri brain w/dye.
70553...........................................  Mri brain w/o & w/dye.
70554...........................................  Fmri brain by tech.
71250...........................................  Ct thorax w/o dye.
71260...........................................  Ct thorax w/dye.
71270...........................................  Ct thorax w/o & w/dye.
71275...........................................  Ct angiography, chest.
71550...........................................  Mri chest w/o dye.
71551...........................................  Mri chest w/dye.
71552...........................................  Mri chest w/o & w/dye.
71555...........................................  Mri angio chest w/or w/o dye.
72125...........................................  CT neck spine w/o dye.
72126...........................................  Ct neck spine w/dye.
72127...........................................  Ct neck spine w/o & w/dye.
72128...........................................  Ct chest spine w/o dye.
72129...........................................  Ct chest spine w/dye.
72130...........................................  Ct chest spine w/o & w/dye.
72131...........................................  Ct lumbar spine w/o dye.
72132...........................................  Ct lumbar spine w/dye.
72133...........................................  Ct lumbar spine w/o & w/dye.
72141...........................................  Mri neck spine w/o dye.
72142...........................................  Mri neck spine w/dye.
72146...........................................  Mri chest spine w/o dye.
72147...........................................  Mri chest spine w/dye.
72148...........................................  Mri lumbar spine w/o dye.
72149...........................................  Mri lumbar spine w/dye.
72156...........................................  Mri neck spine w/o & w/dye.
72157...........................................  Mri chest spine w/o & w/dye.
72158...........................................  Mri lumbar spine w/o & w/dye.
72159...........................................  Mri angio spine w/o & w/dye.
72191...........................................  Ct angiography, pelv w/o & w/dye.
72192...........................................  Ct pelvis w/o dye.
72193...........................................  Ct pelvis w/dye.
72194...........................................  Ct pelvis w/o & w/dye.
72195...........................................  Mri pelvis w/o dye.
72196...........................................  Mri pelvis w/dye.
72197...........................................  Mri pelvis w/o &w/dye.
72198...........................................  Mri angio pelvis w/or w/o dye.
73200...........................................  Ct upper extremity w/o dye.
73201...........................................  Ct upper extremity w/dye.
73202...........................................  Ct upper extremity w/o & w/dye.
73206...........................................  Ct angio upper extr w/o & w/dye.
73218...........................................  Mri upper extr w/o dye.
73219...........................................  Mri upper extr w/dye.
73220...........................................  Mri upper extremity w/o & w/dye.
73221...........................................  Mri joint upper extr w/o dye.
73222...........................................  Mri joint upper extr w/dye.
73223...........................................  Mri joint upper extr w/o & w/dye.
73225...........................................  Mri angio upr extr w/o & w/dye.
73700...........................................  Ct lower extremity w/o dye.
73701...........................................  Ct lower extremity w/dye.

[[Page 73192]]

 
73702...........................................  Ct lower extremity w/o & w/dye.
73706...........................................  Ct angio lower extr w/o & w/dye.
73718...........................................  Mri lower extremity w/o dye.
73719...........................................  Mri lower extremity w/dye.
73720...........................................  Mri lower extr w/& w/o dye.
73721...........................................  Mri joint of lwr extre w/o dye.
73722...........................................  Mri joint of lwr extr w/dye.
73723...........................................  Mri joint of lwr extr w/o & w/dye.
73725...........................................  Mri angio lower extr w or w/o dye.
74150...........................................  Ct abdomen w/o dye.
74160...........................................  Ct abdomen w/dye.
74170...........................................  Ct abdomen w/o & w/dye.
74175...........................................  Ct angio abdom w/o & w/dye.
74176...........................................  Ct abd & pelvis w/o contrast.
74177...........................................  Ct abdomen & pelvis w/contrast.
74178...........................................  Ct abd & pelv 1+ section/regns.
74181...........................................  Mri abdomen w/o dye.
74182...........................................  Mri abdomen w/dye.
74183...........................................  Mri abdomen w/o and w/dye.
74185...........................................  Mri angio, abdom w/or w/o dye.
74261...........................................  Ct colonography, w/o dye.
74262...........................................  Ct colonography, w/dye.
75557...........................................  Cardiac mri for morph.
75559...........................................  Cardiac mri w/stress img.
75561...........................................  Cardiac mri for morph w/dye.
75563...........................................  Cardiac mri w/stress img & dye.
75565...........................................  Card mri vel flw map add-on.
75571...........................................  Ct hrt w/o dye w/ca test.
75572...........................................  Ct hrt w/3d image.
75573...........................................  Ct hrt w/3d image, congen.
75574...........................................  Ct angio hrt w/3d image.
75635...........................................  Ct angio abdominal arteries.
76380...........................................  CAT scan follow up study.
77058...........................................  Mri, one breast.
77059...........................................  Mri, both breasts.
77078...........................................  Ct bone density, axial.
77084...........................................  Magnetic image, bone marrow.
----------------------------------------------------------------------------------------------------------------

b. HCPCS Code-Specific PE Issues
    In this section, we discuss other specific CY 2011 proposals and 
changes related to direct PE inputs. The changes that follow were 
proposed in the CY 2011 PFS proposed rule and included in the proposed 
CY 2011 direct PE database, which is available on the CMS Web site 
under the downloads for the CY 2011 PFS proposed rule at http://www.cms.gov/PhysicianFeeSched/. The final direct PE database for CY 
2011 is available under the downloads for the CY 2011 PFS final rule 
with comment period at the same location.
(1) Biohazard Bags
    We identified 22 codes for which the supply item ``biohazard bag'' 
(SM004) is currently considered a direct PE input. The item is already 
properly accounted for in the indirect PE because it is not 
attributable to an individual patient service. Therefore, we proposed 
to remove the biohazard bag from the CY 2011 direct PE database and 
noted that the changes in direct PE inputs for the associated services 
were reflected in the proposed CY 2011 direct PE database.
    We did not receive any public comments on our proposal to remove 
biohazard bags as a supply input. Therefore, we are finalizing our CY 
2011 proposal to remove the supply item as a direct PE input for the 
associated services. This change is reflected in the final CY 2011 
direct PE database.
(2) PE Inputs for Professional Component (PC) Only and Technical 
Component (TC) Only Codes Summing to Global Only Codes
    In the case of certain diagnostic tests, different but related CPT 
codes are used to describe global, professional, and technical 
components of a service. These codes are unlike the majority of other 
diagnostic test CPT codes where modifiers may be used in billing a 
single CPT code in order to differentiate professional and technical 
components. When different but related CPT codes are used to report the 
components of these services, the different CPT codes are referred to 
as ``global only,'' ``professional component (PC) only,'' and 
``technical component (TC) only'' codes. Medicare payment systems are 
programmed to ensure that the PE RVUs for global only codes equal the 
sum of the PE RVUs for the PC and TC only codes. However, it came to 
our attention that the direct PE inputs for certain global only codes 
do not reflect the appropriate summation of their related TC only and 
PC only component code PE inputs as they appear in the direct PE 
database. While the PFS payment calculations have been programmed to 
apply the correct PE RVUs for the global only code based on a summation 
of component code PE RVUs, the direct PE database has reflected 
incorrect inputs that are overridden by the payment system. Therefore, 
we proposed to correct the direct PE inputs for the global only codes 
so that the inputs reflect the appropriate summing of the PE inputs for 
the associated PC only and TC only codes. The proposed CY 2011 direct 
PE database included PE

[[Page 73193]]

corrections to the 14 CPT codes listed in Table 4.

     Table 4--Groups of Related CPT Codes with Proposed Changes to PE Inputs so that Inputs for Professional
              Component (PC) Only and Technical Component (TC) Only Codes Sum to Global Only Codes
----------------------------------------------------------------------------------------------------------------
                CPT Code                                             Long descriptor
----------------------------------------------------------------------------------------------------------------
93224..................................  Wearable electrocardiographic rhythm derived monitoring for 24 hours by
                                          continuous original waveform recording and storage, with visual
                                          superimposition scanning; includes recording, scanning analysis with
                                          report, physician review and interpretation.
93225..................................  Wearable electrocardiographic rhythm derived monitoring for 24 hours by
                                          continuous original waveform recording and storage, with visual
                                          superimposition scanning; recording (includes connection, recording,
                                          disconnection).
93226..................................  Wearable electrocardiographic rhythm derived monitoring for 24 hours by
                                          continuous original waveform recording and storage, with visual
                                          superimposition scanning; scanning analysis with report.
93230..................................  Wearable electrocardiographic rhythm derived monitoring for 24 hours by
                                          continuous original waveform recording and storage without
                                          superimposition scanning utilizing a device capable of producing a
                                          full miniaturized printout; including recording, microprocessor-based
                                          analysis with report, physician review and interpretation.
93231..................................  Wearable electrocardiographic rhythm derived monitoring for 24 hours by
                                          continuous original waveform recording and storage without
                                          superimposition scanning utilizing a device capable of producing a
                                          full miniaturized printout; recording (includes connection, recording,
                                          and disconnection).
93232..................................  Wearable electrocardiographic rhythm derived monitoring for 24 hours by
                                          continuous original waveform recording and storage without
                                          superimposition scanning utilizing a device capable of producing a
                                          full miniaturized printout; microprocessor-based analysis with report.
93268..................................  Wearable patient activated electrocardiographic rhythm derived event
                                          recording with presymptom memory loop, 24-hour attended monitoring,
                                          per 30 day period of time; includes transmission, physician review and
                                          interpretation.
93270..................................  Wearable patient activated electrocardiographic rhythm derived event
                                          recording with presymptom memory loop, 24-hour attended monitoring,
                                          per 30 day period of time; recording (includes connection, recording,
                                          and disconnection).
93271..................................  Wearable patient activated electrocardiographic rhythm derived event
                                          recording with presymptom memory loop, 24-hour attended monitoring,
                                          per 30 day period of time; monitoring, receipt of transmissions, and
                                          analysis.
93720..................................  Plethysmography, total body; with interpretation and report.
93721..................................  Plethysmography, total body; tracing only, without interpretation and
                                          report.
93784..................................  Ambulatory blood pressure monitoring, utilizing a system such as
                                          magnetic tape and/or computer disk, for 24 hours or longer; including
                                          recording, scanning analysis, interpretation and report.
93786..................................  Ambulatory blood pressure monitoring, utilizing a system such as
                                          magnetic tape and/or computer disk, for 24 hours or longer; recording
                                          only.
93788..................................  Ambulatory blood pressure monitoring, utilizing a system such as
                                          magnetic tape and/or computer disk, for 24 hours or longer; scanning
                                          analysis with report.
----------------------------------------------------------------------------------------------------------------

    Comment: A number of commenters expressed support for CMS' proposal 
to ensure that the direct PE inputs for certain global only codes 
reflect the appropriate summation of their related TC only and PC only 
component code PE inputs as they appear in the direct PE database. One 
commenter questioned why the prior clinical labor time for the global 
only codes in the PE database did not match the direct PE inputs that 
must have been used in CY 2010 to generate the PE RVUs, given that the 
PE RVUs for the global only codes were the sum of the PE RVUs for the 
component codes.
    Response: We appreciate the commenters' support for the proposal, 
and we are finalizing our correction of the direct PE inputs for the 
global only codes so that the inputs reflect the appropriate summing of 
the PE inputs for the associated PC only and TC only codes. In response 
to the commenter who questioned why prior clinical labor time for the 
global only codes in the PE database did not match the direct PE inputs 
that must have been used to generate the PE RVUs for payment, we note 
that Medicare payment systems are programmed to ensure that the PE RVUs 
for global only codes equal the sum of the PE RVUs for the PC and TC 
only codes. Therefore, rather than relying upon the direct PE inputs 
for the global only codes to determine the PE RVUs, which would have 
not resulted in values that equaled the summation of the component code 
PE RUVs, our PFS system was programmed so that the PE RVUs for the 
global only codes were set as the sum of the PE RVUS for the component 
codes. We expect the corrections to the inputs as incorporated in the 
direct PE database to alleviate any confusion caused by the prior 
inclusion of inputs associated with the global only codes that were not 
actually used to generate the PE RVUs.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to correct the direct PE inputs for the 
global only codes so that the inputs reflect the appropriate summing of 
the PE inputs for the associated PC only and TC only codes. The final 
CY 2011 direct PE database includes PE corrections to the 14 CPT codes 
listed in Table 4.
(3) Equipment Time Inputs for Certain Diagnostic Tests
    In the CY 2011 PFS proposed rule (75 FR 40056), we stated that we 
had recently identified equipment time PE inputs that we believed were 
incorrect for four CPT codes associated with certain diagnostic tests 
(each is displayed in Table 4):
    <bullet> CPT code 93225 is the TC only code that includes the 
connection, recording, and disconnection of the holter monitor (CMS 
Equipment Code EQ127) used in 24-hour continuous electrocardiographic 
rhythm derived monitoring. The CY 2010 equipment time input for the 
holter monitor is 42 minutes, which parallels the intra-service 
clinical labor input time for the CPT code. However, we believed that 
the equipment time should reflect the 24 hours of continuous monitoring 
in which the device is used exclusively by the patient. Therefore, we 
proposed to change the monitor equipment time for CPT code 93225 to 
1440 minutes, the number of minutes in 24 hours.
    <bullet> CPT code 93226 is the TC only code that includes the 
scanning analysis with report. We believed that the number of minutes 
the monitor (CMS Equipment

[[Page 73194]]

Code EQ127) is used in this service should parallel the intra-service 
clinical labor input time of 52 minutes during which the monitor is in 
use, instead of the CY 2010 equipment time of 1440 minutes, because 
this code does not represent 24 hours of device use. Therefore, we 
proposed to change the monitor equipment time for CPT code 93226 to 52 
minutes.
    <bullet> CPT 93224 is the global only code that includes the 
connection, recording, and disconnection of the monitor (CMS Equipment 
Code EQ127) and the scanning analysis with report, as well as the 
physician review and interpretation. We proposed direct PE inputs for 
CPT code 93224 to include 1492 total minutes of monitor time (which 
represents the total monitor time we proposed for CPT codes 93225 and 
93226).
    <bullet> CPT code 93788 is the TC only code that describes the 
scanning analysis with report for ambulatory blood pressure monitoring. 
We believed that the equipment time input for the blood pressure 
monitor should parallel the 10 minutes of clinical labor input for the 
CPT code since that is the time during which the monitor is in use. In 
CY 2010, the equipment time input for the monitor is 1440 minutes, 
which is appropriate only for CPT code 93786, the code that describes 
the 24 hours of ambulatory blood pressure monitoring recording. 
Therefore, we proposed to correct the equipment time input for the 
ambulatory blood pressure monitor in CPT code 93788 to 10 minutes.
    <bullet> CPT code 93784 is the global only code that includes the 
recording, the scanning analysis with report, and the physician 
interpretation and report for ambulatory blood pressure monitoring. We 
proposed to establish the direct PE inputs for CPT code 93784 to 
include 1450 total minutes of time for the ambulatory blood pressure 
monitor (which represents the proposed total amount of monitor time 
included in CPT codes 93786 and 93788).
    The proposed CY 2011 direct PE database reflected these changes.
    Comment: Several commenters pointed out that the prior assignment 
of the 1440 minutes of holter monitor equipment time to CPT code 93226 
stemmed from discussions between CMS and provider groups that resulted 
in PE policies initially implemented in CY 2007 (72 FR 18910). The 
commenters recommended that CMS retain the 1440 minutes of holter 
monitor equipment for CPT code 93326, consistent with current policy, 
rather than reassign the 1440 minutes of holter monitor equipment time 
as proposed to CPT code 93226.
    Response: We agree with the commenters that it would be most 
appropriate to maintain our established policy for the equipment times 
associated with CPT codes 93225 and 93226, based upon further 
description of the direct practice expenses experienced by the current 
providers that typically furnish these services to Medicare 
beneficiaries. Therefore, we are not adopting the equipment time 
changes that we proposed for CPT codes 93225 and 93226. However, we are 
revising the direct PE inputs for CPT code 93224, a global only code, 
to include the total equipment time for the holter monitor that is 
incorporated in component codes CPT codes 93225 and 93226, as discussed 
in section II.A.3.b.(2). of this final rule with comment period. The PE 
inputs for CPT code 93224 did not previously correctly reflect the 
summation of the direct PE inputs for the component codes.
    Comment: One commenter supported the proposed changes to the direct 
PE inputs for CPT codes 93784 through 93788. However, the commenter was 
confused about why 1440 minutes of equipment time were assigned to CPT 
code 93786, which the commenter stated is used only for the technical 
component of scanning the data rather than recording the data.
    Response: As we stated in our proposal, we believe that the direct 
PE inputs for CPT code 93786 are currently correct because the code 
describes the recording of the data. We believe that the commenter may 
have inadvertently referred to CPT code 93786 instead of CPT code 
93788, which is the technical component code that describes the 
scanning rather than the recording of the data. We proposed to remove 
the 1440 minutes associated with the scanning analysis from the inputs 
for CPT code 93788, not CPT code 93786.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposals to change the ambulatory blood 
pressure monitor equipment times included as direct PE inputs for CPT 
codes 938784 and 93788, while maintaining the current equipment time 
direct PE input for CPT code 93786. However, we are not finalizing our 
proposals to change the holter monitor equipment times included as 
direct PE inputs for CPT codes 93225 and 93226, but instead will 
maintain the inputs for CPT codes 93225 and 93226 as they were for CY 
2010. We are also revising the direct PE inputs for CPT code 93224 to 
include the total equipment time for the holter monitor that is 
incorporated in CPT codes 93225 and 93226. The equipment times in the 
final CY 2011 direct PE database reflect these decisions.
(4) Cobalt-57 Flood Source
    Stakeholders requested that CMS reevaluate the useful life of the 
Cobalt-57 flood source (CMS Equipment Code ER001), given their estimate 
of approximately 271 days for the source's half-life. The CY 2010 
useful life input in the CY 2010 direct PE database for the Cobalt-57 
flood source is 5 years. Using publicly available catalogs, we found 
that the Cobalt-57 flood source is marketed with a useful life of 2 
years. Therefore, we proposed to change the useful life input from the 
current 5 years to 2 years. The Cobalt-57 flood source was included 
with the revised useful life input for 96 HCPCS codes in the proposed 
CY 2011 direct PE database.
    Comment: One commenter supported the proposal to change the useful 
life input from 5 years to 2 years for the Cobalt-57 flood source.
    Response: We appreciate the commenter's support for our proposal.
    After consideration of the public comment we received, we are 
finalizing our CY 2011 proposal to change the useful life input in the 
direct PE database for the Cobalt-57 flood source from 5 years to 2 
years. This change is included in the final CY 2011 direct PE database.
(5) Venom Immunotherapy
    One stakeholder provided updated price information for the venoms 
used for the five venom immunology CPT codes, specifically 95145 
(Professional services for the supervision of preparation and provision 
of antigens for allergen immunotherapy (specify number of doses); 
single stinging insect venom); 95146 (Professional services for the 
supervision of preparation and provision of antigens for allergen 
immunotherapy (specify number of doses); 2 single stinging insect 
venoms); 95147 (Professional services for the supervision of 
preparation and provision of antigens for allergen immunotherapy 
(specify number of doses); 3 single stinging insect venoms); 95148 
(Professional services for the supervision of preparation and provision 
of antigens for allergen immunotherapy (specify number of doses); 4 
single stinging insect venoms); 95149 (Professional services for the 
supervision of preparation and provision of antigens for allergen 
immunotherapy (specify number of doses); 5 single stinging insect 
venoms).
    In the CY 2004 PFS final rule with comment period (68 FR 63206), we 
adopted a pricing methodology that utilizes the average price of a 1 
milliliter

[[Page 73195]]

dose of venom and adds that price per dose as direct PE inputs for CPT 
codes 95145 and 95146. When a patient requires three stinging insect 
venoms, as for CPT code 95147, the price input for a 3-vespid mix is 
used. This 3-vespid mix price is also used to value CPT codes 95148 
(four venoms) and 96149 (five venoms), with the single venom price 
added once to CPT code 97148 and twice to CPT code 97149.
    As requested by the stakeholder, we updated the price inputs for 
the 1-milliliter dose of venom to $16.67 and for the 3-vespid mix to 
$30.22 in the proposed CY 2011 direct PE database.
    Comment: One commenter supported the proposal to update the price 
inputs for the venoms used for venom immunotherapy.
    Response: We appreciate the information provided by stakeholders 
regarding the price inputs for venom immunotherapy supplies, consistent 
with our interest in utilizing accurate market prices as the direct PE 
inputs for these items.
    After consideration of the public comment we received, we are 
finalizing our CY 2011 proposals to update the price inputs for the 1-
milliliter dose of venom to $16.67 and for the 3-vespid mix to $30.22 
in the CY 2011 direct PE database. These changes are included in the 
final CY 2011 direct PE database.
(6) Equipment Redundancy
    Stakeholders recently brought to our attention that the ECG, 3-
channel (with SpO2, NIBP, temp, resp) (CMS Equipment Code EQ011) 
incorporates all of the functionality of the pulse oximeter with 
printer (CMS Equipment Code EQ211). Therefore, in HCPCS codes where CMS 
Equipment Code EQ011 is present, CMS Equipment Code EQ211 is redundant. 
On this basis, we proposed to remove the pulse oximeter with printer 
(CMS Equipment Code EQ211) as an input for the 118 codes that also 
contain the ECG, 3-channel (with SpO2, NIBP, temp, resp) (CMS Equipment 
Code EQ011). We made these adjustments in the proposed CY 2011 direct 
PE database.
    We received no public comments regarding this proposal to address 
the pulse oximeter equipment redundancy. Therefore we are finalizing 
our CY 2011 proposal without modification. We have made these 
adjustments in the final CY 2011 direct PE database.
(7) Equipment Duplication
    We recently identified a number of CPT codes with duplicate 
equipment inputs in the PE database. We proposed to remove the 
duplicate equipment items and modified the proposed CY 2011 direct PE 
database accordingly as detailed in Table 5.

                             TABLE 5--CPT Codes With Proposed Removal of Duplicate Equipment Items in the Direct PE Database
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  CMS equipment code
              CPT Code                                              for duplicate                          Description of equipment
                                                                      equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
19302..............................  P-mastectomy w/1n removal.  EF014                light, surgical.
                                                                 ED005                camera, digital system, 12 megapixel (medical grade).
19361..............................  Breast reconstr w/lat flap  EF031                table, power.
                                                                 EQ168                light, exam.
44157..............................  Colectomy w/ileoanal anast  EF031                table, power.
                                                                 EQ168                light, exam.
44158..............................  Colectomy w/neo-rectum      EF031                table, power.
                                      pouch.                     EQ168                light, exam.
56440..............................  Surgery for vulva lesion..  EF031                table, power.
                                                                 EQ170                light, fiberoptic headlight w-source.
57296..............................  Revise vag graft, open abd  EF031                table, power.
                                                                 EQ170                light, fiberoptic headlight w-source.
58263..............................  Vag hyst w/t/o & vag        EF031                table, power.
                                      repair.
59610..............................  Vbac delivery.............  EF031                table, power.
67228..............................  Treatment of retinal        EL005                lane, exam (oph).
                                      lesion.                    EQ230                slit lamp (Haag-Streit), dedicated to laser use.
76813..............................  Ob us nuchal meas, 1 gest.  ED024                film processor, dry, laser.
77371..............................  Srs, multisource..........  EQ211                pulse oximeter w-printer.
                                                                 ED018                computer workstation, cardiac cath monitoring.
                                                                 EL011                room, angiography.
93540..............................  Injection, cardiac cath...  EQ011                ECG, 3-channel (with SpO2, NIBP, temp, resp).
                                                                 EQ032                IV infusion pump.
                                                                 EQ088                contrast media warmer.
                                                                 EQ211                pulse oximeter w-printer.
93542..............................  Injection for heart x-rays  ED018                computer workstation, cardiac cath monitoring.
                                                                 EL011                room, angiography.
                                                                 EQ011                ECG, 3-channel (with SpO2, NIBP, temp, resp).
                                                                 EQ032                IV infusion pump.
                                                                 EQ088                contrast media warmer.
                                                                 EQ211                pulse oximeter w-printer.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comment: One commenter pointed out that the equipment duplication 
issue for CPT codes 93540 and 93542 is irrelevant because these codes 
would no longer be reported for Medicare in CY 2011. The commenter 
stated that the codes are being replaced by a new set of diagnostic 
cardiac catheterization CPT codes.
    Response: We agree with the commenter's assessment that our 
proposal for these codes is not relevant for CY 2011 because these 
codes are being deleted.
    Comment: One commenter reviewed the duplicate inputs and offered a 
correction regarding CPT code 19302 (Mastectomy, partial (eg, 
lumpectomy,

[[Page 73196]]

tylectomy, quadrantectomy, segmentectomy); with axillary 
lymphadenectomy). The commenter pointed out that one of the line-items 
erroneously duplicated (light, surgical, EF014) for that code should 
have originally been applied to CPT code 19304 (Mastectomy, 
subcutaneous).
    Response: We appreciate the commenter bringing this error to our 
attention and we agree with the commenter's assessment.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to remove the duplicate equipment items 
from the CY 2011 direct PE database as detailed in Table 5, with 
modification to transfer the duplicate surgical light input from CPT 
code 19302 to CPT code 19304. These changes are reflected in the final 
CY 2011 direct PE database.
(8) Establishing Overall Direct PE Supply Price Inputs Based on Unit 
Prices and Quantities
    In the CY 2011 PFS proposed rule (75 FR 40057), we stated that we 
had identified minor errors in total price inputs for a number of 
supply items due to mathematical mistakes in multiplying the item unit 
price and the quantity used in particular CPT codes for the associated 
services. We proposed to modify the direct PE database to appropriately 
include the overall supply price input for a supply item as the product 
of the unit price and the quantity of the supply item used in the CPT 
code. Most of the overall supply price input changes were small, and we 
adjusted the proposed CY 2011 direct PE database accordingly. The CPT 
and Level II HCPCS codes and associated supplies for nonfacility and 
facility settings that were subject to these corrections are displayed 
in Tables 6 and 7, respectively.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR29NO10.235


[[Page 73200]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.236


[[Page 73201]]


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[GRAPHIC] [TIFF OMITTED] TR29NO10.238


[[Page 73203]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.239

BILLING CODE 4120-01-C
    Comment: Several commenters agreed that the overall supply price 
inputs should be equal to the product of the supply price and the 
quantity associated with each code. Some commenters pointed out that 
for many of the supply items displayed in Tables 6 and 7, the overall 
supply prices remained incorrect in the proposed CY 2011 direct PE 
database. The commenters speculated that an underlying programming 
error may have led to incorrect calculations.
    Response: In constructing the proposed CY 2011 direct PE database 
posted on the CMS web site, we inadvertently retained a display column 
of data that reflected our previous calculation error, despite our 
correct calculation of the values for PFS ratesetting purposes. We have 
corrected the underlying process error that led to the incorrect 
display. We have modified the direct PE database for the CY 2011 PFS 
final rule with comment period to appropriately display the overall 
supply price input for a supply item as the product of the unit price 
and the quantity of the supply item used in the CPT code.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to modify the direct PE database to 
include the overall supply price input for a supply item as the product 
of the unit price and the quantity of the supply item used in the CPT 
code. We have modified the display column within the publicly available 
database to reflect the proper calculation. These changes are reflected 
in the final CY 2011 direct PE database.
c. AMA RUC Recommendations in CY 2010 for Changes to Direct PE Inputs
    In a March 2010 letter, the AMA RUC made specific PE 
recommendations that we considered in the CY 2011 PFS proposed rule (75 
FR 40062 through 40063). The proposed changes that follow were included 
in the proposed CY 2011 direct PE database, which is available on the 
CMS Web site under the downloads for the CY 2011 PFS proposed rule at 
http://www.cms.gov/PhysicianFeeSched/. The final direct PE database for 
CY 2011 is available under the downloads for the CY 2011 PFS final rule 
with comment period at the same location.
(1) Electrogastrography and Esophageal Function Test
    We proposed to accept the AMA RUC recommendations for the CY 2011 
PE inputs for the following CPT codes: 91132 (Electrogastrography, 
diagnostic, transcutaneous); 91133 (Electrogastrography, diagnostic, 
transcutaneous; with provocative testing); 91038 (Esophageal function 
test, gastroesophageal reflux test with nasal catheter intraluminal 
impedance electrode(s) placement, recording, analysis and 
interpretation; prolonged (greater than 1 hour, up to 24 hours)). For 
CPT code 91038, we assumed a useful life of 5 years for the equipment 
item ``ZEPHR impedance/pH reflux monitoring system with data recorder, 
software, monitor, workstation and cart,'' based on its entry in the 
AHA's publication, ``Estimated Useful Lives of Depreciable Hospital 
Assets,'' which we use as a standard reference. The proposed CY 2011 
direct PE database was changed accordingly.
(2) 64-Slice CT Scanner and Software
    The AMA RUC submitted an updated recommendation regarding the 
correct pricing of the 64-slice CT scanner and its accompanying 
software. Based on the documentation accompanying the recommendation, 
we accepted this recommendation and proposed to update the price input 
for the 64-slice scanner and software. This affected the following four 
CPT codes that use either the scanner, the software, or both: 75571 
(computed tomography, heart, without contrast material, with 
quantitative evaluation of coronary calcium); 75572 (Computed 
tomography, heart, with contrast material, for evaluation of cardiac 
structure and morphology (including 3D image postprocessing, assessment 
of cardiac function, and evaluation of venous structures, if 
performed)); 75573 (Computed tomography, heart, with contrast material, 
for evaluation of cardiac structure and morphology in the setting of 
congenital heart disease (including 3D image postprocessing, assessment 
of LV cardiac function, RV structure and function and evaluation of 
venous structures, if performed)); and 75574 (Computed tomographic 
angiography, heart, coronary arteries and bypass grafts (when present), 
with contrast material, including 3D image post processing (including 
evaluation of cardiac structure and morphology, assessment of cardiac 
function, and evaluation of venous structure, if performed)). The 
proposed CY 2011 direct PE database was modified accordingly.
(3) Breath Hydrogen Test
    The AMA RUC provided recommendations regarding the PE inputs for 
CPT code 91065 (breath

[[Page 73204]]

hydrogen test (e.g., for detection of lactase deficiency, fructose 
intolerance, bacterial overgrowth, or oro-cecal gastrointestinal 
transit). We accepted the recommendations with two modifications. We 
folded the two pieces of equipment listed as ``quinGas Table-Top 
Support Stand, 3 Tank'' and ``Drying Tube, Patient Sample'' into the 
``BreathTrackerDigital SC Instrument'' and summed their inputs into one 
equipment line-item, since these equipment items are used together 
specifically for the service in question. We increased the useful life 
input of the ``BreathTrackerDigital SC Instrument'' from 7 to 8 years 
based on our use of the American Hospital Association (AHA)'s 
publication entitled, ``Estimated Useful Lives of Depreciable Hospital 
Assets'' as a standard reference. Additionally, because the AMA RUC did 
not include equipment times in their recommendations for this CPT code, 
we used 53 minutes as the total time for all equipment items based on 
the total intra-service period for the clinical labor, consistent with 
our general policy for establishing equipment times. These 
modifications were reflected in the proposed CY 2011 direct PE 
database.
(4) Radiographic Fluoroscopic Room
    A recent AMA RUC review of services that include the radiographic 
fluoroscopic room (CMS Equipment Code EL014) as a direct PE input 
revealed that the use of the item is no longer typical for certain 
services in which it is specified within the current direct cost 
inputs. The AMA RUC recommended to CMS that the radiographic 
fluoroscopic room be deleted from CPT codes 64420 (Injection, 
anesthetic agent; intercostal nerve, single); 64421 (Injection, 
anesthetic agent; intercostal nerves, multiple, regional block); and 
64620 (Destruction by neurolytic agent, intercostal nerve). We accepted 
these recommendations and, therefore, these changes were included in 
the proposed CY 2011 direct PE database.
    Comment: Several commenters generally expressed support for our 
acceptance of these AMA RUC-recommended direct PE inputs with the 
stated refinements. The AMA RUC expressed appreciation for CMS' 
acceptance of the committee's recommendations.
    Response: We appreciate the assistance of stakeholders in our 
efforts to utilize the most accurate direct PE inputs for PFS services. 
We also appreciate the judicious work of the AMA RUC in providing these 
recommendations in time for us to respond to them and include our 
proposals in the CY 2011 proposed rule.
    Comment: One commenter expressed concern about these 
recommendations on the basis of the flawed professional composition of 
the AMA RUC. The commenter stated that without fair representation by 
all specialties, including nonphysician practitioners who may bill Part 
B directly under the PFS, CMS' reliance on the AMA RUC as representing 
the professional views and knowledge of all healthcare specialties for 
purposes of establishing the direct PE inputs for services paid under 
the PFS is deeply flawed.
    Response: As we have stated previously (69 FR 66243), because the 
AMA RUC is an independent committee, we are not in a position to set 
the requirements for AMA RUC membership. Concerned stakeholders should 
communicate directly with the AMA RUC regarding its professional 
composition. We note that we alone are responsible for all decisions 
about the direct PE inputs for purposes of PFS payment so, while the 
AMA RUC provides us with recommendations for new and revised CPT codes 
in the context of what we believe is its broad expertise, we ultimately 
remain responsible for determining the direct PE inputs for all new or 
revised services.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposals to accept the AMA RUC recommendations, 
with certain changes described above, regarding the direct PE inputs 
for electrogastrography and esophageal function tests, the 64-slice CT 
scanner and software, the breath hydrogen test, and certain procedures 
that no longer require a radiographic fluoroscopic room. These 
decisions are reflected in the final CY 2011 direct PE database.
(5) Cystometrogram
    The AMA RUC recently identified a rank order anomaly regarding CPT 
code 51726 (Complex cystometrogram (i.e., calibrated electronic 
equipment)). Currently, this procedure has higher PE RVUs, despite 
being less resource-intensive than the three CPT codes for which it 
serves as the base: 51727 (Complex cystometrogram (i.e., calibrated 
electronic equipment); with urethral pressure profile studies (i.e., 
urethral closure pressure profile), any technique); 51728 (Complex 
cystometrogram (i.e., calibrated electronic equipment); with voiding 
pressure studies (that is, bladder voiding pressure), any technique); 
and 51729 (Complex cystometrogram (i.e., calibrated electronic 
equipment); with voiding pressure studies (that is, bladder voiding 
pressure) and urethral pressure profile studies (that is, urethral 
closure pressure profile), any technique).
    Since the AMA RUC's general view is that CPT codes with a 0-day 
global period do not have pre-service time associated with the code, 
the AMA RUC recommended removing the nonfacility pre-service clinical 
labor time from the PE inputs for 51726. Additionally, the AMA RUC 
recommended that the nonfacility clinical intra-service staff time for 
CPT code 51276 be reduced from the 118 minutes of intra-service 
clinical labor time currently assigned to the code to 85 minutes of 
intra-service clinical labor time. These changes would resolve the rank 
order anomaly and bring the PE inputs for CPT code 51726 into alignment 
with the other three codes. Finally, and for the reasons stated above, 
the AMA RUC recommended that CMS remove the 23 minutes of pre-service 
nonfacility clinical labor time from CPT code 51725 (Simple 
cystometrogram (CMG) (for example, spinal manometer)). We agreed with 
the AMA RUC recommendations, proposed to accept these recommendations 
for CY 2011 and, therefore, changed the direct PE inputs for CPT codes 
51725 and 51726 in the nonfacility setting in the proposed CY 2011 
direct PE database.
    Comment: Some commenters argued that the rank order anomaly 
resulted from clinical labor inputs that were too low in the more 
complex codes, rather than too high in the base codes. These commenters 
stated that the AMA RUC and CMS had addressed the wrong ``end'' of the 
rank order anomaly in making the changes to the clinical labor minutes 
assigned to CPT codes 51725 and 51726. Several commenters on the CY 
2010 PFS final rule with comment period, where new CY 2011 CPT code 
51727, 51728, and 51729 were assigned interim direct PE inputs, also 
argued that CPT codes 51727, 51728, and 51729 should have additional 
clinical labor inputs, including a greater number of minutes during the 
intra-service period and minutes during the pre-service period.
    Response: We have reviewed the direct PE inputs for all five CPT 
codes in this series and continue to agree with the AMA RUC's 
recommendations regarding changes for CY 2011. Specifically, we believe 
the pre-service nonfacility clinical labor time for the 0-day global 
period CPT codes 51725 and 51726 should be removed and the intra-
service clinical labor time for CPT code 51726 should also be reduced, 
consistent with the usual treatment of

[[Page 73205]]

other 0-day global codes. We believe the AMA RUC provided 
recommendations to us regarding the direct PE inputs for these four 
cystometrogram services that accurately reflect the costs of the 
resources (that is, the clinical labor, equipment, and supplies) 
typically required to furnish these services to Medicare beneficiaries.
    Comment: Several commenters requested that CMS change the supply 
inputs included in the direct PE database for the complex 
cystometrogram services. For example, the commenters requested that 
single dual sensor catheters replace the single sensor catheters 
currently included as direct PE inputs for these codes. The commenters 
stated that both the catheters and their price inputs are outdated. In 
other cases, the commenters explained that certain supplies in the 
database were not those typically used by certain physician specialties 
in performing the services.
    Response: We rely on our review of recommendations received from 
the AMA RUC in order to make changes to the clinical labor, supply, and 
equipment inputs for CPT codes within the direct PE database. We have 
no reason to believe that the supplies used in the complex 
cystometrogram procedures described by CPT codes 51727, 51728, and 
51729 are outdated because these were new codes for CY 2010 and the AMA 
RUC recently addressed their direct PE inputs when initially 
recommending values for the services. We believe the AMA RUC's 
extensive expertise and broad perspective generally allows it to 
accurately identify the direct PE inputs for new and revised CPT codes. 
We encourage stakeholders who believe that enhancements in technology 
or changes in medical practice have resulted in changes in the supplies 
or equipment typically used in furnishing a particular service to 
address these concerns with the AMA RUC.
    As we discuss further in section II.A.3.e. of this final rule with 
comment period with respect to our proposal regarding updating supply 
and equipment price inputs, we welcome public requests for updates to 
supply price and equipment price and useful life inputs associated with 
existing codes through the process we are adopting beginning in CY 
2011.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to accept the recommendations of the 
AMA RUC regarding the revised direct PE inputs for CPT codes 51725 and 
52726. The final direct PE inputs are included in the final CY 2011 
direct PE database.
d. Referral of Existing CPT Codes for AMA RUC Review
    As part of our review of high cost supplies, we conducted a 
clinical review of the procedures associated with high cost supplies to 
confirm that those supplies currently are used in the typical case 
described by the CPT codes. While we confirmed that most high cost 
supplies could be used in the procedures for which they are currently 
direct PE inputs, we noted that one of the high cost supplies, fiducial 
screws (CMS Supply Code SD073) with a current price of $558, is 
included as a direct PE input for two CPT codes, specifically 77301 
(Intensity modulated radiotherapy plan, including dose-volume 
histograms for target and critical structure partial tolerance 
specifications) and 77011 (Computed tomography guidance for 
stereotactic localization). The documentation used in the current 
pricing of the supply item describes a kit that includes instructions, 
skull screws, a drill bit, and a collar for the TALON[reg] System 
manufactured by Best nomos. Best nomos' literature describes the 
insertion of the screws into the patient's skull to ensure accurate 
set-up. When CPT codes 77301 and 77011 were established in CY 2002 and 
CY 2003, respectively, we accepted the AMA RUC recommendations to 
include fiducial screws in the PE for these services. Upon further 
review, while we understand why this supply may still be considered a 
typical PE input for CPT code 77011, we do not now believe that 
fiducial screws, as described in the Best nomos literature, would 
typically be used in CPT code 77301, where the most common clinical 
scenario would be treatment of prostate cancer.
    Therefore, in order to ensure that CPT codes 77301 and 77011 are 
appropriately valued for CY 2011 through the inclusion or exclusion of 
fiducial screws in their PE, in the CY 2011 PFS proposed rule (75 FR 
40063), we asked the AMA RUC to review these CPT codes with respect to 
the inclusion of fiducial screws in their PE. We requested that the AMA 
RUC make recommendations to us regarding whether this supply should be 
included in the PE or removed from the PE for CPT codes 77301 and 77011 
in a timeframe that would allow us to adopt interim values for these 
codes for CY 2011, should the AMA RUC recommend a change. Were the AMA 
RUC to continue to recommend the inclusion of fiducial screws in the PE 
for CPT code 77301 and/or 77011 for CY 2011, we requested that the AMA 
RUC provide us with a detailed rationale for the inclusion of this 
specialized supply in the PE for the typical case reported under the 
relevant CPT code. We also requested that the AMA RUC furnish updated 
pricing information for the screws if they were to continue to 
recommend the screws as a PE input for one or both of these CPT codes 
in CY 2011.
    Comment: The AMA RUC recommended that CMS remove the fiducial 
screws as a direct PE input from both CPT codes 77011 and 77301. 
Several commenters also agreed that the fiducial screws would not 
typically be used with CPT code 77301. Additionally, multiple 
commenters pointed out that the fiducial screws may now be reported 
using HCPCS supply code A4648 (Tissue marker, implantable, any type, 
each) when the markers are implanted.
    Response: We appreciate the responsiveness of the AMA RUC to our 
request and the interest of the other commenters in this issue.
    After consideration of the public comments we received and the AMA 
RUC recommendation following publication of the CY 2011 PFS proposed 
rule, for CY 2011, we are accepting the AMA RUC's recommendation and 
removing fiducial screws from the direct PE database as inputs for CPT 
codes 77011 and 77301. Because the direct PE inputs for these codes are 
being revised on an interim final basis for CY 2011, the changes are 
subject to public comment on this final rule with comment period.
e. Updating Equipment and Supply Price Inputs for Existing Codes
    Historically, we have periodically received requests to change the 
PE price inputs for supplies and equipment in the PE database. In the 
past, we have considered these requests on an ad hoc basis and updated 
the price inputs as part of quarterly or annual updates if we believed 
them to be appropriate. In the CY 2011 PFS proposed rule (75 FR 49963), 
we proposed to establish a regular and more transparent process for 
considering public requests for changes to PE database price inputs for 
supplies and equipment used in existing codes.
    We proposed to act on public requests to update equipment and 
supply price inputs annually through rulemaking by following a regular 
and consistent process as discussed in the following paragraphs. We 
proposed to use the annual PFS proposed rule released in the summer and 
the final rule with comment period released on or about

[[Page 73206]]

November 1 each year as the vehicle for making these changes.
    We would accept requests for updating the price inputs for supplies 
and equipment on an ongoing basis; requests must be received no later 
than December 31 of each calendar year to be considered for inclusion 
in the next proposed rule. In that next proposed rule, we would present 
our review of submitted requests to update price inputs for specific 
equipment or supplies and our proposals for the subsequent calendar 
year. We would then finalize changes in the final rule with comment 
period for the upcoming calendar year. Our review of the issues and 
consideration of public comments may result in the following outcomes 
that would be presented in the final rule with comment period:
    <bullet> Updating the equipment or supply price inputs, as 
requested.
    <bullet> Updating the equipment or supply price inputs, with 
modifications.
    <bullet> Rejecting the new price inputs.
    <bullet> Declining to act on the request pending a recommendation 
from the AMA RUC.
    To facilitate our review and preparation of issues for the proposed 
rule, at a minimum, we would expect that requesters would provide the 
following information:
    <bullet> Name and contact information for the requestor.
    <bullet> The name of the item exactly as it appears in the direct 
PE database under downloads for the most recent PFS final rule with 
comment period, available on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
    In order to best evaluate the requests in the context of our goal 
of utilizing accurate market prices for these items as direct PE 
inputs, we also would expect requestors to provide multiple invoices 
from different suppliers/manufacturers. In some cases, multiple sources 
may not be available, whereupon a detailed explanation should be 
provided to support the request. When furnishing invoices, requestors 
should take into consideration the following parameters:
    ++ May be either print or electronic but should be on supplier and/
or manufacturer stationery (for example, letterhead, billing statement, 
etc.)
    ++ Should be for the typical, common, and customary version of the 
supply or equipment that is used to furnish the services.
    ++ Price should be net of typical rebates and/or any discounts 
available, including information regarding the magnitude and rationale 
for such rebates or discounts.
    ++ If multiple items are presented on the same invoice, relevant 
item(s) should be clearly identified.
    We solicited public comments on this process, including the 
information that requestors should furnish to facilitate our full 
analysis in preparation for the next calendar year's rulemaking cycle.
    Comment: Several commenters supported establishing a regular and 
more transparent process for considering public requests for changes to 
the direct PE price inputs for supplies and equipment used in existing 
codes. However, other commenters were concerned that the process might 
prevent CMS from making timely corrections to the database that are 
brought to the attention of the agency by specialty societies or other 
stakeholders. These commenters suggested creating an expedited process 
whereby mistakes could be corrected.
    Response: We appreciate the broad support for the proposal. We 
believe that this process, though regular, would not limit our ability 
to correct technical errors that are discovered by the agency or 
brought to our attention by stakeholders. On these occasions, we would 
continue to correct errors and issue correction notices to final rules 
when appropriate. The regular process for updating supply and equipment 
prices is intended to reflect significant changes in the market prices 
of supplies and equipment that are used in the direct PE database. It 
would not substitute for the timely correction of technical errors.
    Comment: Some commenters were concerned that the proposed process 
would necessitate a 12- to 24-month delay between CMS' acknowledgement 
of a price update and the resulting change in PE RVU calculations. The 
commenters pointed out that the current ad hoc process has historically 
resulted in a fairly timely response from the agency in most 
circumstances and were concerned that the formalization of the process 
might result in unnecessary delays. One commenter suggested creating a 
process for quarterly updates to the supply and equipment price inputs.
    Response: We understand that some commenters are concerned about 
the timelines for price updates. However, we believe that the value of 
the transparency of the proposed process outweighs its potential for 
slowing the previous ad hoc process. Additionally, it is important to 
acknowledge that in most previous cases, price input updates would not 
have been immediately effective since such updates have always required 
CMS' review, concurrence, and processing through the rate setting 
methodology prior to any change in Medicare payment rates. 
Additionally, many stakeholders already provide public comments to CMS 
regarding specific issues addressed in our annual rate setting for the 
PFS through the notice and comment rulemaking process. Therefore, we 
believe that the annual process offers both an economic use of 
stakeholders' resources, as well as the best opportunity for broad 
public input into proposed price changes. These are qualities any 
accelerated alternative, such as quarterly updates, would lack.
    We believe that an annual update process most effectively promotes 
both timeliness and transparency, while also allowing for public 
comment and input regarding our proposals before the adoption of 
pricing changes that could have a significant effect on payment for 
services under the PFS.
    Comment: Some commenters asserted that it may be more difficult to 
obtain invoices for some supplies that are not frequently used and 
there should be acceptable alternative sources of information, 
including price lists or other information from the manufacturer. One 
commenter suggested that in the case of items that are not used in high 
volumes in physicians' office, volume or other discounts are unlikely 
for physicians' practices.
    Response: Even though the direct PE inputs should reflect the 
resource costs required for typical cases, we understand that there may 
be circumstances in which updated invoices or invoices that reflect 
volume or other discounts may be difficult to obtain. As stated in our 
proposal, we will consider a detailed written explanation in support of 
requests submitted without the documentation usually required.
    Comment: One commenter urged that the updating of supply and 
equipment prices be only for ``like'' items and not for ``newer 
technology'' items. The commenter requested that CMS refer the initial 
review of new supply and equipment inputs to the AMA RUC Practice 
Expense Subcommittee for review and recommendation back to CMS. Other 
commenters made specific requests for additions, deletions, or 
substitutions of supply and equipment items associated with particular 
codes.
    Response: We appreciate the opportunity to clarify that this 
regular and consistent process would only apply to the price inputs for 
supply and equipment items. As part of our review of equipment price 
inputs, we will also consider updates to the useful life of equipment 
insofar as that information is

[[Page 73207]]

supported by similar documentation. However, we will continue to 
encourage stakeholders who believe that there should be additions, 
deletions, or substitutions of direct PE inputs associated with 
particular codes to address these concerns through the AMA RUC, 
including when a stakeholder believes that enhanced technology has 
replaced older technology in the typical case of a particular service. 
We believe the AMA RUC recommendations are an efficient and effective 
mechanism to inform our review of changes to the clinical labor, 
supply, and equipment inputs within the direct PE database.
    Comment: One commenter was concerned about the potential for CMS to 
reject the requested price input outright and suggested that CMS be 
required to explain its rejection of the request for an updated price 
input.
    Response: We appreciate the concerns of the commenter and consider 
this perspective as providing additional support for instituting such a 
regular and transparent process. As we stated in the CY 2011 proposed 
rule (75 FR 40063), we would present our review of submitted requests 
to update price inputs for specific equipment or supplies and our 
proposals for the subsequent calendar year in the annual proposed rule. 
This process would provide CMS an annual opportunity to explain our 
review and decisions regarding public requests for changes in direct PE 
price inputs.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to act on public requests to update 
equipment and supply price inputs annually through rulemaking by 
following a regular and consistent process as discussed in the 
preceding paragraphs. We will use the annual PFS proposed rule released 
in the summer and the final rule with comment period released on or 
about November 1 each year as the vehicle for making these changes. In 
order to make the most effective use of the rulemaking process and be 
responsive to the concerns of stakeholders that we consider the most 
recent evidence available, we ask that requests for updates to supply 
price inputs or equipment price or useful life inputs be submitted as 
comments to the PFS final rule with comment period each year, subject 
to the deadline for public comments applicable to that rule. 
Alternatively, stakeholders may submit requests to CMS on an ongoing 
basis throughout a given calendar year to CMS <a href="/cdn-cgi/l/email-protection#5f0f1a000f2d363c3a0016312f2a2b000a2f3b3e2b3a1f3c322c7137372c71383029"><span class="__cf_email__" data-cfemail="3464716b64465d57516b7d5a4441406b614450554051745759471a5c5c471a535b42">[email protected]</span></a>. Requests received by the end of a calendar year 
will be considered in rulemaking during the following year. For 
example, requests received by December 31, 2010 will be considered in 
conjunction with the CY 2012 PFS rulemaking cycle. We refer readers to 
the description earlier in this section of the minimum information we 
are requesting that stakeholders provide in order to facilitate our 
review and preparation of issues for the proposed rule.
    In the CY 2012 PFS proposed rule, scheduled to be released in the 
summer of CY 2011, we will present a review of any timely requests we 
receive to update supply price inputs or equipment price or useful life 
inputs. After reviewing the issues and responding to the public 
comments, we will finalize our decision as one of the outcomes listed 
below for each request in the final rule with comment period for CY 
2012.
    <bullet> Updating the equipment or supply price inputs, as 
requested.
    <bullet> Updating the equipment or supply price inputs, with 
modifications.
    <bullet> Rejecting the new price inputs.
    <bullet> Declining to act on the request pending a recommendation 
from the AMA RUC.
f. Other Issues
    We received other public comments on matters related to direct PE 
inputs that were not the subject of proposals in the CY 2011 PFS 
proposed rule. We thank the commenters for sharing their views and 
suggestions. Because we did not make any proposals regarding these 
matters, we do not generally summarize or respond to such comments in 
this final rule with comment period. However, we are summarizing and 
responding to several of the public comments in order to reiterate or 
clarify certain information.
    Comment: Several commenters stated that the clinical labor minutes 
for CPT code 37210 (Uterine fibroid embolization (UFE, embolization of 
the uterine arteries to treat uterine fibroids, leiomyomata), 
percutaneous approach inclusive of vascular access, vessel selection, 
embolization, and all radiological supervision and interpretation, 
intraprocedural roadmapping, and imaging guidance necessary to complete 
the procedure) are inconsistent with recommendations forwarded to CMS 
by the AMA RUC for CY 2007 and accepted by CMS in the CY 2007 PFS final 
rule with comment period (71 FR 69643). The commenters indicated that 
10 minutes of clinical labor time were erroneously not attributed to 
this CPT code in the proposed CY 2011 direct PE database.
    Response: We agree with the commenters' assessment and appreciate 
being informed of the error. The 10 minutes of clinical labor time 
missing from the direct PE inputs for CPT code 37210 have been 
incorporated and this change is reflected in the final CY 2011 direct 
PE database.
    Comment: Several commenters expressed concerns regarding the 
current direct PE inputs for various services. One commenter submitted 
extensive information regarding a perceived disparity between the 
equipment inputs for echocardiography services and those for other 
ultrasound services. Another commenter requested that CMS ask the AMA 
RUC to establish nonfacility RVUs for the placement or insertion of 
high dose rate brachytherapy catheters/applicators because it is common 
practice, especially in gynecology, for physicians to perform such 
procedures in their offices or in freestanding clinics. One commenter 
stated that the proposed PE RVUs do not provide sufficient payment to 
cover the cost of prothrombin time (PT)/international normalized ratio 
(INR) home monitoring services and recommended that CMS alter the 
direct PE inputs for those services. Another commenter requested that 
CMS alter direct PE inputs for holter monitoring based on changes to 
the language in CPT code descriptors from the current ``24 hours'' to 
``up to 48 hours,'' even when the AMA RUC did not recommend such 
changes.
    Response: We did not propose CY 2011 changes to the direct PE 
inputs for any of those services referenced by the commenters and, 
therefore, their direct PE inputs have already been finalized in a 
prior year's PFS rulemaking. As we have previously stated in this 
section, we encourage stakeholders who believe a change is required in 
the direct PE inputs associated with a particular service in the 
typical case that is furnished in the facility or nonfacility setting 
to address these concerns with the AMA RUC with respect to codes that 
have been reviewed by the AMA RUC. The direct PE inputs for existing 
services paid under the PFS have all been adopted through rulemaking 
that has allowed for public notice and comment, so their current direct 
PE inputs are final unless we would make a proposal to change them in a 
future year. In most cases, we like to receive and review 
recommendations from the AMA RUC for new and revised codes or other 
codes for which another review has been conducted in order to assist us 
in determining whether we should make changes to the clinical labor, 
supply, and equipment inputs within the direct

[[Page 73208]]

PE database and, if so, what revisions should be made.
    Additionally, throughout the year we meet with parties who want to 
share their views on topics of interest to them. These discussions may 
provide us with information regarding changes in medical practice and 
afford opportunities for the public to bring to our attention issues 
they believe we should consider for future rulemaking. Thus, we 
encourage stakeholders to contact us at any time if there are topics 
related to the direct PE inputs for physicians' services that they 
would like to discuss.

B. Malpractice Relative Value Units (RVUs)

1. Background
    Section 1848(c) of the Act requires that each service paid under 
the PFS be comprised of three components: Work, PE, and malpractice. 
From 1992 to 1999, malpractice RVUs were charge-based, using weighted 
specialty-specific malpractice expense percentages and 1991 average 
allowed charges. Malpractice RVUs for new codes after 1991 were 
extrapolated from similar existing codes or as a percentage of the 
corresponding work RVU. Section 4505(f) of the BBA required us to 
implement resource-based malpractice RVUs for services furnished 
beginning in 2000. Therefore, initial implementation of resource-based 
malpractice RVUs occurred in 2000.
    The statute also requires that we review, and if necessary adjust, 
RVUs no less often than every 5 years. The first review and update of 
resource-based malpractice RVUs was addressed in the CY 2005 PFS final 
rule with comment period (69 FR 66263). Minor modifications to the 
methodology were addressed in the CY 2006 PFS final rule with comment 
period (70 FR 70153). In the CY 2010 PFS final rule with comment 
period, we implemented the second review and update of malpractice 
RVUs. For a discussion of the second review and update of malpractice 
RVUs see the CY 2010 PFS proposed rule (74 FR 33537) and final rule 
with comment period (74 FR 61758).
2. Malpractice RVUs for New and Revised Services Effective Before the 
Next 5-Year Review
    Currently, malpractice RVUs for new and revised codes effective 
before the next 5-Year Review (for example, effective CY 2011 through 
CY 2014) are determined by a direct crosswalk to a similar ``source'' 
code or a modified crosswalk to account for differences in work RVUs 
between the new/revised code and the source code. For the modified 
crosswalk approach, we adjust the malpractice RVUs for the new/revised 
code to reflect the difference in work RVUs between the source code and 
the AMA RUC's recommended work value (or the work value we are applying 
as an interim final value under the PFS) for the new code. For example, 
if the interim final work RVUs for the new/revised code are 10 percent 
higher than the work RVUs for the source code, the malpractice RVUs for 
the new/revised code would be increased by 10 percent over the source 
code RVUs. This approach presumes the same risk factor for the new/
revised code and source code but uses the work RVUs for the new/revised 
code to adjust for risk-of-service. The assigned malpractice RVUs for 
new/revised codes effective between updates remain in place until the 
next 5-Year Review.
    For CY 2011, we explained that we will continue our current 
approach for determining malpractice RVUs for new/revised codes that 
become effective before the next 5-Year Review and update. Under this 
approach we crosswalk the new/revised code to the RVUs of a similar 
source code and adjust for differences in work (or, if greater, the 
clinical labor portion of the fully implemented PE RVUs) between the 
source code and the new/revised code. Additionally, we stated that we 
would publish a list of new/revised codes and the analytic crosswalk(s) 
used for determining their malpractice RVUs in the CY 2011 final rule 
with comment period, which we have not previously done. We also 
explained that the CY 2011 malpractice RVUs for new/revised codes would 
be implemented as interim final values in the CY 2011 PFS final rule 
with comment period, where they would be subject to public comment, and 
finalized in the CY 2012 PFS final rule with comment period.
    Comment: Several commenters supported the continuation of our 
current approach to determining malpractice RVUs for new/revised codes 
that become effective before the next 5-Year Review and update. The 
commenters stated that publication of the new/revised codes and the 
analytic crosswalk(s) used for determining their malpractice RVUs in 
the final rule is a move toward greater transparency. A few commenters 
requested that CMS provide the rationale used for selecting crosswalks 
for new/revised codes and subject the rationale to public comment.
    Response: For purposes of determining malpractice RVUs for the CY 
2011 new/revised codes, we accepted all source code recommendations 
submitted by the AMA RUC. We understand that the AMA RUC-recommended 
source codes for new/revised codes were based on the expected similar 
specialty mix of practitioners furnishing the source code and the new/
revised code. In other words, the medical specialties furnishing a 
source code were expected to be similar to the specialty mix furnishing 
the new/revised code. In adopting all of the AMA RUC's source code 
recommendations for CY 2011, we agree with its assessment of these 
similarities in each new/revised code case. If we were to disagree with 
the AMA RUC's malpractice source code recommendations in a future year 
for any new/revised codes, we would provide the rationale for both our 
difference of opinion and the alternative source code we select for 
purposes of establishing the interim final malpractice RVUs.
    After consideration of the public comments we received, we are 
continuing our current approach of assigning the interim final 
malpractice RVUs for new/revised codes based on the methodology 
described earlier in this section. We adjusted the malpractice RVUs of 
the CY 2011 new/revised codes for differences in work RVUs (or, if 
greater, the clinical labor portion of the fully implemented PE RVUs) 
between the source code and the new/revised code to reflect the 
specific risk-of-service for the new/revised code. The source code 
crosswalks for the CY 2011 new/revised codes are being adopted on an 
interim final basis and are subject to public comment on this CY 2011 
final rule with comment period, as are the CY 2011 malpractice RVUs of 
the new/revised codes that are listed in Addendum C to this final rule 
with comment period. The malpractice RVUs for the CY 2011 new/revised 
codes will be finalized in the CY 2012 PFS final rule with comment 
period, where we will also respond to the public comments received on 
the values that are included in this CY 2011 final rule with comment 
period.
    Table 8 lists the CY 2011 new/revised codes and their respective 
source codes for determining the interim final CY 2011 malpractice 
RVUs. We are also posting this crosswalk on the CMS Web site under the 
downloads for the CY 2011 PFS final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
BILLING CODE 4120-01-P

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[[Page 73211]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.242


[[Page 73212]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.243


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[GRAPHIC] [TIFF OMITTED] TR29NO10.244

BILLING CODE 4120-01-C
3. Revised Malpractice RVUs for Selected Disc Arthroplasty Services
    As discussed in the CY 2010 PFS proposed rule (74 FR 33539), we 
assign malpractice RVUs to each service based upon a weighted average 
of the risk factors of all specialties that furnish the service. For 
the CY 2010 review of malpractice RVUs, we used CY 2008 Medicare 
payment data on allowed services to establish the frequency of a 
service by specialty. CPT code 22856 (Total disc arthroplasty 
(artificial disc), anterior approach, including discectomy with end 
plate preparation (includes osteophytectomy for nerve root or spinal 
cord decompression and microdissection), single interspace, cervical) 
had zero allowed services for CY 2008. Therefore, our contractor 
initially set the level of services to 1, and assigned a risk factor 
according to the average risk factor for all services that do not 
explicitly have a separate technical or professional component. We 
proposed to adopt our contractor's initial malpractice RVUs for CPT 
code 22856 in the CY 2010 proposed rule. Application of the average 
physician risk factor would have resulted in a significant decrease in 
malpractice RVUs for CPT code 22856 in CY 2010.
    Several commenters on the CY 2010 PFS proposed rule expressed 
concern regarding the proposed malpractice RVUs for CPT code 22856, 
which represented a proposed reduction of more than 77 percent. The 
commenters stated that this service is predominantly furnished by 
neurosurgeons and orthopedic surgeons. Given the high risk factors 
associated with these specialty types and the changes in malpractice 
RVUs for comparable services, the commenters stated that a reduction in 
the malpractice RVUs of this magnitude for CPT code 22856 could not be 
correct.
    After consideration of the public comments, for CY 2010, we set the 
risk factor for CPT code 22856 as the weighted average risk factor of 
six comparable procedures mentioned by the commenters: CPT code 22554 
(Arthrodesis, anterior interbody technique, including minimal 
discectomy to prepare interspace (other than for decompression); 
cervical below C2); CPT code 22558 (Arthrodesis, anterior interbody 
technique, including minimal discectomy to prepare interspace (other 
than for decompression); lumbar); CPT code 22857 (Total disc 
arthroplasty (artificial disc), anterior approach, including discectomy 
to prepare interspace (other than for decompression), single 
interspace, lumbar); CPT code 22845 (Anterior instrumentation; 2 to 3 
vertebral segments (list separately in addition to code for primary 
procedure)); CPT code 63075 (Discectomy, anterior, with decompression 
of spinal cord and/or nerve root(s), including osteophytectomy; 
cervical, single interspace); and CPT code 20931 (Allograft for spine 
surgery only; structural (list separately in addition to code for 
primary procedure)). The weighted average risk factor for these 
services is 8.4.
    Since publication of the CY 2010 PFS final rule with comment 
period, stakeholders have mentioned that we made significant changes to 
the malpractice RVUs for CPT code 22856 in CY 2010. The commenters also 
brought to our attention that other services are clinically similar to 
CPT code 22856 and have similar work RVUs and, therefore, some 
stakeholders believe these services should all have similar malpractice 
RVUs. Services mentioned by the stakeholders that are clinically 
similar to CPT code 22856 include CPT code 22857; CPT code 22861 
(Revision including replacement of total disc arthroplasty (artificial 
disc), anterior approach, single interspace;

[[Page 73214]]

cervical); CPT code 22862 (Revision including replacement of total disc 
arthroplasty (artificial disc) anterior approach, lumbar); CPT code 
22864 (Removal of total disc arthroplasty (artificial disc), anterior 
approach, single interspace; cervical); and CPT code 22865 (Removal of 
total disc arthroplasty (artificial disc), anterior approach, single 
interspace; lumbar).
    After further review of this issue, for CY 2011 we proposed to 
apply the same risk factor used for CPT code 22856 to certain other 
services within this family of services (CPT codes 22857 through 22865) 
for which there were no allowed services in CY 2008. CPT codes 22861 
and 22864 had zero allowed services in CY 2008 and our contractor 
initially set their malpractice RVUs in the same way as it did for CPT 
code 22856. Therefore, for CY 2011 we proposed to assign the weighted 
average risk factor used for CPT code 22856 (that is, the weighted 
average of the risk factors for CPT codes 20931, 22554, 22558, 22845, 
22857, and 63075) to CPT codes 22861 and 22864. However, CPT codes 
22857, 22862, and 22865 are low volume services (allowed services under 
100). Our policy for low volume services is to apply the risk factor of 
the dominant specialty as indicated by our claims data. Thus, for CY 
2011 we proposed to continue to apply our policy for low volume 
services to CPT codes 22857, 22862, and 22865.
    Comment: A few commenters expressed support for the proposed 
changes in malpractice RVUs for disc arthroplasty services that are 
similar to CPT code 22856. One commenter urged CMS to finalize the 
proposal in the CY 2011 PFS final rule.
    Response: We appreciate the commenters' support for our proposal.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to apply the same risk factor used for 
CPT code 22856 to CPT codes 22861 and 22864 for purposes of setting the 
malpractice RVUs for these codes prior to the next 5-Year Review of 
malpractice RVUs.

C. Potentially Misvalued Services Under the Physician Fee Schedule

1. Valuing Services Under the PFS
    As discussed in section I. of this final rule with comment period, 
in order to value services under the PFS, section 1848(c) of the Act 
requires the Secretary to determine relative values for physicians' 
services based on three components: The work, practice expense (PE), 
and malpractice components. Section 1848(c)(1)(A) of the Act defines 
the work component to include ``the portion of the resources used in 
furnishing the service that reflects physician time and intensity in 
furnishing the service.'' Additionally, the statute provides that the 
work component shall include activities that occur before and after 
direct patient contact. Furthermore, the statute specifies that with 
respect to surgical procedures, the valuation of the work component for 
the code would reflect a ``global'' concept in which pre-operative and 
post-operative physicians' services related to the procedure would also 
be included.
    In addition, section 1848(c)(2)(C)(i) of the Act specifies that 
``the Secretary shall determine a number of work relative value units 
(RVUs) for the service based on the relative resources incorporating 
physician time and intensity required in furnishing the service.'' As 
discussed in detail in sections I.A.2. and I.A.3. of this final rule 
with comment period, the statute also defines the PE and malpractice 
components and provides specific guidance in the calculation of the 
RVUs for each of these components. Section 1848(c)(1)(B) of the Act 
defines the PE component as ``the portion of the resources used in 
furnishing the service that reflects the general categories of expenses 
(such as office rent and wages of personnel, but excluding malpractice 
expenses) comprising practice expenses.''
    Section 1848(c)(2)(C)(ii) of the Act specifies that the ``Secretary 
shall determine a number of practice expense relative value units for 
the services for years beginning with 1999 based on the relative 
practice expense resources involved in furnishing the service.'' 
Furthermore, section 1848(c)(2)(B) of the Act directs the Secretary to 
conduct a periodic review, not less often than every 5 years, of the 
RVUs established under the PFS. Finally, on March 23, 2010, the ACA was 
enacted, further requiring the Secretary to periodically review and 
identify potentially misvalued codes and make appropriate adjustments 
to the relative values of those services identified as being 
potentially misvalued. Section 3134(a) of the ACA added a new section 
1848(c)(2)(K) of the Act which requires the Secretary to periodically 
identify potentially misvalued services using certain criteria, and to 
review and make appropriate adjustments to the relative values for 
those services. Section 3134(a) of the ACA also added a new section 
1848(c)(2)(L) of the Act which requires the Secretary to develop a 
validation process to validate the RVUs of potentially misvalued codes 
under the PFS and make appropriate adjustments.
    As discussed in section I.A.1. of this final rule with comment 
period, we establish physician work RVUs for new and revised codes 
based on our review of recommendations received from the AMA RUC. The 
AMA RUC also provides recommendations to CMS on the values for codes 
that have been identified as potentially misvalued. To respond to 
concerns expressed by MedPAC, the Congress, and other stakeholders 
regarding accurate valuation of services under the PFS, the AMA RUC 
created the Five-Year Review Identification Workgroup in 2006. In 
addition to providing recommendations to CMS for work RVUs, the AMA 
RUC's Practice Expense Subcommittee reviews direct PE (clinical labor, 
medical supplies, and medical equipment) for individual services and 
examines the many broad methodological issues relating to the 
development of PE RVUs.
    In accordance with section 1848(c) of the Act, we determine 
appropriate adjustments to the RVUs, taking into account the 
recommendations provided by the AMA RUC and MedPAC, and publish the 
explanation for the basis of these adjustments in the PFS proposed and 
final rules. We note that section 1848(c)(2)(A)(ii) of the Act 
authorizes the use of extrapolation and other techniques to determine 
the RVUs for physicians' services for which specific data are not 
available, in addition to taking into account the results of 
consultations with organizations representing physicians.
2. Identifying, Reviewing, and Validating the RVUs of Potentially 
Misvalued Services Under the PFS
a. Background
    In its March 2006 Report to Congress, MedPAC noted that ``misvalued 
services can distort the price signals for physicians' services as well 
as for other health care services that physicians order, such as 
hospital services.'' In that same report MedPAC postulated that 
physicians' services under the PFS can become misvalued over time for a 
number of reasons: ``For example, when a new service is added to the 
physician fee schedule, it may be assigned a relatively high value 
because of the time, technical skill, and psychological stress that are 
required to perform it. Over time, skill, and stress involved may 
decline as physicians become more familiar with the service and more 
efficient at providing it. The amount of physician work needed to 
furnish an existing service may decrease when new technologies are 
incorporated. Services

[[Page 73215]]

can also become overvalued when practice expenses decline. This can 
happen when the costs of equipment and supplies fall, or when equipment 
is used more frequently, reducing its cost per use. Likewise, services 
can become undervalued when physician work increases or practice 
expenses rise.'' In the ensuing years since MedPAC's 2006 report, 
additional groups of potentially misvalued services have been 
identified by Congress, CMS, MedPAC, the AMA RUC, and other 
stakeholders.
    In recent years CMS and the AMA RUC have taken increasingly 
significant steps to address potentially misvalued codes. As MedPAC 
noted in its March 2009 Report to Congress, in the intervening years 
since MedPAC made the initial recommendations, ``CMS and the AMA RUC 
have taken several steps to improve the review process.'' Most 
recently, section 1848(c)(2)(K)(ii) of the Act (as added by section 
3134 of the ACA) directed the Secretary to specifically examine 
potentially misvalued services in seven categories as follows:
    (1) Codes and families of codes for which there has been the 
fastest growth.
    (2) Codes or families of codes that have experienced substantial 
changes in practice expenses.
    (3) Codes that are recently established for new technologies or 
services.
    (4) Multiple codes that are frequently billed in conjunction with 
furnishing a single service.
    (5) Codes with low relative values, particularly those that are 
often billed multiple times for a single treatment.
    (6) Codes which have not been subject to review since the 
implementation of the RBRVS (the so-called ``Harvard-valued codes'').
    (7) Other codes determined to be appropriate by the Secretary.
    Section 1848(c)(2)(K)(iii) of the Act (as added by section 3134 of 
the ACA) also specifies that the Secretary may use existing processes 
to receive recommendations on the review and appropriate adjustment of 
potentially misvalued services. In addition, the Secretary may conduct 
surveys, other data collection activities, studies, or other analyses 
as the Secretary determines to be appropriate to facilitate the review 
and appropriate adjustment of potentially misvalued services. This 
section authorizes the use of analytic contractors to identify and 
analyze potentially misvalued codes, conduct surveys or collect data, 
and make recommendations on the review and appropriate adjustment of 
potentially misvalued services. Finally, section 1848(c)(2)(K)(iii)(V) 
of the Act (as added by section 3134 of the ACA) specifies that the 
Secretary may make appropriate coding revisions (including using 
existing processes for consideration of coding changes) which may 
include consolidation of individual services into bundled codes for 
payment under the physician fee schedule.
b. Progress in Identifying and Reviewing Potentially Misvalued Codes
    Over the last several years, CMS, in conjunction with the AMA RUC, 
has identified and reviewed numerous potentially misvalued codes in all 
seven of the categories specified in section 1848(c)(2)(K)(ii) (as 
added by section 3134 of the ACA), and we plan to continue our work 
examining potentially misvalued codes in these areas over the upcoming 
years, consistent with the new legislative mandate on this issue. In 
the current process, the AMA RUC reviews potentially misvalued codes 
that are identified either by CMS or through its own processes and 
recommends revised work RVUs and/or direct PE inputs for those codes to 
CMS. CMS then assesses the recommended revised work RVUs and/or direct 
PE inputs and, in accordance with section 1848(c) of the Act, we 
determine if the recommendations constitute appropriate adjustments to 
the RVUs under the PFS. Since CY 2009, CMS and the AMA RUC have 
identified over 700 potentially misvalued codes.
    For example, in regard to the first category (codes and families of 
codes for which there has been the fastest growth), for CY 2009 CMS 
identified over 100 potentially misvalued codes for which an analysis 
of the utilization data showed an annual growth in allowed services of 
10 percent (or more) for 3 consecutive years (73 FR 38586). Each of 
these codes had allowed charges of $1 million or more in CY 2007. We 
published this list in the CY 2009 PFS proposed rule (73 FR 38586 
through 38589) and requested that the AMA RUC immediately begin a 
review of the codes on this list. Meanwhile, in parallel with CMS' 
efforts, the AMA RUC also initiated processes to identify and review 
potentially misvalued codes on an ongoing basis using certain screens, 
including screens for ``CMS fastest growing procedures'' and ``high 
volume growth.'' Both of these AMA RUC screens are applicable to the 
first category of potentially misvalued codes specified in the ACA. We 
plan to continue to analyze Medicare claims data over future years to 
identify additional services that exhibit rapid growth and high 
Medicare expenditures for referral to the AMA RUC for review as 
potentially misvalued codes.
    Pertaining to the second category specified in section 
1848(c)(2)(K)(ii) of the Act (as added by section 3134 of the ACA) 
(codes or families of codes that have experienced substantial changes 
in practice expenses), in CY 2009 we requested that the AMA RUC 
continue its review of direct PE inputs, focusing particularly on high-
volume codes where the PE payments are increasing significantly under 
the transition to the new PE methodology (73 FR 38589). The AMA RUC has 
responded by sending CMS recommendations for revised direct PE inputs 
for codes identified for PE review on an ongoing basis.
    Additionally in CY 2009, we began an initiative to review and 
update the prices for high-cost supplies in order to ensure the 
accuracy and completeness of the direct PE inputs. We discuss our most 
recent efforts in refining the process to update the prices of high-
cost supplies in section II.C.5. of this final rule with comment 
period.
    For the third category of potentially misvalued codes identified in 
section 1848(c)(2)(K)(ii) (as added by section 3134 of the ACA) (codes 
that are recently established for new technologies or services), the 
AMA RUC routinely identifies such codes through a screen based on 3 
years of Medicare claims data, and sends CMS recommendations for 
revised work RVUs and/or direct PE inputs for these codes on an ongoing 
basis. The AMA RUC may determine that a code for a new service requires 
reevaluation or does not require reevaluation, or it may conclude, on a 
case-by-case basis, that more than 3 years of claims data are necessary 
before the code can be reviewed. In that case, it would determine the 
appropriate future timeframe for review.
    We also note that in its June 2008 Report to Congress entitled 
``Reforming the Health Care System'' and in the context of a discussion 
about primary care, MedPAC acknowledges, ``* * * Efficiency can improve 
more easily for other types of services, such as procedures, with 
advances in technology, technique, and other factors. Ideally, when 
such efficiency gains are achieved, the fee schedule's relative value 
units (RVUs) for the affected services should decline accordingly, 
while budget neutrality would raise the RVUs for the fee schedule's 
primary care services.'' (page 27). Section II.C.5. of this final rule 
with comment period includes a discussion regarding periodic updates to 
the costs of high-cost supplies. This discussion is highly relevant to 
new technology services, where growth in volume of a

[[Page 73216]]

service as it diffuses into clinical practice may lead to a decrease in 
the cost of expensive supplies. We also expect that other efficiencies 
in physician work and PE may be achieved after an initial period of 
relative inefficiency that reflects the ``learning curve.'' We plan to 
pay particular attention to the work values and direct PE inputs for 
these new services and the AMA RUC's periodic review process to ensure 
that any efficiencies are captured under the PFS over time, recognizing 
that the appropriate timing for revaluing these services needs to be 
considered on a case-by-case basis depending on the growth rate in 
service volume.
    We have also addressed the fourth category (multiple codes that are 
frequently billed in conjunction with furnishing a single service) in 
rulemaking prior to the enactment of the ACA. As discussed in the CY 
2009 PFS proposed rule (73 FR 38586), we have a longstanding policy of 
reducing payment for multiple surgical procedures performed on the same 
patient, by the same physician, on the same day. Over the ensuing 
years, the multiple procedure payment reduction (MPPR) policy has been 
extended to a number of nuclear diagnostic and diagnostic imaging 
procedures. We continue our work to recognize efficiencies in this area 
with a new CY 2011 policy to expand the MPPR policy to additional 
combinations of imaging services and to therapy services for CY 2011 as 
described in section II.C.4. of this final rule with comment period.
    We note the AMA RUC has also established a screen to identify 
services performed by the same physician on the same date of service 95 
percent of the time or more. Over the past 2 years, the CPT Editorial 
Panel has established new bundled codes to describe a comprehensive 
service for certain combinations of these existing services that are 
commonly furnished together, and the AMA RUC has recommended work 
values and direct PE inputs to CMS for these comprehensive service 
codes that recognize the associated efficiencies. We look forward to 
working with the AMA RUC in this joint effort to examine codes commonly 
reported together and more appropriately value common combinations 
services.
    We address the fifth category of potentially misvalued codes (codes 
with low relative values, particularly those that are often billed 
multiple times for a single treatment) in section II.C.3.b. of this 
final rule with comment period. That is, we have provided a list of 
services with low work RVUs that are commonly reported with multiple 
units in a single encounter and requested that the AMA RUC review these 
codes that we have identified as potentially misvalued.
    The sixth category (codes which have not been subject to review 
since the implementation of the RBRVS (the so-called ``Harvard-valued 
codes'')) also continues to be addressed by CMS and the AMA RUC on an 
ongoing basis. As we noted in the CY 2009 PFS proposed rule (73 FR 
38589), there were at that time approximately 2,900 codes, representing 
$5 billion in annual spending, that were originally valued using 
Harvard data and had not subsequently been evaluated by the AMA RUC. 
Consequently, in CY 2009, we requested that the AMA RUC engage in an 
ongoing effort to review the remaining Harvard-valued codes, focusing 
first on the high-volume, low-intensity codes (73 FR 38589). In 
response to our request, the AMA RUC initially conducted an analysis of 
Harvard-valued services with utilization above 10,000 services per 
year, which resulted in a list of 296 distinct services (73 FR 69883). 
The AMA RUC, in its public comment on the CY 2009 proposed rule, stated 
that it believes it would be effective to limit any review to these 296 
services and also noted that of the 296 services identified, 23 had 
already been identified by another screen and were in the process of 
being reviewed (73 FR 69883). To date, the AMA RUC has reviewed and 
submitted to CMS recommendations for revised work RVUs and/or direct PE 
inputs for a number of Harvard-valued codes, prioritizing those codes 
with utilization of over 1 million services. The AMA RUC and CMS intend 
to continue our ongoing assessment of Harvard-valued codes, next 
targeting codes with utilization of over 100,000 services.
    Finally, the seventh category of potentially misvalued codes in 
section 1848(c)(2)(K)(ii) (as added by section 3134 of the ACA) is all 
other codes determined to be appropriate by the Secretary. In this 
category, CMS has previously proposed policies and requested that the 
AMA RUC review codes for which there have been shifts in the site-of-
service (site-of-service anomalies), as well as codes that qualify as 
``23-hour stay'' outpatient services. The policies for valuation of 
both the site-of-service anomaly codes and the ``23-hour stay'' codes 
are developed further in sections II.C.3.d. and e., respectively, of 
this final rule with comment period. For CY 2011, we have also 
identified codes with low work RVUs but that are high volume based on 
claims data as another category of potentially misvalued codes and 
referred these codes to the AMA RUC for review, as discussed in section 
II.C.3.b. of this final rule with comment period. In addition, for CY 
2011 we have newly targeted key codes that the AMA RUC uses as 
reference services for valuing other services, termed ``multispecialty 
points of comparison'' services, and referred these to the AMA RUC for 
review as potentially misvalued codes as described in section II.C.3.a. 
of this final rule with comment period. Finally, we note the AMA RUC 
has also established screens to identify potentially misvalued codes in 
additional categories, including codes with a high intra-service work 
per unit of time (IWPUT) and codes representing services that had been 
surveyed by one specialty, but are now performed by a different 
specialty. We will continue to review AMA RUC recommendations for 
revised work RVUs and/or direct PE inputs for codes that fall into 
these categories.
    As a result of the combined efforts of CMS and the AMA RUC to 
address potentially misvalued codes, for CY 2009 the AMA RUC 
recommended revised work values and/or PE inputs for 204 misvalued 
services (73 FR 69883). For CY 2010, an additional 113 codes were 
identified as misvalued and the AMA RUC provided new recommendations 
for revised work RVUs and/or PE inputs to CMS as discussed in the CY 
2010 PFS final rule with comment period (74 FR 61778). Upon review of 
the AMA RUC-recommended work RVUs, CMS accepted the majority of the 
values as appropriate adjustments to the RVUs under the PFS, in 
accordance with section 1848(c) of the Act. However, for a number of 
codes, mainly the site-of-service anomaly codes, we indicated that 
although we would accept the AMA RUC valuations for these codes on an 
interim basis through CY 2010, we had ongoing concerns about the 
methodology used by the AMA RUC to review these services (73 FR 69883 
and 74 FR 61776 through 61778, respectively). In the CY 2010 PFS final 
rule with comment period, we requested that the AMA RUC reexamine the 
site-of-service anomaly codes and use the building block methodology to 
revalue the services (74 FR 61777). In that same rule, we also stated 
that we would continue to examine these codes and consider whether it 
would be appropriate to propose additional changes in future 
rulemaking. We discuss our CY 2011 proposals with respect to these 
codes in section II.C.3.d. of this final rule with comment period.

[[Page 73217]]

c. Validating RVUs of Potentially Misvalued Codes
    In addition to identifying and reviewing potentially misvalued 
codes, section 1848(c)(2)(L) (as added by section 3134 of the ACA) 
specifies that the Secretary shall establish a formal process to 
validate relative value units under the PFS. The validation process may 
include validation of work elements (such as time, mental effort and 
professional judgment, technical skill and physical effort, and stress 
due to risk) involved with furnishing a service and may include 
validation of the pre-, post-, and intra-service components of work. 
The Secretary is directed to validate a sampling of the work RVUs of 
codes identified through any of the seven categories of potentially 
misvalued codes specified by section 1848(c)(2)(K)(ii) of the Act (as 
added by section 3134 of the ACA). Furthermore, the Secretary may 
conduct the validation using methods similar to those used to review 
potentially misvalued codes, including conducting surveys, other data 
collection activities, studies, or other analyses as the Secretary 
determines to be appropriate to facilitate the validation of RVUs of 
services. Currently, while CMS does assess the AMA RUC-recommended work 
RVUs to determine if the recommendations constitute appropriate 
adjustments to the RVUs under the PFS, we intend to establish a more 
extensive validation process of RVUs in the future in accordance with 
the requirements of section 1848(c)(2)(L) of the Act (as added by 
section 3134 of the ACA). Therefore, in the CY 2011 PFS proposed rule 
(75 FR 40068), we solicited public comments on possible approaches and 
methodologies that we should consider for a validation process. We were 
interested in public comments regarding approaches, including the use 
of time and motion studies, to validate estimates of physician time and 
intensity that are factored into the work RVUs for services with rapid 
growth in Medicare expenditures, one of the categories that the statute 
specifically directs CMS to examine. We indicated that we plan to 
discuss the validation process in a future PFS rule once we have 
considered the matter further in conjunction with any public comments 
and other input from stakeholders that we receive.
    Comment: Some commenters were skeptical that there could be viable 
alternative methods to the existing AMA RUC code review process for 
validating physician time and intensity that would preserve the 
appropriate relativity of specific physician's services under the 
current payment system. These commenters generally urged CMS to rely 
solely on the AMA RUC to provide valuations for services under the PFS. 
A number of commenters expressed the belief that since CMS has reviewed 
the AMA RUC recommendations for codes and generally accepted these 
valuations in the past, these actions constitute a ``CMS validation 
process.'' The commenters asserted that this current ``CMS validation 
process'' more than meets the requirement of section 1848(c)(2)(L) of 
the Act (as added by section 3134 of the ACA).
    In addition, a number of commenters opposed the approach of using 
time and motion studies to validate estimates of physician time and 
intensity, stating that properly conducted time and motion studies are 
extraordinarily expensive and, given the thousands of codes paid under 
the PFS, it would be unlikely that all codes could be studied. The 
commenters generally opposed applying different methodologies to 
valuing different services under the PFS and supported using a 
consistent methodology for all codes. Some commenters observed that it 
would be extremely difficult for CMS to establish a process by which to 
validate a sample of work RVUs under the PFS because of the relative 
nature of the system. Specifically, one commenter noted that the 
``advantages of a relative system are considerable--they allow scaling 
based on available funds and make it far easier for a payer such as 
Medicare to set rates for multiple services with a single adjustment to 
the conversion factor. However, one disadvantage of a relative system 
is that it cannot be externally validated unless all components are 
included in the validation. Services cannot be examined for absolute 
accuracy, only for relative precision. If we identify some component of 
the calculation used to generate the RVU that is incorrect, it is 
impossible to know whether this is a systemic error or an issue with an 
individual code. If it is a systemic error, then it does not invalidate 
the relative value system, which merely must operate on an even playing 
field.'' That is, many commenters believe that as long as appropriate 
relativity is maintained in the work RVUs for services valued under the 
PFS, the specific methodology for valuing services is less important. 
Accordingly, many commenters expressed support for the AMA RUC's use of 
``magnitude estimation'' to develop the recommended value for a service 
and urged CMS to accept the AMA RUC's recommendations as the most 
informed and best estimation of the true value of physician work for a 
service.
    In contrast, some commenters declared that ``the flaws inherent in 
the RUC system are the lack of accountability and transparency.'' These 
commenters believe that the AMA RUC's composition as a professional 
panel puts cognitive services at a disadvantage and suggested that 
``the composition of the RUC needs to be modified to more accurately 
reflect the desired workforce composition. At present primary care 
specialties are under-represented which we [the commenters] believe 
contributes to the overvaluation of procedural codes and undervaluation 
of cognitive codes.'' Similarly, other commenters noted that while 
certified registered nurse anesthetists (CRNAs) furnished approximately 
32 million anesthesia services in the United States annually and can 
bill Medicare directly for their services, ``the AMA RUC excludes CRNAs 
from directly participating in its deliberations because CRNAs are not 
physicians.'' These commenters noted that ``without fair representation 
by all specialties that bill Part B directly, CMS' reliance on the AMA-
RUC as representing the professional views and knowledge of all 
healthcare specialties is deeply flawed.'' The commenters also advised 
that ``while the RUC relies on persuasion and brokering deals, RVUs 
need to be validated empirically.'' In general, these commenters 
believe that since section 1848(c)(2)(L) of the Act (as added by 
section 3134 of the ACA) expressly specifies that CMS has the authority 
to conduct surveys and studies and collect data, CMS should develop a 
process that uses empirical evidence as the basis for validation of 
work RVUs.
    Response: We agree with the commenters that the work before us to 
develop a formal validation process as specified by section 
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA) will be 
a challenging but worthwhile effort to ensure accurate valuation of 
physician work under the PFS. While we have reviewed AMA RUC 
recommendations for codes and frequently accepted these valuations in 
the past, we disagree with the commenters' assertion that these actions 
constitute a formal CMS validation process as envisioned by section 
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA). Section 
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA) clearly 
specifies a new requirement that ``the Secretary shall establish a 
process to validate relative value units under the fee schedule.'' 
While we solicited

[[Page 73218]]

comments on the possibility of using time and motion studies to support 
a future validation process, we understand that these studies would 
require significant resources and we remain open to suggestions for 
other approaches to developing a validation process.
    In response to the commenters who raised the issue of the AMA RUC's 
most commonly used approach for valuing codes, referred to as 
``magnitude estimation,'' we note that the AMA RUC does not rely on a 
single consistent methodology to value codes. Based on our historical 
and current review of the AMA RUC recommendation summaries which 
accompany the work RVU recommendations for each code newly valued or 
revalued by the AMA RUC each year, we have noticed that the AMA RUC 
appears to use a variety of methodologies in its valuation process. For 
some codes, the AMA RUC uses magnitude estimation in conjunction with 
survey data from surveys conducted by the specialty societies to 
support the values. For other codes, the AMA RUC uses magnitude 
estimation to override the results of the survey data, recommending to 
CMS a value that is not based on survey data, but rather, justified in 
terms of its appropriate relativity within the system to other similar 
services. The AMA RUC may also elect to use a crosswalk approach in 
valuing a code by applying a work value from a currently valued code to 
the code under review based on the clinical similarity of the 
procedures or explicit considerations of pre-, intra-, and post-service 
time. In some instances, we note that the AMA RUC has asserted that it 
uses the building block methodology to value the code, a methodology we 
have historically supported (74 FR 61777). Since the AMA RUC uses a 
variety of methodologies for valuing codes, not just magnitude 
estimation supported by survey data, or our recommended methodology of 
valuation based on building blocks, we foresee that validation of the 
work RVUs will be complex, perhaps requiring an initial study of the 
all the possible valuation methodologies currently being employed by 
the AMA RUC so that we can better understand how relativity between 
services under the PFS has developed and been maintained over the 
years.
    As we have stated previously (69 FR 66243), because the AMA RUC is 
an independent committee, we are not in a position to set the 
requirements for AMA RUC membership regarding primary care specialties 
or other types of practitioners. Concerned stakeholders should 
communicate directly with the AMA RUC regarding its professional 
composition. We note that we alone are responsible for all decisions 
about establishing the RVUs for purposes of PFS payment so, while the 
AMA RUC provides us with recommendations regarding the work and direct 
PE inputs for new and revised CPT codes in the context of its broad 
expertise, we determine the interim final RVUs for all new or revised 
services. Additionally, the interim RVUs are subject to public comment 
and we respond to those comments in a final rule when we adopt the 
final RVUs for the new and revised CPT codes. We believe that the 
formal validation process will further complement the ongoing work of 
the AMA RUC to provide recommendations to us regarding the valuation of 
PFS services.
    Comment: While a number of commenters strongly opposed CMS' plans 
to develop a formal validation process, many other commenters expressed 
support for the development and establishment of a system-wide 
validation process of the work RVUs under the PFS. The commenters 
commended CMS for seeking new approaches to validation, as well as 
being open to suggestions from the public on this process. A number of 
commenters submitted technical advice and offered their time and 
expertise as resources for CMS to draw upon in any examination of 
possible approaches to developing a formal validation process.
    Furthermore, MedPAC advised that a formal validation process should 
include validating the fee schedule's estimates of physician time. 
MedPAC noted that ``Contract research for CMS and the Assistant 
Secretary for Planning and Evaluation has shown that some of the time 
estimates are likely too high. In addition, the Government 
Accountability Office has found that the fee schedule does not 
adequately account for efficiencies occurring when a physician 
furnishes multiple services for the same patient on the same day.'' 
Finally, MedPAC suggested that CMS should consider alternative 
approaches, ``such as collecting data on a recurring basis from a 
cohort of practices and other facilities where physicians and 
nonphysician clinical practitioners work.''
    Some commenters noted that ``involving RUC experts, those who are 
most intimately acquainted with and possess the deepest level of 
expertise and experience makes the most sense'' and stated that these 
individuals ``are also those best equipped to provide insights and 
guidance to help shape an independent validation system.'' A number of 
commenters asked CMS to confirm that stakeholders would be given the 
opportunity to comment on any specific proposals for a validation 
process that CMS plans to implement.
    Response: We thank the many commenters who generously offered to 
help and provided technical suggestions, including the use of 
statistical modeling and possible sources of data that we should 
consider in developing a validation process. We will review MedPAC's 
suggestions to examine physician time in the formal validation process. 
We will also consider the commenters' recommendation that we include 
the AMA RUC and other professional groups who also have a stake in 
ensuring appropriate payment for practitioners' services. As we stated 
previously, we intend to establish a more extensive validation process 
of RVUs in the future in accordance with the requirements of section 
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA). We note 
that MedPAC, in providing comments to the CY 2011 PFS proposed rule, 
``strongly supports efforts to improve the accuracy of the fee 
schedule's RVUs.'' We plan to discuss the validation process in more 
detail in a future PFS rule once we have considered the matter further 
in conjunction with the public comments that we have received in 
response to our solicitation in the CY 2011 proposed rule as well as 
other input from stakeholders. Moreover, we note that any proposals we 
would make on the formal validation process would be subject to public 
comment, and we would consider those comments before finalizing any 
policies.
3. CY 2011 Identification and Review of Potentially Misvalued Services
    In this section, we discuss codes that may be potentially misvalued 
according to five different criteria:
    <bullet> Codes on the multi-specialty points of comparison list;
    <bullet> Codes with low work RVUs commonly billed in multiple units 
per single encounter;
    <bullet> Codes with high volume and low work RVUs;
    <bullet> Codes with site-of-service anomalies; and
    <bullet> Codes that qualify as ``23-hour stay'' outpatient 
services.
a. Codes on the Multispecialty Points of Comparison List
    The AMA RUC uses a scale referred to as the multispecialty points 
of comparison (MPC) to evaluate the reasonableness of a specialty 
society's recommended RVU value for a service.

[[Page 73219]]

The MPC list contains reference codes of established comparison 
services that are used in the valuation of new codes. The current MPC 
list consists of 316 codes which the AMA RUC may use to compare and 
contrast the relativity of codes under review to existing relative 
values. Since the AMA RUC may use the values on the MPC list as a basis 
for relativity when determining the values for new, revised, and newly 
reviewed codes (including potentially misvalued codes), it is essential 
that the services on the MPC list be appropriately valued since any 
codes misvalued on the MPC list could contribute to the misvaluing of 
other codes under review. While we believe that the entire MPC list 
should be assessed to ensure that services are paid appropriately under 
the PFS, we prioritized the review of the MPC list, ranking the codes 
by allowed service units and charges based on CY 2009 claims data. We 
proposed to refer the codes in Table 9 to the AMA RUC for review in CY 
2011.

       Table 9--Codes on the MPC List Referred for AMA RUC Review
------------------------------------------------------------------------
           CPT code                         Short descriptor
------------------------------------------------------------------------
66984.........................  Cataract surg w/iol, 1 stage.
97110.........................  Therapeutic exercises.
43239.........................  Upper GI endoscopy, biopsy.
20610.........................  Drain/inject, joint/bursa.
78815.........................  Pet image w/ct, skull-thigh.
45385.........................  Lesion removal colonoscopy.
45380.........................  Colonoscopy and biopsy.
11721.........................  Debride nail, 6 or more.
17000.........................  Destruct premalg lesion.
92980.........................  Insert intracoronary stent.
74160.........................  Ct abdomen w/dye.
71020.........................  Chest x-ray.
11100.........................  Biopsy, skin lesion.
66821.........................  After cataract laser surgery.
52000.........................  Cystoscopy.
92083.........................  Visual field examination(s).
73721.........................  Mri jnt of lwr extre w/o dye.
93010.........................  Electrocardiogram report.
77334.........................  Radiation treatment aid(s).
92250.........................  Eye exam with photos.
95810.........................  Polysomnography, 4 or more.
77003.........................  Fluoroguide for spine inject.
11056.........................  Trim skin lesions, 2 to 4.
76700.........................  Us exam, abdom, complete.
77290.........................  Set radiation therapy field.
77300.........................  Radiation therapy dose plan.
43235.........................  Uppr gi endoscopy, diagnosis.
71275.........................  Ct angiography, chest.
95900.........................  Motor nerve conduction test.
31231.........................  Nasal endoscopy, dx.
95165.........................  Antigen therapy services.
94060.........................  Evaluation of wheezing.
31575.........................  Diagnostic laryngoscopy.
------------------------------------------------------------------------

    Comment: While some commenters agreed with CMS that the entire MPC 
list should be assessed to ensure that services are paid appropriately 
under the PFS, and supported the proposal that the AMA RUC review the 
services listed in Table 9, a number of other commenters expressed 
surprise that CMS seemed to be suggesting that any code on the MPC list 
could be classified as potentially misvalued. Many commenters noted 
that the MPC list of codes is considered the ``gold standard'' within 
the PFS and it is used to help judge the appropriate relativity of 
procedures across specialties. A number of commenters assured CMS that 
the codes on the MPC list have been thoroughly vetted and, therefore, 
these commenters took issue with CMS for implying that the codes could 
somehow be considered potentially misvalued. Specifically, one 
commenter noted, ``[t]he assumption of the specialties, the RUC and CMS 
has been that these services are appropriately valued and well 
established.'' Another commenter expressed the concern as follows: 
``[c]hallenging the rank order of the MPC list essentially negates 20 
years of RUC work. Obtaining new data to validate the old data 
inevitably leads to the problem of what should be done if the data 
yield different results. Is there any reason to believe that a newer 
survey is a more accurate survey, or that the data analysis and 
subsequent opinion of the current or future RUCs will be more valid 
than that of previous RUCs? Admittedly data collection methods have 
become more refined in the past 20 years, but that neither means nor 
implies that relativity amongst physician services has changed.'' Some 
commenters reminded CMS that the AMA RUC is already planning to review 
some codes on the MPC list in the coming year, while other commenters 
noted that some of the codes on the MPC list have been reviewed by the 
AMA RUC within the past 6 years. Some commenters did not believe that 
some of the well-established services on the MPC list would need 
another review and that the resources required to re-review such 
services could be better used elsewhere. Furthermore, some commenters 
believe that if a code has been surveyed as part of the potentially 
misvalued services initiative during the last 5 years and it is 
identified again using a different screen, that it need not be 
resurveyed again.
    Finally, several commenters noted that while reviewing all the 
codes on the MPC list would ``be a substantial undertaking for the RUC, 
properly valuing these services will help restore equity in the 
physician payment system.'' The commenters further suggested that CMS 
should specify to the AMA RUC what it considers good survey 
methodology, including the use of peer review and time studies.
    Response: We note that the vast majority of commenters, whether 
they supported or opposed our proposal, acknowledged the significant 
and central role that the MPC list plays in the valuation of services 
under the PFS. Because it is currently the ``gold standard'' to which 
other codes, across specialties, are compared, we agree with the 
commenters who suggested that codes on this list should be vetted, 
though we disagree that we should assume this has been done or occurs 
automatically and systematically. We also acknowledge that the AMA RUC 
recently has reviewed some of the codes and is planning to review more 
codes on the MPC list. Our proposal suggested prioritizing the review 
of the codes by ranking them according to utilization which, in our 
view, would potentially provide the most immediate benefit to the 
system.
    If a code on the MPC list has not been reviewed recently--certainly 
more recently than 6 years ago--we believe that the code is vulnerable 
to being potentially misvalued and that the misvaluation of an MPC code 
could disproportionately affect the correct valuation of other related 
services under the PFS. Given the rapid changes in medical practice, we 
have no reason to believe that the relativity of the MPC codes would 
not have changed over the past 20 years and we would expect that more 
recent survey data would more accurately reflect the physician work in 
current medical practice. If the codes are resurveyed and newer more 
accurate data are available, we would support using the most recent 
available data to value physician work under the PFS, which is 
consistent with our general policy to use the most current data 
whenever possible and practicable to update the PFS.
    Given the evolving review process of the AMA RUC over the past 
several years, CMS' strong interest in ensuring current and appropriate 
physician work values for PFS services, and the increased emphasis on 
revaluing established services that are potentially misvalued, we are 
requesting that the AMA RUC provide a current and comprehensive 
recommendation on the appropriate physician work value, including 
describing and affirming the methodology for the recommended work 
value, for all of the codes listed in Table 9. To the extent the AMA 
RUC chooses to limit its work in reexamining MPC codes that have 
recently been evaluated, consistent with our usual practice, we will 
consider the context when we evaluate the AMA RUC's recommendation for 
the value of the code.

[[Page 73220]]

    Although valuation is ultimately our responsibility, the AMA RUC 
and CMS remain partners in ensuring the appropriate valuation of 
physician work for services under the PFS and we believe our proposal 
serves to enhance this process. Accordingly, after consideration of the 
public comments we received, we are finalizing our CY 2011 proposal and 
we look forward to receiving the AMA RUC's recommendations for the 
codes listed in Table 9.
b. Codes With Low Work RVUs Commonly Billed in Multiple Units Per 
Single Encounter
    Consistent with section 1848(c)(2)(K)(ii) of the Act (as added by 
section 3134 of the ACA) which identifies categories of potentially 
misvalued codes for our review, we believe services with low work RVUs 
that are commonly billed with multiple units in a single encounter are 
an additional appropriate category for identifying potentially 
misvalued codes. An example of a high multiple/low work RVU service is 
CPT code 95004 (Percutaneous tests (scratch, puncture, prick) with 
allergenic extracts, immediate type reaction, including test 
interpretation and report by a physician, specify number of tests). For 
purposes of compiling a list of the high multiple/low work RVU 
services, we defined a high multiple service as one that is commonly 
performed in multiples of 5 or more per day. Then, we selected from 
high multiple services with work RVUs of less than or equal to 0.5 
RVUs. We note that in selecting 5 per day as the minimum threshold for 
the number of common services performed in a multiple service 
encounter, we intended to establish a meaningful threshold which, in 
conjunction with the threshold for work RVUs of 0.5 RVUs or less, would 
produce a reasonable number of services for the RUC to review that have 
substantial total work RVUs for the comprehensive service furnished 
during a single treatment. That is, as a general example, with a work 
RVU threshold of 0.5 RVUs and a multiple threshold of 5 per day, the 
total work RVUs for a typical treatment would equate to 2.5 RVUs, which 
is approximately comparable to a high level office visit, an 
interpretation of a complex imaging procedure, or a minor surgical 
procedure.
    In the CY 2011 PFS proposed rule (75 FR 40069), we requested that 
the AMA RUC review the codes in Table 10.

 Table 10--Codes With Low Work RVUs That are Commonly Billed in Multiple
                    Units Referred for AMA RUC Review
------------------------------------------------------------------------
           CPT code                         Short descriptor
------------------------------------------------------------------------
95904.........................  Sense nerve conduction test.
17003.........................  Destruct premalg les, 2-14.
95004.........................  Percut allergy skin tests.
11101.........................  Biopsy, skin add-on.
95024.........................  Id allergy test, drug/bug.
76000.........................  Fluoroscope examination.
95144.........................  Antigen therapy services.
95010.........................  Percut allergy titrate test.
88300.........................  Surgical path, gross.
95027.........................  Id allergy titrate--airborne.
95015.........................  Id allergy titrate--drug/bug.
95148.........................  Antigen therapy services.
------------------------------------------------------------------------

c. Codes With High Volume and Low Work RVUs
    We believe that codes that have low work RVUs but are high volume 
based on claims data are another category of potentially misvalued 
codes. Although these codes have low work RVUs (less than or equal to 
0.25 RVUs), the high utilization of these codes represents significant 
expenditures under the PFS such that their appropriate valuation is 
especially important. Table 11 contains a list of such codes and we 
requested that the AMA RUC review these codes in the CY 2011 PFS 
proposed rule (75 FR 40069).

Table 11: Codes With Low Work RVUs That Are High Volume Referred for AMA
                               RUC Review
------------------------------------------------------------------------
            CPT code                         Short descriptor
------------------------------------------------------------------------
71010..........................  Chest x-ray.
73510..........................  X-ray exam of hip.
97035..........................  Ultrasound therapy.
88313..........................  Special stains group 2.
73630..........................  X-ray exam of foot.
72100..........................  X-ray exam of lower spine.
73030..........................  X-ray exam of shoulder.
73562..........................  X-ray exam of knee, 3.
73560..........................  X-ray exam of knee, 1 or 2.
94010..........................  Breathing capacity test.
77052..........................  Comp screen mammogram add-on.
88304..........................  Tissue exam by pathologist.
73564..........................  X-ray exam, knee, 4 or more.
72170..........................  X-ray exam of pelvis.
74000..........................  X-ray exam of abdomen.
73610..........................  X-ray exam of ankle.
11719..........................  Trim nail(s).
73620..........................  X-ray exam of foot.
92567..........................  Tympanometry.
73110..........................  X-ray exam of wrist.
73130..........................  X-ray exam of hand.
93701..........................  Bioimpedance, cv analysis.
72040..........................  X-ray exam of neck spine.
92543..........................  Caloric vestibular test.
------------------------------------------------------------------------

    Comment: A number of commenters agreed with CMS' proposal for the 
AMA RUC to review codes with low work RVUs that are commonly billed 
with multiple units, and codes with high volume and low work RVUs. 
Other commenters did not support these proposals based on a belief that 
just because a code has low work RVUs, the conclusion should not 
necessarily be drawn that the code is potentially misvalued.
    Response: While we do not believe that low work RVUs automatically 
indicate that the code is misvalued, we believe that some codes in this 
category may be vulnerable to being potentially misvalued because they 
have not been subject to review recently, there are particular 
challenges associated with establishing appropriate low work RVUs for 
services, and these services would not likely be subject to AMA RUC 
revaluation without CMS' recommendation. Accordingly, after 
consideration of the public comments we received, we are finalizing our 
CY 2011 proposal and we look forward to receiving the AMA RUC's 
recommendation for the codes listed in Tables 10 and 11.
d. Codes With Site-of-Service-Anomalies
    In previous years, we requested that the AMA RUC review codes that, 
according to the Medicare claims database, have experienced a change in 
the typical site of service since the original valuation of the code. 
For example, we have found services that originally were furnished in 
the inpatient setting but for which current claims data show the 
typical case has shifted to being furnished outside the inpatient 
setting. Since the procedures were typically performed in the inpatient 
setting when the codes were originally valued, the work RVUs for these 
codes would have been valued to include the inpatient physician work 
furnished, as well as to reflect the intensive care and follow-up 
normally associated with an inpatient procedure. If the typical case 
for the procedure has shifted from the inpatient setting to an 
outpatient or physician's office setting, it is reasonable to expect 
that there have been changes in medical practice, and that such changes 
would represent a decrease in physician time or intensity or both. The 
AMA RUC reviewed and recommended to CMS revised work RVUs for 29 codes 
for CY 2009 and 11 codes for CY 2010 that were identified as having 
site-of-service anomalies.
    In the CY 2010 PFS proposed and final rules with comment period (74 
FR 33556 and 74 FR 61777, respectively), we encouraged the AMA RUC to 
utilize the building block methodology when revaluing services with 
site-of-service

[[Page 73221]]

anomalies. Specifically, where the AMA RUC has determined in its review 
that changes in the inclusion of inpatient hospital days, office 
visits, and hospital discharge day management services (that is, the 
``building blocks'' of the code) are warranted in the revaluation of 
the code, we asked the AMA RUC to adjust the site-of-service anomaly 
code for the work RVUs associated with those changes.
    Additionally, we suggested that in cases where the AMA RUC has 
adjusted the pre-service, intra-service and post-service times of the 
code under review, the AMA RUC should also make associated work RVU 
adjustments to account for those changes. However, we remained 
concerned that in the AMA RUC's recommendations of the work RVUs for 
the CYs 2009 and 2010 site-of-service anomaly codes, the AMA RUC may 
have determined that eliminating or reallocating pre-service and post-
service times, hospital days, office visits, and hospital discharge day 
management services was appropriate to reflect the typical case that is 
now occurring in a different setting, but the work RVUs associated with 
those changes may not have been systematically extracted or reallocated 
from the total work RVU value for the service.
    In the CYs 2009 and 2010 PFS final rules with comment period (73 FR 
69883 and 74 FR 61776 through 61778, respectively), we indicated that 
although we would accept the AMA RUC valuations for these site-of-
service anomaly codes on an interim basis through CY 2010, we had 
ongoing concerns about the methodology used by the AMA RUC to review 
these services. We requested that the AMA RUC reexamine the site-of-
service anomaly codes and use the building block methodology to revalue 
the services (74 FR 61777). We also stated that we would continue to 
examine these codes and consider whether it would be appropriate to 
propose additional changes in future rulemaking.
    Accordingly, in preparation for CY 2011 rulemaking, we conducted a 
comprehensive analysis of the codes that the AMA RUC reviewed for CYs 
2009 and 2010 due to site-of-service anomaly concerns. We 
systematically applied the reverse building block methodology to the 29 
codes from CY 2009 and 11 codes from CY 2010 as follows:
    <bullet> First, we obtained the original work RVU value assigned to 
the code (this is the ``starting value'') and made a list of the 
building block services with RVUs that were originally associated with 
the code (that is, before the AMA RUC reviewed the code for site-of-
service anomalies).
    <bullet> Next, we examined the AMA RUC-recommended changes to the 
building blocks of the code.
    <bullet> We then deducted the RVUs associated with the AMA RUC's 
recommended eliminations from the code's starting RVU value.
    Generally, the AMA RUC eliminated inpatient hospital visit building 
blocks from the value of the code since the site-of-service for the 
code has shifted from the inpatient setting to another setting. We 
noted in some cases, the AMA RUC left an inpatient hospital visit in 
the valuation of the code. We believe this is inconsistent with the 
change in the site-of-service to non-inpatient settings. Accordingly, 
we adhered to the methodology and deducted the RVUs associated with all 
inpatient hospital visits from the starting value. In cases where the 
AMA RUC recommended adding or substituting outpatient visits, we also 
added or substituted the RVUs associated with those changes to the 
starting value. If the AMA RUC recommended changes to the pre-, intra-, 
or post-service times, we calculated the incremental change in RVUs 
associated with that time and either added or deducted that RVU amount 
from the starting value. We noted that the RVU values associated with 
the incremental time change were calculated using the intensity 
associated with the particular pre-, intra-, or post-period. For the 
intensity of the intra-service period, we utilized the original IWPUT 
associated with the code. The AMA RUC generally recommended allowing 
only half of a hospital discharge day management service for the site-
of-service anomaly codes. That is, CPT code 99238 (Hospital discharge 
day management; 30 minutes or less) has a work RVU value of 1.28; 
therefore, half the value associated with CPT code 99238 is 0.64. 
Accordingly, if a code had one CPT code 99238 listed as part of the 
original valuation, we deducted 0.64 RVUs from the starting value.
    We standardized the methodology so that each of the site-of-service 
anomaly codes had half of a hospital discharge day management service 
value accounted in the valuation. Finally, we noted that while we 
eliminated the RVUs associated with all inpatient hospital visits built 
into the code's starting value, because the typical case no longer 
occurs in the inpatient setting, we allowed for the possibility that in 
some cases, some part of the work which had been furnished in the 
inpatient setting may continue to be furnished even in the outpatient 
setting. Therefore, to be conservative in our deductions of work RVUs 
associated with the inpatient hospital codes from the starting values, 
we allowed the intra-time of any inpatient hospital visits included in 
the original valuation to migrate to the post-service period of the 
code. Accordingly, while we deducted the full RVUs of an inpatient 
hospital visit from the starting value, we added the intra-service time 
of the inpatient hospital visit to the post-service time of the code 
and accounted for the incremental change in RVUs. The following 
description provides an example of our methodology.
    CPT code 21025 (Excision of bone (e.g., for osteomyelitis or bone 
abscess); mandible) has a starting value of 11.07 RVUs. Table 12 shows 
the building blocks that are included in the original valuation of the 
code.

                                                                                            Table 12
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                  Median intra-    Immediate post-                                                                                                                     Original
       Pre-service time           service time      service time          99231              99232              99238              99211              99212              99213           IWPUT
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
75 min........................  120 min.........  43 min..........  1 visit..........  1 visit..........  1 visit..........  2 visits.........  2 visits.........  2 visits.........      0.0145
                                                                    (0.76 RVUs)......  (1.39 RVUs)......  (1.28 RVUs)......  (0.36 RVUs)......  (0.96 RVUs)......  (1.94 RVUs)......
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    The AMA RUC removed two inpatient hospital visits and reduced the 
outpatient visits from 6 to 4 visits. Table 13 shows the building 
blocks that were recommended for CY 2009 by the AMA RUC after its 
review of the code for site-of-service anomalies.

[[Page 73222]]



                                                                                            Table 13
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                  Median intra-    Immediate post-                                                                                                                     Original
       Pre-service time           service time      service time          99231              99232              99238              99211              99212              99213           IWPUT
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
85 min........................  90 min..........  30 min..........                                                                              2 visits.........  2 visits.........      0.0530
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Next we calculated the RVUs associated with the changes to the 
building blocks recommended by the AMA RUC. We note that the immediate 
post-service value of 0.38 RVUs (Table 14) includes 30 minutes of 
intra-service time from inpatient hospital CPT code 99231 (Level 1 
subsequent hospital care, per day). Also, the median intra-service 
value of 0.44 RVUs (Table 14) was determined using the starting IWPUT 
value of 0.0145. Additionally, our methodology accounted for a half of 
a hospital discharge day management service (CPT code 99238) for the 
site-of-service anomaly code. Table 14 shows the RVU changes to the 
building blocks that were calculated based on the methodology discussed 
above.

                                                                                            Table 14
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Median intra-      Immediate post-
        Pre-service time            service time        service time            99231                99232               99238               99211               99212               99213
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0.22 RVUs......................  -0.44 RVUs........  0.38 RVUs.........  -0.76 RVUs.........  -1.39 RVUs........  -0.64 RVUs........  -0.36 RVUs........  ..................  ..................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    In the final step, the RVUs associated with the changes to the 
building blocks recommended by the AMA RUC (Table 14) were deducted 
from or added to the starting value of 11.07 RVUs, which resulted in 
the CY 2011 reverse building block value of 8.08 RVUs (11.07 + 0.22-
0.44 + 0.38 - 0.76 - 1.39 - 0.64 - 0.36 = 8.08).
    The methodology discussed above was applied to each of the site-of-
service anomaly codes from CYs 2009 and 2010 and the results are 
summarized in Tables 15 and 16.
BILLING CODE 4120-01-P

[[Page 73223]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.245


[[Page 73224]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.246

BILLING CODE 4120-01-C
    For most codes in Tables 15 and 16, the CY 2011 reverse building 
block methodology produced a value that was somewhat lower than the AMA 
RUC-recommended value. While our results suggested that the majority of 
the codes with site-of-service anomalies continue to be overvalued 
under the AMA RUC's most recent recommendations, we also found that the 
methodology may produce a result that is considerably reduced or, in 
several cases, a negative value. We understand that in previous years, 
stakeholders have expressed confusion as to why the application of a 
building block methodology would produce negative values. We believe in 
some cases, the starting value, that is, the original work RVU, may 
have been misvalued using building block inputs that were not 
consistent with the service, although the overall work value of the 
code may have been consistent with the values for other similar 
services. Moreover, a number of these services are the Harvard-valued 
codes, for which the RVUs were established many years ago based on 
historical inputs that may no longer be appropriate for the code. An 
attempt to extract the RVUs associated with these inappropriate inputs 
through the reverse building block methodology could produce aberrant 
results. Furthermore, in some cases, we noticed that the original IWPUT 
of the code was negative even before the code was reviewed by the AMA 
RUC for a site-of-service anomaly. A negative value for the IWPUT is 
counterintuitive to the IWPUT concept, indicating that the code was 
originally misvalued at the building block level. At a minimum, we 
believe that in cases where the reverse building block methodology 
produced aberrant results, and where clinical review indicated a need 
for further analysis, the codes should be referred back to the AMA RUC 
for review and new valuation should be performed based on the building 
block methodology.
    We noted the application of the reverse building block methodology 
is an objective way to account for changes in the resources resulting 
from the change in the site-of-service in which the typical service is 
furnished. However, because relative values under the PFS are 
``relative,'' that is, where work relative value units for a code are 
established relative to work relative value units for other codes, the 
recommended methodology of valuing services based on input building 
blocks is best applied within the context of the AMA RUC discussion. 
For example, we recognize that the AMA RUC looks at families of codes 
and may assign RVUs based on a particular code ranking within the 
family. This method of valuing services preserves relativity within the 
relative value scale for that code family. However, we have stated that 
we believe the relative value scale requires each service to be valued 
based on the resources used in furnishing the service as specified in 
section 1848(c)(1)(A) of the Act, which defines the physician work 
component to include ``the portion of the resources used in furnishing 
the service that reflects physician time and intensity in furnishing 
the service.'' Furthermore, section 1848(c)(2)(C)(i) of the Act 
specifies that ``the Secretary shall determine a number of work 
relative value units (RVUs) for the service based on the relative 
resources incorporating physician time and intensity required in 
furnishing the service.'' Read together, these two sections of the 
statute support our intention to rely on the building block methodology 
to determine appropriate work RVUs for codes.
    We noted that we continue to rely on the extensive expertise 
provided by the AMA RUC to recommend appropriate input building blocks 
for codes. Additionally, the AMA RUC's unique infrastructure and broad 
perspective permits the valuation of a code within the context of 
relativity to the entire relative value system. Therefore, we believe 
that the recommended methodology of valuing services based on input 
building blocks is best applied within the context of the AMA RUC 
discussion.
    Accordingly, in the CY 2011 PFS proposed rule (75 FR 40072), we 
requested that the AMA RUC review the CPT codes displayed in Tables 15 
and 16. In addition, where the application of the CY 2011 reverse 
building block methodology produced an aberrant result that is clearly 
not a reflection of physician work for the service, we requested that 
the AMA RUC review the

[[Page 73225]]

input building blocks and recommend an appropriate RVU value that is 
both consistent with the building blocks of the code and appropriate 
relative to the values for other codes in the family. For other codes 
where the application of the CY 2011 reverse building block methodology 
produced a result that is consistent with the physician work for the 
service, we encouraged the AMA RUC to confirm the values and recommend 
these work values for CY 2011. In this way, we hoped to receive new AMA 
RUC recommendations for all of the codes in Tables 15 and 16 for CY 
2011. Furthermore, we indicated that if the recommendations that we 
received from the AMA RUC were not consistent with the building block 
methodology and not appropriate relative to the values of other 
services, and the application of the CY 2011 reverse building block 
methodology produced a result that CMS medical advisors believe is 
consistent with the work for the service, we proposed to adopt the CY 
2011 reverse building block methodology values that are listed in 
Tables 15 and 16 for CY 2011. In cases where the reverse building block 
methodology produced a negative work value, we suggested that the AMA 
RUC review and revise the building blocks of the code so that a new 
valuation could be determined based on the building block methodology. 
For such codes, if the revised recommendations that we hoped to receive 
from the AMA RUC were still not consistent with the building block 
methodology upon revision, because we could not pay for these services 
based on negative work RVUs, we proposed to modify the AMA RUC-
recommended values for these codes as CMS determined to be clinically 
appropriate and adopt the CMS-modified RVUs on a interim final basis 
for CY 2011.
    In their future work, we urged the AMA RUC to use the building 
block methodology when valuing services or provide CMS with extensive 
rationale for cases where the AMA RUC believes the building block 
methodology is inappropriate for a specific code. Since section 
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA) 
specifies that the Secretary shall establish a process to validate work 
RVUs of potentially misvalued codes under the PFS, as we have discussed 
earlier in this section, we believe codes that are valued using the 
building block methodology would be more likely to meet the standards 
of a systematic RVU validation process that could be developed in 
accordance with the requirements of the statute.
    Comment: While several commenters supported CMS' recommendation to 
use the reverse building block methodology to value physician work for 
codes identified as having site-of-service anomalies, the majority of 
commenters strongly opposed the reverse building block methodology, 
expressing concern that the methodology produced very low or negative 
work RVUs for a number of the codes listed in Tables 14 and 15. Several 
letter writing campaigns by groups of providers and beneficiaries 
affected by some of the codes listed in Tables 14 and 15 produced 
scores of comments expressing confusion and alarm that CMS appeared to 
be on the verge of finalizing negative work RVUs. Some commenters noted 
that the values calculated by the application of the reverse building 
block methodology would result in rank order anomalies across the PFS.
    Many commenters reiterated CMS' observation that some of the codes 
were originally Harvard-valued, for which the RVUs were established 
many years ago based on historical inputs that may no longer be 
appropriate for the code, and an attempt to extract the RVUs associated 
with these inappropriate inputs through the reverse building block 
methodology would produce aberrant (that is, very low or negative) 
results. Some commenters disagreed with CMS' statement that if the 
typical case for the procedure has shifted from the inpatient setting 
to an outpatient or physician's office setting, it would be reasonable 
to expect that there have been changes in medical practice, and that 
such changes would represent a decrease in physician time, or 
intensity, or both. These commenters believe that that this assumption 
is fundamentally wrong and that the reverse actually may be true. One 
commenter noted, ``When a procedure migrates from the inpatient to the 
outpatient setting, the physician work and practice expense actually 
increase. The result is more office visits, more utilization of office 
staff, more consumption of office supplies, and no decrease in legal 
liability to the physician (and in some instances increased legal 
liability as functions formerly performed by hospital staff are now 
done by physician office staff).''
    A number of commenters asserted that any mathematical or 
computational methodology used to value physician work is simply 
absurd. Many commenters stated their preference for the AMA RUC's 
established valuation process which the commenters believe is based on 
specialty society survey data. Other commenters asserted that the AMA 
RUC's use of magnitude estimation is the only methodology that makes 
sense in assigning physician work values to individual services because 
the PFS is a relative system and maintaining appropriate relativity 
between the services is paramount in valuing physician work.
    Response: We acknowledge that commenters overwhelmingly objected to 
the proposed reverse building block methodology because, in some cases, 
it produced very low or negative physician work values. While we 
explained in the proposed rule (75 FR 40071 through 40072) the possible 
reasons why negative values could be generated in the application of 
the reverse building block methodology, the commenters generally 
disregarded this explanation and summarily dismissed the methodology as 
invalid based on the reasoning that negative work values are absurd. 
Responding to the commenters who were concerned that CMS was preparing 
to implement negative work RVUs imminently, we assure the commenters 
that at no time was this a possibility, as we made clear in the CY 2011 
PFS proposed rule (75 FR 40072) where we acknowledge that we could not 
pay for services based on negative work RUVs. As we stated in the 
proposed rule, in cases where the reverse building block methodology 
produced a negative work value, we suggested that the AMA RUC review 
and revise the building blocks of the code so that a new valuation 
could be determined based on the building block methodology. We further 
proposed that if we did not believe the AMA RUC recommended values were 
consistent with the building block methodology, we would modify the 
recommended values as we determined to be clinically appropriate and 
adopt the modified RVUs on an interim final basis for CY 2011.
    The AMA RUC has not provided revised work recommendations to us for 
these codes for CY 2011. Therefore, in light of the strong public 
opposition to the reverse building block methodology and since we 
remain convinced that the values for the codes with site-of-service 
anomalies listed in Tables 14 and 15 continue to be misvalued based on 
our clinical review of the building blocks for those services as 
recommended previously by the AMA RUC, we believe that the most 
appropriate action is to continue to await the further AMA RUC review 
of these codes that we requested in the CY 2011 PFS proposed rule (75 
FR 40072). However, after consideration of the public comments we 
received, we are modifying our CY 2011 proposal and we will not apply 
the reverse building block methodology to value any of these codes for 
CY 2011 as we proposed. We

[[Page 73226]]

are requesting that the AMA RUC reconsider its previously recommended 
values that have been applied on an interim basis in CYs 2009 and 2010, 
as applicable, and revise the work RVUs to better reflect the intensity 
of the services and the revised physician times and post-procedure 
visits included in the valuation of these codes. As we stated in the CY 
2011 PFS proposed rule (75 FR 40072), we suggest that the AMA RUC 
review and revise the building blocks of the codes so that a new 
valuation can be determined based on the building block methodology. 
Until we receive the revised values from the AMA RUC for CY 2012 and 
can make a determination regarding them, we will continue to accept the 
existing AMA RUC-recommended work RVUs listed in Tables 14 and 15 on an 
interim basis for CY 2011. We would follow our usual method of 
reviewing the AMA RUC recommendations in the context of the associated 
valuation methodologies it used for CY 2012 and would either accept the 
recommendations for these codes or provide alternative work values that 
would be adopted on an interim final basis for CY 2012 and open to 
public comment on the CY 2012 PFS final rule with comment period.
e. Codes With ``23-hour'' Stays
    In the CY 2010 PFS proposed rule (74 FR 33557), we requested that 
the AMA RUC review services that are typically performed in the 
outpatient setting and require a hospital stay of less than 24 hours. 
We stated in the proposed rule that we believed these to be primarily 
outpatient services and expressed concern that the value of evaluation 
and management (E/M) visits for inpatients was inappropriately included 
in the valuation of codes that qualify as ``23-hour stay'' outpatient 
services.
    We received a number of comments in response to the discussion in 
the CY 2010 proposed rule. The AMA RUC stated that it already values 
stays of less than 23 hours appropriately by reducing the hospital 
discharge day management service (that is, CPT code 99238), from 1 day 
to a half day. The AMA RUC also explained that when the AMA RUC refers 
to 23-hour stay services in discussions at AMA RUC meetings, it is 
referring primarily to services that are reported in the Medicare 
claims database as typically outpatient services, but where the patient 
is kept overnight and, on occasion, even longer in the hospital. 
Because the AMA RUC believes the patient stays overnight in the 
hospital, it believes the inclusion of inpatient E/M visits to be 
appropriate in the valuation of this category of codes.
    We believe that the 23-hour stay issue encompasses several 
scenarios. The typical patient is commonly in the hospital for less 
than 24 hours, which often means the patient may indeed stay overnight 
in the hospital. On occasion, the patient may stay longer than a single 
night in the hospital; however, in both cases, the patient is 
considered for Medicare purposes to be a hospital outpatient, not an 
inpatient, and our claims data support that the typical 23-hour stay 
service is billed as an outpatient service. Accordingly, we believe 
that the valuation of the codes that fall into the 23-hour stay 
category should not reflect work that is typically associated with an 
inpatient service. For example, inpatient E/M visit codes such as CPT 
codes 99231 (Level 1 subsequent hospital care, per day); 99232 (Level 2 
subsequent hospital care, per day); and 99233 (Level 3 subsequent 
hospital care, per day), should not be included at the full value in 
the valuation of 23-hour stay services.
    Currently, the valuation of 23-hour stay services is conducted in a 
nonuniform manner by the AMA RUC. The AMA RUC has indicated that it 
currently includes a half hospital discharge day management service and 
no hospital inpatient visits for outpatient services with expected 
hospital stays of 23 hours or less. In contrast, for those outpatient 
services where the AMA RUC believes that the recovery period could be 
longer than 23 hours, the AMA RUC stated in its comment on the CY 2010 
PFS proposed rule that it currently includes a full hospital discharge 
day management service and one or more inpatient E/M visits in the 
code's value. However, we note the typical 23-hour stay service is 
billed as an outpatient service and so long as the typical case 
continues to be billed as an outpatient service, we believe the code 
should not incorporate physician work values for services that are 
typically associated with an inpatient service. In the CY 2010 PFS 
proposed rule and final rule with comment period (74 FR 33556 and 74 FR 
61777, respectively), we stated that we believed the use of inpatient 
E/M visit codes for services rendered in the post-service period for 
outpatient 23-hour stay procedures would result in overpayment for pre- 
and post-service work that would not be furnished. Accordingly, we 
proposed in the CY 2010 proposed rule (74 FR 33556 through 33557) not 
to allow any additional inpatient E/M service to be billed for care 
furnished during the post-procedure period when care is furnished for 
an outpatient service requiring less than a 24-hour hospital stay.
    However, we find it is plausible that while the patient receiving 
the 23-hour stay service remains a hospital outpatient, the patient 
would typically be cared for by the physician furnishing the procedure 
during that post-procedure period. While we do not believe that post-
procedure hospital ``visits'' would be at the inpatient level since the 
typical case is an outpatient who would be ready to be discharged from 
the hospital in 23 hours or less, we agree that the intra-service time 
of the inpatient hospital visit may be included in the valuation for 
the 23-hour stay code.
    Accordingly, for CY 2011 we modified our proposed CY 2010 approach 
and suggested that in the future, when the AMA RUC reviews new and 
potentially misvalued codes that are identified as 23-hour stay 
services, the AMA RUC would apply the following methodology:
    <bullet> Begin with the starting RVU value of the 23-hour stay code 
under review and decrease the hospital discharge day management service 
from one day to a half day.
    <bullet> Deduct the RVUs of inpatient hospital visits from the 
starting RVU value.
    <bullet> Reallocate the time associated with the intra-service 
portion of the inpatient hospital visits to the immediate post-service 
time of the 23-hour stay code under review.
    Example: A 23-hour stay code is currently valued at 15 RVUs and has 
1 hospital discharge day management service and 1 level 3 subsequent 
hospital care visit incorporated in this value.
    <bullet> Applying step (1): 15-0.64* = 14.36
    <bullet> Applying step (2): 14.36-2** = 12.36
    <bullet> Applying step (3): 12.36 + (30 minutes x 0.0224)*** = 
13.032 RVUs

* Value associated with \1/2\ hospital discharge day management 
service.
** Value associated with an inpatient hospital visit, CPT code 
99233.
*** Value associated with the reallocated intra-service time 
multiplied by the post-service intensity of the 23-hour stay code.

    Finally, we note that since work relative value units are 
established by the Secretary in the context of relativity to other 
codes in the system, the recommended methodology for the evaluation of 
23-hour stay codes is best applied within the context of relativity. We 
appreciate that the AMA RUC has the ability to assess the 23-hour stay 
code after application of the recommended methodology to ensure

[[Page 73227]]

appropriate relativity of this code and other codes within the system. 
We strongly encourage the AMA RUC to apply the recommended methodology 
to ensure the consistent and appropriate valuation of the physician 
work for these services.
    Comment: A number of commenters asserted that if a service is 
performed in the hospital and the patient stays overnight, the work of 
the physician is typically the same regardless of whether the hospital 
designates the patient receiving the services as an inpatient or 
outpatient. Other commenters supported CMS' position in that it is 
appropriate for physicians' services related to the post-procedure care 
of the patient to be recognized and the intra-service time of the 
inpatient hospital visit should be included in the valuation for the 
23-hour stay code. Some commenters noted that recent issues associated 
with hospital observation care may also be impacting CPT observation 
care codes, and these commenters ``request that any changes in the 23+ 
hour stay policy be deferred until after the RUC conducts its 
consideration of hospital observation services in February 2011.''
    Response: While some commenters advocated for a deferral on the 
issue of valuing 23-hour stay services, we note that a number of 
commenters supported CMS' proposed approach. As we stated in the CY 
2010 PFS proposed rule (74 FR 33557) and affirmed in the CY 2011 PFS 
proposed rule (75 FR 40072), we believe these services, for a typical 
patient, would be considered for Medicare purposes to be hospital 
outpatient services, not inpatient services, and our claims data 
support that the typical 23-hour stay service is billed as an 
outpatient service. Furthermore, since the typical patient commonly 
remains in the hospital for less than 24 hours, even if the stay 
extends overnight, and discharge from the hospital is therefore 
imminent, we believe the acuity of the typical patient is less than 
that of a typical inpatient who is admitted to the hospital, resulting 
in less intensity for the physician work to care for the hospital 
outpatient immediately following a 23-hour stay procedure. Accordingly, 
we believe that the valuation of the codes that fall into the 23-hour 
stay category should not reflect physician work that is typically 
associated with an inpatient service. Furthermore, we do not believe 
that it would be more beneficial to suspend valuing 23-hour services in 
the manner we discussed in the proposed rule until after the AMA RUC's 
review of hospital observation care services. Even if the AMA RUC were 
to provide future recommendations to us for valuing surgical procedures 
in which hospital observation care services were substituted for 
hospital inpatient care visits, we believe that we should treat the 
valuation of the physician time in the same manner as discussed 
previously, that is, by valuing the intra-service time of the hospital 
observation care service in the immediate post-service time of the 23-
hour stay code being valued.
    Accordingly, in light of the support from the commenters, we are 
finalizing our proposed approach to valuing 23-hour stay services by 
allowing the intra-service portion of the subsequent hospital care 
visits (or observation care visits in the future if the AMA RUC were to 
recommend them instead as building blocks for outpatient surgical 
services) furnished to outpatients in the hospital post-procedure to be 
allocated to the immediate post-service time of the procedure to 
account for the physician work in these cases. We encourage the AMA RUC 
to apply this methodology itself in the recommendations it provides to 
us for valuing 23-hour stay codes, in order to ensure the consistent 
and appropriate valuation of the physician work for these services.
4. Expanding the Multiple Procedure Payment Reduction (MPPR) Policy to 
Additional Nonsurgical Services
a. Background
    Medicare has a longstanding policy to reduce payment by 50 percent 
for the second and subsequent surgical procedures furnished to the same 
patient by the same physician on the same day, largely based on the 
presence of efficiencies in the practice expense (PE) and pre- and 
post-surgical physician work. Effective January 1, 1995, the MPPR 
policy, with the same percentage reduction, was extended to nuclear 
medicine diagnostic procedures (CPT codes 78306, 78320, 78802, 78803, 
78806, and 78807). In the CY 1995 PFS final rule with comment period 
(59 FR 63410), we indicated that we would consider applying the policy 
to other diagnostic tests in the future.
    Consistent with recommendations of MedPAC in its March 2005 Report 
to Congress on Medicare Payment Policy, under the CY 2006 PFS, the MPPR 
policy was extended to the technical component (TC) of certain 
diagnostic imaging procedures performed on contiguous areas of the body 
in a single session (70 FR 70261). The reduction recognizes that, for 
the second and subsequent imaging procedures, there are some 
efficiencies in clinical labor, supplies, and equipment time. In 
particular, certain clinical labor activities and supplies are not 
duplicated for subsequent procedures and, because equipment time and 
indirect costs are allocated based on clinical labor time; those would 
also be reduced accordingly.
    The imaging MPPR policy currently applies to computed tomography 
(CT) and computed tomographic angiography (CTA), magnetic resonance 
imaging (MRI) and magnetic resonance angiography (MRA), and ultrasound 
services within 11 families of codes based on imaging modality and body 
region. When we adopted the policy in CY 2007, we stated that we 
believed efficiencies were most likely to occur when contiguous body 
areas are the focus of the imaging because the patient and equipment 
have already been prepared for the second and subsequent procedures, 
potentially yielding resource savings in areas such as clerical time, 
technical preparation, and supplies (70 FR 45850). Therefore, the MPPR 
policy currently applies only to procedures involving contiguous body 
areas within a family of codes, not across families, and to those 
procedures that are furnished in a single session. Additionally, while 
the MPPR policy applies to TC-only services and to the TC of global 
services, it does not apply to professional component (PC) services.
    Under the current imaging MPPR policy, full payment is made for the 
TC of the highest-paid procedure, and payment is reduced by 25 percent 
of the TC for each additional procedure when an MPPR scenario applies. 
We had originally planned to phase in the MPPR policy over a 2-year 
period, with a 25 percent reduction in CY 2006 and a 50 percent 
reduction in CY 2007 (70 FR 70263). However, the Deficit Reduction Act 
of 2005 (DRA) (Pub. L. 109-171) capped the PFS payment amount for most 
imaging procedures at the amount paid under the hospital outpatient 
prospective payment system (OPPS). In view of the DRA, we determined 
that it would be prudent to retain the MPPR at 25 percent while we 
continued to examine the appropriate payment levels (71 FR 69659). The 
DRA also exempted reduced expenditures attributable to the MPPR policy 
from the PFS budget neutrality provision. Most recently, effective July 
1, 2010, section 3135(b) of the ACA increased the MPPR on the TC of 
imaging services under the policy established in the CY 2006 PFS final 
rule with comment period from 25 to 50 percent and exempted the reduced 
expenditures attributable to this further change from the PFS budget 
neutrality provision.

[[Page 73228]]

    In the July 2009 GAO report entitled, ``Medicare Physician 
Payments: Fees Could Better Reflect Efficiencies Achieved when Services 
are Provided Together,'' the GAO recommended that we take further steps 
to ensure that fees for services paid under the PFS reflect 
efficiencies that occur when services are furnished by the same 
physician on the same beneficiary on the same day. The GAO recommended 
the following: (1) Expanding the existing MPPR policy to the PC to 
reflect efficiencies in physician work for certain imaging services; 
and (2) expanding the MPPR to reflect PE efficiencies that occur when 
certain nonsurgical, nonimaging services are furnished together. The 
GAO also encouraged us to focus on service pairs that have the most 
impact on Medicare spending.
    In the March 2010 report, MedPAC noted its concerns about 
mispricing of services under the PFS. MedPAC indicated that it would 
explore whether expanding the unit of payment through packaging or 
bundling would improve payment accuracy and encourage more efficient 
use of services.
    In the CYs 2009 and 2010 PFS proposed rules (73 FR 38586 and 74 FR 
33554, respectively), we stated that we planned to analyze nonsurgical 
services commonly furnished together (for example, 60 to 75 percent of 
the time) to assess whether an expansion of the MPPR policy could be 
warranted. MedPAC encouraged us to consider duplicative physician work, 
as well as PE, in any expansion of the MPPR policy.
b. CY 2011 Expansion of the Imaging Technical Component MPPR Policy to 
Additional Combinations of Imaging Services
    Over the past 2 years, the AMA RUC has examined several services 
billed 90 percent or more of the time together as part of the 
potentially misvalued service initiative and, in several cases, created 
one code to describe the complete service, with a value that reflects 
the expected efficiencies. Notwithstanding the bundling work of the 
RUC, there may be additional imaging and other diagnostic services that 
are furnished together less than 90 percent of the time where we could 
still expect efficiencies in the TC, and in some cases in the PC, 
resulting in potential overpayment for these services under current 
policy when furnished together.
    Section 1848(c)(2)(K) of the Act (as added by section 3134 of the 
ACA) specifies that the Secretary shall identify potentially misvalued 
codes by examining multiple codes that are frequently billed in 
conjunction with furnishing a single service, and review and make 
appropriate adjustments to their relative values. As a first step in 
applying this provision, we proposed a limited expansion of the current 
imaging MPPR policy for CY 2011. We will continue to review other 
possible expansions of the MPPR policy to the TC and/or PC of imaging 
procedures or other diagnostic tests for the future. Any further 
changes will be addressed in future rulemaking.
    In a related policy for hospital outpatient payment of imaging 
services, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68559 through 68569), the OPPS adopted a policy to pay for two or more 
CT and CTA, MRI and MRA, or ultrasound procedures furnished in the same 
session through a single composite ambulatory payment classification 
(APC) group. These composite APC payments were based on the 11 families 
of codes subject to the MPPR under the PFS that were collapsed into 3 
imaging families for the OPPS according to their modality--1 for 
ultrasound, 1 for CT and CTA, and 1 for MRI and MRA services.
    At that time, we stated our belief that the contiguous body area 
concept that was incorporated in the PFS imaging families was not 
necessary for potential efficiencies to be achieved in an imaging 
session. We provided examples to illustrate that we would not expect 
second and subsequent imaging services of the same modality involving 
noncontiguous body areas to require duplicate facility resources 
(comparable to the TC under the PFS) for clinical labor activities such 
as greeting the patient, providing education and obtaining consent, 
retrieving prior exams, setting up an intravenous infusion, and 
preparing and cleaning the room, any more than second and subsequent 
imaging procedures of the same modality involving contiguous body 
areas. While we noted that multiple imaging claims under the OPPS are 
generally within the same imaging modality and involve contiguous body 
areas the vast majority of the time, we estimated that the collapsed 3 
families, as opposed to the 11 PFS families, would add 12 percent 
additional claims to those eligible for a single composite APC payment 
under the OPPS based on the provision of 2 or more imaging services in 
a single session, allowing us to capture additional claims with 
efficiencies.
    Taking into consideration the OPPS policy that was adopted in the 
CY 2009 OPPS/ASC final rule with comment period, for CY 2011 under the 
PFS, we proposed to apply the MPPR regardless of family, that is, the 
policy would apply to multiple imaging services furnished within the 
same family of codes or across families. This proposal would simplify 
the current imaging MPPR policy in a way that is consistent with the 
standard PFS MPPR policy for surgical procedures that does not group 
procedures by body region. Therefore, the MPPR would apply to CT and 
CTA, MRI and MRA, and ultrasound procedures services furnished to the 
same patient in the same session, regardless of the imaging modality, 
and not limited to contiguous body areas.
    Because of the different pieces of equipment used for CT/CTA, MRI/
MRA, and ultrasound procedures, it would be unlikely that a single 
practitioner would furnish more than one imaging procedure involving 2 
different modalities to one patient in a single session where the 
proposed MPPR policy would apply. On the other hand, while most 
multiple procedures furnished with a single modality in one session 
would involve procedures currently assigned to one of the 11 imaging 
families, it would not be uncommon for more than one imaging procedure 
of the same modality to be furnished across families and, like the 
scenario for hospital outpatient imaging services, we would expect 
efficiencies to occur in these cases. Therefore, we believe that an 
expansion of the current imaging MPPR policy to account for 
efficiencies in such situations would allow us to pay more 
appropriately for these multiple imaging procedure sessions, consistent 
with our ongoing efforts to address misvalued services.
    The expansion of the imaging MPPR policy to include all of the 
current codes in a single family to which the standard 50 percent 
reduction for second and subsequent procedures would apply would reduce 
payment for 20 percent more services than the current MPPR policy under 
the PFS. Thus, in CY 2011, we would capture additional efficiencies and 
pay more appropriately in these cases. We note that section 
1848(c)(2)B)(v)(VI) (as added by section 3135(b) of the ACA)) specifies 
that reduced expenditures attributable to the increase in the imaging 
MPPR from 25 to 50 percent in CY 2011 are excluded from the PFS budget 
neutrality adjustment. However, the reduced payment for code 
combinations that would newly be subject to the imaging MPPR policy 
under this proposal would be made in a budget neutral manner under the 
PFS, as these new combinations are not included under section 
1848(b)(4)(D) (as added by section 3135(b) of the ACA), which addresses 
``single-session imaging to

[[Page 73229]]

consecutive body parts'' under the established imaging MPPR policy.
    We also proposed to add the CY 2010 codes displayed in Table 17 of 
the CY 2011 PFS proposed rule (75 FR 40075) to the list of imaging 
services subject to the MPPR policy in CY 2011. These four codes (CPT 
codes 75771 through 75774) were newly created for CY 2010 and are 
similar to codes currently in imaging family 2, titled CT and CTA 
(Chest/Thorax/Abdomen/Pelvis).
    We further note that new CY 2010 CPT codes 74261 (Computed 
tomography (CT) colonography, diagnostic, including image 
postprocessing; without contrast material) and 74262 (Computed 
tomography (CT) colonography, diagnostic, including image 
postprocessing; with contrast material(s) including non-contrast 
images, if performed) were added to the CY 2010 MPPR policy through the 
July 2010 PFS quarterly update, with a retroactive effective date of 
January 1, 2010. These codes replaced CPT code 0067T (Computed 
tomographic (CT) colonography (that is, virtual colonoscopy); 
diagnostic) in CY 2010, which was on the list of procedures subject to 
the imaging MPPR policy prior to CY 2010.
    As discussed earlier in this section, reduced expenditures 
attributable to the increase in the MPPR for multiple imaging 
procedures to consecutive body parts (that is, those previously 
designated in the same family of codes) are exempt from the budget 
neutrality provision of the PFS. However, the reduced expenditures 
attributable to the MPPR for combinations of multiple imaging 
procedures that we proposed for CY 2011 (the MPPR for multiple imaging 
procedures not involving consecutive body parts) would be subject to 
budget neutrality adjustment under the PFS. We note that this 
formulation for whether reduced expenditures are exempt from budget 
neutrality applies both to procedures currently subject to the imaging 
MPPR and to new codes that would be subject to the policy in CY 2011 
and in future years. To the extent that imaging procedures described by 
the new codes are furnished in combination with other procedures that 
are subject to the imaging MPPR on consecutive body areas, the reduced 
expenditures attributable to the MPPR for these combinations would be 
exempt from the PFS budget neutrality adjustment.
    Comment: With one exception, the commenters uniformly opposed the 
proposal to consolidate the imaging families for application of the 
imaging MPPR and urged CMS not to finalize the proposal. The exception 
was MedPAC, which supported the policy as reasonable and consistent 
with the hospital OPPS policy on multiple imaging and the PFS MPPR 
policy for multiple surgical procedures, neither of which are limited 
to procedures involving contiguous body areas.
    Many commenters pointed out that the AMA RUC has worked to resolve 
any duplication in the direct PE inputs for services commonly furnished 
together over the past few years. The commenters stated that new 
bundled services were implemented in CY 2010 and speculated that 
additional ones would be implemented in the future and, therefore, 
concluded that a general MPPR to adjust PFS payment when imaging 
services are commonly furnished together is not necessary. The 
commenters argued that any duplication in the PE should be resolved at 
the code pair level. The AMA RUC urged CMS to continue to work within 
the established processes and offered for its Practice Expense 
Subcommittee to review specific code pairs about which CMS was 
concerned regarding potential PE duplication and recommend a course of 
action that would be fair and consistent.
    Response: The imaging MPPR is not intended to supersede the AMA RUC 
process that values services described by CPT codes. We encourage the 
AMA RUC to continue examining code pairs for PE duplication based upon 
the typical case and appropriately valuing new comprehensive codes for 
bundled services that are established by the CPT Editorial Panel. 
However, we believe that it is necessary to address the PE duplication 
immediately for imaging code pairs that have not been recently reviewed 
or bundled into single comprehensive codes. We note that as more code 
combinations are bundled into a single complete service reported by one 
CPT code, they would no longer be subject to the MPPR. For example, 
there are new CY 2011 codes to describe abdominal and pelvic CT scans 
furnished together, specifically CPT codes 74176 (Computed tomography, 
abdomen and pelvis; without contrast material); 74177 (Computed 
tomography, abdomen and pelvis; with contrast material); and 74178 
(Computed tomography, abdomen and pelvis; without contrast material in 
one or both body regions, followed by with contrast material(s) and 
further sections in one or both body regions). We are accepting the AMA 
RUC recommendations for the direct PE inputs for these codes for CY 
2011 and, therefore, their TCs are valued accordingly. Whereas prior to 
CY 2011, the 50 percent imaging MPPR would have applied to the TC of 
the second service when an abdominal and pelvic CT were furnished in 
the same imaging session, this will no longer be the case in CY 2011. 
Instead, the TC payment for the comprehensive code will reflect the 
valuing of the specific services furnished in combination with one 
another. Thus, we believe our current and proposed MPPR formulations 
are consistent with the AMA RUC's work to review code pairs for 
potential PE duplication and to appropriately value comprehensive codes 
for a bundle of component services.
    Comment: Numerous commenters opposed applying the MPPR to 
noncontiguous body area imaging services using the same modality and to 
combinations of imaging services involving different modalities. Many 
commenters indicated that there is no major duplication in clinical 
labor activities when two studies of noncontiguous body areas using a 
single imaging modality are furnished in the same session and even less 
duplication when imaging services are furnished in a separate session 
on the same day using different modalities. The commenters argued that 
the duplication in clinical labor activities that occurs in the pre- 
and post-operative periods for multiple surgical procedures does not 
apply to imaging services.
    More specifically, several commenters observed that the minimal 
duplicate costs of a few minutes of technician time do not justify a 50 
percent payment reduction in the TC for the second service. Some 
commenters also believe that the imaging MPPR creates an incentive for 
physicians to order separate procedures on different days, thereby 
discouraging efficiencies. In addition, the commenters contended that 
the imaging MPPR is detrimental to patient care, access, and 
convenience.
    One commenter asserted that it is not appropriate to compare the 
OPPS composite ambulatory payment classification (APC) groups to 
office-based imaging as a justification for expanding the imaging MPPR 
under the PFS. The commenter cited an analysis of OPPS payment 
demonstrating that CMS pays hospitals for the second imaging study at 
nearly 100 percent of the amount paid for a single study, concluding 
that not until the third study would the payment be reduced from the 
sum of what would otherwise be paid under the OPPS if the studies were 
performed alone.
    Another commenter agreed that the current PFS imaging families 
could be further collapsed to eliminate the contiguous body area 
concept but opposed applying the MPPR across

[[Page 73230]]

modalities. The commenter suggested establishing three families to 
parallel the modality-based APC groups used under the OPPS, that is, 
CT/CTA, MRI/MRA, and ultrasound. Another commenter noted that highly 
specialized clinics often treat complex conditions and perform multiple 
imaging services on noncontiguous body areas primarily for good patient 
care. As an example of a situation when complex imaging services are 
used to diagnose and treat significant medical conditions, the 
commenter indicated that a CT of the chest may be furnished, resulting 
in a diagnosis of lung cancer. In addition, the same commenter noted 
that appropriate treatment of the patient's neurological signs and 
symptoms also requires a CT of the head, because primary lung tumors 
account for 50 percent of all metastatic brain tumors. The commenter 
explained that these medically necessary combinations of imaging 
services are often performed in a single imaging session. Results of 
the initial imaging service, contended the commenter, could change the 
course of treatment for the patient and it would be prudent not to 
delay or complicate a patient's treatment plan. The commenter also 
pointed out that it is a convenience to the patient to have same day 
access for all imaging services.
    Another commenter acknowledged that while some efficiencies are 
gained in certain situations and settings when multiple imaging 
services are furnished together, the expanded MPPR policy would not 
appropriately pay for the additional studies required for the majority 
of patients with significant medical conditions. The commenter 
explained that highly organized clinics treating these complex patients 
often structure patient encounters so that there are intervening 
consultations with multiple providers and additional tests in between 
imaging services.
    Response: While most multiple procedures furnished with a single 
modality in 1 session would involve procedures currently assigned to 1 
of the 11 imaging families, it would not be uncommon for more than 1 
imaging procedure of the same modality to be furnished across families, 
and we would expect efficiencies to occur in these cases. As noted by 
MedPAC, the proposed PFS MPPR expansion to eliminate the concept of 
contiguous body areas as the basis for a payment reduction due to 
efficiencies is consistent with the established hospital OPPS policy on 
multiple imaging and the PFS MPPR policy for multiple surgical 
procedures, neither of which is limited to procedures involving 
contiguous body areas. While we acknowledge that the OPPS composite 
imaging APCs utilize a different payment methodology than an MPPR to 
reflect the level of efficiencies when multiple imaging services are 
furnished together, consideration of the specific body areas imaged is 
not an aspect of the OPPS policy. The OPPS methodology continues to 
distinguish among services using different imaging modalities in part 
because of the statutory requirement that APCs be clinically 
homogenous. This same limitation would not apply to an MPPR. Despite 
the differences in their payment methodologies, both the OPPS and the 
PFS strive to recognize the efficiencies in the TCs when multiple 
imaging services are furnished together. We continue to believe that 
there are significant efficiencies in the TCs when multiple imaging 
procedures of the same modality are furnished on noncontiguous body 
areas in the same imaging a session, and believe that an expanded 
imaging MPPR under the PFS is an important policy refinement to pay 
more appropriately for the comprehensive imaging service under such 
circumstances.
    Because most of the combinations of imaging services furnished in 
one session that are not now subject to the imaging MPPR occur within 
one modality, we believe it would be unnecessarily complex to continue 
separate families (even if fewer than 11) for different imaging 
modalities to address the limited circumstances when imaging services 
furnished with more than one modality are performed in a single imaging 
session. Even in these unusual cases, we would expect certain 
efficiencies in the TCs, such as the establishment of venous access 
only one time. Finally, the more general proposed policy would provide 
a streamlined basis for our further consideration of other possible 
expansions of an MPPR policy to the TC and/or PC of imaging procedures 
or other diagnostic tests in the future.
    Consistent with our current expectations for provider ordering 
practices under the established imaging MPPR policy for single 
modality, contiguous body area imaging studies, under an expanded MPPR 
we would not expect providers to order multiple imaging procedures of 
different modalities or for noncontiguous body areas on different days 
or order different imaging sessions on the same day simply to garner 
increased payment unless it were medically reasonable and necessary 
that the studies be furnished on different days or in different 
sessions on the same day. However, where it is medically necessary to 
have intervening consultations among multiple providers or other 
diagnostic tests furnished to a patient between imaging services on the 
same day to which the MPPR would otherwise apply, such cases would 
constitute separate imaging sessions and the MPPR would not apply.
    Comment: Many commenters addressed CMS' assertion that because of 
the different pieces of equipment used for CT/CTA, MRI/MRA, and 
ultrasound procedures it would be unlikely that a single practitioner 
would furnish more than one imaging procedure involving two different 
modalities to one patient in a single session where the proposed MPPR 
policy would apply. While most commenters agreed with this statement, 
the commenters questioned why CMS would implement the proposal if this 
were the case. When procedures are furnished across modalities, the 
commenters believe them to be separate and distinct procedures with 
little or no overlap and argue that efficiencies cannot be achieved. 
The commenters asserted that CMS offered no data to support its 
expectation that efficiencies would occur when different imaging 
modalities are furnished at the same time. Many commenters requested a 
more rigorous analysis, validated evidence to support the proposed 
expansion, and an opportunity for stakeholders to comment on the 
analysis.
    A number of the commenters agreed that specialized staff with 
different expertise and certification is often needed to furnish 
services within the different imaging modalities. When multiple imaging 
is necessary, the commenters explained that two appointments are 
created, and the patient is checked in twice, prepared and instructed 
twice, educated on each study independently, transported from one room 
to another, and furnished separate supplies such as contrast and IV 
tubing, following which the two rooms are cleaned.
    Response: We agree with the majority of commenters that in most 
cases a practitioner would not furnish more than one imaging procedure 
involving two different modalities to one patient in a single session. 
While there may be some instances where the MPPR applies to two 
different modalities used in a single session, the MPPR would not apply 
in most cases because this clinical scenario is uncommon. In response 
to the commenters who questioned why we proposed to apply an MPPR 
across modalities, we believe that if, in the unusual case, more than 
one imaging service of different modalities were

[[Page 73231]]

furnished to a patient in a single session, there would be some 
efficiencies in the TC, such as greeting the patient only one time and 
setting up one intravenous line. We acknowledge that the application of 
a general MPPR policy to numerous imaging service combinations may 
result in an overestimate of the efficiencies in some cases and an 
underestimate in others, but this can be true for any service paid 
under the PFS, and we believe it is important to establish a general 
policy to pay appropriately for the TCs of combinations of imaging 
services upon which we may consider building in the future. We do not 
believe that it is administratively efficient or necessary for 
appropriate payment to maintain modality-specific imaging families 
given the uncommon occurrences of pairs of imaging services involving 
different modalities furnished by one practitioner on the same day to a 
single patient that we observe in our claims data.
    Comment: Several commenters generally opposed the inclusion of 
nondiagnostic radiation oncology imaging procedures in any future 
expansion of the MPPR policy, given the clinical differences between 
radiation oncology and diagnostic imaging. In addition, one commenter 
noted that cardiologists commonly provide echocardiography services and 
peripheral vascular ultrasound tests. While both types of services use 
ultrasound technology that resembles the technology used in the 
ultrasound procedures currently subject to the imaging MPPR, the 
commenter reported that these services are furnished using a different 
machine and different staff who have different expertise so the imaging 
MPPR policy.
    Response: We did not propose to expand the existing contiguous body 
area MPPR policy, which currently includes only nonobstetrical chest, 
abdominal, and pelvic ultrasound services, to include peripheral 
vascular ultrasound services or echocardiography services in CY 2011. 
While we explained in the CY 2011 PFS proposed rule (75 FR 40074) that 
we would continue to review other possible expansions of the MPPR 
policy to the TC and/or PC of imaging procedures or other diagnostic 
tests for the future, we have not proposed to do so at this time. 
Further changes to include services such as nondiagnostic radiation 
oncology imaging services or echocardiography or peripheral vascular 
ultrasound services would be addressed in future rulemaking.
    Comment: A few commenters reported that it is often difficult for 
imaging providers to understand when an encounter begins and ends and, 
therefore, urged CMS to better define a single session. They explained 
that it is not always easy to identify when the use of the -59 modifier 
(Distinct procedural services), denoting a separate session under the 
current imaging MPPR policy, is appropriate. This ambiguity leaves the 
responsibility for determining whether imaging services are furnished 
in a separate session to the judgment of the imaging technologist, 
leading to inconsistent determinations and, therefore, variable payment 
for the same services furnished in similar clinical scenarios. One 
commenter specifically requested further parameters of a separate 
encounter be defined to include the same exam room, a specific 
timeframe, or a specific action. Another commenter noted that 
distinguishing separate sessions is a particular challenge for 
ultrasound imaging.
    Response: In the CY 2006 PFS final rule with comment period (70 FR 
70262), we indicated that a single imaging session is one encounter 
where a patient could receive one or more radiological studies. If a 
patient has a separate encounter on the same day for a medically 
necessary reason and receives a second imaging service, this would 
represent a separate session. Physicians would report the -59 modifier 
to indicate multiple sessions and the MPPR would not apply. This same 
policy would continue in CY 2011 under the consolidation of the imaging 
families to expand the imaging MPPR under the PFS. We believe that 
providers' 5 years of previous experience with this policy should allow 
them to continue to appropriately distinguish separate imaging sessions 
by reporting the -59 modifier, even under the expanded MPPR policy. We 
may provide further subregulatory guidance to providers on this issue 
in the future in view of our CY 2011 expanded imaging MPPR policy if 
specific issues arise that we believe warrant further clarification 
regarding the characteristics of separate imaging sessions.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to apply the 50 percent 
imaging MPPR to all of the ultrasound, CT, CTA, MRI, and MRA services 
to which the current contiguous body area and modality-specific policy 
applies, regardless of the specific combinations of imaging services 
furnished to the patient in a single session. We believe this proposal 
is consistent with our overall strategy to pay more appropriately for 
services that are commonly furnished together, consistent with section 
1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) that 
instructs the Secretary to identify multiple codes that are frequently 
billed in conjunction with furnishing a single service, and review and 
make appropriate adjustments to their relative values.
    As stated earlier in this section, expenditures attributable to the 
increase in the MPPR for multiple imaging procedures to consecutive 
body parts (that is, those previously designated in the same family of 
codes) are exempt from the budget neutrality provision of the PFS. 
However, the reduced expenditures attributable to the MPPR for new 
combinations of multiple imaging procedures that we are finalizing for 
CY 2011 (the MPPR for multiple imaging procedures not involving 
consecutive body parts) would be subject to budget neutrality 
adjustment under the PFS. We note that this formulation for whether 
reduced expenditures are exempt from budget neutrality applies both to 
procedures currently subject to the imaging MPPR and to new codes that 
are subject to the policy in CY 2011 and in future years. To the extent 
that imaging procedures described by the new codes are furnished in 
combination with other procedures that are subject to the imaging MPPR 
on consecutive body areas, the reduced expenditures attributable to the 
MPPR for these combinations would be exempt from the PFS budget 
neutrality adjustment.
    The complete list of codes subject to the CY 2011 MPPR policy for 
diagnostic imaging services is included in Addendum F to this final 
rule with comment period and the CY 2011 code additions to the MPPR 
policy are listed in Table 17. The codes being added to the policy are 
those we proposed, as well as new CY 2011 codes or newly covered codes 
that are clinically similar to the imaging codes subject to the MPPR in 
CY 2010. The new codes include CPT codes 74176 (Computed tomography, 
abdomen and pelvis; without contrast material); 74177 (Computed 
tomography, abdomen and pelvis; with contrast material(s)); and 74178 
(Computed tomography, abdomen and pelvis; without contrast material in 
one or both body regions, followed by contrast material(s) and further 
sections in one or both body regions). The newly covered codes are CPT 
codes 72159 (Magnetic resonance angiography, spinal canal and contents, 
with or without contrast material) and 73225 (Magnetic resonance 
angiography, upper extremity, with or without contrast material). These 
codes are being added on an interim final

[[Page 73232]]

basis and are open to public comment on this final rule with comment 
period. The complete list of CPT codes newly added to the diagnostic 
imaging MPPR for CY 2011 is displayed in Table 17 below.

 TABLE 17--CPT Code Additions to the Diagnostic Imaging MPPR Policy for
                                 CY 2011
------------------------------------------------------------------------
                                                           Subject to
                                                          comment in CY
           CPT code                Short descriptor      2011 PFS final
                                                              rule
------------------------------------------------------------------------
72159.........................  Mr angio spine w/o & w/ Yes.
                                 dye.
73225.........................  Mr angio upr extr w/o   Yes.
                                 & w/dye.
74176.........................  Ct abd & pelvis w/o     Yes.
                                 contrast.
74177.........................  Ct abdomen & pelvis w/  Yes.
                                 contrast.
74178.........................  Ct abd & pelv 1+        Yes.
                                 section/regns.
75571.........................  Ct hrt w/o dye w/ca     No.
                                 test.
75572.........................  Ct hrt w/3d image.....  No.
75573.........................  Ct hrt w/3d image,      No.
                                 congen.
75574.........................  Ct angio hrt w/3d       No.
                                 image.
------------------------------------------------------------------------

c. CY 2011 Expansion of the MPPR Policy to Therapy Services
    In the July 2009 GAO report entitled, ``Medicare Physician 
Payments: Fees Could Better Reflect Efficiencies Achieved when Services 
are Provided Together,'' the GAO found efficiencies when multiple 
physical therapy services were furnished in one session and concluded 
that an MPPR policy could be appropriate for these services. In the 
report, the GAO noted that officials from the AMA RUC explained that 
time spent on pre-service and post-service therapy activities is spread 
across the number of services in a typical session in order to avoid 
duplication of the PE for the services. Nevertheless, the GAO found 
that there was duplication of certain activities in the intra-service 
period, and provided the example of time spent testing range of motion 
or muscle flexibility that was duplicated in commonly observed code 
pairs.
    In the typical clinical scenario for therapy services, we believe 
that therapy services are misvalued for PFS payment when multiple 
services are furnished to a patient in a single session because 
duplicate clinical labor and supplies are included in the PE of the 
services furnished. We believe this duplication should be accounted for 
under the PFS, as we currently account for efficiencies in multiple 
surgical and multiple diagnostic imaging procedures furnished in a 
single session. Over the past 2 years, the AMA RUC has examined several 
services billed 90 percent or more of the time together as part of its 
potentially misvalued service initiative and, in several cases, created 
one code to describe the complete service, with a value that reflects 
the expected efficiencies. Notwithstanding the AMA RUC's analyses, in 
most cases it has not created one code to describe a complete therapy 
service, in part because many of the core therapy CPT codes are timed 
codes based on increments of treatment time.
    Therefore, in the CY 2011 PFS proposed rule (75 FR 40075), we 
proposed a further step to implement section 1848(c)(2)(K) of the Act 
(as added by section 3134 of the ACA) that specifies that the Secretary 
shall identify potentially misvalued codes by examining multiple codes 
that are frequently billed in conjunction with furnishing a single 
service. For CY 2011 we proposed an MPPR policy for the HCPCS codes 
listed in Table 18, specifically the separately payable ``always 
therapy'' services that are only paid by Medicare when furnished under 
a therapy plan of care. These services are designated ``always 
therapy'' services regardless of who furnishes them and always require 
therapy modifiers to be reported, specifically -GP (Services rendered 
under outpatient physical therapy plan of care); -GO (Services rendered 
under outpatient occupational therapy plan of care); or -GN (Services 
rendered under outpatient speech-language pathology plan of care). The 
therapy codes are available in a file on the CMS Web site at: http://www.cms.gov/TherapyServices/. We excluded both contractor-priced and 
bundled codes from Table 18 because, under our proposal, an MPPR would 
not be applicable for ``always therapy'' services furnished in 
combination with these codes. In the case of bundled codes that are not 
separately paid, there are no explicit efficiencies in the direct PE to 
be reflected in payment for the second and subsequent therapy services 
furnished to the patient on the same day. In the case of contractor-
priced codes, there is no nationally established pricing that could be 
uniformly adjusted to reflect the expected efficiencies when multiple 
therapy services are furnished.

  Table 18--Separately Payable ``Always Therapy'' Services Proposed as
                  Subject to the CY 2011 MPPR Policy *
------------------------------------------------------------------------
        CPT/HCPCS code                      Short descriptor
------------------------------------------------------------------------
92506.........................  Speech/hearing evaluation.
92507.........................  Speech/hearing therapy.
92508.........................  Speech/hearing therapy.
92526.........................  Oral function therapy.
92597.........................  Oral speech device eval.
92607.........................  Ex for speech device rx, 1hr.
92608.........................  Ex for speech device rx addl.
92609.........................  Use of speech device service.
96125.........................  Cognitive test by hc pro.
97001.........................  Pt evaluation.
97002.........................  Pt re-evaluation.
97003.........................  Ot evaluation.
97004.........................  Ot re-evaluation.
97010.........................  Hot or cold packs therapy.
97012.........................  Mechanical traction therapy.
97016.........................  Vasopneumatic device therapy.
97018.........................  Paraffin bath therapy.
97022.........................  Whirlpool therapy.
97024.........................  Diathermy eg, microwave.
97026.........................  Infrared therapy.
97028.........................  Ultraviolet therapy.
97032.........................  Electrical stimulation.
97033.........................  Electric current therapy.
97034.........................  Contrast bath therapy.
97035.........................  Ultrasound therapy.
97036.........................  Hydrotherapy.
97110.........................  Therapeutic exercises.
97112.........................  Neuromuscular reeducation.
97113.........................  Aquatic therapy/exercises.
97116.........................  Gait training therapy.
97124.........................  Massage therapy.
97140.........................  Manual therapy.
97150.........................  Group therapeutic procedures.
97530.........................  Therapeutic activities.
97533.........................  Sensory integration.
97535.........................  Self care mngment training.
97537.........................  Community/work reintegration.
97542.........................  Wheelchair mngment training.
97750.........................  Physical performance test.
97755.........................  Assistive technology assess.
97760.........................  Orthotic mgmt and training.
97761.........................  Prosthetic training.
97762.........................  C/o for orthotic/prosth use.
G0281.........................  Elec stim unattend for press.

[[Page 73233]]

 
G0283.........................  Elec stim other than wound.
G0329.........................  Electromagnetic tx for ulcers.
------------------------------------------------------------------------
*Excludes contractor-priced and bundled codes.

    We did not propose an MPPR policy for ``sometimes therapy'' 
services, specifically those services that may be furnished under a 
therapy plan of care or otherwise by physicians or NPPs as medical 
services. We believe that the care patterns are different for the 
latter group of services that may sometimes be furnished as therapy 
services, and we noted that they are less commonly furnished with 
multiple services in a single session than the ``always therapy'' 
services. In the discussion that follows, our reference to therapy 
services means those HCPCS codes designated annually as ``always 
therapy'' services by CMS.
    Based on CY 2009 PFS claims data, we identified over 500 therapy 
service code pairs billed for the same patient in a single session. We 
then reviewed a sample of the most common therapy code pairs, 
specifically those high volume code pairs with more than 250,000 
combined services per year, to examine the potential for duplication in 
the PE. These code pairs represented more than half of the occurrences 
of therapy services billed together. While we acknowledged that the PE 
inputs per service for some therapy services were included in the 
direct PE database based on one-half of the total PE inputs required 
for two services furnished in a single session, which would account for 
some duplication, this was not the case for all combinations of therapy 
services. Of the high volume therapy services examined, approximately 
one-fourth of the code pairs were not valued based on two services. In 
addition, we noted that the CY 2009 PFS claims data for services paid 
under the PFS (excluding services furnished in facility settings that 
were paid at PFS rates) show that when multiple therapy services are 
billed on a claim for the same date of service, the median number is 
four services per day. Therefore, even for those clinical labor times 
that may reflect the allocation of total time across two units of 
therapy services, we believe that some elements of the current PE 
inputs are duplicated based on current patterns of therapy service 
delivery where most multiple service claims involve delivery of more 
than two services in a session.
    In the CY 2011 proposed rule (75 FR 40076), we stated that 
duplicate labor activities currently included in the PE for the service 
period for these high volume pairs of therapy services are as follows: 
clean room/equipment; education/instruction/counseling/coordinating 
home care; greet patient/provide gowning; obtain measurements, for 
example, ROM/strength/edema; and post-treatment patient assistance. The 
most common duplicate supply item included in the PE was the 
multispecialty visit pack. Examples of duplicated and unduplicated 
labor activities and supplies for two sample therapy code pairs and our 
estimates of potential clinically appropriate time and quantity 
reductions for multiple service sessions (which were also included in 
our proposed rule) are displayed in Table 19. We note that CY 2009 PFS 
claims data for these sample code pairs include over 3.4 million pairs 
of CPT codes 97112 (Therapeutic procedure, 1 or more areas, each 15 
minutes; neuromuscular reeducation of movement, balance, coordination, 
kinesthetic sense, posture, and/or proprioception for sitting and/or 
standing activities) and 97110 (Therapeutic procedure, 1 or more areas, 
each 15 minutes; therapeutic exercises to develop strength and 
endurance, range of motion and flexibility) furnished by the same 
practitioner on the same day and over 500,000 pairs of CPT codes 97001 
(Physical therapy evaluation) and 97140 (Manual therapy techniques (eg, 
mobilization/manipulation, manual lymphatic drainage, manual traction), 
1 or more regions, each 15 minutes).
BILLING CODE 4120-01-P

[[Page 73234]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.247


[[Page 73235]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.248

BILLING CODE 4120-01-C
    In the CY 2011 PFS proposed rule (75 FR 40078), we did not remove 
minutes for clinical labor tasks that were not duplicated. For example, 
for CPT code pair 97001 and 97140 the following tasks were not 
duplicated: post treatment patient assistance; prep and position 
patient; and prepare room, equipment, and supplies. In addition, we did 
not remove any supply items that would be required for only one of the 
separate services because these would not be duplicated in the PE 
applicable to the combination of services. We estimated no reduction 
for equipment time, even though efficiencies would be expected for 
equipment that is used in both services when they are furnished 
together. Finally, a corresponding reduction to the indirect expenses 
would be appropriate since indirect costs are allocated partially based 
on direct costs. For five high volume therapy code pairs that each 
occur over 2 million times in PFS claims for multiple therapy services 
and account for almost half of such claims, we estimated that the 
resulting reduction in the PE for the lower paying code would range 
from 28 to 56 percent.
    As we summarized in the CY 2011 PFS proposed rule (75 FR 40078), 
given the duplicative clinical labor activities and supplies as shown 
in the code combination examples, we believe it would be appropriate to 
extend the MPPR policy that is currently applied to surgical services 
and the TC of imaging services, to the PE component of certain therapy 
services. Specifically, we proposed to apply a 50 percent payment

[[Page 73236]]

reduction to the PE component of the second and subsequent therapy 
services for multiple ``always therapy'' services furnished to a single 
patient in a single day. Because we believed it would be difficult to 
determine the precise beginning and end of therapy sessions and we did 
not believe that beneficiaries would typically have more than one 
therapy session furnished in a single day, we proposed to apply the 50 
percent MPPR policy to the PE component of subsequent therapy services 
furnished to the same patient on the same day, rather than limiting the 
proposed policy to services furnished in the same session.
    We noted that many therapy services are time-based CPT codes, so 
multiple units of a single code may be billed for a single session that 
lasts for a longer period of time than one unit of the code. The 
proposed MPPR policy would apply to multiple units of the same therapy 
service, as well as to multiple different services, when furnished to 
the same patient on the same day. Therefore, we proposed that full 
payment would be made for the service or unit with the highest PE and 
payment would be made at 50 percent of the PE component for the second 
and subsequent procedures or units of the same service.
    We proposed that the work and malpractice components of the therapy 
service payment would not be reduced. For therapy services furnished by 
an individual or group practice or ``incident to'' a physician's 
service, the MPPR would apply to all ``always therapy'' services 
furnished to a patient on the same day, regardless of whether the 
services are furnished in one therapy discipline or multiple 
disciplines, for example, physical therapy, occupational therapy, or 
speech-language pathology. The MPPR policy would apply to both those 
services paid under the PFS that are furnished in the office setting 
and those services paid at the PFS rates that are furnished by 
outpatient hospitals, home health agencies, comprehensive outpatient 
rehabilitation facilities (CORFs), and other entities that are paid by 
Medicare for outpatient therapy services. Table 20 provides a sample 
calculation of the current and proposed CY 2011 payment for multiple 
therapy services furnished in on the same day. For those services paid 
under the PFS, the PFS budget neutrality provision would apply so that 
the estimated reduced expenditures for therapy services would be 
redistributed to increase payment for other PFS services.

                    TABLE 20--Sample Payment Calculation for Multiple Therapy Services Furnished to a Single Patient on the Same Day
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Proposed CY
                                   Procedure 1     Procedure 1     Procedure 2    Current total    2011 total          Proposed payment calculation
                                     Unit 1          Unit 2                          payment         payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Work...........................           $7.00           $7.00          $11.00          $25.00          $25.00  no reduction
PE.............................          $10.00          $10.00           $8.00          $28.00          $19.00  $10 + (0.5 x $10) + (0.5 x $8)
Malpractice....................           $1.00           $1.00           $1.00           $3.00           $3.00  no reduction
                                ------------------------------------------------------------------------------------------------------------------------
Total..........................          $18.00          $18.00          $20.00          $56.00          $47.00  $18 + $7 + (0.5 x $10) + $1 + $11
                                                                                                                 + (0.5 x $8) + $1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In the CY 2011 PFS proposed rule (75 FR 40078), we stated that we 
believe the proposed therapy MPPR policy would provide more appropriate 
payment for therapy services that are commonly furnished together by 
taking into account the duplicative clinical labor activities and 
supplies in the PE that are not furnished more than once in the single 
therapy session. This approach is consistent with the statutory 
requirement for the Secretary to identify, review and adjust the 
relative values of potentially misvalued services under the PFS as 
specified by section 1848(c)(2)(K) of the Act (as added by section 3134 
of the ACA). We also believe this proposed policy is responsive to 
continued concerns about significant growth in therapy spending and to 
MedPAC and GAO recommendations regarding the expansion of MPPR policies 
under the PFS to account for additional efficiencies. We observed that 
paying more appropriately for therapy services based on PE relative 
values that are adjusted for the clinical scenario under which the 
services are furnished would result in reduced therapy expenditures, 
and beneficiaries would be able to receive more medically necessary 
outpatient therapy services before reaching the therapy cap. For a 
further discussion of potential alternatives to the therapy caps, we 
refer readers to section III.A.2. of this final rule with comment 
period.
    Comment: Many commenters opposed application of the proposed MPPR 
policy to therapy services. The commenters characterized the proposal 
as drastic, arbitrary, and unfair, resulting in across-the-board cuts 
based on flawed assumptions that would lead to therapy underpayments 
that would jeopardize access to necessary care and harm patients. The 
commenters requested that CMS withdraw the proposal, study the issue 
further, and share the analyses with the public.
    In contrast, MedPAC supported the general direction of the proposed 
policy, but suggested that CMS better justify how a 50 percent 
reduction would capture the duplicate inputs related to multiple 
therapy services performed in a single session. MedPAC also recommended 
that CMS request that the AMA RUC review the values of all outpatient 
therapy codes to ensure that the practice expenses are not duplicated, 
regardless of whether or not the current values of those codes assume 
that two services are furnished during a single visit.
    Numerous commenters requested a detailed justification for the 
proposed policy's 50 percent reduction, including an explanation of the 
methodology used to calculate the new payments that would result. These 
commenters asked CMS to work with stakeholders to finalize a policy 
that would not adversely impact access to care, particularly in rural 
and other underserved areas. The commenters further urged consideration 
of other payment methods and alternatives to the therapy caps that 
would preserve and improve access to therapy services. The commenters 
stated that between 80 to 90 percent of physical therapy services 
furnished in private practices would potentially be subject to the 
MPPR, concluding that the policy would result in payment decreases of 
19.2 percent and 17.8 percent for physical therapy services in 
facilities

[[Page 73237]]

and offices, respectively, notably more than the CMS' impact estimate 
of 11 percent for the proposed rule.
    The commenters provided analyses to show that the duplication of 
supplies is very limited and argued that a more thorough analysis of 
duplication based on expert clinical review would result in 
considerably lower estimates of duplication. For example, the AMA RUC 
explained that for a typical single session combination of 2 units of 
CPT code 97110 (Therapeutic procedure, 1 or more areas, each 15 
minutes; therapeutic exercises to develop strength and endurance, range 
of motion and flexibility) and one unit of 97140 (Manual therapy 
techniques (e.g., mobilization/manipulation, manual lymphatic drainage, 
manual traction), 1 or more regions, each 15 minutes), a $12 PE payment 
reduction from the MPPR would be applied to adjust for $3.60 in 
potentially duplicated costs.
    Before implementing an MPPR, the commenters urged CMS to take time 
to ensure that individual services were valued correctly based upon the 
resources needed to deliver them. The commenters advised CMS to conduct 
a more thorough analysis, taking into consideration the fact that the 
direct PE inputs for therapy services were already reduced to avoid 
duplication. The commenters alleged that CMS provided incorrect 
examples of duplication in the proposed rule examples by overestimating 
the duplication compared to the standard time allocated by the AMA RUC 
for certain activities. The commenters explained that PE for therapy 
services was valued by the AMA RUC based upon three units of service, 
not two units of service as stated by CMS in the proposed rule. Three 
units of service are typical, and the commenters contended that no 
duplication of PE exists when the typical three units of service are 
delivered using typical time allotments for clinical labor activities. 
The commenters submitted multiple examples of combinations of therapy 
services, using the most frequently billed therapy codes and providing 
valuations for each of the components of PE, such as pre-service and 
post-service physical therapy assistant activities. The commenters 
pointed out that in the case of single unit therapy claims, or claims 
with one therapeutic procedure and one modality, there would currently 
be underpayment based on how therapy services are valued. The 
commenters further argued that it would not be fair to apply the MPPR 
to all subsequent services when some of the code combinations are 
already undervalued.
    Many commenters observed that the AMA RUC has worked in good faith 
to resolve any duplication in the PE inputs over the past few years and 
pointed out that CMS has historically accepted over 90 percent of the 
AMA RUC's recommendations. In April 2010, some commenters reported that 
the AMA RUC reviewed high volume therapy code pairs that included the 
most frequently billed therapy CPT code 97110, and the commenters 
conveyed the AMA RUC's conclusion that there is no duplication in the 
work or PE inputs for the most frequently reported therapy codes.
    The commenters pointed out that single comprehensive codes for 
certain bundles of component services were implemented in CY 2010, and 
that additional ones would be created in the future. Therefore, the 
commenters disagreed with CMS' reasoning for proposing a general MPPR 
that is not code pair-specific in the context of these ongoing efforts 
of the CPT Editorial Panel and the AMA RUC to revise the coding and 
values for services that are commonly furnished together. Instead, the 
commenters urged CMS to continue to work within the established 
processes and resolve duplication, where it exists, at the code pair 
level rather than with payment.
    Response: We appreciate the detailed information provided by the 
commenters regarding the historical AMA RUC process to value the 
therapy codes and the additional examples of the practice expenses as 
they apply to the many combinations of therapy services that may be 
reported. We understand that the AMA RUC valued many of the therapy 
services based on certain assumptions about the typical combinations of 
services furnished in a therapy session. However, as the commenters 
pointed out, there are numerous combinations of therapy services 
observed in the PFS claims data that we posted on the CMS Web site 
under supporting files for the CY 2011 PFS proposed rule that are 
commonly furnished in the physician's office setting. In the context of 
this large number of commonly observed combinations, we do not believe 
that our usual PFS methodology of valuing the typical service 
adequately accounts for the duplication in PE that occurs in the many 
possible therapy service combinations. Although they are frequent, they 
do not represent the typical case used by the AMA RUC in valuing the 
individual component services and, thus, do not fully account for 
duplications in PE. We proposed the therapy MPPR in order to pay more 
appropriately for therapy services in general by adjusting for the 
duplicate payment for the PE that may occur when combinations of 
therapy services are furnished together.
    We agree with the commenters that, when considering all claims for 
therapy services paid under the PFS, the median number of services is 
three. Thus, that number may have been appropriate for the AMA RUC to 
use in valuing therapy services. However, the median number of four 
services that we presented in the CY 2011 PFS proposed rule was based 
upon all claims for multiple therapy services, and did not include 
claims for a single therapy service. It was the multiple service claims 
that we examined for purposes of the MPPR analysis, and it is these 
claims to which the MPPR would apply. Therefore, we continue to believe 
that the median number of four is the appropriate reference point when 
evaluating an MPPR. We note further that when the AMA RUC valued 
certain therapy services based on the assumption that a combination of 
three types of therapy services would be furnished to the patient, then 
in the case of multiple service claims where the median number of 
services is four, some PE duplication would clearly occur for the 
typical multiple service case with more than three services.
    Although we continue to believe that 50 percent would generally be 
an appropriate level for an MPPR for the PE component of payment for 
therapy services, consistent with the current PFS MPPR policies for 
imaging and surgical services and our PE overlap analysis of certain 
therapy code combinations for the CY 2011 PFS proposed rule, we 
acknowledge there are particular challenges associated with 
establishing an MPPR for therapy services to account for the 
duplication in PE. For example, the current coding structure for 
therapy services relies upon timed units in many cases, and as a 
result, the number of commonly observed combinations is very large. The 
PE overlaps vary depending upon the specific combinations of services 
furnished to the patient, which may include evaluation services, 
therapeutic procedures, and therapeutic modalities. The common 
occurrence of such a great variety of multiple therapy code 
combinations contrasts with the relatively lesser number of 
combinations and/or frequency of combinations of surgical procedures or 
diagnostic imaging procedures to which the established PFS MPPR 
policies apply.
    As the commenters pointed out, the direct PE inputs for certain 
therapy services were systematically established

[[Page 73238]]

based upon a standard AMA RUC methodology of three therapy services 
furnished in a session that included two therapeutic procedures and one 
therapeutic modality and that assigned certain PE inputs solely to the 
two therapeutic procedures. However, the scenarios utilized by the AMA 
RUC in this process are an incomplete representation of the usual 
combinations of services reported when therapy services are furnished 
in a practitioner's office. For example, the most common combination of 
CPT codes for therapy services in CY 2009 PFS claims data consisted of 
an average of 3.5 services which were comprised of some combination of 
one or more units of a single therapeutic procedure CPT code and one or 
more units of a single modality CPT code, rather than 3 total units of 
the services. The second most common combination was a therapeutic 
procedure CPT code alone, with an average of 2.8 units, while the AMA 
RUC relied upon 2 therapeutic procedures in a session for its 
assignment of certain PE inputs. Other commonly observed combinations 
of codes included 3.4 to 4.6 therapy services, with different numbers 
of therapeutic procedures and therapeutic modalities furnished to the 
patient than were assumed by the AMA RUC under the scenarios that were 
the basis for establishing the PE inputs for certain therapy CPT codes. 
Therefore, despite the AMA RUC's consideration of multiple services for 
valuation, the therapy code combinations as actually reported by 
practitioners would typically have some additional duplication in their 
PE. Thus, while the current PFS values for therapy services may reflect 
some efficiencies in the PE for certain code combinations based on the 
AMA RUC approach to valuation (to the extent we accepted the AMA RUC 
recommendations), the actual efficiencies are not fully recognized in 
the PE inputs for the most commonly reported therapy code combinations, 
nor are they necessarily recognized in the many other common code 
combinations that were not considered by the AMA RUC as the typical 
case.
    Based on our review of the scenarios submitted by the commenters, 
we continue to believe that there is significant overlap in the PE when 
many combinations of therapy services are furnished together and that 
this overlap has not been adequately accounted for in the direct PE 
inputs that the AMA RUC has recommended to us for the component 
services. We believe the overlaps remain substantial and they can be 
potentially higher than 50 percent for some combinations while lower 
for others. Our analysis of five high volume therapy code pairs as 
noted in the CY 2011 PFS proposed rule (75 FR 40078) suggested a 
reduction in the PE for the lower paying code of 28 to 56 percent to 
account for PE duplication.
    In response to the commenters who projected that the impact on 
physician's office payment for physical therapy services would be 
greater than the 11 percent reduction we modeled for the proposed rule 
(75 FR 40232), we note that an additional element of our analysis was 
the continued transition to setting the PE RVUs based on the PPIS data. 
The PPIS transition is expected to significantly increase payment for 
the PE component of therapy services in CY 2011. While we acknowledge 
that the estimated change in PE RVUs due to the proposed therapy MPPR 
alone would result in a payment decrease for the specialty of physical 
and occupational therapy of somewhat more than 11 percent, it is the 
combined consideration of all factors affecting the CY 2011 PE RVUs 
that resulted in the 11 percent decrease for physical and occupational 
therapists in the proposed rule specialty impact table (75 FR 40232). 
We note further that the estimated impact of all the PE RVU changes for 
physical and occupational therapy based upon our proposals for CY 2011 
if there were no remaining transition to the new PE RVUs using the PPIS 
data would be -7 percent.
    Any MPPR policy, such as the MPPR that currently applies to 
surgical services and imaging procedures, is a relatively blunt payment 
policy tool that improves the overall accuracy of payment when 
combinations of services are furnished together but is not, by its 
nature, a specific policy that precisely values each code combination. 
A general MPPR is not unlike the well-established PFS pricing 
methodology that relies on the typical case, where we readily 
acknowledge that the clinician's resources used to furnish a specific 
service to a specific patient on a specific day may be more or less 
than those used in the typical case. Similarly, while we believe that 
an MPPR would generally improve the accuracy of PFS payment when 
multiple therapy services are furnished to a single patient in a single 
session, we understand that for a specific combination of services for 
a given patient, the resources required may be more or less than those 
recognized for payment under the MPPR policy. In view of the 
requirements of section 1848(c)(2)(K) of the Act (as added by section 
3134 of the ACA) which specify that the Secretary shall identify 
potentially misvalued codes by examining multiple codes that are 
frequently billed in conjunction with furnishing a single service and 
make RVU adjustments, we continue to believe it would be appropriate to 
expand the current PFS MPPR policies to address those scenarios where 
we conclude that combinations of services commonly furnished together 
are systematically overvalued.
    We believe the more specific valuation of common code combinations 
is best conducted with input from the AMA RUC as it evaluates single 
new comprehensive codes for a bundle of component services when those 
new codes are established by the CPT Editorial Panel. In such cases 
where a single code is used to report a comprehensive service, an MPPR 
would no longer apply, which would be appropriate because the potential 
for PE duplication would have been explicitly considered in determining 
the PE inputs for the comprehensive service. As we stated earlier in 
this section concerning the MPPR for imaging services, the MPPR is not 
intended to supersede the AMA RUC process. We encourage the AMA RUC to 
reexamine the values and direct PE inputs for therapy services, 
including code pairs, for duplication in the PE, and to recommend 
therapy services to the CPT Editorial Panel for consideration of 
bundling into comprehensive codes. However, we believe it is 
appropriate to use an MPPR to address the PE duplication that is 
currently present within the PFS RVUs for the therapy codes when more 
than one service is furnished to a patient.
    After consideration of the public comments we received, we are 
adopting, with modifications, our proposal to establish a MPPR policy 
for ``always therapy'' services for CY 2011. However, given the 
complexities involved in establishing an MPPR for the very large number 
of therapy codes and combinations, rather than the proposed 50 percent 
payment reduction to the PE component of the second and subsequent 
``always therapy'' services billed by the same practitioner or facility 
on the same date of service for the same patient, we are adopting a 25 
percent MPPR for ``always therapy'' services furnished in CY 2011. We 
continue to believe that a 50 percent MPPR for therapy services may be 
appropriate in light of our analysis of five high volume therapy code 
pairs that each occur over 2 million times in PFS claims for multiple 
therapy services and account for almost half of such claims, and for 
which we estimated that the resulting reduction in the PE for the lower 
paying code would range from 28 to 56 percent. However, we believe a 25

[[Page 73239]]

percent MPPR represents an appropriate and conservative first step 
toward eliminating payment for duplicative PE when multiple ``always 
therapy'' services are furnished to the same patient by the same 
therapy provider on the same date of service. We note that a 25 percent 
MPPR represents half the proposed reduction, and is slightly less than 
the lower range of the reduction suggested by our analysis of high 
volume code pairs. During CY 2011 and future years, we will continue to 
refine our analyses and consider whether further modifications to the 
policy would be appropriate, including the possible adoption of a 50 
percent MPPR or a different payment percentage reduction. Any further 
changes to the MPPR for therapy services will be addressed in future 
rulemaking, including the possible adoption of any alternative 
percentage payment reduction to the 25 percent MPPR that will be in 
place for CY 2011. We will also closely follow the work of the CPT 
Editorial Panel and the AMA RUC with respect to the coding and 
valuation for therapy services over the next few years as we assess the 
potential merits of further changes to the MPPR policy. We note that 
the typical reductions in total PFS payment for high utilization 
therapy code combinations due to the MPPR alone would fall within the 
range of 7 to 9 percent under our final policy, but this decrease will 
be mitigated by the continued transition to use of the PPIS data. As 
displayed in Table 101 of this final rule with comment period, we 
estimate that the CY 2011 impact on the PE RVUs of the new therapy MPPR 
and continued PPIS transition is a reduction in PFS payment to physical 
and occupational therapists of approximately -3 percent.
    The final list of CY 2011 CPT codes for ``always therapy'' services 
that are subject to the therapy MPPR is displayed in Table 21 at the 
end of this section.
    Comment: Some commenters pointed out that CMS' analysis was based 
only on data from physicians and private practice therapists, which the 
commenters opposed as unrepresentative of the typical therapy session 
because the data represent only 35 percent of outpatient therapy 
services paid under Medicare. The commenters objected that no data from 
skilled nursing facilities (SNFs), rehabilitation agencies, CORFs, and 
hospital outpatient departments were considered in the analysis. The 
commenters reported that application of the MPPR policy on a per-day 
basis would be inconsistent with the delivery of therapy services in 
provider settings where multiple sessions of the same or different 
disciplines of therapy on the same day are commonly furnished to 
``captive'' patients and would unfairly reduce payment for the 
resources used to provide these services. The commenters believe there 
is no duplication in the PE in such circumstances. Some commenters 
suggested that reductions should not be applied when there is a break 
in services into more than one session in the same day.
    Response: With respect to payment under the PFS, according to 
section 1848(c)(1)(B) of the Act, the term ``practice expense 
component'' means the portion of the resources used in furnishing the 
service that reflects the general categories of expenses (such as 
office rent and wages of personnel, but excluding malpractice expenses) 
comprising practice expenses. Under section 1848(c)(2)(C)(ii) of the 
Act, we are required to determine PE RVUs based on the relative 
practice expense resources involved in furnishing services. We develop 
these resource-based PE RVUs by looking at the direct and indirect 
physician practice resources involved in furnishing each service. To 
establish the direct PE inputs for services paid under the PFS, we 
consider the typical clinical scenario in which those services are 
delivered and paid by Medicare. In the case of therapy services that 
are paid under the PFS, the scenarios we consider are office-based (not 
institutional) because these therapy services are the only ones that 
are actually paid under the PFS (section 1848 of the Act) and subject 
to all of the provisions of the PFS, including budget neutrality under 
section 1848(c)(2)(B)(ii)(II) of the Act. Section 1834(k)(3) of the Act 
then requires that we pay for all outpatient therapy services at the 
applicable PFS amount. Therefore, our analyses and policy development 
regarding the therapy MPPR were based solely on claims for office-based 
therapy services and, given the applicable statutory payment 
provisions; we do not believe it would have been appropriate for us to 
consider institutional patterns of care in setting PFS rates for 
therapy services.
    We are required to establish the values for services paid under the 
PFS (office-based services) so that therapy services are valued 
appropriately in the context of all other services paid under the PFS, 
and that means ensuring that therapy services are appropriately valued 
for the office setting. In the case of other services paid under the 
PFS that may be furnished in both facility and nonfacility settings, we 
generally establish separate but related facility and nonfacility 
values to differentially value the services when furnished in each of 
the two types of settings. However, therapy services are only paid 
under the PFS when furnished in the office setting, so we establish the 
PFS values for therapy services based on patterns of care in the office 
setting. This approach ensures equitable and relative treatment of all 
services paid under the PFS with respect to the statutory provisions 
that apply to the PFS, including year-to-year budget neutrality. In 
contrast to other services paid under the PFS, the statute then 
specifies that we pay for therapy services furnished in facility 
settings at the applicable PFS amount (which, as discussed above, is 
established based upon our resource-based methodology for services 
furnished in nonfacility settings). Although the statutory payment 
scheme for therapy services differs from most other services, we note 
that this treatment ensures that Medicare payment is the same across 
all settings for outpatient Part B therapy services.
    We acknowledge the commenters' point that multiple therapy sessions 
furnished to one patient by one provider (one National Provider 
Identifier (NPI)) in a single day are more common in facility settings 
than in the office setting. However, we continue to believe that in 
these situations there would be some overlaps in the PE, including 
patient education and obtaining measurements, that would be 
appropriately accounted for through the therapy MPPR. Furthermore, 
given the nature of therapy services and the associated coding, we 
believe it would be very challenging to determine the medical necessity 
of multiple therapy sessions on one date of service or the precise 
beginning and ending of therapy sessions if we were to exclude from the 
MPPR those therapy services furnished by the same provider to a single 
patient on the same day but in different sessions, although we 
acknowledge that this modification would be consistent with our 
established policy for the imaging MPPR.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to apply the therapy MPPR when multiple 
therapy services are billed on the same date of service for the same 
patient by the same practitioner or facility under the same NPI, 
regardless of whether those therapy services are furnished in separate 
sessions.
    Comment: Many commenters objected to applying the MPPR across 
therapy disciplines because the commenters argued that physical 
therapy,

[[Page 73240]]

occupational therapy, and speech-language pathology (SLP) are separate 
and distinct interventions furnished independently by individually 
licensed professionals, each of which is certified to provide unique 
and specialized services that do not cross discipline or service lines. 
Several commenters explained that each discipline involves entirely 
different skills, equipment, supplies, and treatment goals, and 
separate disciplines are often located in different treatment settings. 
Individual plans of care, explained the commenters, are separately 
maintained for each therapy discipline and contain specific goals and 
treatments. Some commenters compared the proposal to claiming that 
services furnished to a single patient on the same day by a 
cardiologist and internal medicine specialist contain duplicative PE 
inputs. The same commenters described administrative contact with the 
patient in this scenario as distinct and separate, observing that 
greeting and gowning the patient, cleaning, and assistant activities 
are furnished independently by the second or subsequent discipline, and 
cannot be shared.
    The large majority of commenters argued that the proposal did not 
make logical distinctions between therapy treatments or specialties or 
even properly distinguish between the skills of rehabilitation 
practitioners. While physical therapists and occupational therapists 
report the same CPT codes, the commenters noted that the codes do not 
represent the same service and the plan and approach to treatments 
differ depending on the discipline.
    Response: We recognize that the therapy disciplines are separately 
qualified professionals who address specific impairments using separate 
and unique skills. However, in the office setting which is the basis 
for our valuing therapy services for payment under the PFS as discussed 
previously, although we believe it would be uncommon for services to be 
furnished to a single patient by different therapy disciplines and 
billed by a single provider (one NPI) on the same date of service, we 
continue to believe that there would be some overlap in the PE in this 
circumstance. The PE overlaps that we would anticipate include greeting 
the patient, obtaining vital signs, and post-visit phone calls. We do 
not agree with the commenters that we should accept such multiple 
discipline cases from the therapy MPPR that would otherwise apply.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to apply the therapy MPPR to all 
therapy services across the disciplines billed on the same date of 
service for the same patient by the same practitioner or facility under 
the same NPI.
    Comment: Several commenters pointed out that, unlike other therapy 
services, many SLP services contain therapist work in their PE because 
SLPs have no assistants. These commenters requested that the therapy 
MPPR not be implemented, or at least be delayed, until the AMA RUC 
completes its plan to recommend moving SLP work from PE to work. In 
addition to bundled codes, the commenters also requested that add-on 
codes, such as CPT code 92608 (Evaluation for prescription for speech-
generating augmentative and alternative communication device, face-to-
face with the patient; each additional 30 minutes (List separately in 
addition to code for primary procedure)), be exempted from the therapy 
MPPR, since the PE inputs for add-on codes explicitly take into 
consideration the PE inputs for a base code that is always reported. 
The commenters reported that the major SLP codes include a wide variety 
of service types and are essentially bundled already, meaning that SLP 
practitioners rarely bill two different services on the same day for 
the same patient. The commenters expressed concern because SLP services 
are furnished and valued differently than physical and occupational 
therapy, yet the proposed rule contained no SLP examples to justify 
including SLP codes in the MPPR or to estimate the impact on SLP 
services.
    Response: We note that most of the SLP codes will have been valued 
with therapist work in the work component of the SLP service RVUs by CY 
2011, although we do not see the continued valuation of therapist work 
in the PE as an impediment to application of the MPPR to SLP services. 
Since many single SLP codes represent multiple component services that 
are reported using a single comprehensive code, the impact of the 
therapy MPPR on PFS payment for SLP services would be minimal. For 
those services that may occasionally be billed with more than one SLP 
code for a session, we see no basis for treating SLP services 
differently than other therapy services because we believe there would 
also be PE duplication in these cases.
    However, we agree with the commenters that add-on codes should not 
be subject to the MPPR for therapy services because their PE inputs 
already consider that the add-on code is always furnished along with a 
primary service.
    Therefore, after consideration of the public comments we received, 
we are removing add-on therapy CPT code 92608 from the list of ``always 
therapy'' services that we proposed for application of the therapy MPPR 
policy. In addition, we are removing CPT code 97010 (Application of a 
modality to 1 or more areas; hot or cold pack) which is a bundled code 
that was inadvertently included on the proposed list. These changes are 
reflected in the final list of codes subject to the therapy MPPR policy 
that is displayed in Table 21 at the end of this section. This policy 
parallels our treatment of the MPPR for surgical services, where 
surgical add-on codes are not subject to the surgical MPPR.
    Comment: Some commenters characterized the proposed therapy MPPR as 
contrary to the objectives of the ACA, which the commenters believe was 
designed to shift care to the most effective and efficient delivery 
setting to ensure beneficiary access to cost-effective, high quality 
and coordinated care. Because therapy services do not involve expensive 
drugs or testing, yet they assist patients in avoiding or reducing 
other medical costs, many commenters believe that physical therapy is 
the most efficient and cost-effective treatment to return patients to 
independent function. The commenters contended that growing Medicare 
expenditures for the treatment of common musculoskeletal problems could 
easily be controlled by earlier access of patients to physical therapy 
services.
    The commenters were concerned that lower therapy payments would 
exacerbate the shortage of therapists, lead to restricted access to 
therapy services, especially in rural areas, and result in patients who 
are more prone to injuries and functioning at a lower level. 
Undertreated functional impairments, argued the commenters, would lead 
to increased spending for medication and medical costs associated with 
decreased mobility, pain and falls, increased emergency room services, 
longer inpatient stays, quicker returns to the hospital setting, and 
earlier placement in nursing homes.
    In addition, some commenters were concerned that the MPPR would 
provide an incentive to schedule patients in a manner that would be 
inefficient, inappropriate, and inconvenient for patients. The 
commenters noted that research proves therapy is more effective for 
many elderly patients with several visits on the same day, separated by 
rest. The commenters indicated that patients in rural communities 
prefer multiple therapy service visits to minimize lengthy commutes.

[[Page 73241]]

    Response: Through the CY 2011 proposed rule and its associated 
public comment period, we have invited public involvement in the 
process of policy development regarding an MPPR for therapy services. 
We believe the therapy MPPR policy is fully consistent with section 
1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) which 
specifies that the Secretary shall identify potentially misvalued codes 
by examining multiple codes that are frequently billed in conjunction 
with furnishing a single service, and review and make appropriate 
adjustments to their relative values. Therefore, we do not agree with 
the commenters that the MPPR policy undermines the goals of the ACA 
but, instead, we believe the policy fulfills one of our statutory 
obligations by valuing more appropriately combinations of therapy 
services furnished to patients and paid under the PFS. We have no 
reason to believe that appropriately valuing services for payment under 
the PFS by reducing payment for duplication in the resource-based PE 
payment for the component services would contribute to therapist 
workforce shortages or limit patients' access to medically reasonable 
and necessary therapy services.
    With respect to the ordering and scheduling of therapy services for 
Medicare beneficiaries, we require that Medicare-covered services be 
appropriate to patient needs and that a physician certifies each 
patient's plan of care. We would not expect the adoption of an MPPR for 
therapy services to result in therapy services being furnished on 
separate days by one provider so that the provider may garner increased 
therapy payment unless this pattern of care is the most clinically 
appropriate for the patient. We agree with the commenters that this 
unprofessional behavioral response on the part of practitioners would 
be inefficient and inappropriate and could result in patient compliance 
problems with the plan of care. We will continue to monitor access to 
care and patterns of delivery for therapy services, with particular 
attention focused on identifying any changes in the delivery of same 
day therapy services that may be inappropriate.
    Comment: Several commenters noted that CMS has contracted with 
Computer Sciences Corporation (CSC) and RTI International to develop 
outpatient therapy payment alternatives and urged CMS to place a high 
priority on the development of an alternative payment approach for 
therapy services rather than applying the proposed MPPR. Many 
commenters supported bundled per-session codes that would vary based on 
the severity of the patient and the complexity of evaluation and 
treatment services, and some commenters believe this payment approach 
would be more equitable than the proposed MPPR. The commenters argued 
for a scientific approach to the development of alternatives to the 
current payment system, which the commenters believe contrasts with the 
analysis presented by CMS to support the MPPR. However, most commenters 
encouraged further study and development before implementation of any 
alternatives. Many commenters pledged to work with CMS in the future to 
further develop a bundled service approach based on episodes of care.
    Response: We appreciate the effort and useful information 
contributed by stakeholders to the discussion and development of 
alternatives to the therapy caps and we refer readers to section 
III.A.2. of this final rule with comment period for a further 
discussion of the public comments and our responses on this issue. We 
look forward to the continued cooperation of stakeholders as we 
continue our work in this area over the coming years. However, we do 
not believe short-term alternative payment options for therapy services 
are sufficiently developed to warrant immediate implementation, and the 
commenters on the CY 2011 PFS proposed rule generally shared that view. 
In contrast, we believe that we can implement an appropriate MPPR for 
therapy services beginning in CY 2011 that would immediately provide 
more appropriate payment for the PE component of therapy services when 
multiple therapy services are furnished to one patient on one date of 
service by one provider. Paying more appropriately for therapy services 
in CY 2011 will allow patients to receive more medically necessary 
therapy services before reaching the therapy cap. To the extent that 
the therapy MPPR encourages the future bundling of therapy codes into a 
single comprehensive service that would be specifically valued, we 
support the exploration of that concept to capture the specific 
efficiencies associated with certain combinations of therapy services.
    Comment: Several commenters asserted that the therapy MPPR proposal 
violated the Administrative Procedure Act (APA), alleging the proposal 
was arbitrary and capricious. In addition, some commenters argued that 
CMS did not provide sufficient information regarding the data and 
analysis used to develop the policy to allow the informed public input 
from qualified providers of therapy services.
    Response: Consistent with the requirements of the APA, a full 
description of our analysis and the rationale we used as the basis for 
the proposed therapy MPPR policy was presented in the proposed rule, 
the public comments on our proposal have been reviewed, and our 
responses are provided in this final rule with comment period. Although 
many commenters requested that we share more data to support the 
proposed policy, several commenters demonstrated that they have their 
own access to Medicare data by submitting reports to us along with 
their comments in order to support their views or to refute the 
examples we presented in the proposed rule. We note further that we 
posted therapy utilization data on the CMS web site after publication 
of the proposed rule to provide additional information regarding the 
specific combinations and utilization of therapy services on PFS 
claims. The information was posted under downloads for the CY 2011 PFS 
proposed rule at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage. Therefore, we believe the final MPPR for therapy 
services is being adopted in compliance with the notice and comment 
rulemaking process under the APA.
    In summary, after consideration of the public comments we received, 
we are adopting our CY 2011 proposal to apply an MPPR to the PE 
component of Medicare payment for the second and subsequent outpatient 
``always therapy'' services, with a modification to apply a 25 percent 
reduction for CY 2011 rather than the 50 percent reduction we had 
proposed. Specifically, beginning in CY 2011 we are adopting an MPPR 
for ``always therapy'' services under which a 25 percent reduction will 
be applied to the PE component of payment for the second and subsequent 
``always therapy'' service(s) (those displayed in Table 21) that are 
furnished to a single patient by a single provider on one date of 
service in all settings where outpatient therapy services are paid 
under Part B. This policy applies to office-based therapy services paid 
under the PFS as well as to institutional therapy services paid under 
Part B at the PFS rates. We note that the MPPR would apply only when 
multiple therapy services are billed on the same date of service for 
one patient by the same practitioner or facility under the same NPI. 
This policy does not apply to add-on, bundled, or contractor-priced 
``always therapy'' codes. It does, however, apply to all ``always 
therapy'' services furnished on a single date of service by the same 
provider to a single

[[Page 73242]]

patient, including ``always therapy'' services furnished in different 
sessions or in different therapy disciplines.
    For those therapy services paid under the PFS, we are required to 
make a budget neutrality adjustment under section 1848(c)(2)(B)(ii)(II) 
of the Act. As a result, the estimated reduced expenditures for therapy 
services due to the 25 percent MPPR will be redistributed to increased 
CY 2011 payments for other PFS services. We refer readers to XI.A.2. of 
this final rule with comment period for further discussion of the 
impact of this policy. The final list of CY 2011 ``always therapy'' CPT 
codes subject to the MPPR policy for therapy services is displayed in 
Table 21.

    Table 21--``Always Therapy'' Services Subject To The CY 2011 MPPR
                                 Policy*
------------------------------------------------------------------------
           CPT code                         Short descriptor
------------------------------------------------------------------------
92506.........................  Speech/hearing evaluation.
92507.........................  Speech/hearing therapy.
92508.........................  Speech/hearing therapy.
92526.........................  Oral function therapy.
92597.........................  Oral speech device eval.
92607.........................  Ex for speech device rx, 1 hr.
92609.........................  Use of speech device service.
96125.........................  Cognitive test by hc pro.
97001.........................  Pt evaluation.
97002.........................  Pt re-evaluation.
97003.........................  Ot evaluation.
97004.........................  Ot re-evaluation.
97012.........................  Mechanical traction therapy.
97016.........................  Vasopneumatic device therapy.
97018.........................  Paraffin bath therapy.
97022.........................  Whirlpool therapy.
97024.........................  Diathermy eg, microwave.
97026.........................  Infrared therapy.
97028.........................  Ultraviolet therapy.
97032.........................  Electrical stimulation.
97033.........................  Electric current therapy.
97034.........................  Contrast bath therapy.
97035.........................  Ultrasound therapy.
97036.........................  Hydrotherapy.
97110.........................  Therapeutic exercises.
97112.........................  Neuromuscular reeducation.
97113.........................  Aquatic therapy/exercises.
97116.........................  Gait training therapy.
97124.........................  Massage therapy.
97140.........................  Manual therapy.
97150.........................  Group therapeutic procedures.
97530.........................  Therapeutic activities.
97533.........................  Sensory integration.
97535.........................  Self care mngment training.
97537.........................  Community/work reintegration.
97542.........................  Wheelchair mngment training.
97750.........................  Physical performance test.
97755.........................  Assistive technology assess.
97760.........................  Orthotic mgmt and training.
97761.........................  Prosthetic training.
97762.........................  C/o for orthotic/prosth use.
G0281.........................  Elec stim unattend for press.
G0283.........................  Elec stim other than wound.
G0329.........................  Electromagntic tx for ulcers.
------------------------------------------------------------------------
 *Excludes contractor-priced, bundled, and add-on ``always therapy''
  codes.

5. High Cost Supplies
a. Background
    MedPAC and the AMA RUC have long recommended that CMS establish a 
frequent price update process for high-cost supplies that are direct PE 
inputs in the PE database for services paid under the PFS because of 
their speculation that prices for these items may decrease over time as 
competition increases and new technologies disseminate into medical 
practice. MedPAC in particular has perennially noted that it is 
important for CMS to update the prices of high-priced supplies on a 
regular basis as inaccurate prices can distort PE RVUs over time, 
contributing to the misvaluation of established services under the PFS.
    Most of the current prices for high-cost supplies included in the 
direct PE database are from 2004 or earlier. There are currently 62 
unique supplies with prices of $150 or more in the proposed CY 2011 PE 
database, which is available on the CMS Web site under the supporting 
data files for the CY 2011 PFS proposed rule at http://www.cms.gov/PhysicianFeeSched/. Finally, we note that we do not actually pay the 
supply prices included in the PE database but, instead, use them to 
develop the PE RVUs according to our standard PE methodology as 
described in section II.A.2. of this final rule with comment period. 
Payment for a procedure that uses a supply is based upon the PE RVUs 
that result from the PE methodology, and supplies are among the direct 
PE inputs for procedures. Therefore, it is the relativity of high-cost 
supply prices to prices for other PE items (equipment, low-cost 
supplies, and clinical labor) that is important.
    Accordingly, in the CY 2009 PFS proposed rule (73 FR 38582), we 
proposed a process to update the prices for high-cost supplies priced 
at $150 or more that are included in the PE inputs for procedures paid 
under the PFS PE methodology. The CY 2009 proposed rule described a 
publicly transparent process in which CMS would publish a list of the 
high-cost supplies in the PFS proposed rule (65 supplies were included 
in the CY 2009 PFS proposed rule), and specialty societies or other 
relevant organizations would provide acceptable documentation 
supporting the pricing for the supplies during the 60-day public 
comment period. Furthermore, in that same proposed rule (73 FR 38582), 
we provided guidance on what constitutes valid, reliable documentation 
that reflects the typical price of the high-cost item in the 
marketplace. We outlined examples of acceptable documentation, such as 
a detailed description (including system components), sources, and 
current pricing information, confirmed by copies of catalog pages, 
invoices, and quotes from manufacturers, vendors, or distributors. We 
indicated that documentation that does not include specific pricing 
information such as phone numbers and addresses of manufacturers, 
vendors, or distributors or Web site links without pricing information 
would not be acceptable. We also noted that if acceptable documentation 
was not received within the proposed rule's 60-day public comment 
period, we would use prices from the Internet, retail vendors, and 
supply catalogs to determine the appropriate cost, and that we would 
use the lowest price identified by these sources (73 FR 38582). 
Finally, we solicited public comments on alternatives that could be 
used to update pricing information in the absence of acceptable 
documentation provided by specialty societies or other interested 
organizations.
    In the CY 2009 PFS final rule with comment period (73 FR 69882), we 
indicated that we received many comments on the proposed process and, 
while some commenters expressed support, others believed the proposed 
process was flawed and burdensome. Moreover, although we received some 
data in response to our request for information on the 65 high-cost 
supplies with prices of $150 or more, much of what we received was not 
complete or did not represent typical market prices. In particular, we 
expressed concern that the submitted data often represented 
manufacturer list prices for the premier models of many supplies, while 
we believed there were less expensive alternatives. Therefore, we were 
unable to determine the most appropriate, typical supply prices for our 
PFS payment methodology that prices the typical service described by a 
HCPCS code. Rather than finalizing the proposed process for updating 
high-cost supplies and revising the prices for the 65 supplies based on 
inadequate pricing information, we stated in the CY 2009 PFS final rule 
with comment period (73 FR 69882) that we would research the 
possibility of using an independent contractor to assist us in 
obtaining accurate pricing information. Furthermore, we informed the 
public that we planned to study the limitations of available pricing 
data and determine how to revise our proposed process to elicit better 
data.
    In the CY 2010 PFS proposed rule and final rule with comment period 
(74 FR 33554 and 61776, respectively), we

[[Page 73243]]

stated that we were continuing to examine ways to obtain accurate 
pricing information for high-cost supplies. We noted again in the CY 
2010 PFS proposed rule that we would depend upon the cooperation of the 
medical community to obtain typical prices in the marketplace, and we 
provided stakeholders with another opportunity to submit public 
comments on the process. In the CY 2010 PFS final rule with comment 
period, we acknowledged commenters' general support for an initiative 
to ensure accurate pricing of high-cost supplies. In general, the 
commenters strongly preferred a transparent and public process, and we 
stated that we would consider this perspective as we explore the best 
way to ensure that accurate supply pricing information is used in the 
PFS payment methodology.
b. Future Updates to the Prices of High-Cost Supplies
    In working towards refining a process to update the prices of high-
cost supplies and consistent with our intention expressed in the CY 
2009 PFS final rule with comment period (73 FR 69882), we contracted 
with an independent contractor during CY 2009 to help us study the 
availability of accurate pricing information. We requested that the 
independent contractor, L&M Policy Research, research pricing 
information for the 65 high-cost supplies listed in the CY 2009 
proposed rule (73 FR 38583 through 38585) and determine what, if any, 
pricing information reflecting typical market prices could be obtained 
for these high-cost supplies.
    We first requested that the contractor explore publicly available 
sources to obtain typical market prices for these supplies. The 
contractor utilized supply vendor catalogs and web sites and directly 
contacted vendors, manufacturers, group purchasing organizations 
(GPOs), and any other suppliers that the contractor identified in their 
research in order to identify prices for each of the supplies. Where 
more than one version of a supply item appeared to match a description 
of a high-cost supply and/or more than one possible vendor or 
manufacturer was identified, the contractor attempted to obtain prices 
from the multiple sources.
    Upon review of the high-cost supply list, the contractor refined 
the list to 62 unique high-cost items with prices of $150 or more for 
the study. The original list only consisted of 64 items but included 
one item inadvertently listed twice (CMS Supply Code SD207 (suture 
device for vessel closure (Perclose A-T))) and one item (CMS Supply 
Code SH079 (collagen implant)) that was deleted from the PE database 
after CY 2007 because it was no longer used as an input for any codes. 
While the contractor was able to obtain prices for 37 of the 62 unique 
supplies, the contractor was unable to obtain pricing information for 
the remaining 25 supplies. Documentation of these prices, a requirement 
we discussed in the CY 2009 PFS proposed rule (73 FR 38582), was only 
obtained for 25 of the 36 supplies with new pricing information. For 
the remainder, while the contractor was given price quotes over the 
phone, the sales agents or customer service representatives declined to 
provide any form of written documentation, in some cases because 
company policies restricted providing pricing documentation to 
prospective customers without an account. Moreover, information on 
typical discounts was obtained for only seven products, and only one 
discount was documented. In the case of these products, companies 
disclosed the maximum available discounts, ranging from 18 percent to 
45 percent. Relative to prices currently included in the PE database, 
the contractor found higher prices for the majority of the medical 
supplies that were researched, specifically 23 supplies with higher 
prices, 8 with lower prices, and 3 with the same price. The high-cost 
supplies studied by the contractor and their current database prices 
are displayed in Table 22.

[[Page 73244]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.249

BILLING CODE 4120-01-P

[[Page 73245]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.250


[[Page 73246]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.251


[[Page 73247]]


[GRAPHIC] [TIFF OMITTED] TR29NO10.252

    Next, we directed the contractor to access the United States 
General Services Administration (GSA) medical supply schedule to 
augment the results obtained through review of vendor materials and 
direct contact with vendors, manufacturers, and GPOs. We note that the 
GSA establishes long-term government-wide contracts with commercial 
firms for many products, negotiating contracts and determining prices 
to be fair and reasonable prior to placing them on schedule. Included 
on the schedule are thousands of medical supplies at prices that, in 
most cases, are established through competition. The GSA schedule is an 
open solicitation and a business of any size, if it is stable and 
financially sound, can request to be included on the schedule. GSA's 
vendors usually are nationwide

[[Page 73248]]

vendors with substantial non-government sales, and products on the 
schedule must be manufactured in the U.S. or in a nation with a trade 
agreement with the United States. Submissions for the schedule are 
received 365 days per year, vendor contracts can be of varying lengths, 
and vendors can add or delete products from the schedule. Depending on 
the aggregate cost estimate associated with the vendor's supply items, 
the time to achieve inclusion on the schedule can vary from as short as 
several months to as long as 2 years. The GSA has delegated authority 
to the Department of Veterans Affairs (VA) to procure medical supplies 
under the VA Federal Supply Schedules Program.
    Using the GSA general search engine under the category 
``Laboratory, Scientific, & Medical'' available at https://www.gsaadvantage.gov/advgsa/advantage/main/start_page.do, the 
contractor obtained nine prices for items similar to the high-cost 
supplies in the PE database and that are displayed in Table 20 from the 
publicly available information on the Internet, including pricing for 
one product for which its prior work did not yield an updated price. We 
believe that additional items that are similar to the high-cost 
supplies in the PE database and that may be used with the same 
procedures may be on the GSA schedule but we are still working through 
the crosswalk between our supplies and the way the supplies are 
presented on the GSA schedule. In the proposed rule (75 FR 40081), we 
stated that examples of high-cost supplies in the PE database that the 
contractor located on the GSA schedule include: (1) Kit, capsule, ESO, 
endoscopy w-application supplies (ESO), priced at $450 in the PE 
database and $444 on the GSA schedule; and (2) tube, jejunostomy, 
priced at $195 the PE database and $60 to $83 on the GSA schedule, 
depending on the characteristics of the tube. We note that the price of 
the ``jejunostomy'' tube that we included in the proposed rule was 
incorrect. The actual price of that supply item in the PE database is 
$97.50, a lower value that is still substantially higher than the price 
range on the GSA schedule.
    Since the GSA medical supply schedule is a source for pricing 
information that is public and transparent and reflects the best 
government contract price for a product, we believe it is a desirable 
resource for us to use in a refined process for updating the prices of 
high-cost supplies. For historical context, CMS has previously proposed 
to use VA prices that result from the competitive marketplace as 
comparison points to limit the Medicare prices for oxygen and certain 
items of durable medical equipment and prosthetic devices (62 FR 38100 
through 38107, and 64 FR 44227 through 44231) in 1997 and 1999, 
respectively. These prior proposals were based on our determination 
that the Medicare payment amounts for these items as durable medical 
equipment or prosthetics (not as physicians' services) were not 
inherently reasonable. We noted, however, that our current interest in 
the GSA schedule for pricing high-cost supplies for payment of 
physicians' services is not based on considerations of inherent 
reasonableness, and we do not actually pay the prices in the PE 
database for supplies under the PFS.
    We further noted that public commenters on pricing high-cost 
supplies have consistently requested that we ensure that the pricing 
information used to update the prices is provided publicly. The 
commenters have observed that this transparency would enable 
stakeholders to evaluate and provide feedback to the agency on pricing 
accuracy (74 FR 61776). We also acknowledged that our past attempts 
over several years to identify typical market prices for the high-cost 
supplies have been inhibited by the limited availability of public data 
that meet the documentation requirements we have previously 
established. Individual vendors do not always publish their product 
prices or provide typical discounts. Moreover, discounts may vary 
depending on suppliers and the volume of supplies purchased. In the CY 
2011 PFS proposed rule (75 FR 40082), we explained that our 
understanding of the GSA medical supply schedule is that the publicly 
listed fair and reasonable prices on the schedule generally do not 
include volume and or certain other discounts that may be subsequently 
negotiated by the buyer. Consequently, we would consider the prices 
available on the GSA schedule to represent the ``individual item 
ceiling'' price for a single item purchase, which we believe would be 
appropriate to estimate the high-cost supply prices for physicians' 
office purchases. We solicited public comments regarding the high-cost 
supplies in the direct PE database for the CY 2011 PFS proposed rule, 
available on the CMS Web site as noted earlier in this section, and the 
corresponding supplies or alternative items that could be used for the 
same function that are currently on the GSA supply schedule. We 
encouraged commenters to provide a detailed analysis of the current 
relationships between the items in the PE database and those on the GSA 
schedule.
    In the CY 2011 PFS proposed rule (75 FR 40082), we described a 
refined process for regularly updating prices for high-cost supplies 
under the PFS and solicit comments on how we could improve on this 
process. The process could occur every 2 years beginning as soon as CY 
2013, although we noted that we would propose the refined process 
through rulemaking before revising the prices for any high-cost supply 
item based on the GSA schedule. We could also consider establishing a 
different price update period depending on whether a high-cost supply 
was a new supply in the PE database or had been in use for some time, 
in which case we might expect that the price would have stabilized and, 
therefore, could be updated less frequently. In general, we would 
expect that the periodicity of updating prices for high-cost supplies 
that we eventually adopted would balance the associated administrative 
burden with the rate of price changes, to ensure that the associated 
procedures remain appropriately valued, rather than increasingly 
misvalued, over time.
    We envisioned that we would base high-cost supply price inputs on 
the publicly available price listed on the GSA medical supply schedule. 
Since the medical community would have several years to examine the GSA 
medical supply schedule before the refined process would be adopted, 
and we had found no apparent limitations on vendors placing products on 
the GSA schedule, beyond the schedule's interest in competitive, best 
value procurements, stakeholders would have the opportunity to ensure 
that any high-cost direct PE input for a PFS service that may currently 
be missing from the GSA medical supply schedule would be included 
before CMS needs to access the publicly available price for the item. 
If a supply price were not publicly available on the GSA medical supply 
schedule by the time CMS needs to access the price, we would propose to 
reduce the current price input for the supply by a percentage that 
would be based on the relationship between GSA prices at that time and 
the existing PE database prices for similar supplies (currently an 
average 23 percent reduction). We believe that this refined process 
would be desirable because it is consistent with commenters' repeated 
requests for the updating methodology to be transparent and 
predictable.
    Moreover, the VA (with responsibility delegated by the GSA) 
determines whether prices are fair and reasonable by comparing the 
prices and discounts that a company offers the government

[[Page 73249]]

with the prices and discounts that the company offers to commercial 
customers. Therefore, using the GSA medical supply schedule as a source 
for publicly available prices would also better account for product-
specific market dynamics than the alternative of an across-the-board 
percentage reduction for supplies not on the GSA schedule based on 
general price trends for the high-cost supplies on the schedule. That 
is, if the market price of a particular supply were not to drop 
according to broad trends for other high-cost supplies, suppliers would 
have the opportunity to provide their price to the public on the GSA 
schedule in order to preclude any reduction in Medicare payment for 
procedures associated with that supply.
    Finally, we reiterated our interest in receiving detailed public 
comments on the refined process discussed above, including all aspects 
of the price update methodology that we have presented. Moreover, we 
believe a similar approach could potentially be appropriate to update 
the prices for other supplies in the PE database that would not fall 
under our definition of high-cost supplies, and we welcomed further 
public comments on that possible extension. We also invited further 
suggestions for alternative approaches to updating high-cost supply 
prices, specifically those that would result in a predictable, public, 
and transparent methodology that would ensure that the prices in the PE 
database reflect typical market prices. These principles are 
particularly important in order to ensure that the services that 
utilize the high-cost supplies when provided in the physician's office 
are appropriately valued under the PFS and continue to be appropriately 
valued over time.
    Comment: Many commenters agreed with the need for a frequent, 
transparent price update process for high-cost supplies based on 
publicly available sources of pricing information. MedPAC supported 
CMS' description of the process update the prices of high-cost supplies 
presented in the CY 2011 PFS proposed rule: ``As an initial step, it is 
reasonable to use the GSA schedule as a source for the prices of high-
cost supply items and to reduce the prices of items not on the GSA 
schedule by the average difference between the GSA prices and the 
prices in CMS' PE database for similar supplies.''
    Response: We appreciate the general affirmation by many 
stakeholders of the significance of accurate pricing of high-cost 
supplies relative to other PE items (equipment, low-cost supplies, and 
clinical labor). We also value MedPAC's support for the update process 
that we described for the prices of high-cost supplies.
    Comment: Many commenters asserted that because the medical supply 
prices on the GSA schedule reflect the best price for government 
entities, these prices are not representative of typical prices 
available to practitioners caring for Medicare beneficiaries. The 
commenters suggested that physicians in private practices do not have 
the requisite purchasing power to negotiate such large discounts on 
their own and that the sales environments for the government and 
private markets are vastly different. Therefore, the commenters argued, 
because the GSA schedule is a streamlined buying process that the 
government uses to buy products and services through registered vendors 
at pre-negotiated prices, the schedule does not provide an accurate 
reflection of prices faced by any physician practice. Some commenters 
also observed that the prices on this schedule have historically been 
used only by manufacturers and suppliers in the context of providing 
these high-cost supplies to the VA alone, and do not reflect prices to 
other non-governmental entities.
    Response: We appreciate the differences in the purchasing power of 
the federal government and individual practitioners. However, we have 
reason to believe that prices on the GSA schedule do not reflect the 
full volume discounts available to large purchasers like the Federal 
government. In fact, while the GSA has delegated the authority to the 
VA to procure medical supplies under the VA Federal Supply Schedules 
Program, we understand that the prices that appear on the schedule do 
not reflect the prices the VA itself would usually pay for a medical 
supply. Instead, the VA determines the schedule prices to be fair and 
reasonable prior to placing them on the schedule, and uses that 
schedule price as a starting point for its own negotiations with supply 
vendors for specific purchases.
    While several commenters explained how vendors provide the VA 
itself with discounts that are greater than those offered to other 
buyers, and a few additional commenters made uncorroborated claims that 
prices on the GSA supply schedule reflect discounts unavailable to 
other providers, we received no evidence that the prices contained on 
the schedule are atypical of medical supply prices in the private 
marketplace. We agree that the prices on the GSA schedule may reflect 
some discounting, but we do not believe that the prices reflect the 
full discounting available to the VA itself for many purchases. 
Instead, we believe that the discounting on the GSA schedule reflects 
what the VA has deemed reasonable for other government buyers in the 
context of prices and discounts that a vendor offers to commercial 
customers.
    We also believe that typical practitioners receive discounts from 
vendors' listed prices for supply items for a variety of reasons, 
although we acknowledge that the basis for the discounts reflected on 
the GSA schedule may differ from the basis for the discounts that are 
available to typical practitioners. Therefore, we do not necessarily 
agree with the premise underlying many commenters' concerns that the 
usefulness of the GSA schedule as a source for PFS high-cost supply 
prices is necessarily undermined solely because large government buyers 
benefit from some exclusive discounts.
    We believe that in a relative payment system, maintaining the 
relativity of discounting among the prices for supply items may be more 
significant than any concern associated with the reasons different 
buyers receive particular discounts. At the moment, we have no reason 
to believe that the prices on the GSA schedule are atypical of the non-
government market, despite broad assertions by the commenters that the 
government may receive discounts for different reasons than those 
available to private purchasers. As we consider this high-cost supply 
update process for the future, we would be interested in receiving 
further public comments that substantiate the claims that medical 
supply prices on the GSA schedule are not representative of actual 
prices paid by typical practitioners caring for Medicare patients.
    Comment: Some commenters expressed concern that pricing high-cost 
supplies based on the GSA supply schedule could result in loss of 
appropriate relativity in PE RVUs because pricing for other supplies 
would be determined using other methodologies.
    Response: As stated earlier in this section, we do not actually pay 
the supply prices included in the PE database but instead use them to 
develop the PE RVUs according to our standard PE methodology as 
described in section II.A.2. of this final rule with comment period. 
However, we believe that inaccuracies in the prices for high-cost 
supplies that are specific to a very few PFS services may 
disproportionately distort physician payment by leading to inaccurate 
PE RVUs for services using those high-cost supplies. We believe that 
neglecting to incorporate any discounts or typical reductions in the 
market price for a

[[Page 73250]]

high-cost supply that is sold to a practitioner for use in a specific 
service would result in a greater likelihood that the service would be 
misvalued under a relative payment system than would similar 
imprecision in the prices for lower-cost supplies that are commonly 
used in many services and where price changes are typically less 
extreme. Finally, we note that we also remain interested in the 
possibility of using the GSA supply schedule for all PFS supply and 
equipment price inputs, as we stated in the CY 2011 PFS proposed rule 
(75 FR 40082).
    Comment: One commenter suggested that using the GSA schedule for 
supply price inputs might allow a single supplier furnishing a small 
volume of a product at a divergent price to distort the PE RVU 
calculations. On the other hand, MedPAC stated that the current CMS' 
process of ``using price information voluntarily submitted by specialty 
societies, individual practitioners, suppliers, and product developers 
might not result in objective and accurate prices because each group 
has a financial stake in the process.''
    Another commenter recommended that if CMS were to use the GSA 
schedule prices as high-cost inputs, then CMS should guarantee that 
physicians may purchase supplies at the GSA schedule prices. The 
commenter claimed that failure to do so would result in inherently 
unfair, lower PE RVUs for certain procedures, which could ultimately 
create an access to care problem for Medicare beneficiaries.
    Response: We believe that our current system of accepting 
voluntarily submitted invoices for supply and equipment price direct PE 
inputs may be problematic for high-cost supplies because the prices for 
such supplies may be particularly susceptible to distortions that 
significantly influence the PE RVUs that we use for payment of the 
associated services. We also believe that any attempt to account for 
these distortions and more appropriately value the services must be 
transparent to the stakeholders. Because the prices on the GSA supply 
schedule are developed based on the interaction between parties that 
have competing financial interests (the VA and supply vendors), we 
believe that these prices are more likely to be representative of 
competitive market prices than are prices that are voluntarily 
submitted by individuals with financial stakes in the PFS payment 
process. We agree that distortions--whether price overstatements or 
understatements--in the values of the direct PE inputs, resulting in 
misvalued services, have the potential to create financial incentives 
for practitioners that are detrimental to ensuring access to medically 
necessary and reasonable care for Medicare beneficiaries. Based in part 
on prior analysis by MedPAC, we believe that the greater risk of 
misvalued PE RVUs results from overvaluing high-cost supplies since we 
believe that prices for these items may generally decrease over time as 
competition increases.
    As we discussed in our response to a previous comment, we do not 
actually use the prices in the PE database for supplies but instead 
those prices are the basis for the PE RVUs for the associated services 
developed under the budget neutral PFS. Therefore, we do not agree with 
the commenter that we should guarantee that physicians may purchase 
supplies at the GSA schedule prices. Where our goal is for the high-
cost supply prices we use for PFS ratesetting to reflect typical market 
prices for these items, especially in a relative sense, for many 
reasons different supplies may not be available to individual 
practitioners purchasing them at the prices in the PE database. The PFS 
is not a payment system that reimburses health care practitioners based 
on their individual costs, and the price available to an individual 
practitioner for a supply item may be high or lower than the price in 
the PE database that is used for setting the PFS PE RVUs for the 
associated procedure.
    Comment: One commenter claimed that no U.S. manufacturer sells 
cryoablation probes through the GSA supply schedule and, therefore, 
asserted that the pricing process for high-cost supplies described in 
the CY 2011 PFS proposed rule would be inappropriate for that 
particular supply. Other commenters reported difficulty locating 
particular medical supplies on the GSA supply schedule.
    Response: While we recognize that not all high-cost supplies are 
currently on the GSA supply schedule, as we stated in the CY 2011 PFS 
proposed rule (75 FR 40082), we believe that since we have provided the 
medical community several years to examine the GSA medical supply 
schedule before its use could be adopted under the PFS, stakeholders 
would have the opportunity to ensure that any high-cost direct PE input 
for a PFS service that may currently be missing from the GSA medical 
supply schedule would be included before CMS needs to access the 
publicly available price for the item. Furthermore, we have found that 
the use of multiple clinically related search terms under the GSA 
schedule search engine improves our ability to locate supply items that 
are related to those that we currently include in the direct PE 
database for the PFS. We believe that the mistaken assumption that 
certain supplies are unavailable on the GSA supply schedule, resulting 
from some commenters' inconclusive searches, may have influenced many 
commenters' responses to the process we discussed in the CY 2011 PFS 
proposed rule.
    Prior to adopting use of the GSA supply schedule to update the 
prices for high-cost supplies under the PFS, we believe it would be 
appropriate to work with interested stakeholders to consider developing 
a crosswalk between supply items included the direct PE database and 
the GSA supply schedule.
    Comment: One commenter contended that implementation of a process 
to update high-cost supply prices based on the GSA schedule would 
disadvantage all medical device companies that have chosen to provide 
devices directly to the armed services or facilities for the treatment 
of veterans. A few commenters speculated that many supply vendors would 
resist placing their products on the GSA schedule for a variety of 
reasons, including avoiding any unnecessary regulatory burden or the 
scrutiny of GSA audits.
    Response: We have no reason to believe that vendors who sell 
directly to the VA at discounts must incorporate negotiated discounted 
prices on the GSA schedule, so we do not believe that utilizing 
publicly available prices as direct PE inputs would have a 
disproportionately unfair impact on suppliers who sell directly to the 
VA. At the same time, we also understand that not every medical supply 
vendor would choose to place their products on the GSA schedule. That 
is why we stated in the proposed rule (75 FR 40082) that if a supply 
price were not publicly available on the GSA medical supply schedule by 
the time CMS needs to access the price, we would consider proposing to 
reduce the current price input in the PE database for the supply by a 
percentage that would be based on the relationship between GSA prices 
at that time and the existing PE database prices for similar supplies. 
Vendors would need to balance their concerns about placing their 
products on the GSA supply schedule with the alternative pricing policy 
that would apply.
    Comment: Several commenters objected to a reduction of supply price 
inputs based on the relationship between GSA prices at the time the 
prices are being updated and the existing PE database prices for 
similar supplies. Many of the commenters stated that the 23 percent 
reduction presented as an example in the CY 2011 PFS proposed rule (75 
FR 40082) was

[[Page 73251]]

based on a very small sample of items and appeared arbitrary. One 
commenter contended that the percentage reduction would need to be 
validated for application to current pricing and argued that it would 
be inappropriate for use on an item-specific basis.
    Additional commenters, including the AMA RUC, pointed out the 
discrepancy between the price of the ``jejunostomy tube'' supply item 
listed in the chart of high-cost supplies and in the direct PE 
database. These commenters were concerned that this discrepancy may 
have led CMS to incorrectly calculate the average difference between 
GSA prices and current prices in the direct PE database. One commenter 
reasoned that it would be unfair for CMS to change the price inputs for 
innovative medical devices by relying on ``speculation that prices for 
these items may decrease over time as competition increases and new 
technologies disseminate into medical practice.''
    Response: We appreciate the commenters' concerns regarding the 
example of the 23 percent reduction mentioned in the CY 2011 PFS 
proposed rule. We provided that sample percentage as an example based 
on a current analysis of a small sample of supplies. We appreciate 
commenters correctly pointing out that we displayed an outdated price 
input for the supply item ``jejunostomy tube'' in the CY 2011 PFS 
proposed rule (75 FR 40080 through 40081). As we explained in the 
proposed rule, we are still working through the crosswalk between our 
supplies and the way the supplies are presented on the GSA schedule. We 
included the 23 percent figure as a rough guide based on a comparison 
of current GSA schedule and PE database prices for a small sample of 
high-cost supply items.
    Prior to implementing any price update based on GSA supply schedule 
prices, we would conduct a thorough analysis of the validity of the GSA 
pricing data in question. We believe that using such data for price 
comparisons, validated, and expanded to include all applicable supply 
items, may be more likely to approximate typical prices for these 
supplies than any available alternative--especially failing to update 
the high-cost supply price inputs with the necessary frequency. In 
cases where the prices for certain high-cost supplies do not follow the 
broad trends for other high-cost supplies, suppliers would have the 
opportunity to provide their price to the public on the GSA schedule in 
order to preclude any reduction in Medicare payment for procedures 
associated with that supply.
    Comment: Some commenters asserted that CMS should conduct 
independent market research similar in kind to the research CMS claims 
that the VA conducts in placing supply items and their associated 
prices on the GSA schedule. Another commenter recommended that CMS use 
a particular market research contractor to price these supplies.
    Response: As we stated in the CY 2011 PFS proposed rule (75 FR 
40079), we contracted with an independent contractor during CY 2009 to 
help us study the availability of accurate pricing information for 
high-cost supplies. We believe such research needs to be conducted with 
transparency, including using publicly available sources and contacting 
supply vendors directly. The contractor reported tremendous difficulty 
in identifying typical market prices using these methods. We have no 
reason to believe that a different contractor using similar methods 
would have greater success in acquiring market pricing information 
without utilizing a methodology that would be burdensome to 
practitioners or supply vendors or other stakeholders. Because the 
supply vendors in contact with the VA generally have a financial 
incentive to cooperate with their market research directly, we believe 
that the VA's methodology in this case would yield more accurate 
information than information derived from market researchers who do not 
have such cooperation, like the contractor working previously on behalf 
of CMS.
    Comment: Several commenters, including the AMA RUC, recommended 
that CMS consider creating HCPCS codes to be reported by rendering 
physicians for high-cost supplies when used for the care of a patient 
during procedure. The supplies could then be removed from the direct PE 
database and appropriate pricing for these supply HCPCS codes could be 
determined by CMS on an annual basis. One commenter requested that CMS 
explore whether such a methodology would be budget neutral under the 
PFS, since the commenter did not support an approach that would reduce 
PFS payments for cognitive services.
    Response: We appreciate the commenters' suggestions, but we believe 
creating separately reportable HCPCS codes for high-cost supplies and 
paying separately for these items would merely shift the pricing 
challenge rather than resolve it, and could compound the problem of 
misvaluing services by explicitly paying for high-cost supplies at the 
expense of other low-cost supplies, equipment, and clinical labor 
included in the PE component of PFS payment. We do not understand how 
this suggestion would help CMS price the supply items accurately, nor 
how it would lead to more appropriate payment for high-cost supplies 
under the relativity of the budget neutral PFS. This approach would be 
required to be budget neutral under the PFS and, to the extent that our 
current PE methodology pays less than the direct PE database cost for a 
supply item, payment for individual high-cost supplies at prices we 
establish could redistribute dollars from other PFS services to payment 
for these supply items if we were to pay more for them separately. 
Finally, unbundling payment for high-cost supplies from the associated 
procedures would be contrary to the current public policy interest in 
increasing the size of the payment bundles used for Medicare payment to 
encourage efficiencies in the delivery of services.
    Comment: Several commenters expressed a readiness to provide any 
additional information that may help CMS in pricing high-cost supplies, 
in lieu of using the GSA schedule prices for that purpose.
    Response: We appreciate commenters' offers of assistance regarding 
the pricing of direct PE inputs. However, based on the public comments 
from stakeholders that we received on the process we proposed in the CY 
2009 PFS proposed rule and the experience of the CMS' contractor who 
attempted to acquire market pricing for supply items directly from 
supply vendors, we believe that use of the GSA schedule would have 
greater potential to provide us systematically and transparently with 
typical market prices for high-cost supply items that could be updated 
with an appropriate periodicity.
    Comment: Some commenters expressed concern that CMS had not 
presented any information about how prices for Medicare PE purposes 
would actually be developed from the GSA supply schedule and had not 
specified how the Agency would do so nor whether (or when) CMS intended 
to make the approach available for public comment.
    Response: We appreciate the commenters' concerns regarding the 
practical implementation of a high-cost supply price update process 
based on prices on the GSA supply schedule. In the CY 2011 PFS proposed 
rule (75 FR 40082), our discussion was intended to encourage broad 
stakeholder comment, including consideration of potential alternatives 
to the process presented. Prior to implementing a high-cost supply 
update methodology, such as the use of prices on the GSA schedule that 
was the focus of our proposed rule

[[Page 73252]]

discussion, we would expect to use annual rulemaking in order to 
propose a more detailed process that would be subject to modification 
based upon our consideration of the public comments.
    In summary, we appreciate the many public comments we received on 
our discussion of a process that would use GSA schedule prices to 
update the prices for high-cost supplies utilized for developing PE 
RVUs under the PFS. In the context of our explicit responsibility to 
review and adjust the PFS values for potentially misvalued services 
under section 1848(c)(2)(K) of the Act (as added by section 3134 of the 
ACA), we believe it is especially important to soon establish a 
periodic and transparent process to update the cost of high-cost 
supplies to reflect typical market prices so that these supply items 
are appropriately considered in our ratesetting methodology. While 
public commenters expressed some concerns regarding our discussion of 
use of the GSA supply schedule prices in such a process, at this point 
we remain optimistic that this approach has significant potential to be 
used under the PFS and, based on our several year history of work in 
this area, we do not see other viable alternatives at this point. We 
will continue to study the issue of how to update the prices for high-
cost supplies over the upcoming months, and we encourage stakeholders 
to also further consider the process we discussed in CY 2011 rulemaking 
and provide their additional thoughts and perspectives to us on an 
ongoing basis.

D. Geographic Practice Cost Indices (GPCIs)

1. Background
    Section 1848(e)(1)(A) of the Act requires us to develop separate 
Geographic Practice Cost Indices (GPCIs) to measure resource cost 
differences among localities compared to the national average for each 
of the three fee schedule components (that is, work, PE, and 
malpractice). While requiring that the PE and malpractice GPCIs reflect 
the full relative cost differences, section 1848(e)(1)(A)(iii) of the 
Act requires that the physician work GPCIs reflect only one-quarter of 
the relative cost differences compared to the national average. In 
addition, section 1848(e)(1)(G) of the Act sets a permanent 1.5 work 
GPCI floor in Alaska for services furnished beginning January 1, 2009. 
Section 1848(e)(1)(C) of the Act requires us to review and, if 
necessary, adjust the GPCIs not less often than every 3 years. This 
section also specifies that if more than 1 year has elapsed since the 
last GPCI revision, we must phase in the adjustment over 2 years, 
applying only one-half of any adjustment in each year. As discussed in 
the CY 2009 PFS final rule with comment period (73 FR 69740), the CY 
2009 adjustment to the GPCIs reflected the fully implemented fifth 
comprehensive GPCI update. CY 2010 would have typically included no 
adjustments to the GPCIs. However, section 3102(a) of the ACA amended 
section 1848(e)(1)(E) of the Act to extend the 1.0 work GPCI floor for 
services furnished through December 31, 2010. Additionally, section 
3102(b) of the ACA added a new subparagraph (H) to section 1848(e)(1) 
of the Act, which specifies that for CY 2010 and CY 2011, the employee 
compensation and rent portions of the PE GPCI must reflect only one-
half of the relative cost differences for each locality compared to the 
national average. The new subparagraph also includes a ``hold 
harmless'' provision for CY 2010 and CY 2011 for any PFS locality that 
would otherwise receive a reduction to its PE GPCI resulting from the 
limited recognition of cost differences. Additionally, section 
1848(e)(1)(I) of the Act (as added by section 10324(c) of the ACA) 
established a 1.0 PE GPCI floor for services furnished in frontier 
States effective January 1, 2011. In May 2010, we provided our Medicare 
contractors with an updated CY 2010 payment file that included the 1.0 
work GPCI floor and the PE GPCIs calculated according to the 
methodology required by section 1848(e)(1)(H) of the Act (as added by 
section 3102(b) of the ACA) for CY 2010, to be used for payment of 
services furnished on or after January 1, 2010.
    For the CY 2011 PFS proposed rule, we completed the sixth review of 
the GPCIs and proposed new GPCIs. We noted that section 1848(e)(1)(E) 
of the Act (as amended by section 3102(a) of the ACA) extends the 1.0 
work GPCI floor only through December 31, 2010. Under current statute, 
the 1.0 work GPCI floor will expire on January 1, 2011. Therefore, the 
CY 2011 physician work GPCIs, and summarized geographic adjustment 
factors (GAFs), do not reflect the 1.0 work floor. However, section 
1848(e)(1)(G) of the Act (as amended by section 134(b) of the MIPPA) 
set a permanent 1.5 work GPCI floor in Alaska for services furnished 
beginning January 1, 2009 and, as noted above, section 1848(e)(1)(I) of 
the Act (as added by section 10324(c) of the ACA) provides for a 
permanent 1.0 PE GPCI floor for frontier States effective January 1, 
2011. Therefore, as required by the statute, the 1.5 work GPCI floor 
for Alaska and the 1.0 PE GPCI floor for frontier States will be in 
effect for CY 2011. In addition to the limited recognition of certain 
cost differences for the PE GPCIs, section 1848(e)(1)(H) of the Act (as 
added by section 3102 (b) of the ACA) also requires us to complete an 
analysis of the data sources used and cost share weights assigned to 
the PE GPCIs. Implementation of the ACA provisions related to the CY 
2011 PE GPCIs is discussed in more detail in the GPCI update section 
below.
2. GPCI Update
    As discussed in the CY 2011 PFS proposed rule (75 FR 40083), the 
updated GPCI values were developed by Acumen, LLC (Acumen) under 
contract to CMS. As mentioned above, there are three GPCI components 
(physician work, PE, and malpractice), and all GPCIs are developed 
through comparison to a national average for each component. 
Additionally, each of the three GPCIs relies on its own data source(s) 
and methodology for calculating its value as described below.
a. Physician Work GPCIs
    The physician work GPCIs are designed to capture the relative cost 
of physician labor by Medicare PFS locality. Previously, the physician 
work GPCIs were developed using the median hourly earnings from the 
2000 Census of workers in seven professional specialty occupation 
categories which we used as a proxy for physicians' wages and 
calculated to reflect one-quarter of the relative cost differences for 
each locality compared to the national average. Physicians' wages are 
not included in the occupation categories because Medicare payments are 
a key determinant of physicians' earnings. Including physicians' wages 
in the physician work GPCIs would, in effect, have made the indices 
dependent upon Medicare payments.
    The physician work GPCIs were updated in CYs 2001, 2003, 2005, and 
2008 using professional earnings data from the 2000 Census. However, 
wage and earnings data are no longer available from the Census long 
form and the 2000 data are outdated. Therefore, for the proposed sixth 
GPCI update, we used the 2006 through 2008 Bureau of Labor Statistics 
(BLS) Occupational Employment Statistics (OES) data as a replacement 
for the 2000 Census data. The use of BLS OES data as a replacement for 
the 2000 Census data is discussed in more detail in the update of the 
PE GPCIs section. As noted above, the 1.0 work GPCI floor is set to 
expire under current statute on December 31, 2010. Therefore, the CY 
2011 proposed

[[Page 73253]]

physician work GPCIs reflected the removal of this floor.
b. Practice Expense GPCIs
(1) The Affordable Care Act Requirements for PE GPCIs
(A) General Methodology for the CY 2011 GPCIs
    The ACA added a new subparagraph (H) to section 1848(e)(1) of the 
Act which revised the methodology for calculating the PE GPCIs for CY 
2010 and CY 2011 so that the employee compensation and rent portions of 
the PE GPCIs reflect only one-half of the relative cost differences for 
each locality compared to the national average. Additionally, under 
section 1848(e)(1)(H)(iii) of the Act (as added by section 3102(b) of 
the ACA), each PFS locality is held harmless so that the PE GPCI will 
not be reduced as a result of the change in methodology for PE GPCIs. 
In accordance with section 1848(e)(1)(H)(ii) of the Act (as added by 
section 3102(b) of the ACA), the employee compensation and rent 
components of the proposed CY 2011 PE GPCIs were calculated to reflect 
one-half of the cost differences for each PFS locality relative to the 
national average cost. Additionally, as required by the statute, 
physicians' services furnished in each PFS locality would be adjusted 
by the higher of the locality's PE GPCI calculated with the limited 
recognition of employee compensation and rent cost differences or the 
PE GPCI calculated without the limited recognition of cost differences.
(B) Phase-In of PE GPCIs
    Section 1848(e)(1)(C) of the Act requires us to phase in GPCI 
adjustments over 2 years if there was more than 1 year between GPCI 
adjustments. In accordance with the statute, we proposed to phase in 
the updated PE GPCIs using one-half of the CY 2010 values and one-half 
of the fully implemented values (as described in this section). To 
apply the phase-in and hold harmless provisions of the Act, we 
calculated transitional PE GPCIs based on two scenarios. Under the 
first scenario, we calculated transitional CY 2011 PE GPCIs using the 
full recognition of employee compensation and rent cost differences for 
each locality as compared to the national average. As discussed below, 
the first scenario reflects the ``hold harmless'' transitional PE GPCI 
value that would apply to any PFS locality receiving a reduction to its 
PE GPCI resulting from the application of the limited recognition of PE 
cost differences. The CY 2011 transitional PE GPCI values with full 
recognition of cost differences were calculated using one-half of the 
CY 2010 PE GPCI values with full recognition of cost differences and 
one-half of the updated PE GPCIs with full recognition of cost 
differences. The first scenario represents the transitional PE GPCI 
values prior to the limited recognition of cost differences (the pre-
ACA CY 2011 transitional values). In other words, this scenario does 
not include the effects of sections 1848(e)(1)(H)(i) and (ii) of the 
Act (as added by section 3102(b) of the ACA).
    For the second scenario, we calculated transitional CY 2011 PE 
GPCIs with the limited recognition of cost differences for the employee 
compensation and rent components (as required by sections 
1848(e)(1)(H)(i) and (ii) of the Act (as added by section 3102(b) of 
the ACA)). The CY 2011 transitional PE GPCI values with the limited 
recognition of cost differences were calculated using one-half of the 
CY 2010 PE GPCIs with the limited cost differences and one-half of the 
updated PE GPCIs with the limited cost differences. The hold harmless 
provision under section 1848(e)(1)(H)(iii) of the Act (as added by 
section 3102(b) of the ACA) was applied by selecting the greater of the 
CY 2011 transitional PE GPCI value calculated with the limited 
recognition of cost differences or the CY 2011 transitional PE GCPI 
value calculated with full recognition of cost differences (the pre-ACA 
CY 2011 transitional values). The phase-in of the CY 2011 PE GPCIs and 
application of the hold harmless provision are illustrated in Table 23 
below.

                                                       Table 23--Phase-In of the CY 2011 PE GPCIs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  CY 2011 (transitional
                                          CY 2010             Updated GPCIs               year)                            Hold harmless
--------------------------------------------------------------------------------------------------------------------------------------------------------
File 1:
PE GPCI Without 3102(b) of ACA...  Without ACA..........  Without ACA (Updated  (\1/2\ of 2010) + (\1/2\   Greater of File 1 Transitional Value or File
                                                           Data).                Updated GPCI).             2 Transitional Value.
File 2:
PE GPCI With 3102(b) of ACA......  With ACA.............  With ACA (Updated     (\1/2\ of 2010 w/ACA) +
                                                           Data).                (\1/2\ Updated GPCI w/
                                                                                 ACA).
--------------------------------------------------------------------------------------------------------------------------------------------------------

(C) Data Analysis
    Section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) 
of the ACA) also requires the Secretary to ``analyze current methods of 
establishing practice expense adjustments under subparagraph (A)(i) and 
evaluate data that fairly and reliably establishes distinctions in the 
cost of operating a medical practice in different fee schedule areas.'' 
Section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of 
the ACA) requires that such analysis shall include an evaluation of the 
following:
    <bullet> The feasibility of using actual data or reliable survey 
data developed by medical organizations on the costs of operating a 
medical practice, including office rents and non-physician staff wages, 
in different fee schedule areas.
    <bullet> The office expense portion of the practice expense 
geographic adjustment, including the extent to which types of office 
expenses are determined in local markets instead of national markets.
    <bullet> The weights assigned to each area of the categories within 
the practice expense geographic adjustment.
    This section also requires the Secretary to make appropriate 
adjustments to the PE GPCIs no later than by January 1, 2012. To begin 
to implement this statutory requirement based on our initial analysis, 
we proposed to implement changes in PE data sources and cost share 
weights discussed herein effective beginning in CY 2011.
    In accordance with section 1848(e)(1)(H)(iv) of the Act (as added 
by section 3102(b) of the ACA), we initially analyzed the current 
methods and data sources used in the establishment of the PE GPCIs. 
With respect to the method used, we began with a review of the GAO's 
March 2005 Report entitled, ``MEDICARE PHYSICIAN FEES: Geographic 
Adjustment Indices Are Valid in Design, but Data and Methods Need 
Refinement'' (GAO-05-119). While we have raised concerns in the past 
about some of the GAO's GPCI

[[Page 73254]]

recommendations, we noted that with respect to the PE GPCIs, the GAO 
did not indicate any significant issues with the methods underlying the 
PE GPCIs. Rather, the report focused on some of the data sources used 
in the method. For example, the GAO stated that the wage data used for 
the PE GPCIs are not current. Similarly, upon our reexamination of 
public comments we had received on the PE GPCIs for previous updates, 
we noted that the commenters predominately focused on either the data 
sources used in the method or raised issues such as incentivizing the 
provision of care in different geographic areas. However, the latter 
issue (incentivizing the provision of care) is outside the scope of the 
statutory requirement that the PE GPCIs reflect the relative costs of 
the mix of goods and services comprising practice expenses in the 
different fee schedule areas relative to the national average.
    One key component of the PE GPCI method that our analysis 
identified involved the office expense portion of the PE GPCIs and the 
cost share weight assigned to this component. Most significantly, we 
proposed that the weight for the office rent component be revised from 
12.209 percent to 8.410 percent to reflect our more detailed breakout 
of the types of office expenses that are determined in local markets 
instead of national markets. For example, for previous GPCI updates, we 
used the office expenses cost category as the cost share weight for 
office rent and, therefore, all individual components previously 
included in the office expenses category were adjusted for local area 
cost differences by the GPCIs. As discussed in section II.E. of this 
final rule with comment period, we proposed to disaggregate the broader 
office expenses component into 9 new cost categories as part of the 
proposed CY 2011 MEI rebasing. The disaggregation of the office 
expenses category indicates that the fixed capital cost category, for 
which the consumer price index (CPI) for owner's equivalent rent is the 
price proxy, is the office expense category applicable to the office 
rent component of the PE GPCI. Therefore, the fixed cost capital cost 
category is the only component of office expenses that we proposed to 
adjust for local area cost differences beginning in CY 2011. We 
proposed to assign other newly defined components of the office 
expenses category (for example, utilities, chemicals, paper, rubber and 
plastics, telephone, postage, and moveable capital) to the medical 
equipment, supplies, and other miscellaneous expenses cost component of 
the PE GPCIs. As discussed later in this section, the medical 
equipment, supplies, and other miscellaneous expenses component of the 
PE GPCIs is assumed to have a national market and, therefore, this 
component is not adjusted for local area cost differences.
    The proposed expense categories for the PE GPCIs, along with their 
respective cost share weights, are primarily derived from the 2006 
American Medical Association (AMA) Physician Practice Information 
Survey (PPIS) for self-employed physicians and selected self-employed 
non-medical doctor specialties. The PPIS is the most comprehensive, 
multispecialty, contemporaneous, and consistently collected PE data 
source available. It was developed by medical organizations and 
captures the costs of operating a medical practice, including office 
rents and nonphysician staff wages. Moreover, we also examined the 
feasibility of using the American Community Survey (ACS) and the Bureau 
of Labor and Statistics (BLS) Occupational Employment Statistics (OES) 
data for the employee compensation component of the PE GPCI. For 
previous updates, the employee compensation component was based on the 
2000 Decennial Census long form data. Since the Census data are 
significantly outdated and the 2010 Census no longer includes 
occupational wage data, we believe the ACS or BLS OES data might be 
viable alternatives. While the ACS 3-year public use microsample (PUMS) 
is currently available, it reflects only about 3 percent of households 
and the data exhibit significant variation due to the small sample. In 
particular, the ACS PUMS has fewer than 10 observations of pharmacists 
in the Manhattan; Beaumont, Texas; and Southern Maine localities. 
Therefore, we believe it would be premature to use the ACS data for 
determining GPCI values. The 2006, 2007, and 2008 panels from the BLS 
OES represent a larger sample than the ACS PUMS and more recent data 
than the 2000 Census. As such, we proposed to use the BLS OES data for 
updating the GPCIs. We look forward to exploring the use of the full 
ACS data when they become available. Additionally, we explored other 
sources of rent data (including commercial rental data and survey data) 
for use in calculating the PE GPCIs. We could not identify a reliable 
alternative rental data source available on a national basis with 
coverage of nonmetropolitan areas.
    We do not believe there is a national data source better than the 
Housing and Urban Development (HUD) data for determining the relative 
cost differences in office rents. Therefore, based on our review of the 
available data sources, we proposed to use the 2010 apartment rental 
data produced by HUD at the 50th percentile as a proxy for the relative 
cost difference in physician office rents.
    In the proposed rule (75 FR 40085), we indicated that we believe 
our analysis of the current methods of establishing PE GPCIs and our 
evaluation of data that fairly and reliably establish distinctions in 
the cost of operating a medical practice in the different fee schedule 
areas meet the statutory requirements of section 1848(e)(1)(H)(iv) of 
the Act (as added by section 3102(b) of the ACA). A more detailed 
discussion of our analysis of current methods of establishing PE GPCIs 
and evaluation of data sources is included in Acumen's draft report. 
Acumen's draft report and associated analysis of the sixth GPCI update, 
including the PE GPCIs, was posted on the CMS Web site after display of 
the CY 2011 PFS proposed rule. The draft report may be accessed from 
the PFS Web site at: http://www.cms.gov/PhysicianFeeSched/ under the 
``Downloads'' section of the CY 2011 PFS proposed rule Web page. 
Acumen's final report and associated analysis of the sixth GPCI update 
will be posted on the CMS Web site after publication of the CY 2011 PFS 
final rule with comment.
(D) Determining the PE GPCI Cost Share Weights
    To determine the cost share weights for the CY 2011 GPCIs, we 
proposed to use the proposed 2006-based Medicare Economic Index (MEI) 
as discussed in section II.E. of this final rule with comment period. 
The proposed MEI was rebased and revised to reflect the weighted-
average annual price change for various inputs needed to provide 
physicians' services. As discussed in detail in that section, the 
proposed expense categories in the MEI, along with their respective 
weights, were primarily derived from data collected in the 2006 AMA 
PPIS for self-employed physicians and selected self-employed non-
medical doctor specialties.
    For the cost share weight for the PE GPCIs, we used the 2006-based 
MEI weight for the PE category of 51.734 percent minus the professional 
liability insurance category weight of 4.295 percent. Therefore, we 
proposed a cost share weight for the PE GPCIs of 47.439 percent. For 
the employee compensation portion of the PE GPCIs, we used the 
nonphysician employee compensation category weight of 19.153 percent. 
The fixed capital category weight of 8.410, for which the CPI for

[[Page 73255]]

owner's equivalent rent is the price proxy, was used for the office 
rent component. To determine the medical equipment, supplies, and other 
miscellaneous expenses component, we removed professional liability 
(4.295 percent), nonphysician employee compensation (19.153 percent), 
and fixed capital (8.410 percent) from the PE category weight (51.734 
percent). Therefore, we proposed a cost share weight for the medical 
equipment, supplies, and other miscellaneous expenses component of 
19.876 percent.
    Furthermore, the physician compensation cost category and its 
weight of 48.266 percent reflected the proposed work GPCI cost share 
weight and the professional liability insurance weight of 4.295 percent 
was used for the malpractice GPCI cost share weight. In the proposed 
rule (75 FR 40085), we stated that we believe our analysis and 
evaluation of the weights assigned to each of the categories within the 
PE GPCIs meets the statutory requirements of section 1848(e)(1)(H)(iv) 
of the Act (as added by section 3102(b) of the ACA).
    The proposed cost share weights for the CY 2011 GPCIs are displayed 
in Table 24 below.

          Table 24--Cost Share Weights for CY 2011 GPCI Update
------------------------------------------------------------------------
                                                  Current      Proposed
               Expense category                  cost share   cost share
                                                weight  (%)  weight  (%)
------------------------------------------------------------------------
Physician Work................................       52.466       48.266
Practice Expense..............................       43.669       47.439
    --Employee Compensation...................       18.654       19.153
    --Office Rent.............................       12.209        8.410
    --Equipment, Supplies, Other..............       12.806       19.876
Malpractice Insurance.........................        3.865        4.295
Total.........................................      100          100
------------------------------------------------------------------------

 (E) PE GPCI Floor for Frontier States
    Section 10324(c) of the ACA added a new subparagraph (I) under 
section 1848(e)(1) of the Act to establish a 1.0 PE GPCI floor for 
physicians' services furnished in frontier States. In accordance with 
section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the 
ACA), beginning in CY 2011, we applied a 1.0 PE GPCI floor for 
physicians' services furnished in States determined to be frontier 
States. The statute requires us to define any State as a frontier State 
if at least 50 percent of the State's counties are determined to be 
frontier counties, which the statute defines as counties that have a 
population density less than 6 persons per square mile. However, 
section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the 
ACA) also specifies that this provision shall not apply to States 
receiving a non-labor related share adjustment under section 
1886(d)(5)(H) of the Act (which excludes Alaska and Hawaii from 
qualifying as a frontier State).
    Consistent with the proposed FY 2011 hospital inpatient prospective 
payment system (IPPS) 1.0 wage index floor for frontier States (as 
required by section 10324(a) of the ACA) (75 FR 30920 through 30921), 
we proposed to identify frontier counties by analyzing population data 
and county definitions based upon the most recent annual population 
estimates published by the U.S. Census Bureau. We divided each county's 
population total by each county's reported land area (according to the 
decennial census) in square miles to establish population density. We 
also proposed to update this analysis from time to time, such as upon 
publication of a subsequent decennial census, and if necessary, add or 
remove qualifying States from the list of frontier States based on the 
updated analysis.
    For a State that qualifies as a frontier State, in accordance with 
section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the 
ACA), we proposed that physicians' services furnished within that State 
would receive the higher of the applicable PE GPCI value calculated 
according to the standard CY 2011 methodology or a minimum value of 
1.00. Furthermore, in accordance with section 1848(e)(1)(I) of the Act 
(as added by section 10324(c) of the ACA), the frontier State PE GPCI 
floor is not subject to budget neutrality and would only be extended to 
physicians' services furnished within a frontier State.
    For determining the proposed CY 2011 PFS PE GPCI values, the 
frontier States are the following: Montana; Wyoming; North Dakota; 
Nevada; and South Dakota (as reflected in Table 25).

    Table 25--Frontier States Under Section 1848(e)(1)(I) of the Act
                [as Added by Section 10324(c) of the ACA]
------------------------------------------------------------------------
                                                               Percent
              State                   Total       Frontier     frontier
                                     counties     counties     counties
------------------------------------------------------------------------
Montana..........................           56           45           80
Wyoming..........................           23           17           74
North Dakota.....................           53           36           68
Nevada...........................           17           11           65
South Dakota.....................           66           34           52
------------------------------------------------------------------------

 (2) Summary of the CY 2011 PE GPCIs
    The PE GPCIs include three components: employee compensation, 
office rent, and medical equipment, supplies and miscellaneous expenses 
as discussed below:
    <bullet> Employee Compensation: We used the 2006 through 2008 BLS 
OES data to determine the proposed employee

[[Page 73256]]

compensation component of the PE GPCIs. The proposed employee 
compensation component accounted for 40.4 percent of the total PE 
GPCIs.
    <bullet> Office Rents: Consistent with the previous GPCI update, we 
used the most recent residential apartment rental data produced by HUD 
(2010) at the 50th percentile as a proxy for the relative cost 
differences in physician office rents. The proposed office rent 
component accounted for 17.7 percent of the PE GPCIs.
    <bullet> Medical Equipment, Supplies, and other Miscellaneous 
Expenses: We assumed that items such as medical equipment and supplies 
have a national market and that input prices do not vary among 
geographic areas. As discussed in previous GPCI updates in the CY 2005 
and CY 2008 PFS proposed rules, specifically the fourth GPCI update (69 
FR 47503) and fifth GPCI update (72 FR 38138), respectively, some price 
differences may exist, but we believe these differences are more likely 
to be based on volume discounts rather than on geographic market 
differences. For example, large physicians' practices may utilize more 
medical equipment and supplies and therefore may or may not receive 
volume discounts on some of these items. To the extent that such 
discounting may exist, it is a function of purchasing volume and not 
geographic location. The proposed medical equipment, supplies, and 
miscellaneous expenses component was factored into the PE GPCIs with a 
component index of 1.000. The proposed medical equipment, supplies, and 
other miscellaneous expense component accounted for 41.9 percent of the 
PE GPCIs.
c. Malpractice GPCIs
    The malpractice GPCIs are calculated based on insurer rate filings 
of premium data for $1 million to $3 million mature claims-made 
policies (policies for claims made rather than services furnished 
during the policy term). The CY 2011 malpractice GPCI update reflects 
2006 and 2007 premium data.
d. Public Comments and CMS Responses on the Proposed 6th GPCI Update
    We received many public comments regarding the CY 2011 proposed 
GPCIs. Summaries of the comments and our responses follow.
    Comment: Many commenters requested that CMS delay implementation of 
the changes in underlying PE GPCI data and cost share weights until 
complete findings and recommendations from the Institute of Medicine's 
study of geographic adjustment factors for physician payment, the 
Secretary's Medicare Geographic Payment Summit, and the MEI technical 
advisory panel have been developed and considered. A few commenters 
acknowledged that the BLS OES data is the best data source for updating 
the GPCIs for CY 2011 but expressed concern that it provides data for 
MSAs and rest of state areas and not counties. The commenters believe 
that collecting data at the MSA level distorts the accuracy of the 
input costs and requested that CMS delay the update until the full ACS 
data can be evaluated and compared with the BLS OES data. A few 
commenters requested that CMS delay the GPCI update for CY 2011 as was 
done in the CY 2004 PFS final rule with comment period for the 4th GPCI 
update.
    Additionally, several commenters stated that a more comprehensive 
analysis and evaluation of the PE GPCI is required by the ACA, further 
noting that section 1848(e)(1)(H)(v) of the Act (as added by section 
3102(b) of the ACA) allows CMS until January 1, 2012 to implement the 
findings from the analysis of PE data. To that end, several commenters 
requested a more comprehensive analysis of the occupational groups used 
to determine the employee wage component of the PE GPCI to reflect the 
``true costs'' incurred by physician groups in the delivery of health 
care to Medicare beneficiaries. The commenters cited pharmaceutical, 
accounting, legal, computer science, and management professionals as 
examples of the types of nonphysician labor costs that should be 
included in the determination of the employee compensation index. 
Several commenters also stated that HUD rental data does not reflect 
the ``actual costs'' of physician office rent and therefore should be 
replaced by another data source.
    Response: Section 1848(e)(1)(C) of the Act requires us to review 
and update the GPCIs at least every 3 years. When updating the GPCIs we 
believe we should use the best data that are currently available. As 
mentioned by the commenters, the BLS OES data are more timely data than 
the 2000 census data (which has been used for previous GPCI updates). 
We believe that the BLS OES data, which are currently available, are an 
appropriate and relevant data source for updating the work GPCIs and 
employee compensation component of the PE GPCIs. Also because of the 
timeliness of the data, we believe that using the BLS OES data would 
result in a more accurate reflection of the geographic practice cost 
differences among PFS localities than not updating the GPCIs for CY 
2011.
    While we believe it is appropriate to finalize updated GPCIs for CY 
2011 using the most current data, we also acknowledge that there is 
much ongoing analysis that may inform future GPCI changes. Therefore, 
as discussed below, we are not using the revised cost share weights for 
the CY 2011 GPCIs that would apply under the revised and rebased MEI 
for CY 2011. We will address the GPCI cost share weights once again in 
the CY 2012 PFS proposed rule, and we may make additional proposals 
that would further modify the GPCI data and/or methods for CY 2012.
    Additionally, we will review the complete findings and 
recommendations from the Institute of Medicine's study of geographic 
adjustment factors for physician payment, the Secretary's Medicare 
Geographic Payment Summit, and the MEI technical advisory panel, and we 
will continue to study the issues as required by section 
1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA). 
We will once again consider the GPCIs for CY 2012 in the context of our 
annual PFS rulemaking beginning in CY 2011 based on the information 
available at that time. The CY 2011 GPCIs arising from the 6th GPCI 
update reflect our initial review and response to the currently 
available GPCI data, methods, and cost share weights. Once the full ACS 
data are available, we will reassess the occupational groups used to 
determine the employee compensation component of the PE GPCI and 
continue to explore the use of commercial rent data as part of our 
ongoing analysis of the GPCIs. We anticipate that further information, 
including our review of the full ACS data, may lead to proposed 
additional refinements to the GPCIs for future years. We have addressed 
the CY 2011 GPCI cost share weights in response to other public 
comments received on the CY 2011 PFS proposed rule that are summarized 
later in this section.
    With regard to the commenters who expressed concern that the BLS 
OES data are not collected at the county level, we note that the 2000 
Decennial Census data are only available at the county level for 
approximately 10 percent of counties. For previous updates, the GAFs 
for more than 90 percent of counties were developed based on MSAs or 
larger geographic areas (for example, data for all rural areas in a 
State were combined and used to proxy values for each rural county in a 
State). Therefore, using BLS OES data and disaggregating data to the 
county

[[Page 73257]]

level is not a significant departure from previous GPCI updates.
    Moreover, we acknowledge that in the CY 2004 PFS proposed and final 
rules (68 FR 49042 and 68 FR 63213 respectively), we updated only the 
malpractice GPCI because the special tabulation of census data used for 
the physician work GPCI and employee compensation portion of the PE 
GPCI was not yet available. We explained that no acceptable data 
sources could be found to update the work GPCIs and the employee 
compensation portion of the practice expense GPCIs. Therefore, we made 
no changes to the work GPCIs and PE GPCIs for CY 2004. However, in view 
of the statutory requirement to update the GPCIs at least every 3 
years, we do not believe it would be appropriate to finalize an update 
only for malpractice GPCIs for CY 2011, while delaying the update of 
the work GPCI and PE GPCI, when we currently have appropriate updated 
data available to us for this purpose. As discussed previously, we will 
review the GPCIs as part of the CY 2012 PFS rulemaking cycle (beginning 
in CY 2011) based on the information available at that time, and we may 
propose changes to the GPCIs prior to the next 3-year GPCI update.
    Comment: Several commenters stated that the use of HUD rental data 
is not an appropriate proxy for determining the office rent index and 
suggested that CMS use data on actual physician office rents instead. 
Additionally, one commenter questioned CMS' analysis of the Medical 
Group Management Association's (MGMA's) survey data on rent. The 
commenter raised questions as to why CMS rejected the use of MGMA 
rental data due to insufficiency in sample size and representation, 
despite admitting that the physician response rate on the MGMA survey 
was typical for surveys of business.
    Response: As we have previously explained in the CY 2005 and CY 
2008 final rules with comment period (69 FR 66262 and 72 FR 66245 
respectively), we recognize that apartment rents may not be a perfect 
proxy for measuring the relative cost differences in physician office 
rents. However, we believe the HUD rental data are the most 
comprehensive and valid indicator that is available of the real estate 
rental market in all areas of the country. We continue to believe that 
HUD rental data remain the best data source for determining the 
relative cost differences in physicians' office rent among all areas of 
the country. The data are regularly updated and available nationally, 
and retain consistency area-to-area and year-to-year. We would welcome 
any alternative rental data source that is available nationally with 
sufficient representation among PFS localities.
    With regard to our review of MGMA survey data, we have concerns 
with both the sample size and representativeness of the MGMA data. For 
example, the responses represent only about 2,250 physician practices 
nationwide and have disproportionate sample sizes by State, suggesting 
very uneven response rates geographically. In addition, we also have 
concerns that the MGMA data have the potential for response bias. The 
MGMA's substantial reliance on its membership base suggests a nonrandom 
selection into the respondent group. Some evidence for such issues in 
the MGMA data arises from the very different sample sizes by State. For 
example, in the MGMA data, 10 States have fewer than 10 observations 
each, and California, New York, and New Jersey have fewer than 10 
observations per locality. Therefore, we continue to believe the MGMA 
survey data would not be a sufficient rental data source for all PFS 
localities.
    Comment: One commenter expressed concern that the BLS OES wage data 
may result in the undervaluation of physician earnings because the data 
exclude incomes of self-employed professionals.
    Response: The GPCIs are not an absolute measure of physician 
earnings; rather, they are a measure of the relative cost differences 
for each of the three PFS components. We have no evidence to suggest 
that self-employment income would have different geographic variation 
than non-self-employed income. Absent such evidence, we would expect 
that including wage data from self-employed professionals would result 
in a geographic distribution of professional wages similar to the BLS 
OES data source.
    Comment: Many commenters stated that implementing PE GPCI changes 
in CY 2011 would reduce payment to urban areas and, therefore, would 
violate the ``hold harmless'' provision as required by the ACA.
    Response: Section 1848(e)(1)(H) of the Act (as added by section 
3102 (b) of the ACA) requires that we apply a limited recognition of 
cost differences for the rent component and employee compensation 
component of the PE GPCI as compared to the national average. This 
section also includes a ``hold harmless'' provision for CY 2010 and CY 
2011 for any PFS locality that would receive a reduction to its PE GPCI 
resulting from the limited recognition of PE cost differences. For CY 
2010 and CY 2011, we applied the limited recognition of PE cost 
differences and ``hold harmless provision'' in accordance with the 
statutory requirement, which is specific only to the limited 
recognition of rent and employee wage cost differences. In other words, 
the ``hold harmless'' (non-budget neutral) provision under section 
1848(e)(1)(H)(iii) of the Act (as added by section 3102 (b) of the ACA) 
does not apply to the effects of updated data incorporated into the 
GPCIs as a result of our normal GPCI update process. As discussed 
earlier in this section, the proposed GPCI update reflected our 
preliminary review based on the best information currently available. 
We anticipate that further information may lead to proposed additional 
refinements to the GPCIs in future years.
    Comment: One commenter recommended that CMS track the ``hold 
harmless'' transitional GPCIs to determine whether certain regions of 
the country are underpaid as a result of the application of the limited 
recognition of PE cost differences.
    Response: The ``hold harmless'' provision under section 
1848(e)(1)(H)(iii) of the Act (as added by section 3102(b) of ACA) was 
applied by selecting the greater of the CY 2011 transitional PE GPCI 
value calculated with the limited recognition of cost differences or 
the CY 2011 transitional PE GCPI value calculated with full recognition 
of cost differences. Therefore, no locality is ``underpaid'' by the 
application of the limited recognition of PE cost differences.
    Comment: One commenter requested that CMS consider applying a 1.0 
GPCI floor to non-frontier States that serve significant rural 
populations. The commenter was not specific as to which GPCI (work, PE, 
or malpractice) the floor should be applied.
    Response: As discussed previously in this section, section 
1848(e)(1)(I) of the Act (as added by section 10324(c) of the ACA) 
established a permanent 1.0 PE GPCI floor only for frontier States, and 
section 3102(a) of the ACA amended section 1848(e)(1)(E) of the Act to 
extend the 1.0 work GPCI floor for services furnished only through 
December 31, 2010. We do not otherwise have the authority to establish 
GPCI floors that do not consider the differences in physicians' 
resource costs among localities.
    Comment: A few commenters requested that CMS release underlying 
data sources, including county level GPCI values and budget neutrality 
estimates, which would allow interested parties to replicate GPCI 
calculations.
    Response: We strive to be as transparent as possible in all of our 
proposals. To that end, we have made

[[Page 73258]]

numerous files available on the CMS Web site under the downloads for 
the CY 2011 PFS proposed rule to assist in the public's review of the 
CY 2011 proposal. These files include: The preliminary contractor's 
report on data for the 6th GPCI update; the CY 2010 through CY 2012 
GPCIs, both as proposed (including the ACA provisions) and without the 
ACA provisions to permit isolation of the impacts of the updated data; 
and web links to the publicly available source data and copies of data 
files that are not otherwise publicly available, for example county and 
locality-specific RVUs from Medicare claims data and malpractice 
insurance premium data. In combination, this information allows the 
public to apply our methodology to replicate our calculations for the 
proposed GPCIs.
    Comment: Many commenters expressed concern about the proposed cost 
share weights for the rent component and medical equipment, supplies, 
and other miscellaneous component of the PE GPCI. The commenters stated 
that the proposed cost share weights would unjustifiably shift Medicare 
payment away from urban localities to rural localities. Several 
commenters suggested that portions of the ``all other services'' 
component of the office expenses cost category, (which includes 
maintenance services, storage, security and janitorial services, office 
equipment, information technology systems, and medical record systems) 
and the stand-alone ``other professional services'' cost category 
(which includes accounting services, legal services, office management 
services, continuing education, professional association memberships, 
journals, and professional care expenses) are wage-related and, 
therefore, should be adjusted for locality cost differences. 
Additionally, a few commenters stated that the cost share weight 
attributed to the rent component of the PE GPCI should vary by region 
because one national cost share weight for rent penalizes areas where 
office rent is a higher portion of practice expenses.
    Response: Although we typically update the GPCI cost share weights 
concurrently with the most recent MEI revision and rebasing, the 
commenters raised many points regarding the reallocation of labor-
related costs from the medical equipment and supplies and miscellaneous 
component to the employee compensation component of the PE GPCI. After 
consideration of the public comments we received on this issue, we will 
continue to use the current GPCI cost share weights for CY 2011. We 
have asked the Institute of Medicine to evaluate the accuracy of the 
geographic adjustment factors used for Medicare physician payment. The 
Institute of Medicine will prepare two reports for Congress and the 
Secretary of the Department of Health and Human Services. The first 
report, expected in spring 2011, will include an evaluation of the 
accuracy of geographic adjustment factors, and the methodology and data 
used to calculate them. The second report, expected in spring 2012, 
will evaluate the effects of the adjustment factors on the distribution 
of the health care workforce, quality of care, population health, and 
the ability to provide efficient, high-value care. For more information 
on the Institute of Medicine's study on Medicare geographic adjustment 
factors, we refer readers to the Institute of Medicine Web site: http://iom.edu/Activities/HealthServices/GeographicAdjustments.aspx.
    We will explore further the options that were raised to us by the 
commenters and the recommendations in the forthcoming Institute of 
Medicine report(s). We will also continue our analysis of the cost 
share weights attributed to the PE GPCI as required by section 
1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA), 
including the possibility of assigning cost share weights to the rent 
component of the PE GPCI that vary among fee schedule areas. We will 
address the GPCI cost share weights again in the CY 2012 PFS proposed 
rule.
    Comment: MedPAC suggested an alternative method for calculating the 
PE GPCI. This alternative PE GPCI method would account for variations 
in the cost share of equipment and supplies across services.
    Response: We appreciate MedPAC's suggestion of an alternative 
method that would vary the portion of PE that is geographically 
adjusted for locality differences based on the characteristics of 
individual services, rather than applying a uniform percentage across 
all PFS services. We recommend that MedPAC continue to analyze this or 
other alternative geographic adjustment methods, including their 
administrative feasibility.
    Comment: A few commenters stated that the ``range of disparity'' 
between the highest and lowest paid PFS localities is too large and 
contradicts data studies showing little to no distinction in physician 
practice expenses throughout the nation. For example, the commenters 
stated that the AMA's analysis of its own PPIS data concluded that 
``expenses did not differ significantly by either metro location or 
Census region.'' One commenter requested an explanation of the 
discrepancy between the AMA's findings of no measurable practice 
expense distinctions and CMS' findings that continue to show 
substantial distinctions in physician practice expenses among the 
Medicare payment localities. Another commenter stated that a 2007 
survey conducted by the journal, Medical Economics, indicated that the 
average practice expenses are highest in the Midwestern States (which 
is contrary to the proposed CY 2011 GPCIs).
    Response: We have reviewed the studies referenced by the commenters 
and compared their findings with the GPCI values calculated for the CY 
2011 PFS proposed rule. As mentioned by the commenters, both the AMA 
and Medical Economics studies aggregated per-physician expenses at the 
Census region level. The AMA PPIS analysis showed the Northeast as 
having the lowest per-physician expenses, followed by the Midwest then 
the West, with the South identified as having the highest expenses. 
Although there is about a 20 percent difference in total expenses 
between the Northeast and South, the study noted that the difference 
was not significant after controlling for practice setting and 
physician specialty. The Medical Economics survey findings showed about 
a 30 percent difference in costs, with the East showing the lowest 
expenses and the Midwest with the highest. Both studies demonstrated 
that rural areas have the highest per-physician expenses and highly 
populated areas the lowest.
    To compare the variation of PE GPCI values calculated for the CY 
2011 PFS proposed rule to the AMA and Medical Economics studies, we 
used PE RVUs to create weighted averages of the PE GPCIs by Census 
region. Additionally, because the AMA and Medical Economics data 
reported total per-physician practice expenses, whereas the GPCI is a 
cost index, we produced indices for each source to create comparable 
measures of variation. We then normalized each index to the lowest cost 
area from each data source. Consequently, the index values show the 
percent difference in costs relative to the lowest cost area. For 
example, the AMA study shows the Northeast as having the lowest per-
physician expenses, thus establishing an index value of 1.00 for that 
area. For the AMA study, the Midwest index value is 1.07 which 
signifies that costs in the Midwest are 7 percent above the Northeast 
AMA values. The PE GPCI data indicate that the Midwest has the lowest 
costs; and the South, with an

[[Page 73259]]

index value of 1.01, has costs that are 1 percent above the Midwest 
GPCI values. When aggregated to the Census region, the PE GPCIs showed 
less variation in costs than the comparison data sources (AMA PPIS and 
Medical Economics). Using the PE GPCI data to calculate Census region 
indices produced only a 16 percent difference in costs between the most 
costly and least costly areas, equating to roughly half the variation 
found in the Medical Economics survey and about 75 percent of the 
variation found in the PPIS study. Table 26 compares the results on the 
disparity in costs by Census region.

                               Table 26--Census Region Cost Indices by Data Source
----------------------------------------------------------------------------------------------------------------
                                                                                     PE GPCI components
                                                   Medical      PE GPCI   --------------------------------------
                                        AMA       economics       data                                  Office
                                                                               Rent        Wages       supplies
----------------------------------------------------------------------------------------------------------------
Midwest...........................         1.07         1.29         1.00         1.00         1.04         1.00
South.............................         1.21         1.20         1.01         1.12         1.00         1.00
West..............................         1.11         1.06         1.14         1.47         1.17         1.00
Northeast.........................         1.00         1.00         1.16         1.55         1.18         1.00
----------------------------------------------------------------------------------------------------------------

    Additionally, the conceptual approaches to the GPCIs and the data 
sources noted by the commenters are sufficiently different to make 
comparisons extremely difficult. The different rank ordering in the 
costs by regions, as shown in Table E4, may also reflect the different 
strategies used to measure costs. Specifically, the AMA and Medical 
Economics studies ordered areas based on total physicians' expenses, 
whereas the GPCIs are intended to provide a local cost index that is 
then applied to each PFS component; work, practice expense, and 
malpractice expense. Based on our review of the AMA PPIS and Medical 
Economics studies, a key factor in explaining differences with the 
proposed GPCI values is differences in practice patterns across the 
different areas. Specifically, rural practitioners tend to see more 
patients, incurring higher expenses. However, as noted in the Medical 
Economics study, higher patient loads result in higher payment. To 
place this in the context of Medicare PFS payment, seeing more patients 
produces more billed services, allowed charges, and payments. 
Therefore, the greater number of patients seen by rural physicians is 
accounted for in total RVUs to the physician, rather than through the 
GPCI values.
    Moreover, the very low cost ranking of the Northeast in both the 
AMA PPIS and Medical Economics datasets suggests a possible influence 
of economies of scale. The GPCIs are designed to capture differences in 
the prices of inputs facing physicians in each region. The input prices 
are used to create GPCI values as a measure of the relative cost 
differences in operating a medical practice in one locality versus 
another. It is likely that the AMA and Medical Economics studies are 
capturing differences in the production of services, distinct from the 
input prices. In particular, the geographic differences may reflect 
differences in economies of scale in more and less urbanized areas. 
More rural practitioners are less likely to work in large practices, 
leading to higher per-physician costs, all else being equal. For 
example, a two-physician practice may need the same number of front 
office staff as a one-physician practice. When this expense is measured 
on a per-physician basis, the single physician pays twice as much for 
front office support. This type of variation can occur within 
localities and may reflect the practitioner's choice to work in a small 
or large physician practice. Nevertheless, there is no mechanism within 
the existing GPCI approach to account for the influence of economies of 
scale, despite its potentially significant impact on the effective per-
unit costs of providing care.
    Comment: Several commenters recommended that CMS use data from a 
reliable survey of physicians' practices, such as the AMA PPIS or the 
MGMA survey, to develop the office rent index and employee compensation 
index.
    Response: Because of the limited sample sizes of the AMA PPIS (n = 
2,137) and MGMA studies (n = 2,246), we do not believe that it would be 
possible to calculate reliable indices for all Medicare PFS localities 
based upon these data. As mentioned previously, in the MGMA data, 10 
States have fewer than 10 observations each, and California, New York, 
and New Jersey have fewer than 10 observations per locality.
    In light of the comments received suggesting the use of survey data 
to determine GPCI values and the typical response rates for existing 
physician surveys, we are continuing to consider the possibility of 
establishing a physician cost report and requiring a sufficiently large 
sample of physicians in each locality to report data on actual costs 
incurred. However, we believe that a physician cost report could take 
years to develop and implement, and could be prohibitively expensive. 
We also have some concerns about the administrative burden this 
approach would place on physician's office staff. Therefore, we are 
requesting specific public comments regarding the potential benefits to 
be gained from establishing a physician cost report and whether this 
approach is appropriate to achieve potentially greater precision in 
measuring the relative cost differences in physicians' practices among 
PFS localities. We are also requesting public comments on the potential 
administrative burden of requiring physicians to routinely complete and 
submit a cost report and whether this requirement should be mandatory 
for all physician practices. Additionally, we have asked the Institute 
of Medicine to look at the use of survey data in the context of their 
geographic adjustment analysis. It is also our understanding that 
MedPAC is considering the issue of data sources used to determine 
geographic payment adjustments under the PFS.
    Comment: One commenter stated that all geographic adjustment 
factors should be eliminated from the Medicare PFS ``except for those 
designed to achieve a specific public policy goal, for example, to 
encourage physicians to practice in underserved areas.'' The commenter 
requested that CMS utilize the most broadly applicable methodology 
allowed by law to reduce geographic payment disparity.
    Response: We are required by section 1848(b)(1)(C) and (e)(1)(A) of 
the Act to develop and apply separate GPCIs to adjust for resource cost 
differences among localities compared to the national average for each 
of the three PFS components: work, practice expense, and malpractice 
expense. The purpose of the GPCIs is not to reduce

[[Page 73260]]

geographic payment disparity; rather, the GPCIs distribute PFS payments 
among areas in order to adjust for area cost differences. In general 
the data show that urban areas usually are higher cost, while rural 
areas are lower cost. However, there are several provisions currently 
in place that have the effect of reducing geographic payment 
disparities. For example, the statute requires that only one-quarter of 
area cost differences in physician work be recognized, and we assign a 
1.0 index to the medical equipment, supplies, and miscellaneous 
component of the PE GPCI because we believe there is a national market 
for these items. In addition, 34 States and 2 territories are 
``Statewide'' payment localities wherein all physicians, whether urban 
or rural, are paid the same. Moreover, many geographic areas are 
designated as Health Professional Shortage Areas (HPSAs). Physicians in 
these areas may be eligible for a 10 percent HPSA bonus payment in 
addition to the amount paid under the Medicare PFS for services they 
furnish. Beginning in CY 2011, general surgeons furnishing major 
surgical procedures in these areas may be eligible for the HPSA 
surgical incentive payment program (HSIP) that also pays 10 percent in 
addition to the amount paid under the PFS as discussed in section 
VI.S.2. of this final rule with comment period. For complete 
information on the HPSA bonus payment program and a list of eligible 
areas for both programs by zip code, we refer readers to the CMS Web 
site at: http://www.cms.hhs.gov/hpsapsaphysicianbonuses/01_overview.asp. All of these factors mentioned above have the effect of 
reducing geographic payment disparities under the Medicare PFS.
    Comment: One commenter encouraged CMS to follow the GAO's 
recommendations, as outlined in the GAO's March 2005 Report (GAO-05-
119), for improving underlying GPCI data and methods by taking the 
following actions:
    <bullet> Transition from Census Bureau's Decennial Census data to 
the annual ACS for earning and wage data.
    <bullet> Include physician assistant wage data to improve the 
measurement of the PE GPCI.
    <bullet> Consider the feasibility of using a commercial rent index 
or a residential rent index directly based on ACS data for determining 
the rent component of the PE GPCI.
    <bullet> Collect malpractice premium data from all States, 
accounting for at least half of the malpractice business in a State.
    <bullet> Standardize collection of malpractice premium data, for 
example by using data from Physician Insurer's Association of America.
    Response: As previously discussed, the full ACS data were not 
available in time for the 6th GPCI update. We intend to explore the use 
of ACS data for determining the work GPCI and the employee compensation 
component of the PE GPCI, as well as evaluate its possible use as an 
office rent index once the data are fully available. We also intend to 
continue exploring the potential use of commercial rent data as part of 
our ongoing review and refinement of the GPCIs.
    Additionally, we have considered the use of physician assistant 
wages in calculating the employee compensation index. However, since 
physician assistants can furnish medical services and bill the Medicare 
program directly, their wages are influenced by Medicare PFS payment. 
Therefore, we have some concern that a circular effect could occur if 
we included physician assistants among the occupational groups 
comprising the employee compensation component, similar to our concern 
with including physicians' salaries in the determination of the work 
GPCI.
    With regard to the collection of malpractice premium data, the CY 
2011 malpractice GPCI update reflects 2006 and 2007 premium data which 
were also used for the CY 2010 update to the malpractice RVUs. As 
compared to previous malpractice RVU updates, we substantially 
increased the number of States from which we were able to collect rate 
filings. We were able to collect malpractice premium data from every 
State except for Mississippi and Puerto Rico. Premium data were 
selected from at least two companies in each State, with more selected 
if necessary to reach 50 percent of the market share in that State. To 
ensure consistency across States we collected premium data from State 
Departments of Insurance. For States where we were not able to collect 
rate fillings, we used premium information from the Medical Liability 
Monitor Survey data from 2005 through 2008.
e. Summary of Final CY 2011 GPCIs
    After consideration of the public comments received on the GPCIs, 
we are finalizing the 6th GPCI update using the most current data, with 
modifications; we are not finalizing the proposal to change the GPCI 
cost share weights for CY 2011. Instead, we are continuing to use the 
current GPCI cost share weights for determining the PE GPCI values and 
locality GAFs in CY 2011, and we will address the cost share weights 
again in the CY 2012 PFS proposed rule. As a result, the cost share 
weight for the physician work GPCI (as a percentage of the total) will 
be 52.5 percent (current and for CY 2011) rather than 48.3 percent (as 
proposed), and the cost share weight for the PE GPCI will be 43.7 
percent (current and for CY 2011) rather than 47.4 percent (as 
proposed) with only a slight difference in the employee compensation 
component (18.7 percent rather than 19.2 percent as proposed). However, 
the cost share weight for the office rent component of the PE GPCI will 
be 12.2 percent (current and for CY 2011) rather than 8.4 percent (as 
proposed), and the medical equipment, supplies, and other miscellaneous 
expenses component will be 12.8 percent (current and for CY 2011) 
rather than 19.9 percent (as proposed). Moreover, the cost share weight 
for the malpractice GPCI will be 3.9 percent (current and for CY 2011) 
rather than 4.3 percent (as proposed).
    Additionally, we will review the complete findings and 
recommendations from the Institute of Medicine's study of geographic 
adjustment factors for physician payment, the Secretary's Medicare 
Geographic Payment Summit, and the MEI technical advisory panel, and 
continue to study the issues as required by section 1848(e)(1)(H)(iv) 
of the Act (as added by section 3102(b) of the ACA). We will once again 
consider the GPCIs for CY 2012 in the context of our annual PFS 
rulemaking beginning in CY 2011 based on the information available at 
that time.
    We are using the 2006 through 2008 panels from the BLS OES data for 
updating the work GPCIs and the employee compensation component of the 
PE GPCIs. We are also using the 2010 apartment rental data produced by 
HUD at the 50th percentile as a proxy for the relative cost difference 
in physicians' office rents and 2006 and 2007 malpractice premium data 
for determining the malpractice GPCIs.
    As required by section 1848(e)(1)(H)(ii) and (iii) of the Act (as 
added by section 3102(b) of the ACA), the CY 2011 GPCIs reflect only 
one-half of the relative cost differences for the employee compensation 
and rent portions of the PE GPCI, and the ``hold harmless'' provision 
ensures that no locality receives a payment reduction resulting from 
the limited recognition of PE cost differences. For CY 2011, the ``hold 
harmless'' provision was applied by selecting the greater of the CY 
2011 transitional PE GPCI value calculated with the limited recognition 
of cost differences or the CY 2011 transitional

[[Page 73261]]

PE GPCI value calculated with full recognition of cost differences.
    In accordance with section 1848(e)(1)(I) of the Act (as added by 
section 10324(c) of the ACA), and consistent with the final FY 2011 
hospital IPPS (75 FR 5160 through 5161), we applied a 1.0 PE GPCI floor 
for services furnished in frontier States. The frontier States are the 
following: Montana; Wyoming; North Dakota; Nevada; and South Dakota. As 
we indicated above in this section, section 1848(e)(1)(E) of the Act 
(as amended by section 3102(a) of the ACA) extended the 1.0 work GPCI 
floor only through December 31, 2010. Therefore, the CY 2011 physician 
work GPCIs and summarized GAFs do not reflect the 1.0 work floor. 
However, the permanent 1.5 work GPCI floor for Alaska (as established 
by section 134(b) of the MIPPA) will remain in effect for CY 2011.
    We are finalizing the CY 2011 GPCIs shown in Addendum E. The GPCIs 
have been budget neutralized to ensure that nationwide, total RVUs are 
not impacted by changes in locality GPCIs. The 1.0 PE GPCI floor for 
frontier States and the PE GPCI ``hold harmless'' provision were 
applied to the budget neutralized GPCIs.
    Typically when we complete a review and update of the GPCIs, the 
values shown represent the first year of the 2-year GPCI update 
transition. Although the CY 2011 GPCIs have been set on that basis, we 
note that we will be assessing the results of the various studies 
regarding the GPCIs and cost share weights (once they are completed), 
and exploring the use of the full ACS data. Based on these assessments, 
we may make additional proposals that would further modify the GPCIs 
for CY 2012, which would result in changes to the CY 2012 GPCIs shown 
in Addendum E to this final rule with comment period. Therefore, the 
final CY 2011 GPCIs may not reflect a true mid-point ``phase-in'' to 
the updated GPCIs, although, as noted above, they have been set for CY 
2011 on that basis. The CY 2011 updated GAFs and GPCIs may be found in 
Addenda D and E of this final rule with comment period.
3. Payment Localities
    The current PFS locality structure was developed and implemented in 
1997. There are currently 89 localities; 34 localities are Statewide 
areas. There are 52 localities in the other 18 States, with 10 States 
having 2 localities, 2 States having 3 localities, 1 State having 4 
localities, and 3 States having 5 or more localities. The District of 
Columbia, Maryland, and Virginia suburbs, Puerto Rico, and the Virgin 
Islands are additional localities that make up the remainder of the 
total of 89 localities. The development of the current locality 
structure is described in detail in the CY 1997 PFS proposed rule (61 
FR 34615) and the subsequent final rule with comment period (61 FR 
59494).
    As we have previously noted in the CYs 2008 and 2009 proposed rules 
(72 FR 38139 and 73 FR 38513), any changes to the locality 
configuration must be made in a budget neutral manner within a State 
and can lead to significant redistributions in payments. For many 
years, we have not considered making changes to localities without the 
support of a State medical association in order to demonstrate 
consensus for the change among the professionals whose payments would 
be affected (with some increasing and some decreasing). However, we 
have recognized that, over time, changes in demographics or local 
economic conditions may lead us to conduct a more comprehensive 
examination of existing payment localities.
    For the past several years, we have been involved in discussions 
with physician groups and their representatives about recent shifts in 
relative demographics and economic conditions, most notably within the 
current California payment locality structure. We explained in the CY 
2008 PFS final rule with comment period that we intended to conduct a 
thorough analysis of potential approaches to reconfiguring localities 
and would address this issue again in future rulemaking. For more 
information, we refer readers to the CY 2008 PFS proposed rule (72 FR 
38139) and subsequent final rule with comment period (72 FR 66245).
    As a follow-up to the CY 2008 PFS final rule with comment period, 
we contracted with Acumen to conduct a preliminary study of several 
options for revising the payment localities on a nationwide basis. The 
contractor's interim report was posted on the CMS Web site on August 
21, 2008, and we requested comments from the public. The report 
entitled, ``Review of Alternative GPCI Payment Locality Structures,'' 
remains accessible from the CMS PFS Web page under the heading 
``Interim Study of Alternative Payment Localities under the PFS.'' The 
report may also be accessed directly from the following link: http://www.cms.hhs.gov/PhysicianFeeSched/10_Interim_Study.asp#TopOfPage.
    We accepted public comments on the interim report through November 
3, 2008. The alternative locality configurations discussed in the 
report are described briefly below in this section.
Option 1: CMS Core-Based Statistical Area (CBSA) Payment Locality 
Configuration
    This option uses the Office of Management and Budget (OMB's) 
Metropolitan Statistical Area (MSA) designations for the payment 
locality configuration. MSAs would be considered as urban CBSAs. 
Micropolitan Areas (as defined by OMB) and rural areas would be 
considered as non-urban (rest of State) CBSAs. This approach would be 
consistent with the IPPS pre-reclassification CBSA assignments and with 
the geographic payment adjustments used in other Medicare payment 
systems. This option would increase the number of PFS localities from 
89 to 439.
Option 2: Separate High-Cost Counties from Existing Localities 
(Separate Counties)
    Under this approach, higher cost counties are removed from their 
existing locality structure and they would each be placed into their 
own locality. This option would increase the number of PFS localities 
from 89 to 214, using a 5 percent GAF differential to separate high-
cost counties.
Option 3: Separate MSAs from Statewide Localities (Separate MSAs)
    This option begins with statewide localities and creates separate 
localities for higher cost MSAs (rather than removing higher cost 
counties from their existing locality as described in Option 2). This 
option would increase the number of PFS localities from 89 to 130, 
using a 5 percent GAF differential to separate high-cost MSAs.
Option 4: Group Counties Within a State Into Locality Tiers Based on 
Costs (Statewide Tiers)
    This option creates tiers of counties (within each State) that may 
or may not be contiguous but share similar practice costs. This option 
would increase the number of PFS localities from 89 to 140, using a 5 
percent GAF differential to group similar counties into statewide 
tiers.
    As discussed in Acumen's interim report, all four studied 
alternative locality configurations would increase the number of 
localities and separate higher cost areas from rural ``rest of state'' 
areas. As a result, payments to urban areas would increase, while rural 
areas would see a decrease in payment because they would no longer be 
grouped with higher cost ``urbanized'' areas. A number of public 
commenters

[[Page 73262]]

on the draft report expressed support for Option 3 (separate MSAs from 
Statewide localities) because the commenters believed this alternative 
would improve payment accuracy over the current locality configuration 
and could mitigate possible payment reductions to rural areas as 
compared to Option 1 (CMS CBSAs). Therefore, Acumen is conducting a 
more in-depth analysis of the dollar impacts that would result from the 
application of Option 3. For a detailed discussion of the public 
comments on the contractor's interim locality study report, we refer 
readers to the CY 2010 PFS proposed rule (74 FR 33534) and subsequent 
final rule with comment period (74 FR 61757).
    We note that the discussion of PFS payment localities and our 
preliminary study of alternative payment locality configurations in the 
CY 2011 PFS proposed rule was intended for informational purposes only. 
We did not make any proposals regarding the PFS locality configurations 
for CY 2011 and, therefore, public comments on the PFS locality 
configurations are not within scope of the CY 2011 PFS proposed rule. 
We thank the commenters for sharing their views and suggestions; 
however, we are not summarizing or responding to `out of scope' 
comments in this final rule with comment period.

E. PFS Update for CY 2010: Rebasing and Revising of the Medicare 
Economic Index (MEI)

1. Background
    The Medicare Economic Index (MEI) was originally required by 
section 1842(b)(3) of the Act, which states that prevailing charge 
levels beginning after June 30, 1973 may not exceed the level from the 
previous year except to the extent that the Secretary finds, on the 
basis of appropriate economic index data, that such higher level is 
justified by year-to-year economic changes. We continued to use the MEI 
as part of the statutory update formula (specified under section 1848 
of the Act) when the physician fee schedule was implemented in 1992 (56 
FR 59511).
    Beginning July 1, 1975, and continuing through today, the MEI has 
served these purposes by reflecting the weighted-average annual price 
change for various inputs needed to furnish physicians' services. As 
such, the index is necessarily a fixed-weight input price index, with 
an adjustment for the change in economy-wide, private nonfarm business 
multifactor productivity. The MEI is comprised of two broad categories: 
(1) Physician's own time; and (2) physician's practice expense (PE).
    The MEI was first published on June 16, 1975 (40 FR 25446), and 
became effective for services furnished beginning July 1, 1975. The 
original MEI had a base period of 1971. The structure of the original 
MEI remained essentially unchanged from its original until the CY 1993 
final rule (57 FR 55896) in which we finalized a comprehensive rebasing 
and revision process with a 1989 base year. The new index was based in 
part on the recommendations of a Congressionally-mandated meeting of 
experts held in March 1987. The MEI was again rebased in the CY 1999 
final rule (63 FR 58845), which moved the cost structure of the index 
from a 1989 base to a 1996 base. The methodology for the productivity 
adjustment was revised in the CY 2003 final rule (67 FR 80019) to 
reflect the percentage change in the 10-year moving average of economy-
wide private nonfarm business multifactor productivity (previously the 
index was adjusted by a measure of labor productivity). The current 
form of the MEI was detailed in the CY 2004 PFS final rule (68 FR 
63239) which updated the cost structure of the index from a base year 
of 1996 to 2000.
    We proposed to rebase and revise the MEI and incorporate it into 
the CY 2011 PFS update. The terms ``rebasing'' and ``revising'', while 
often used interchangeably, actually denote different activities. 
Rebasing refers to moving the base year for the structure of costs of 
an input price index, while revising relates to other types of changes 
such as changing data sources, cost categories, or price proxies used 
in the price index. As is always the case with a rebasing and revising 
exercise, we have used the most recently available, relevant, and 
appropriate information to develop the proposed MEI cost category 
weights and price proxies. In the following sections of this final rule 
with comment period, we detail our proposals and respond to comments 
regarding the updated cost weights for the MEI expense categories, our 
rationale for selecting the price proxies in the MEI, and the results 
of the rebasing and revising of the MEI.
2. Use of More Current Data
    The MEI was last rebased and revised in 2003 in the CY 2004 PFS 
final rule with comment period (68 FR 63239). The current base year for 
the MEI is 2000, which means that the cost weights in the index reflect 
physicians' expenses in 2000. However, we believe it is desirable to 
periodically rebase and revise the index so that the expense shares and 
their associated price proxies reflect more current conditions. For the 
CY 2011 PFS update, we are finalizing the proposal to rebase and revise 
the MEI to reflect appropriate physicians' expenses in 2006.
    Compared to the 2000-based MEI, we proposed to make several changes 
to the MEI cost structure. First, we proposed to exclude the 
Pharmaceutical cost category as pharmaceuticals are neither paid for 
under the PFS nor are they included in the definition of ``physicians' 
services'' for purposes of calculating the physician update via the SGR 
system (for more details see the CY 2010 PFS final rule with comment 
period (74 FR 61961 through 61962)). We also proposed to exclude the 
expenses associated with separately billable supplies since these items 
are not paid for under the PFS. Our primary data source, the 2006 
Physician Practice Information Survey (PPIS), collected data on these 
costs enabling us to accurately remove them from the index. In 
addition, we proposed to include nine new cost categories that 
disaggregate the costs under the broader Office Expenses cost category. 
The 2000-based MEI did not break these expenses into individual cost 
categories. As a result of comments received, which are described more 
fully below in this section, we are modifying this proposal to instead 
include ten detailed cost categories. As indicated in the CY 2011 PFS 
proposed rule, we proposed to continue to adjust the MEI for economy-
wide multifactor productivity based on changes in the 10-year moving 
average of private nonfarm business multifactor productivity. After 
considering the comments received, we are finalizing our proposal to 
continue to adjust the MEI for economy-wide multifactor productivity 
based on changes in the 10-year moving average of private nonfarm 
business multifactor productivity.
3. Rebasing and Revising Expense Categories in the MEI
    The MEI is used in conjunction with the SGR system to update the 
PFS and represents the price component of that update. The proposed 
expense categories in the index, along with their respective weights, 
are primarily derived from data collected in the 2006 AMA PPIS for 
self-employed physicians and selected self-employed non-medical doctor 
specialties. As noted, in addition to data on medical doctors, we 
included data from several non-medical doctor specialties in the MEI 
cost weight calculations (including optometrists, oral surgeons, 
podiatrists, and chiropractors) consistent with the definition of the 
term ``physician'' in section 1861(r) of the Act. In summary,

[[Page 73263]]

the term ``physician'' when used in connection with the performance of 
functions or actions an individual is legally authorized to perform 
means the following: (1) A doctor of medicine or osteopathy; (2) a 
doctor of dental surgery or of dental medicine; (3) a doctor of 
podiatric medicine; (4) a doctor of optometry; or (5) a chiropractor. 
For a complete definition, please see section 1861(r) of the Act. We 
weighted the expense data from the above-referenced specialties with 
the self-employed physician expense data using physician counts by 
specialty, the same methodology used in the AMA PPIS.
    The AMA PPIS data were used to determine the expenditure weights in 
the MEI for all of the major cost categories including total expenses, 
physicians' earnings, physicians' benefits, employed physician payroll, 
nonphysician compensation, office expenses, professional liability 
insurance (PLI), medical equipment, medical supplies, and other 
professional expenses. We are finalizing our proposal to further 
disaggregate both non-physician compensation and office expenses into 
subcategories reflecting more detailed expenses. We used several data 
sources for further disaggregation of expenses including: data from the 
2002 Bureau of Economic Analysis (BEA) Benchmark Input-Output table (I/
O), the 2006 Bureau of the Census Current Population Survey (CPS), the 
2006 Bureau of Labor Statistics (BLS) Occupational Employment Survey 
(OES), the 2006 Employment Cost for Employee Compensation Survey 
(ECEC), and the 2006 Internal Revenue Service (IRS) Statistics of 
Income (SOI) data. The development of each of the cost categories using 
these sources is described in detail below.
a. Developing the Weights for Use in the MEI
    Developing a rebased and revised MEI requires selecting a base year 
and determining the appropriate expense categories. We proposed to 
rebase the MEI to CY 2006. We choose CY 2006 as the base year as: 1) 
this is the most recent year for which comprehensive physician expense 
data are available; and (2) we believe these data represent an accurate 
proxy for the physician expense distribution in CY 2011.
    Table 27 lists the set of mutually exclusive and exhaustive cost 
categories that make up the final rebased and revised MEI, including 
the addition of the All Other Products category we are adopting in 
response to public comments.

  Table 27--Final 2006 MEI Cost Categories, Weights, and Price Proxies Compared to the 2000 MEI Cost Categories
                                                   and Weights
----------------------------------------------------------------------------------------------------------------
                                     Final 2006-
           Cost category             cost weights    2000 Cost                  2006 Price proxies
                                        (1,2)         weights
----------------------------------------------------------------------------------------------------------------
Total.............................        100.00         100.000
Physician's Compensation (Own              48.266         52.466
 Time) \(3)\.
    Wages and Salaries............         43.880         42.730  AHE Total Nonfarm Private for Production &
                                                                   Nonsupervisory Employees.\(5)\
    Benefits (3),(4)..............          4.386          9.735  ECI-Benefits Total Nonfarm Private.\(6)\
Physician's Practice Expense......         51.734         47.534
    Nonphysician Employee                  19.153         18.654
     Compensation.
    Nonphysician Employee Wages            13.752         13.809
     and Salaries.
        Prof/Tech Wages...........          6.006          5.887  ECI-Wages/Salaries: Private Professional
                                                                   &Technical.
        Managerial Wages..........          1.446          3.333  ECI-Wages/Salaries: Private Managerial.
        Clerical Wages............          4.466          3.892  ECI-Wages/Salaries: Private Clerical.
        Services Wages............          1.834          0.696  ECI-Wages/Salaries: Private Service.
    Nonphysician Employee Benefits          5.401          4.845  ECI-Ben: Private Blend.
     \(4)\.
    Office Expenses...............         20.035         12.209
        Utilities.................          1.266  .............  CPI Fuel & Utilities.\(7)\
        Chemicals.................          0.723  .............  PPI for Other Basic Organic Chemical
                                                                   Manufacturing.\(8)\
        Paper.....................          0.657  .............  PPI for Converted Paper.
        Rubber & Plastics.........          0.598  .............  PPI for Rubber and Plastics.
        Telephone.................          1.501  .............  CPI for Telephone Services.
        Postage...................          0.898  .............  CPI for Postage.
        All Other Services........          3.582  .............  ECI Compensation Services Occupations.
        All Other Products........          0.500  .............  CPI-U All Items Less Food and Energy.
        Fixed Capital.............          8.957  .............  CPI for Owner's Equivalent Rent.
        Moveable Capital..........          1.353  .............  PPI for Machinery and Equipment.
    PLI...........................          4.295          3.865  CMS-Prof. Liab. Phys. Premiums.
    Medical Equipment.............          1.978          2.055  PPI-Medical Instruments & Equip.
    Pharmaceuticals and Medical             1.760          4.320
     Materials and Supplies.
        Pharmaceuticals...........  .............          2.309
        Medical Materials and               1.760          2.011  PPI Surg. Appliances and Supplies/CPI(U) Med
         Supplies.                                                 Supplies.

[[Page 73264]]

 
    Other Professional Expenses...          4.513  .............  CPI-U All Items Less Food and Energy.
    Other Expenses................  .............          6.433
----------------------------------------------------------------------------------------------------------------
(1) Due to rounding, weights may not sum to 100.000 percent.
(2) Sources: 2006 Physician Practice Information Survey (PPIS), Center for Health Policy Research, American
  Medical Association; 2006 Employment Cost for Employee Compensation, U.S. Department of Labor, Bureau of Labor
  Statistics; 2006 Occupational Employment Statistics (OES), BLS; U.S. Department of Commerce, Bureau of
  Economic Analysis 2002 Benchmark Input Output Tables, and U.S. Department of Commerce, Bureau of the Census,
  2006 Current Population Survey.
(3) Includes employed physician payroll.
(4) Includes paid leave.
(5) Average Hourly Earnings (AHE)
(6) Employment Cost Index (ECI)
(7) Consumer Price Index (CPI)
(8) Producer Price Index (PPI)

    The development of each of the cost categories in the final 2006 
MEI is described, in detail, as follows.
b. Physician's Own Time
    The component of the MEI that reflects the physician's own time is 
represented by the net income portion of business receipts. The 
proposed 2006 cost weight associated with the physician's own time 
(otherwise referred to as the Physician Compensation cost weight) is 
based on 2006 AMA PPIS data for mean physician net income (physician 
compensation) for self-employed physicians and for the selected self-
employed specialties referenced previously in this rule.
    We proposed to continue to add employed physician compensation to 
self-employed physician compensation in order to calculate an aggregate 
Physician Compensation cost weight. By including the compensation of 
employed physicians in the Physician Compensation expense category, 
these expenses will be adjusted by the appropriate price proxies for a 
physician's own time. The proposed 2006 Physician Compensation cost 
weight is 48.266 percent as compared to a 52.466 percent share in the 
2000-based MEI. We split the Physician Compensation component into two 
subcategories: Wages & Salaries; and Benefits. For self-employed 
physician's compensation, the ratios for Wages & Salaries and Benefits 
were calculated using data from the PPIS. Self-employed physician wages 
& salaries accounted for 92.2 percent of physician compensation while 
physician benefits accounted for the remaining 7.8 percent. For 
employed physician payroll, the distribution for wages & salaries and 
benefits for 2006 was 85.8 percent and 14.2 percent, respectively. This 
ratio was determined by calculating a weighted average of available SOI 
data for partnerships, corporations, and S-corporations specific to 
physicians and outpatient care centers. Based on these methods, the 
proposed 2006 Physician Wages & Salaries cost weight was 43.880 percent 
and the proposed 2006 Physician Benefits cost weight was 4.386 percent.
c. Physician's Practice Expenses
    To determine the remaining individual Practice Expenses cost 
weights, we used mean expense data from the 2006 PPIS survey expressed 
as a percentage of total expenses. The detailed explanations for the 
derivation of the individual weights under Practice Expenses are listed 
below.
(1) Nonphysician Employee Compensation
    The cost weight for Nonphysician Employee Compensation was 
developed using the 2006 AMA PPIS mean expenses for these costs. We 
further divided this cost share into Wages & Salaries and Benefits 
using 2006 BLS Employer Costs for Employee Compensation (ECEC) data for 
the Health Care and Social Assistance (private industry) category. 
Although this survey does not contain data only for offices of 
physicians, data are available to help determine the shares associated 
with wages & salaries and benefits for private industry health care and 
social assistance services (which include offices of physicians, 
hospitals, nursing homes, and offices of dentists). We believe these 
data provide a reasonable estimate of the split between wages and 
benefits for employees in physicians' offices. Data for 2006 in the 
ECEC for Health Care and Social Assistance indicate that wages and 
benefits are 71.8 percent and 28.2 percent of compensation, 
respectively. The 2000-based MEI included a wage and benefit split of 
74.0 percent and 26.0 percent of compensation.
    We proposed to use 2006 Current Population Survey (CPS) data and 
2006 BLS Occupational Employment Statistics (OES) data to develop cost 
weights for wages for nonphysician occupational groups. These are the 
same data sources that were used in the 2000-based MEI. We determined 
total annual earnings for offices of physicians using employment data 
from the CPS and mean annual earnings from the OES. To arrive at a 
distribution for these separate categories, we determined annual 
earnings for each of the four categories (which are Professional & 
Technical workers, Managers, Clerical workers, and Service workers), 
using the Standard Occupational Classification (SOC) system. We then 
determined the overall share of the total for each. The resulting 
proposed distribution, as well as the distribution from the 2000-based 
MEI, are presented in Table 28.

    TABLE 28--Percent Distribution of Nonphysician Payroll Expense by
                    Occupational Group: 2006 and 2000
------------------------------------------------------------------------
                                   2006 Expenditure    2000 Expenditure
     BLS Occupational Group             shares              shares
------------------------------------------------------------------------
Total...........................             100.000             100.000

[[Page 73265]]

 
    Professional & Technical                  43.671              42.635
     Workers....................
    Managers....................              10.517              24.138
    Clerical Workers............              32.477              28.187
    Service Workers.............              13.336               5.040
------------------------------------------------------------------------
Values may not sum to 100 due to rounding.

    The decrease in the Managers expenditure share is directly related 
to a decrease in the total number of employees in Management 
occupations in physicians' offices, in particular, ``Medical and health 
service managers.'' The decrease in expenditure share may also be due, 
in part, to the methods used in this rebasing. That is, for the 2006-
based MEI, we are using data limited to ``Offices of physicians.'' In 
the 2000-based version of the index, the only data that were available 
to inform these estimates were inclusive of physician offices and 
clinics (``Offices of physicians and clinics''). An examination of 2006 
CPS and OES data comparing ``Outpatient care centers'' to ``Offices of 
physicians'' indicates that there is a higher share of management 
occupations in the ``Outpatient care centers'' than in ``Offices of 
physicians''.
    The increase in the Service Workers expenditures share is 
attributable to a substantive increase in the number of employees in 
service occupations, particularly, ``Medical assistants and other 
health care support occupations''.
(2) Office Expenses
    The aggregate Office Expenses cost weight was derived using the 
2006 AMA PPIS and was calculated as the mean office expenses expressed 
as a percentage of mean total expenses. This calculation resulted in a 
20.035 percent share of total costs in 2006 compared to a 12.209 
percent share in the 2000-based index. The Office Expenses cost weight 
used in the 2000-based MEI was based on the AMA 1997 Socioeconomic 
Monitoring System (SMS) survey, which defined office expenses as rent, 
mortgage interest, depreciation on medical buildings, utilities, and 
telephones. The AMA expanded the office expense question in the 2006 
PPIS survey to include additional expenses, described in more detail 
below in this section.
    As a result, and in order to provide for a higher level of 
precision in assigning appropriate price proxies to underlying costs, 
we proposed to further disaggregate the Office Expenses cost category 
into 9 detailed cost categories using the BEA 2002-Benchmark I/O data 
for Offices of Physicians, Dentists, and Other Health Practitioners 
(North American Industrial Classification System (NAICS) 621A00). In 
response to comments, and as described more fully below, we are 
finalizing those nine categories, as well as adding a tenth detailed 
cost category.
    The proposed Office Expenses cost categories and associated cost 
weights were developed by matching the BEA I/O data as closely as 
possible to the 2006 AMA PPIS survey, which defined office expenses as 
``office (non-medical) equipment and office (nonmedical) supplies, as 
well as rent, mortgage, interest, maintenance, refrigeration, storage, 
security, janitorial, depreciation on medical buildings used in your 
practice, utilities, or other office computer systems (including 
information management systems/electronic medical record systems) and 
telephone.'' In most instances, the proposed underlying detailed cost 
categories and associated cost weights were chosen to be consistent 
with the NAICS 3-digit classification. BEA I/O expense data is 
published on a NAICS-basis. Some of the proposed underlying detailed 
cost categories such as All Other Services include various 3-digit 
NAICS codes for service related industries. Similar methods are used in 
the other legislatively-required market baskets developed by CMS. After 
we categorized the BEA I/O data, we calculated the relative share for 
each category as a percentage of the total office expenses categories 
within the I/O data. We then aged the 2002 weights forward to 2006 to 
derive the 2006 detailed Office Expense cost weights as a percent of 
total Office Expenses. The methodology we used to age the data forward 
was to apply the annual price changes from each respective price proxy 
to the appropriate cost categories. We repeated this practice for each 
year of the interval from 2002 to 2006. We then applied the resulting 
2006 distributions to the aggregate 2006 AMA Office Expenses weight of 
20.035 percent to yield the detailed 2006 Office Expenses' weights as a 
percent of total expenses.
    In response to public comments that are detailed in the subsequent 
sections of this rule, we conducted an additional review of the BEA I/O 
data used to disaggregate the Office Expense cost category, comparing 
the I/O's detailed categories with the questions on the AMA PPIS 
survey. This review led to small revisions to the underlying Office 
Expense cost weights and resulted in the inclusion of one additional 
cost weight in that category: All Other Products. These products, which 
were previously assumed to be captured in the Other Professional 
Expenses category (as measured by the AMA PPIS survey), include a 
variety of miscellaneous products, such as miscellaneous wood and 
building products, that we believe respondents included in Office 
Expenses as maintenance expense. Table 27 provides the revised MEI 
weights.
    We believe the introduction of these new, more detailed categories 
for the 2006-based index allow for an increased level of precision 
while maintaining appropriate levels of aggregation in the index. The 
individual price proxies are described in more detail in section 
II.E.4.of this final rule.
    The following is a description of the types of expenses included in 
each of the detailed Office Expense cost categories.
    <bullet> Utilities: The Utilities cost weight includes expenses 
classified in the fuel, oil and gas, water and sewage, and electricity 
industries. These types of industries are classified in NAICS and 
include NAICS 2211 (Electric power generation, transmission, and 
distribution), 2212 (Natural gas distribution), and 2213 (Water, 
sewage, and other systems). The cost weight for utilities is 1.266 
percent.
    <bullet> Chemicals: The Chemicals cost weight includes expenses 
classified in the NAICS 325 (Chemical manufacturing), excluding 
pharmaceuticals and biologicals. This would include, but is not limited 
to, expenses such as soap and cleaning compounds, as well as 
photocopier

[[Page 73266]]

toners and laser printer toners. The cost weight for chemicals is 0.723 
percent.
    <bullet> Paper: The Paper cost weight includes expenses classified 
in NAICS 322 (paper manufacturing) and NAICS 323 (printing and related 
support activities). This would include expenses associated with items 
such as paper, paperboard, sanitary paper products, and printing. The 
cost weight for paper is 0.657 percent.
    <bullet> Rubber and Plastics: The Rubber and Plastics cost weight 
includes expenses classified in NAICS 326 (Plastics and Rubber Products 
Manufacturing). This would include, but is not limited to expenses 
associated with plastic bags, plastic trash cans, and plastic plumbing 
fixtures. The cost weight for Rubber and Plastics is 0.598 percent.
    <bullet> Telephone: The Telephone cost weight includes expenses 
classified in NAICS 517 (Telecommunications) and NAICS 518 (Internet 
service providers), and NAICS 515 (Cable and other subscription 
programming). Telephone service, which is one component of the 
Telecommunications expenses, accounts for the majority of the 
expenditures in this cost category. The cost weight for Telephone 
services is 1.501 percent.
    <bullet> Postage: The Postage cost weight includes expenses 
classified in NAICS 491 (Postal services) and NAICS 492 (Courier 
services). The cost weight for Postage is 0.898 percent.
    <bullet> All Other Services: The All Other Services cost weight 
includes other service expenses including, but not limited to, 
nonresidential maintenance and repair, machinery repair, janitorial, 
and security services. This cost weight does not include expenses 
associated with professional services such as accounting, billing, 
legal, and marketing which are included in the Other Professional 
Expenses cost weight derived using the AMA PPIS survey. The cost weight 
for All Other Services is 3.582 percent.
    <bullet> All Other Products: The All Other Products cost weight, 
which we are adding based upon our further review in response to public 
comments, includes other miscellaneous expenses, including but not 
limited to, a variety of miscellaneous building products (such as wood 
and concrete). The cost weight for All Other Products is 0.500 percent.
    <bullet> Fixed Capital: The Fixed Capital cost weight includes 
expenses for building leases, mortgage interest, and depreciation on 
medical buildings. The cost weight for Fixed Capital is 8.957 percent.
    <bullet> Moveable Capital: The Moveable Capital cost weight 
includes expenses and depreciation costs for non-medical equipment 
including but not limited to, computer equipment and software and the 
rental and leasing of industrial machinery equipment. The cost weight 
for Moveable Capital is 1.353 percent.
(3) Professional Liability Insurance (PLI) Expense
    The proposed weight for PLI expense was derived from the 2006 AMA 
survey and was calculated as the mean PLI expense expressed as a 
percentage of mean total expenses. This calculation resulted in a 
4.295-percent share of total costs in 2006 compared to a 3.865-percent 
share in the 2000-based index. The increase in the weight for PLI 
reflects the current prices of premiums, as well as an update to the 
level of coverage purchased by physicians in 2006 compared to 2000.
(4) Medical Equipment Expenses
    The proposed weight for Medical Equipment was calculated using the 
2006 AMA PPIS mean expense data expressed as a percentage of mean total 
expenses. This calculation resulted in a 1.978-percent share of total 
costs in 2006 compared to a 2.055-percent share in the 2000-based 
index. By definition, this category includes the expenses related to 
depreciation, maintenance contracts, and the leases or rental of 
medical equipment used in diagnosis or treatment of patients. The 
category would also include the tax-deductible portion of the purchase 
price or replacement value of medical equipment, if not leased.
(5) Medical Supplies Expenses
    The proposed weight for Medical Supplies was calculated using the 
2006 AMA PPIS mean expense data expressed as a percentage of mean total 
expenses. This calculation resulted in a 1.760-percent share of total 
costs in 2006 compared to a 2.011-percent share in the 2000-based 
index. By definition, this category includes the expenses related to 
medical supplies such as sterile gloves, needles, bandages, specimen 
containers, and catheters. Additionally, we proposed to exclude the 
expenses related to separately billable supplies as these expenses are 
not paid for under the PFS. The Medical Supply cost category does not 
include expenses related to drugs.
(6) Other Professional Expenses
    The proposed weight for Other Professional expenses was calculated 
using the 2006 AMA PPIS mean expense data expressed as a percentage of 
mean total expenses. This calculation resulted in a 4.513-percent share 
of total costs in 2006. By definition, this category includes the 
expenses related to tax-deductible expenses for any other professional 
expenses not reported in another category from the PPIS. These expenses 
would include fees related to legal, marketing, accounting, billing, 
office management services, professional association memberships, 
maintenance of certification or licensure, journals and continuing 
education, professional car upkeep and depreciation, and any other 
general expenses or other professional expenses not reported elsewhere 
on the PPIS.
    In summary, we are finalizing the proposed 2006-based MEI cost 
categories and respective cost weights for all categories except for 
the underlying detailed Office Expense cost categories and cost 
weights. In response to public comments, we reexamined the BEA I/O data 
and compared it again with the specific types of costs sought by the 
AMA PPIS survey question on Office Expenses. Although we are finalizing 
the proposed Office Expense cost weight of 20.035 percent, our re-
evaluation resulted in slight changes to the underlying detail of the 
Office Expense cost categories and cost weights. Specifically, we are 
finalizing the nine proposed detailed cost categories and adding one 
additional detailed cost category, All Other Products. The final 
detailed cost categories and cost weights for the underlying Office 
Expense cost categories are shown in Table 27.
    Table 29 shows a comparison of the proposed MEI Office Expense cost 
categories and weights to the final MEI Office Expense cost categories 
and weights. In addition to adding the subcategory All Other Products, 
the final Office Expenses' category weights were updated in response to 
public comments to reflect the removal of automobile-related expenses, 
which were in effect being double-counted, from the Movable Capital 
category. Further examination of the AMA's PPIS questions showed that 
automobile costs, such as those associated with leasing and 
depreciation, were captured in the question related to other 
professional expenses and are, thus accounted for in Other Professional 
Expenses (with a final cost weight of 4.513 percent). Notably, that 
cost weight is not impacted as, again, those costs were captured there 
in the survey.

[[Page 73267]]



Table 29--Comparison of Proposed Office Expense Cost Categories and Cost
  Weights to the Final Office Expense Cost Categories and Cost Weights
------------------------------------------------------------------------
                                                       2006       2006
                                                      Final     Proposed
                  Cost categories                     weight     weight
                                                       (%)        (%)
------------------------------------------------------------------------
Office Expenses...................................     20.035     20.035
    Utilities.....................................      1.266      1.139
    Chemicals.....................................      0.723      0.679
    Paper.........................................      0.657      0.616
    Rubber & Plastics.............................      0.598      0.563
    Telephone.....................................      1.501      1.415
    Postage.......................................      0.898      0.661
    All Other Services............................      3.582      4.718
    All Other Products............................      0.500  .........
    Fixed Capital.................................      8.957      8.410
    Moveable Capital..............................      1.353      1.834
------------------------------------------------------------------------

4. Selection of Price Proxies for Use in the MEI
    After the 2006 cost weights for the rebased and revised MEI were 
developed, we reviewed all of the price proxies to evaluate their 
appropriateness. As was the case in the development of the 2000-based 
MEI (68 FR 63239), most of the proxy measures we considered are based 
on BLS data and are grouped into one of the following five categories:
    <bullet> Producer Price Indices (PPIs): PPIs measure price changes 
for goods sold in markets other than retail markets. These fixed-weight 
indexes are a measure of price change at the intermediate or final 
stage of production. They are the preferred proxies for physician 
purchases as these prices appropriately reflect the product's first 
commercial transaction.
    <bullet> Consumer Price Indices (CPIs): CPIs measure changes in the 
prices of final goods and services bought by consumers. Like the PPIs, 
they are fixed-weight indexes. Since they may not represent the price 
changes faced by producers, CPIs are used if there are no appropriate 
PPIs or if the particular expenditure category is likely to contain 
purchases made at the final point of sale.
    <bullet> Average Hourly Earnings (AHEs): AHEs are available for 
production and nonsupervisory workers for specific industries, as well 
as for the nonfarm business economy. They are calculated by dividing 
gross payrolls for wages & salaries by total hours. The series reflects 
shifts in employment mix and, thus, is representative of actual changes 
in hourly earnings for industries or for the nonfarm business economy.
    <bullet> ECIs for Wages & Salaries: These ECIs measure the rate of 
change in employee wage rates per hour worked. These fixed-weight 
indexes are not affected by employment shifts among industries or 
occupations and thus, measure only the pure rate of change in wages.
    <bullet> ECIs for Employee Benefits: These ECIs measure the rate of 
change in employer costs of employee benefits, such as the employer's 
share of Social Security taxes, pension and other retirement plans, 
insurance benefits (life, health, disability, and accident), and paid 
leave. Like ECIs for wages & salaries, the ECIs for employee benefits 
are not affected by employment shifts among industries or occupations.
    When choosing wage and price proxies for each expense category, we 
evaluate the strengths and weaknesses of each proxy variable using the 
following four criteria:
    <bullet> Relevance: The price proxy should appropriately represent 
price changes for specific goods or services within the expense 
category. Relevance may encompass judgments about relative efficiency 
of the market generating the price and wage increases.
    <bullet> Reliability: If the potential proxy demonstrates a high 
sampling variability, or inexplicable erratic patterns over time, its 
viability as an appropriate price proxy is greatly diminished. Notably, 
low sampling variability can conflict with relevance--since the more 
specifically a price variable is defined (in terms of service, 
commodity, or geographic area), the higher the possibility of high 
sampling variability. A well-established time series is also preferred.
    <bullet> Timeliness of actual published data: For greater 
granularity and the need to be as timely as possible, we prefer monthly 
and quarterly data to annual data.
    <bullet> Public availability: For transparency, we prefer to use 
data sources that are publicly available.
    The BLS price proxy categories previously described meet the 
criteria of relevance, reliability, timeliness, and public 
availability. Below we discuss the price and wage proxies for the 
rebased and revised MEI (as shown in Table E4), along with a summary of 
the public comments we received on our proposals and our responses to 
those comments.
a. Cost (Expense) Categories in the MEI
(1) Physician's Own Time (Physician Compensation)
    For the revised and rebased MEI, we proposed to continue to use the 
AHE for production and non-supervisory employees for the private 
nonfarm economy as the proxy for the Physician Wages & Salaries 
component (BLS series code: CEU0500000008).
    The AHE for the private nonfarm economy reflects general earnings 
including the impacts of supply, demand, and economy-wide productivity 
for the average worker in the economy. As such, use of this proxy is 
consistent with the original intent of the Congress for the change in 
the MEI to follow reflect changes in expenses of practice and general 
earnings levels.\1\ The current 2000-based MEI uses the ECI for Total 
Benefits (BLS series code: CIU2030000000000I) for total private 
industry as the price proxy for Physician Benefits. We proposed to 
continue using the same proxy for the 2006-based MEI and received no 
public comment on this particular aspect of the index. This means that 
both the wage and benefit proxies for physician earnings are derived 
from the private nonfarm business sector and are computed on a per-hour 
basis.
---------------------------------------------------------------------------

    \1\ U.S. Senate, Committee on Finance, Social Security 
Amendments of 1972. ``Report of the Committee on Finance United 
States Senate to Accompany H.R. 1,'' September 26, 1972, p. 191.
---------------------------------------------------------------------------

(2) Nonphysician Employee Compensation
    For the 2006-based MEI, we proposed to use the same ECI private 
series for each occupational group as in the 2000-based MEI. In 
particular, we proposed to use the ECI for Professional and Technical 
Workers, the ECI for Managerial Services, the ECI for Administrative 
Support Services, and the ECI for Service Occupations.
    As described in the CY 2008 PFS proposed rule (72 FR 38190), as a 
result of the discontinuation of the White Collar Benefit ECI for 
private workers, we proposed to continue to use a composite ECI benefit 
index. We are continuing to use the composite ECI for non-physician 
employees in the proposed rebased and revised MEI; however, we proposed 
to rebase the weights within that blend in order to reflect the more 
recent 2006 data. Table 30 lists the four ECI series and corresponding 
weights used to construct the 2006 composite benefit index.

[[Page 73268]]



 Table 30--CMS Composite Price Index for Nonphysician Employee Benefits
------------------------------------------------------------------------
                                                                   2006
                           ECI series                             weight
                                                                   (%)
------------------------------------------------------------------------
Benefits, Private, Professional & Related......................       44
Benefits, Private, Management, Business, Financial.............       11
Benefits, Private, Office & Administrative Support.............       32
Benefits, Private, Service Occupations.........................       13
------------------------------------------------------------------------

(3) Utilities
    For the 2006-based MEI, we proposed to use the CPI for Fuel and 
Utilities (BLS series code <greek-i>CUUR0000SAH2) to measure the price 
growth of this cost category. This cost category was not broken out 
separately in the 2000-based MEI.
(4) Chemicals
    For the 2006-based MEI, we proposed to use the PPI for Other Basic 
Organic Chemical Manufacturing (BLS series code <greek-i>PCU32519-
32519) to measure the price changes of this cost category. We are using 
this industry-based PPI because BEA's 2002 benchmark I/O data show that 
the majority of the office of physicians' chemical expenses are 
attributable to Other Basic Organic Chemical Manufacturing (NAICS 
32519). This cost category was not broken out separately in the 2000-
based MEI.
(5) Paper
    For the 2006-based MEI, we proposed to use the PPI for Converted 
Paper and Paperboard (BLS series code <greek-i>WPU0915) to measure the 
price growth of this cost category. This cost category was not broken 
out separately in the 2000-based MEI.
(6) Rubber and Plastics
    For the 2006-based MEI, we proposed to use the PPI for Rubber and 
Plastic Products (BLS series code <greek-i>WPU07) to measure the price 
growth of this cost category. This cost category was not broken out 
separately in the 2000-based MEI.
(7) Telephone
    For the 2006-based MEI, we proposed to use the CPI for Telephone 
Services (BLS series code <greek-i>CUUR0000SEED) to measure the price 
growth of this cost category. This cost category was not broken out 
separately in the 2000-based MEI.
(8) Postage
    For the 2006-based MEI, we proposed to use the CPI for Postage (BLS 
series code <greek-i>CUUR0000SEEC01) to measure the price growth of 
this cost category. This cost category was not broken out separately in 
the 2000-based MEI.
(9) All Other Services
    For the 2006-based MEI, we proposed to use the ECI for Compensation 
for Service Occupations (private industry) (BLS series code 
<greek-i>CIU2010000300000I) to measure the price growth of this cost 
category. This cost category was not broken out separately in the 2000-
based MEI.
(10) All Other Products
    As noted previously, we are adding this category in this final rule 
with comment period in response to public comments. This category 
includes a variety of miscellaneous expenses such as miscellaneous 
building products; thus, we will use the CPI-U for All Items Less Food 
and Energy as a proxy for price changes. This cost category was not 
broken out separately in the 2000-based MEI.
(11) Fixed Capital
    For the 2006-based MEI, we proposed to use the CPI for Owner's 
Equivalent Rent (BLS series code <greek-i>CUUS0000SEHC) to measure the 
price growth of this cost category. This price index represents about 
50 percent of the CPI for Housing, which was used in the 2000-based MEI 
to proxy total Office Expenses.
(12) Moveable Capital
    For the 2006-based MEI, we proposed to use the PPI for Machinery 
and Equipment (series code <greek-i>WPU11) to measure the price growth 
of this cost category. This cost category was not broken out separately 
in the 2000-based MEI.
(13) Professional Liability Insurance (PLI)
    Each year, we solicit PLI premium data for physicians from a sample 
of commercial carriers. This information is not collected through a 
survey form, but instead is requested directly from, and provided by 
(on a voluntary basis), several national commercial carriers. As we 
require for our other price proxies, the professional liability price 
proxy is intended to reflect the pure price change associated with this 
particular cost category. Thus, it does not include changes in the mix 
or level of liability coverage. To accomplish this result, we obtain 
premium information from a sample of commercial carriers for a fixed 
level of coverage, currently $1 million per occurrence and a $3 million 
annual limit. This information is collected for every State by 
physician specialty and risk class. Finally, the State-level, 
physician-specialty data are aggregated by effective premium date to 
compute a national total, using counts of physicians by State and 
specialty as provided in the AMA publication, Physician Characteristics 
and Distribution in the U.S.
    The resulting data provide a quarterly time series, indexed to a 
base year consistent with the MEI, and reflect the national trend in 
the average professional liability premium for a given level of 
coverage, generally $1 million/$3 million of claims-made mature 
policies. From this series, quarterly and annual percent changes in PLI 
are estimated for inclusion in the MEI.
    The most comprehensive data on professional liability costs are 
held by the State insurance commissioners, but these data are available 
only with a substantial time lag and hence, the data currently 
incorporated into the MEI are much timelier. We believe that, given the 
limited data available on professional liability premiums, the 
information and methodology described above produces an adequate proxy 
of the PLI price trends facing physicians.
(14) Medical Equipment
    The Medical Equipment cost category includes depreciation, leases, 
and rent on medical equipment. We proposed to use the PPI for Medical 
Instruments and Equipment (BLS series code: WPU156201) as the price 
proxy for this category, consistent with the price proxy used in the 
2000-based MEI and other CMS input price indexes.
(15) Medical Materials and Supplies
    As was used in the 2000-based MEI, we proposed to use a blended 
index comprised of a 50/50 blend of the PPI Surgical Appliances (BLS 
series code: WPU156301) and the CPI-U for Medical Equipment and 
Supplies (BLS series code: CUUR0000SEMG). We believe physicians 
purchase the types of supplies contained within these proxies, 
including such items as bandages, dressings, catheters, intravenous 
(I.V.) equipment, syringes, and other general disposable medical 
supplies, via wholesale purchase, as well as at the retail level. 
Consequently, we proposed to combine the two aforementioned indexes to 
reflect those modes of purchase.

[[Page 73269]]

(16) Other Professional Expenses
    This category includes the residual subcategory of other 
professional expenses such as accounting services, legal services, 
office management services, continuing education, professional 
association memberships, journals, professional car expenses, and other 
general expenses and other professional expenses not captured 
elsewhere. Given this heterogeneous mix of goods and services, we are 
finalizing our proposal to use the CPI-U for All Items Less Food and 
Energy. In summary, we are finalizing the proposed 2006-based MEI price 
proxies with one modification. Since an additional cost category, All 
Other Products, was added to the office expense disaggregation, we are 
also finalizing the decision to use the CPI for All Items Less Food and 
Energy as the price proxy for that category.
(b) Productivity Adjustment to the MEI
    The MEI has been adjusted for changes in productivity since its 
inception. In the CY 2003 PFS final rule (67 FR 80019), we implemented 
a change in the way the MEI was adjusted to account for those changes 
in productivity. The MEI used for the 2003 physician payment update 
incorporated changes in the 10-year moving average of private nonfarm 
business multifactor productivity that were applied to the entire 
index. Previously, the index incorporated changes in productivity by 
adjusting the labor portions of the index by changes in the 10-year 
moving average of economy-wide private nonfarm business labor 
productivity.
    We proposed to continue to use the current method for adjusting the 
full MEI for multifactor productivity in the rebased and revised MEI, 
and are finalizing that proposal.
    As described in the CY 2003 PFS final rule, we believe this 
adjustment is appropriate because it explicitly reflects the 
productivity gains associated with all inputs (both labor and non-
labor). We believe that using the 10-year moving average percent change 
in private nonfarm business multifactor productivity is appropriate for 
deriving a stable measure that helps alleviate the influence that a 
peak (or a trough) of a business cycle may have on the measure. The 
adjustment will be based on the latest available historical e private 
nonfarm business multifactor productivity data as measured and 
published by BLS.
5. Results of Rebasing
    Table 31 illustrates the results of updating the MEI cost weights 
for Physician Compensation, Practice Expenses (excluding PLI), and PLI 
from a 2000-based cost distribution to a 2006-based cost distribution, 
including all the proposed and finalized revisions as specified in this 
final rule.

  Table 31--Percent Distribution of Selected Physician Expenses Used To
                    Calibrate RVUs: CYs 2006 and 2000
------------------------------------------------------------------------
                                                     CY 2006    CY 2000
                                                      weight     weight
                                                       (%)        (%)
------------------------------------------------------------------------
Physician Compensation (Own Time).................     48.266     52.466
Practice Expenses (less PLI)......................     47.439     43.669
PLI...............................................      4.295      3.865
------------------------------------------------------------------------

    The rebased and revised MEI has several differences as compared to 
the 2000-based MEI; these changes have been discussed in detail in 
prior sections of this rule. Table E8 shows the average calendar year 
percent change for CY 2004 to CY 2011 for both the 2000- and 2006-based 
MEIs. The 2006-based MEI annual percent changes differ from the 2000-
based MEI annual percent changes by 0.0 to 0.8 percentage point. For 
CYs 2007 through 2011, the annual percent change in the rebased and 
revised MEI was within 0.3 percentage point of the percent change in 
the 2000-based MEI. In the earlier years, there were larger differences 
between the annual percent change in the rebased and revised MEI and 
the 2000-based MEI. The majority of these differences can be attributed 
to the lower benefit cost weight, as measured by the 2006 AMA data, and 
the exclusion of the Pharmaceuticals cost category. The remaining 
differences are attributable to the higher cost weight for PLI, as 
measured by the 2006 AMA data.

  Table 32--Annual Percent Changes in the 2000-based and Revised 2006-
                                based MEI
------------------------------------------------------------------------
                                                               Current
               Update year \(A)\                Final 2006-   2000-based
                                                 based MEI       MEI
------------------------------------------------------------------------
CY 2004.......................................          2.3          2.6
CY 2005.......................................          1.8          2.6
CY 2006.......................................          1.8          2.4
CY 2007.......................................          1.6          1.9
CY 2008.......................................          1.9          1.8
CY 2009.......................................          1.6          1.6
CY 2010.......................................          1.5          1.2
CY 2011\(B)\..................................          0.4          0.3
Average Change for CYs 2004- 2011.............          1.6          1.8
------------------------------------------------------------------------
\(A)\ Update year based on historical data through the second quarter of
  the prior calendar year. For example, the 2010 update is based on
  historical data through the second quarter 2009.
\(B)\ Based on historical data through the 2nd quarter 2010.

    As shown in Table 33, the percent change of the rebased and revised 
MEI for the CY 2011 PFS final rule is an increase of 0.4 percent, one 
tenth of a percentage point higher than the 2000-based MEI for the same 
period. The proposed rule included an estimated increase of 0.3 percent 
for 2011 based on projected data from IHS Global Insight, Inc. The 0.4 
percent increase was calculated based on historical data through the 
second quarter of 2010, including revised data from the BLS on the 10-
year moving average of BLS private nonfarm business multifactor 
productivity published on October 6, 2010 (http://www.bls.gov/news.release/pdf/prod3.pdf). The 0.1 percentage point difference in the 
MEI update factor from the 0.3-percent estimate indicated in the 
proposed rule to our current figure of 0.4 percent is primarily related 
to the incorporation of more recent historical data for private nonfarm 
business multifactor productivity.

Table 33--Annual Percent Change in the 2000-based and Revised 2006-based
                             MEI for CY 2011
------------------------------------------------------------------------
                                                 2006-based   2000-based
                                                    MEI          MEI
------------------------------------------------------------------------
CY 2011.......................................          0.4          0.3
------------------------------------------------------------------------


[[Page 73270]]


 Table 34--Annual Percent Change in the Revised and Rebased MEI CY 2011,
                           All Categories \1\
------------------------------------------------------------------------
                                                               CY 2011
                Cost categories                 2006 weight    percent
                                                  \2\  (%)      change
------------------------------------------------------------------------
MEI Total, productivity adjusted..............      100.000          0.4
Productivity: 10[dash]year moving average of            N/A          1.2
 MFP..........................................
MEI Total, without productivity adjustment....      100.000          1.6
    Physician Compensation (Own Time) \3\.....       48.266          2.4
        Wages and Salaries....................       43.880          2.5
        Benefits..............................        4.386          1.7
    Physician's Practice Expenses.............       51.734          0.7
        Nonphysician Employee Compensation....       19.153          1.5
            Nonphysician Employee Wages.......       13.752          1.4
                Prof/Tech Wages...............        6.006          1.2
                Managerial Wages..............        1.446          1.2
                Clerical Wages................        4.466          1.7
                Services Wages................        1.834          1.7
            Nonphysician Employee Benefits....        5.401          1.6
        Other Practice Expenses...............       26.308          0.1
            Office Expenses...................       20.035          0.6
                Utilities.....................        1.266         -3.1
                Chemicals.....................        0.723         -2.5
                Paper.........................        0.657         -0.3
                Rubber & Plastics.............        0.598         -0.3
                Telephone.....................        1.501          0.8
                Postage.......................        0.898          4.7
                All Other Services............        3.582          1.8
                All Other Products............        0.500          1.4
                Fixed Capital.................        8.957          0.6
                Moveable Capital..............        1.353          0.1
        PLI \4\...............................        4.295         -2.9
        Medical Equipment.....................        1.978          0.5
        Medical Materials and Supplies........        1.760          0.4
        Other Professional Expenses...........        4.513          1.4
------------------------------------------------------------------------
\1\ The estimates are based upon the latest available Bureau of Labor
  Statistics data on the 10-year moving average of BLS private nonfarm
  business multifactor productivity published on October 6, 2010 (http://www.bls.gov/news.release/pdf/prod3.pdf).
\2\ The weights shown for the MEI components are the 2006 base-year
  weights, which may not sum to subtotals or totals because of rounding.
  The MEI is a fixed-weight, Laspeyres input price index whose category
  weights indicate the distribution of expenditures among the inputs to
  physicians' services for CY 2006. To determine the MEI level for a
  given year, the price proxy level for each component is multiplied by
  its 2006 weight. The sum of these products (weights multiplied by the
  price index levels) yields the composite MEI level for a given year.
  The annual percent change in the MEI levels is an estimate of price
  change over time for a fixed market basket of inputs to physicians'
  services.
\3\ The measures of Productivity, Average Hourly Earnings, Employment
  Cost Indexes, as well as the various Producer and Consumer Price
  Indexes can be found on the Bureau of Labor Statistics (BLS) Web site
  at http://stats.bls.gov.
\4\ Derived from a CMS survey of several major commercial insurers.
\N/A\ Productivity is factored into the MEI as a subtraction from the
  total index growth rate; therefore, no explicit weight exists for
  productivity in the MEI.

6. Medicare Economic Index Technical Advisory Panel
    In the CY 2011 PFS proposed rule, we notified the public of our 
intent to convene a Medicare Economic Index Technical Advisory Panel 
(MEI TAP) to study all aspects of the MEI including its cost 
categories, their associated cost weights and price proxies, and the 
adjustment of the index by an economy-wide measure of multi-factor 
productivity. We will be convening the MEI TAP. More details regarding 
this issue can be found in the next section of this rule.
7. Summary of Comments and the Associated Responses
a. Timing of Rebasing and Revising the MEI
    Comment: Many commenters support the rebasing and revising of the 
MEI using CY 2006 as a base year and the incorporation of practice cost 
changes reflected in the 2006 AMA PPIS. Many of these commenters also 
indicated their support for the upcoming MEI technical advisory panel, 
but stressed that CMS should not delay moving forward with rebasing and 
revising the MEI for CY 2011. Several people wrote that they believe 
that the rebasing, along with the addition of new product categories, 
will result in a more accurate distribution of expenses among physician 
compensation, practice expense, and professional liability. The 
commenters believe that the proposal to rebase to 2006 will make the 
MEI more representative of current conditions in the health care 
marketplace and, in particular, more reflective of the higher burden of 
practice expenses in relation to physician compensation in modern 
physician practices. The commenters agree that the use of more current 
data and the expansion of the categories used in determining the MEI 
update are a technical improvement over the 2000-based MEI and urge CMS 
to proceed accordingly.
    Response: We agree with the commenters that the 2006-based MEI 
reflects a more current estimate of the cost distribution associated 
with furnishing physicians' services. Therefore we are finalizing our 
proposals (with minor modifications described above) to rebase and 
revise the MEI, and are proceeding with implementation of the 2006-
based MEI for CY 2011.
    Comment: Many commenters indicated CMS should postpone 
implementation of the rebased and revised MEI until the MEI technical 
advisory panel can conduct a comprehensive review of all aspects of the 
index. These commenters believe that it is premature to finalize 
proposals

[[Page 73271]]

that will significantly change the MEI prior to receiving 
recommendations from the technical advisory panel and therefore 
strongly support convening the technical advisory panel first and 
rebasing and revising the MEI afterwards.
    Response: We agree with the commenters that the MEI technical 
advisory panel should move forward (discussed in more detail below). 
However, we do not find any compelling technical reason to postpone 
finalizing the proposed changes to the index. We believe rebasing and 
revising the index for CY 2011 to reapportion the work, practice 
expense, and malpractice weights will allow the MEI to appropriately 
reflect more recent data. For these reasons we disagree with the 
commenters that support delaying the rebasing of the MEI until the 
technical panel has had a chance to convene and make further 
recommendations. Should we concur with recommendations from the 
technical advisory panel that would result in technical improvements to 
the MEI, we would propose any changes in a future rulemaking exercise.
    Comment: One commenter questioned the need for changes in the MEI 
in 2011, particularly since there is no statutory timeframe for these 
changes and the most recent changes in practice expenses from the PPIS 
survey are in the first year of a 4-year phase-in.
    Response: The current MEI reflects the physician practice cost 
structure for 2000. Based on both our own analysis and supporting 
public comments, it is evident that this cost structure has changed 
from 2000 to 2006. Accordingly, we believe it is technically 
appropriate to update to a more recent base year for use in CY 2011.
    Comment: A commenter suggested that when rebasing is done in the 
future, CMS should propose phasing in the changes, perhaps over 2 
years, in order to mitigate negative consequences.
    Response: We do not believe it would be appropriate to phase in 
changes to the MEI associated with rebasing and revising the index. 
These periodic efforts are done to ensure that the MEI is reflecting 
the latest available information and echoes current cost distributions 
associated with furnishing physicians' services. Our approach is 
consistent across all of the Medicare market baskets in this regard and 
is likewise consistent with how technical improvements are incorporated 
into other published price indexes, such as the CPI or PPI.
    Comment: Some commenters asked CMS to delay rebasing the MEI until 
the summit on geographic practice costs and the IOM studies have been 
completed.
    Response: We believe that it is technically appropriate to update 
the MEI to reflect the more current cost structure as determined by 
using the 2006 AMA PPIS data. We note that the MEI is constructed 
independent of the GPCIs. While the GPCI weights have historically been 
linked to the MEI cost weights, we do not believe it would be 
appropriate to postpone rebasing the MEI in anticipation of the 
summit's or the IOM's findings.
b. PPIS Data
    Comment: Many commenters stated they, like CMS, are unaware of 
another more robust or more current source of available data on 
physician practice costs than the PPIS. Other commenters noted that CMS 
and the AMA have supported using PPIS data to update the practice 
expense per hour (PE/HR) calculations beginning in CY 2010. The 
commenters believe that if the data were sufficient to adjust PE/HR, 
then they are sufficient to update the MEI. Other commenters indicate 
they support periodic updates to the index, recognizing the 
difficulties associated with updating the MEI's cost categories and 
weights on an annual basis.
    Response: We agree with the commenters that the PPIS is the most 
up-to-date and comprehensive data source available on physician 
practice costs. We also believe that the estimates derived from the 
PPIS are current, valid, and appropriate for use in rebasing and 
revising the MEI. Likewise, we concur that a variety of data-related 
issues would make updating the MEI on an annual basis difficult and 
believe that periodic revisions such as the one we are adopting in this 
final rule with comment period are more appropriate.
    Comment: A few commenters expressed general concerns over using 
data from the PPIS. One commenter specifically notes that the MEI 
changes are allegedly being proposed to reflect changes in medical 
practice based on research using PE data. The commenter has reviewed 
some of the research, including the research process and questioned the 
research data itself. Their concerns over the raw data source include 
issues related to sample design, sample geographic distribution, and 
sample size sufficiency. They questioned the choice of the data 
collection firm used by AMA.
    Response: We conducted an extensive review of the PPIS data and 
continue to believe it appropriately reflects the cost distributions of 
physicians. We note that we rely upon the physician community to 
complete the AMA surveys as accurately as possible since unlike other 
provider types (such as hospitals and skilled nursing facilities) 
physicians are not required to submit annual Medicare cost report data.
    Comment: Some commenters indicated that CMS did not make clear why 
the rebased MEI would be based on PPIS data from 2006. Several 
expressed concerns that the use of 4-year old data is questionable as 
data this old would not reflect physician expenses in 2011 (and that 
more up-to-date data on physician costs is surely available).
    Response: As stated in the CY 2011 PFS proposed rule (75 FR 40088), 
we chose to rebase the MEI to 2006 in order to incorporate the 2006 AMA 
PPIS data. We believe the 2006 AMA PPIS data is the most up-to-date, 
complete, statistically valid data source available. We welcome any 
recommendations for more up-to-date data sources available on physician 
expenses. We would also note that the 2006 data from the PPIS are used 
to provide the cost structure that is used in the MEI. The increase in 
the CY 2011 MEI ultimately reflects the input price inflation, adjusted 
for productivity, that physicians face based on a 2006 distribution of 
costs. It does not, nor is it intended to, reflect physician input cost 
levels for 2011.
    Comment: Some commenters noted that in the interest of 
transparency, CMS should publish on its Web site all data from the PPIS 
that were used in rebasing the MEI.
    Response: We understand the commenter's request for transparency. 
Unfortunately, we are unable to publish the detailed micro level data 
from the AMA PPIS survey as it is proprietary information. We would 
suggest the commenter contact the AMA with their request.
c. Office Expenses
    Comment: Several commenters appreciated the intent of the new 
subcategories found in Office Expenses to include more medical office-
specific data and believe it will improve the index.
    Response: We agree with the commenters and believe that having 
greater detail under the Office Expense cost category in the MEI 
provides a technical improvement.
    Comment: Several commenters questioned the CMS proposal to create 
detailed categories under the broader Office Expense cost category. 
Some of the commenters had specific concerns about the particular 
subcategories. Examples included the following:
    <bullet> The Chemicals and Rubber & Plastics categories (all 
derived from the BEA) might not be relevant (or

[[Page 73272]]

meaningful) to today's physicians' practice.
    <bullet> Computers, computer expenses, billing, and scheduling 
technology and electronic medical records are high-cost, non-optional 
office expenses for medical practices that are not adequately captured 
and would represent more appropriate categories.
    <bullet> CMS references data on the Office Expenses' components 
derived from the BEA, but the agency provided no rationale to justify 
the changes in Office Expenses, nor did it provide a detailed 
accounting methodology or solicit advice on new inputs to the index.
    Response: We proposed to disaggregate the Office Expense cost 
category into more detailed cost categories as a result of a change to 
the question in the 2006 AMA PPIS survey that captured these types of 
costs. In addition, in rulemaking for the CY 2008 Physician Fee 
Schedule, we received a comment from the industry about our use of the 
CPI for Housing to proxy Office Expenses (72 FR 66376). At that time, 
we notified the public of our intent to explore the feasibility of 
breaking the Office Expenses category into more descriptive cost 
categories during the next rebasing.
    In order to appropriately represent the information collected by 
the PPIS and to increase the level of precision of our price proxies, 
we proposed to disaggregate the Office Expense cost category and its 
associated weight into more detailed components and to proxy those 
costs with the most technically appropriate price proxies. Moreover, we 
believe it would be technically inappropriate to proxy the Office 
Expense cost category, which now includes a much broader range of 
expenses, by one price proxy, namely the CPI for Housing. For these 
reasons, we developed our proposals and solicited public comments.
    We disagree with the commenters' assertion that the Chemicals and 
Rubber & Plastics categories are not relevant to today's physician 
practice (and note that the commenters did not provide additional 
information or data to support the claim that the proposed categories 
are not relevant). The information we relied on came directly from the 
BEAs' Benchmark I/O files for Offices of Physicians, Dentists, and 
Other Health Practitioners. The Chemicals cost category includes 
expenses for items such as soaps and cleaning compounds, as well as 
photocopier toners and laser printer toners. The Rubber and Plastics 
category includes expenses for items such as plastic plumbing fixtures, 
plastic bags, and plastic trash cans. Although we will continue to 
explore further additional disaggregation of expenses, we believe that 
the aforementioned costs are associated with, and relevant to, 
furnishing physicians' services.
    As indicated previously, and in response to the comment, we 
conducted an additional review of the BEA I/O data used to disaggregate 
the Office Expense cost category, comparing the detailed underlying 
expenses with the questions on the AMA PPIS survey. This review led us 
to make small revisions to the underlying Office Expense cost weights, 
including the addition of another cost weight for the new subcategory, 
All Other Products. These products were initially assumed to be 
captured in Other Professional Expenses as measured by the AMA PPIS 
survey, but were determined to have been reported as Office Expenses. 
All Other Products would include a variety of miscellaneous products 
such as miscellaneous wood and apparel products. Table E4 provides the 
revised MEI weights. Also, as part of this additional analysis on the 
Office Expense categories, we determined that automobile-related 
expenses were captured in the PPIS question associated with Other 
Professional Expenses (and that its associated weight reflected 
respondents including those costs when answering that question). As a 
result, we removed automobile-related NAICS-based industry spending 
from the BEA I/O data that was being used to distribute expenses across 
the various Office Expense subcategories. As this spending was included 
in the Movable Capital subcategory for the proposed rule, the weight 
associated with that subcategory will be 1.353 rather than the 1.834 we 
proposed.
    We disagree with the commenters' statements that the MEI does not 
adequately capture high-level or high-cost technology expenses (and 
briefly note that Movable Capital includes only non-medical movable 
equipment). The Office Expense cost weight (20.035 percent) was 
calculated using the 2006 PPIS data, which specifically requested 
health information technology equipment and other nonmedical office 
equipment to be included in the Office Expense category as follows:

    Provide [your] share (dollar amount) of the specialty or 
department level's share (dollar amount) of the practice's total 
(dollar amount) for] 2006 office expenses, including office (non-
medical) equipment and office (non-medical) supplies, as well as 
rent, mortgage interest, maintenance, refrigeration, storage, 
security, janitorial, depreciation on medical buildings used in your 
practice, utilities, or other office computer systems (including 
information management systems/electronic medical record systems) 
and telephone.

    Given that the expenses related to information management systems 
and electronic medical record systems were included as ``office 
expenses'' in the 2006 PPIS, the 20.035 percent weight would include 
these costs. Unfortunately, given the data limitations, it remains 
difficult to determine a percentage associated specifically with 
computer equipment, computer-related depreciation, and computer-related 
leasing. For this rebasing, the costs we classified as Moveable Capital 
are comprised of the expenses paid by Office of Physicians industry to 
the following industries based on NAICS classification:


------------------------------------------------------------------------
 
------------------------------------------------------------------------
33329A............................  Other industrial machinery
                                     manufacturing.
33331A............................  Vending, commercial, industrial, and
                                     office machinery manufacturing.
333414............................  Heating equipment, except warm air
                                     furnaces.
333415............................  Air conditioning, refrigeration, and
                                     warm air heating equipment
                                     manufacturing.
33399A............................  Other general purpose machinery
                                     manufacturing.
33411A............................  Computer terminals and other
                                     computer peripheral equipment
                                     manufacturing.
334210............................  Telephone apparatus manufacturing.
334220............................  Broadcast and wireless
                                     communications equipment.
334290............................  Other communications equipment
                                     manufacturing.
334300............................  Audio and video equipment
                                     manufacturing.
334418............................  Printed circuit assembly (electronic
                                     assembly) manufacturing.
334613............................  Magnetic and optical recording media
                                     manufacturing.
335120............................  Lighting fixture manufacturing.
337110............................  Wood kitchen cabinet and countertop
                                     manufacturing.
337215............................  Showcase, partition, shelving, and
                                     locker manufacturing.
532400............................  Commercial and industrial machinery
                                     and equipment rental and leasing.
------------------------------------------------------------------------



[[Page 73273]]

    We believe technology-related expense are captured in the MEI and 
that the PPI for Machinery and Equipment is an appropriate price proxy 
to estimate price changes. However, we will actively monitor the data 
moving forward to ensure these types of expenses are adequately 
reflected in the MEI.
    Finally, we would note that the descriptions of the methodologies 
used to construct the subcategories under Office Expenses were both 
detailed and consistent with those provided in the recent proposed 
rules relating to the rebasing of other CMS market baskets. However, in 
response to the comment we hope the additional information provided 
here is helpful.
    Comment: One commenter found it most problematic that the CMS 
proposal related to Office Expenses would reduce the weight of rent 
within physician practice expenses. Currently, rent comprises 12.2 
percent of the practice expense GPCI. Under the proposed rule, rent 
would be reduced to 8.4 percent. The commenter also noted that their 
attempt to validate the proposal, using BEA 2002 Benchmark I/O use 
files for NAICS 621A00 as described in the proposed rule were not 
successful.
    Response: We proposed to disaggregate the Office Expense cost 
weight in the 2006-based MEI in order to recognize and take advantage 
of the expansion of the AMA PPIS survey question to include additional 
expenses not included in the 2000-based survey. Consistent with the 
methodology used for other CMS market baskets, we relied upon the BEA 
I/O data to disaggregate the Office Expense cost category, which we 
described in the proposed rule. This methodology required a series of 
calculations including classifying costs as office expenses consistent 
with AMA PPIS survey. As noted elsewhere, and based on public comment, 
we have refined our methodology, as well as added additional detail in 
this final rule which we believe will be helpful in validating our 
estimates. The new methodology has resulted in a cost weight of 8.957 
percent for Fixed Capital. Comments related to weights specifically 
associated with the PE GPCIs are found in section II.D. of this final 
rule with comment period.
    Comment: A commenter stated that it appeared that utility costs 
have been included twice in the MEI calculation. The HUD data used by 
CMS as a source for the rent data includes utilities. However, 
utilities have been included a second time as a new component of the 
``Office Expense'' category of ``Other Practice Expenses'' and it does 
not appear that the ``Fixed Capital'' (rent) component has been scaled 
down as a result. This error should be corrected, a new proposed rule 
published, and a new comment period opened.
    Response: We disagree with the commenter's assertions that 
utilities expenses in the MEI are double counted. The Utilities cost 
weight in the MEI was derived using the BEA I/O data for NAICS 621A 
(Offices of Physicians, Offices of Dentist, and Offices of Other 
Practitioners). The BEA I/O data provide information regarding 
physicians' purchases from other industries. Expenses classified in the 
Utilities cost weight, such as NAICS 22110 (Electric power generation, 
transmission, and distribution), were not included in the Fixed Capital 
cost weight; therefore, we did not include utility costs twice in the 
MEI calculation. The HUD data referenced by the commenter is used in 
conjunction with the GPCI rent update and is independent of the 
development of the cost weight for Utilities in the MEI.
d. Purpose of the MEI
    Comment: Several commenters requested that CMS address the problem 
that the ``market basket'' of inputs, whose prices are measured in the 
MEI, is outdated and, despite periodic rebasing, has not been 
comprehensively revised since it was originally developed in 1973. They 
indicated that the MEI does not reflect the inputs involved in 21st 
century medical practice and claim that the costs associated with 
complying with an array of government-imposed regulatory requirements, 
including increasing staffing levels, costs related to Medicare 
prescription drug plans and formulary compliance, compliance with rules 
governing referrals and interactions with other providers, and others, 
are not accounted for in the index. They also indicate that the MEI has 
not been adjusted for modern practice costs such as computers, copiers, 
and new medical technology.
    Response: We disagree with the commenters' statement that the MEI 
only measures changes in specific types of practice costs that existed 
in 1973. Since 1973, the MEI has been rebased four times. For each of 
those updates, the MEI methodology and data sources were thoroughly 
reviewed and evaluated to ensure that the index accurately reflected 
the cost distributions encountered by physicians. The revisions have 
included changes to the structure of the index, the price proxies used, 
the data sources used to develop the weights, the productivity 
adjustment, and, as proposed in the CY 2011 PFS proposed rule, 
disaggregating categories within the Office Expenses category into more 
detail.
    We also note that the MEI is a price index, not a cost index. 
Changes in physician costs are a function of changes in prices and 
changes in quantities. Examples of changes in quantities include 
purchasing more moveable equipment (such as health information 
technology), hiring additional office staff, or changing the mix of 
staff. The MEI was established in accordance with section 1842(b)(3) of 
the Act, which states the growth of prevailing charge levels is to be 
limited to growth in an ``appropriate economic index''. The relevant 
Senate Finance Committee report \2\ provides slightly more detail on 
such an index, stating that:
---------------------------------------------------------------------------

    \2\ U.S. Senate, Committee on Finance, Social Security 
Amendments of 1972. ''Report of the Committee on Finance United 
States Senate to Accompany H.R. 1,'' September 26, 1972, p. 190.

    [I]t is necessary to move in the direction of an approach to 
reasonable charge reimbursement that ties recognition of fee 
increases to appropriate economic indexes so that the program will 
not merely recognize whatever increases in charges are established 
in a locality but would limit recognition of charge increases to 
rates that economic data indicate would be fair to all concerned and 
---------------------------------------------------------------------------
follow rather than lead any inflationary trends.

    Thus, in accordance with Congressional intent that the index 
reflect and follow inflationary trends, and since its inception in 
1973, the MEI has been constructed as a fixed-weight price index that 
measures the inflationary trends of goods and services associated with 
furnishing physicians' services. The data sources that are used to 
construct the weights have been updated regularly to include the modern 
inputs required by physicians in running their respective practices. 
The MEI then appropriately apportions the various costs into their 
respective categories and calculates the associated weights. It is this 
distribution of costs, and not the level of costs, that the MEI 
appropriately incorporates. Based on this distribution, the MEI 
measures the weighted input price inflation, adjusted by productivity, 
faced by physicians. The MEI is then incorporated into the SGR formula 
to derive the final PFS update. Having an accurate and contemporary 
distribution of input costs is critical to producing an accurate 
measure of price inflation and is the major reason we are moving 
forward to rebase and revise the MEI for CY 2011.
    Finally, to date, we have not received any proposals from the 
public on how the MEI should be revised and still meet

[[Page 73274]]

its statutory requirements. We will continue to evaluate the validity 
and relevance of the index to ensure that it meets statutory 
requirements while adequately reflecting the evolution of the expense 
distribution associated with furnishing physicians' services.
    Comment: A commenter asserted that the time gap between the two 
surveys, the PPIS and the SMS, may not be directly comparable, but a 
comparison of the two indicates that medical practice costs increased 
79 percent from 2000 to 2006. However, the MEI only increased 18 
percent from 2000 to 2006. The commenter notes that every other 
available measure of physician expense growth shows faster growth than 
the MEI.
    Response: The MEI is strictly a fixed-weight price index expressly 
designed to measure the change in price of a fixed basket of goods. 
Changes in physician costs are a function of changes in prices and 
changes in quantities. As other commenters have noted to CMS, and CMS 
agrees, cost increases are only reflected in the MEI's weights to the 
extent the relative cost of an input changes over time. Comparing the 
MEI (reflecting price changes) to other cost metrics (that reflect both 
price changes, as well as changes in volume and mix) is inappropriate 
given the MEI's definition and purpose.
    Comment: A commenter noted that the proposed revisions to the MEI 
do not do anything to improve the adequacy of the MEI. The commenter 
also noted that in the proposed rule, CMS estimated the 2011 MEI at 
just 0.3 percent, and the addition of the new components that CMS has 
proposed based on BEA data does nothing to increase it.
    Response: The rebased and revised MEI is intended to more 
accurately reflect the cost structure of furnishing physicians' 
services, as well as measure the input price inflation encountered by 
physicians. Accordingly, we disagree with the commenter and believe 
that the 2006-based MEI offers numerous technical improvements. These 
improvements include updating the base year to reflect more current 
cost distributions, updating price proxies, and adding more detailed 
cost categories.
    Comment: A commenter stated that the MEI is used to annually update 
medical practice costs in the SGR calculation. Virtually all physician 
groups signed on to a January 2009 letter arguing that the MEI's price 
inputs as currently structured do not accurately reflect current 
medical practice costs. No action has been taken to remedy the 
situation.
    Response: We disagree with the commenter's claim the MEI annually 
updates the medical practice cost in the SGR. The purpose of the MEI in 
the SGR is to measure price increases related to the furnishing of 
physician services. It is not intended to measure cost increases, but 
rather to reflect the cost structure associated with furnishing 
physicians' services, and then subsequently measure the weighted price 
increases associated with that cost structure. We would also like to 
note that the MEI is currently part of the statutorily prescribed 
formula for physician payment updates and that revisions to the MEI are 
adopted through the notice and comment rulemaking process.
e. Technical Panel
    Comment: Many commenters expressed their support for the convening 
of a Medicare Economic Index Technical Advisory Panel (MEI TAP).
    Response: We agree that the MEI TAP should be convened and will be 
moving forward accordingly. This process includes announcing the 
panel's creation through an official CMS communication such as a 
Federal Register announcement. This announcement will provide details 
on the expected number of panel members, provide an opportunity for the 
public to nominate members, and inform the public of the objectives and 
scope of the panel's activities.
    We will be asking this group of independent experts to evaluate 
only technical aspects of the MEI, including the index's inputs, input 
weights, price-measurement proxies, and the productivity adjustment.
    Any formal recommendations made by the MEI TAP will be carefully 
considered by CMS. Suggested modifications that we believe would result 
in technical improvements to the MEI would appear in subsequent PFS 
proposed rules and be subject to public comment and the overall 
rulemaking process.
    Comment: Several commenters provided many suggestions on technical 
issues that they believe should be considered by the technical advisory 
panel. The commenters generally requested that the panel perform a 
thorough review of all aspects and elements of the MEI.
    Response: We appreciate the constructive comments on potential 
topics for the MEI technical advisory panel, which will be asked to 
fully evaluate the index. As noted above, the panel will be evaluating 
all technical aspects of the MEI including the cost categories, their 
associated weights and price proxies, and the productivity adjustment.
    Comment: A commenter stated that any recommendations that are made 
by the panel should be published with an opportunity for comment before 
they are finalized.
    Response: Any substantive recommendations from the technical 
advisory panel that CMS believes will result in technical improvements 
to the MEI will be subject to the rulemaking process, including giving 
the opportunity to the public to review and comment.
    Comment: Some commenters request that CMS reach out to the medical 
community to ensure that the panel's work is accurate and complete. 
Others indicated that pending the recommendations of the technical 
advisory panel, CMS should: (1) Include physicians and other 
stakeholders in the MEI revision process, so that the impact of any 
recommended changes can be studied prior to implementation; and (2) 
clearly state their rationale for proposed changes.
    Response: As mentioned previously, we will be reaching out to the 
public for suggestions as to the composition of an independent expert 
panel that will assist us in ensuring that the MEI is constructed 
accurately and completely, and fulfills its purpose to appropriately 
reflect the inflationary pressures faced by physicians in furnishing 
services. CMS will also present to the public any future proposed 
revisions to the MEI through notice and comment rulemaking, during 
which we will clearly state the rationale for any proposed changes and 
consider public comment before finalizing changes to the index.
    Comment: One commenter believes that one of the possible options 
for resolving the SGR problem involves replacing the SGR update formula 
with the MEI. The commenter noted that input from the MEI technical 
panel should better position the MEI as a viable alternative to the SGR 
update formula.
    Response: We welcome any technical comments the public has on the 
composition of the MEI, including the inputs, input weights, price-
measurement proxies, and productivity adjustment. Any recommendations 
from the MEI TAP will be evaluated and considered for possible future 
rulemaking. However, we note that replacement of, or adjustments to, 
the SGR is outside the scope of the MEI TAP.

[[Page 73275]]

f. Other
    Comment: Several commenters agreed with CMS' proposal to remove 
pharmaceuticals and separately billable medical supplies, since these 
are not paid under the PFS. Even though this change lessens the weight 
given to the practice expense component of the index, it made sense to 
the commenters given the separate line-item payments for these goods. 
Further, incident-to drugs are now paid based on average sales price 
(ASP) and, since last-year's changes, are no longer a factor in the SGR 
formula and the determination of the PFS conversion factor.
    Response: We agree with the commenters on the appropriateness of 
removing drugs and separately billable supplies from the MEI since they 
are not paid under the PFS and are no longer included as costs in the 
SGR formula.
    Comment: A commenter disagreed with the continued use of the AHE 
wage data for the total nonfarm business economy as a price proxy for 
physician income rather than using BLS data specific to all 
professional and technical workers.
    Response: We disagree with the commenter's suggestion. We believe 
that the use of the average hourly earnings data for the total nonfarm 
business economy, which captures skill mix shifts in the labor force, 
is the most appropriate index for use as the price proxy for physician 
income in the MEI. The AHE for the nonfarm business economy reflects 
general earnings including the impacts of supply, demand, and economy-
wide productivity for the average worker in the economy. Its use is 
consistent with the Congress's original intent that the index be based 
on changes in expenses of practice and general earnings levels.\3\ It 
is also consistent with our use of the BLS private nonfarm business 
multifactor productivity measure to adjust the index as economy-wide 
wage increases reflect economy-wide productivity increases. Therefore, 
we are finalizing our proposal to continue to use average hourly 
earnings for the total private nonfarm economy as a price proxy for 
physician income in the 2006-based MEI.
---------------------------------------------------------------------------

    \3\ U.S. Senate, Committee on Finance, Social Security 
Amendments of 1972, ``Report of the Committee on Finance United 
States Senate to Accompany H.R. 1,'' September 26, 1972, p. 191.
---------------------------------------------------------------------------

    Comment: A commenter stated that although CMS has expanded the 
designation of the data underlying some of the GPCI and MEI constructs 
over the designations of previous years, the descriptions used are 
sometimes either inconsistent or contradictory. For example, CMS noted 
that ``for the proposed sixth GPCI update, we used the 2006 through 
2008 Bureau of Labor Statistics (BLS) Occupational Employment 
Statistics (OES) data as a replacement for the 2000 Census data.'' (75 
FR 40083). In contrast, CMS used ``2006 Occupational Employment 
Statistics (OES), BLS'' for the proposed 2006 MEI expense weights. (75 
FR 40089, note (2)). The commenter believes it is impossible to discern 
from the proposed rule whether inconsistent data sets were used or 
whether there is simply a misprint.
    Response: Because the MEI and GPCIs serve different purposes and 
are not interdependent, we may use data from different years and, in 
some instances, different sources. Both the MEI and the GPCI use the 
OES. However, because the MEI is based to 2006 it is appropriate to use 
the 2006 BLS Occupational Employment Statistics data to disaggregate 
the nonphysician wages cost weight into more detailed occupational cost 
weights.
    For the proposed sixth GPCI update, CMS proposed to use OES data 
for 2006 through 2008. The rationale for choosing this data for the 
proposed GPCI update was provided in the CY 2011 PFS proposed rule (75 
FR 40084).
8. Adjustments to the RVU Shares To Match the Proposed Rebased MEI 
Weights
    As described in the previous section, CMS proposed to rebase the 
MEI for CY 2011 based on the most current data and establish new 
weights for physician work, PE, and malpractice under the MEI. As 
stated in the previous section, the MEI was rebased to a CY 1996 base 
year beginning with the CY 1999 MEI (63 FR 58845), and to a CY 2000 
base year beginning with the CY 2004 MEI (68 FR 63239). For both the CY 
1999 and CY 2004 rebasing, we made adjustments to ensure that estimates 
of aggregate PFS payments for work, PE, and malpractice were in 
proportion to the weights for these categories in the rebased MEI (63 
FR 58829 and 69 FR 1095).
    Consistent with past practice when the MEI has been rebased, we 
proposed to make adjustments to ensure that estimates of aggregate CY 
2011 PFS payments for work, PE, and malpractice are in proportion to 
the weights for these categories in the rebased CY 2011 MEI.
    As explained in the CY 2011 PFS proposed rule (75 FR 40095), to 
match the proportions for work, PE, and malpractice in the rebased CY 
2011 MEI would necessitate increasing the proportion of aggregate CY 
2011 PFS payments for PE and malpractice and decreasing the proportion 
for work. This could be accomplished by applying adjustments directly 
to the work, PE, and malpractice RVUs. However, as stated in the 
proposed rule (75 FR 40095), we are cognizant of the public comments 
made during prior rulemaking on issues related to scaling the work 
RVUs. Many commenters have indicated a preference for the work RVUs to 
remain stable over time and for any necessary adjustments that would 
otherwise be made broadly to the work RVUs to be accomplished in an 
alternative manner. For example, in past 5-Year Reviews of the work 
RVUs, many commenters cited stability in the work RVUs, among other 
reasons, in their requests that any required budget neutrality 
adjustments not be made directly to the work RVUs. Given these prior 
comments, for CY 2011, we proposed to make the necessary MEI rebasing 
adjustments without adjusting the work RVUs. Instead, we proposed to 
increase the PE RVUs and the malpractice RVUs. Furthermore, as noted in 
the proposed rule (75 FR 40096), section 1848(c)(2)(B)(ii)(II) of the 
Act requires that changes to RVUs cannot cause the amount of 
expenditures for a year to differ by more than $20 million from what 
expenditures would have been in the absence of the changes. Therefore, 
as required by section 1848(c)(2)(B)(ii) of the Act, we proposed to 
make an adjustment to the CY 2011 conversion factor to ensure that the 
adjustments to the PE RVUs and the malpractice RVUs would not cause an 
increase in CY 2011 PFS expenditures.
    Comment: A number of commenters expressed support for the use of 
the most current and accurate data as inputs to ``formulas used by the 
Agency, whether the formula for the SGR, for practice expense inputs, 
malpractice expense inputs, or in this case to calculating the Medicare 
Economic Index.'' These commenters supported the proposal to rebase and 
revise the MEI using the AMA PPIS data and the corresponding 
adjustments to the work, PE, and MP RVUs. Some commenters noted 
particularly that since the AMA PPIS has been deemed appropriate for 
the purpose of the PE RVU update process begun in CY 2010, using this 
same data source to inform the MEI costs and weights in CY 2011 is also 
appropriate because it will ensure that all of the major cost-based 
components of the fee schedule methodology will now be tied to cost 
data collected in the same year (2006). Furthermore, a number of 
commenters supported the

[[Page 73276]]

proposed policy to adjust the RVU shares on the basis that the changes 
appear to have a modest positive impact on many of the services that 
were negatively affected by the implementation of the AMA PPIS data in 
CY 2010. These services were typically ones that are more heavily 
weighted to PE than work. In contrast, numerous commenters expressed 
dissatisfaction with the proposed policy on the premise that it 
``penalizes health care work that is not technology-intensive,'' that 
is, services that are typically more heavily weighted to physician work 
than PE, ``when in fact it is the technology-intensive health expenses 
that are actually driving up costs.'' A few of these commenters 
suggested that CMS insulate certain services that are work-intensive 
from the effects of the MEI rebasing.
    Response: We believe that using the most current and accurate data 
whenever practicable to update the PFS is a key principle for the 
payment system. We agree with the commenters that using the AMA PPIS 
data to rebase and revise the MEI in CY 2011 promotes consistency 
within the PFS. In using the AMA PPIS information to rebase and revise 
the MEI, the result is that the most current data drive the work RVU 
share down compared to the PE RVU and malpractice RVU shares. Since the 
PFS is both resource-based, relative, and budget neutral, if the data 
show that physicians' resources (that is, costs) have shifted 
proportionately more to PE and malpractice, the proportion for work 
must come down. We have tried to accommodate the preferences of 
previous commenters to preserve the stability of work RVUs by proposing 
to make the necessary MEI rebasing adjustments without adjusting the 
work RVUs. However, given the PFS budget neutrality requirement, we 
cannot implement some commenters' suggestion to insulate certain 
services that are work-intensive from the effects of the MEI rebasing 
without violating the inherent relativity of the system. That is, in 
order to insulate certain services from the effects of the MEI rebasing 
while adjusting the RVU shares to match the proportions for work, PE, 
and malpractice in the rebased MEI in a budget neutral manner as 
discussed previously, the individual work RVUs for those certain 
services would need to be increased. However, if we were to increase 
the work RVUs for those certain services, the services would no longer 
be appropriately valued relative to the other services under the PFS.
    Comment: Of the many commenters who supported CMS' proposal to 
adjust the RVU shares to match the proportions for work, PE, and 
malpractice in the rebased CY 2011 MEI, the vast majority also favored 
adjusting the RVU shares upward for PE and malpractice while making a 
corresponding adjustment to the conversion factor for budget neutrality 
without modifying the RVUs for work. These commenters stated that 
stability in the work RVUs was desirable. However, some commenters also 
expressed concern that CMS proposed an additional downward adjustment 
to the conversion factor when, under current law, the effect of the SGR 
update formula in December of 2010 and CY 2011 would reduce PFS 
payments significantly. These commenters generally opposed the MEI 
rebasing and the adjustment to the RVUs to match the MEI weights; 
however, if CMS were to proceed with the policy, the commenters 
suggested that, at the very least the adjustments be phased in over 2 
or 4 years. A few commenters suggested replacing the SGR update formula 
entirely with the MEI.
    Response: We are sympathetic to the commenters' concern that an 
additional downward adjustment to the conversion factor on top of the 
negative effect of the statutory SGR-based update is inopportune. 
However, as we explained in the proposed rule (75 FR 40095) and 
discussed previously in this section, rather than applying adjustments 
directly to the work, PE, and malpractice RVUs in order to match the 
rebased MEI weights for those categories, we believe that it is 
appropriate for the work RVUs to remain stable over time. The only way 
we can make the adjustments without affecting the work RVUs is to also 
make an adjustment to the conversion factor. We note that we did not 
receive a public comment suggesting that we make the downward 
adjustment to the work RVUs instead of the conversion factor in order 
to meet the requirements of section 1848(c)(2)(B)(ii) of the Act for 
budget neutrality. In response to the commenters that suggested 
replacing the SGR update with the MEI, we assume the commenters are 
making a general suggestion for a change in the current law, which is 
outside the purview of CMS.
    Comment: Many commenters addressed CMS' proposal to convene a 
technical advisory panel to review all aspects of the MEI. In light of 
this proposal, the majority of commenters urged CMS to delay 
implementation of the MEI rebasing and any other MEI changes, including 
the proposed adjustment to the RVU shares, until the advice of the 
technical advisory panel is reviewed by CMS and recommendations for 
change, if any, are considered. Additionally, while the commenters 
generally supported convening an MEI technical advisory panel, some 
commenters, including MedPAC, advised that CMS should go ahead and 
implement the rebased and revised MEI and the proposed adjustment to 
the RVU shares in CY 2011. These commenters noted that if the 
recommendations of the advisory panel indicated that the MEI should be 
adjusted, CMS could propose future changes accordingly.
    Response: We acknowledge the overwhelming support from commenters 
for the MEI technical advisory panel and refer readers to section 
II.E.6 of this final rule with comment period for a more detailed 
discussion of our plans to convene the panel. We note that a more 
detailed summary of the public comments and our responses is included 
in that section.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to make MEI rebasing adjustments to the 
PFS work and PE RVUs and to adjust the conversion factor to maintain 
budget neutrality. In light of the substantial support in general for 
us to make adjustments to match the proportions of the work, PE, and 
malpractice RVU shares to the categories in the revised and rebased CY 
2011 MEI and our decision, as described in section II.E.5 of this final 
rule, to proceed with rebasing the MEI for CY 2011, we are finalizing 
our proposal to adjust the RVU shares for CY 2011 to align the RVU 
shares with the rebased MEI weights. Specifically, we will not be 
making an adjustment directly to the work RVUs. Instead, we are 
increasing the PE RVUs by an adjustment factor of 1.181 and the 
malpractice RVUs by an adjustment factor of 1.358. The RVUs in Addendum 
B to this final rule with comment period reflect the application of 
these adjustment factors. We note that an application of the 1.358 
adjustment factor to the malpractice RVUs for services with malpractice 
RVUs of 0.01 will, due to rounding, result in malpractice RVUs of 0.01.
    Furthermore, section 1848(c)(2)(B)(ii)(II) of the Act requires that 
changes to RVUs cannot cause the amount of expenditures for a year to 
differ by more than $20 million from what expenditures would have been 
in the absence of the changes. Therefore, as required by section 
1848(c)(2)(B)(ii) of the Act, we are making an adjustment of 0.9181 to 
the CY 2011 conversion factor to ensure that the 1.181 adjustment to 
the PE RVUs and the 1.358 adjustment

[[Page 73277]]

to the malpractice RVUs do not cause an increase in CY 2011 PFS 
expenditures.

F. Allowed Expenditures for Physicians' Services and the Sustainable 
Growth Rate

1. Medicare Sustainable Growth Rate (SGR)
    The SGR is an annual growth rate that applies to physicians' 
services paid by Medicare. The use of the SGR is intended to control 
growth in aggregate Medicare expenditures for physicians' services. 
Payments for services are not withheld if the percentage increase in 
actual expenditures exceeds the SGR. Rather, the PFS update, as 
specified in section 1848(d)(4) of the Act, is adjusted based on a 
comparison of allowed expenditures (determined using the SGR) and 
actual expenditures. If actual expenditures exceed allowed 
expenditures, the update is reduced. If actual expenditures are less 
than allowed expenditures, the update is increased.
    Section 1848(f)(2) of the Act specifies that the SGR for a year 
(beginning with CY 2001) is equal to the product of the following four 
factors:
    (1) The estimated change in fees for physicians' services;
    (2) The estimated change in the average number of Medicare fee-for-
service beneficiaries;
    (3) The estimated projected growth in real GDP per capita; and
    (4) The estimated change in expenditures due to changes in statute 
or regulations.
    In general, section 1848(f)(3) of the Act requires us to publish 
SGRs for 3 different time periods, no later than November 1 of each 
year, using the best data available as of September 1 of each year. 
Under section 1848(f)(3)(C)(i) of the Act, the SGR is estimated and 
subsequently revised twice (beginning with the FY and CY 2000 SGRs) 
based on later data. (The Act also provides for adjustments to be made 
to the SGRs for FY 1998 and FY 1999. See the February 28, 2003 Federal 
Register (68 FR 9567) for a discussion of these SGRs.) Under section 
1848(f)(3)(C)(ii) of the Act, there are no further revisions to the SGR 
once it has been estimated and subsequently revised in each of the 2 
years following the preliminary estimate. In this final rule with 
comment, we are making our preliminary estimate of the CY 2011 SGR, a 
revision to the CY 2010 SGR, and our final revision to the CY 2009 SGR.
2. Physicians' Services
    Section 1848(f)(4)(A) of the Act defines the scope of physicians' 
services covered by the SGR. The statute indicates that ``the term 
physicians' services includes other items and services (such as 
clinical diagnostic laboratory tests and radiology services), specified 
by the Secretary, that are commonly performed or furnished by a 
physician or in a physician's office, but does not include services 
furnished to a Medicare+Choice plan enrollee.''
    We published a definition of physicians' services for use in the 
SGR in the November 1, 2001 Federal Register (66 FR 55316). We defined 
physicians' services to include many of the medical and other health 
services listed in section 1861(s) of the Act. As discussed in the CY 
2010 PFS final rule with comment period (74 FR 61961), the statute 
provides the Secretary with clear discretion to decide whether 
physician-administered drugs should be included or excluded from the 
definition of ``physicians' services.'' Accordingly, we removed 
physician-administered drugs from the definition of ``physicians' 
services'' in section 1848(f)(4)(A) of the Act for purposes of 
computing the SGR and the levels of allowed expenditures and actual 
expenditures beginning with CY 2010, and for all subsequent years. 
Furthermore, in order to effectuate fully the Secretary's policy 
decision to remove drugs from the definition of ``physicians' 
services,'' we removed physician-administered drugs from the 
calculation of allowed and actual expenditures for all prior years.
    Additionally, payment was made under the PFS for several new 
benefit categories in CY 2010 including pulmonary rehabilitation (PR), 
cardiac rehabilitation (CR), intensive cardiac rehabilitation (ICR), 
and kidney disease education (KDE) services. We note further that 
section 101 of the MIPPA added a new benefit category for ``additional 
preventive services'' effective January 1, 2009. Although we neglected 
to identify and add these additional benefit categories when describing 
the scope of physicians' services for purposes of the SGR in course of 
rulemaking for CY 2010 and CY 2009, respectively, we did include 
payments for these services in calculating target and actual PFS 
expenditures beginning in CY 2009 for additional preventive services 
and beginning in CY 2010 for PR, CR, ICR, and KDE services.
    Section 4103 of the ACA added a new benefit category for 
``personalized prevention plan services'' (which include the annual 
wellness visit). Payment for these services will be made under the PFS, 
and payments for these services will be included in calculating target 
and actual PFS expenditures, beginning January 1, 2011.
    Thus, for purposes of determining allowed expenditures, actual 
expenditures for all years, and SGRs beginning with CY 2010 and for all 
subsequent years, we are specifying that physicians' services include 
the following medical and other health services if bills for the items 
and services are processed and paid by Medicare carriers (and those 
paid through intermediaries where specified) or the equivalent services 
processed by the Medicare Administrative Contractors (MACs):
    <bullet> Physicians' services.
    <bullet> Services and supplies furnished incident to physicians' 
services, except for the expenditures for drugs and biologicals which 
are not usually self-administered by the patient.
    <bullet> Outpatient physical therapy services and outpatient 
occupational therapy services.
    <bullet> Services of PAs, certified registered nurse anesthetists, 
certified nurse midwives, clinical psychologists, clinical social 
workers, NPs, and certified nurse specialists.
    <bullet> Screening tests for prostate cancer, colorectal cancer, 
and glaucoma.
    <bullet> Screening mammography, screening pap smears, and screening 
pelvic exams.
    <bullet> Diabetes outpatient self-management training (DSMT) 
services.
    <bullet> MNT services.
    <bullet> Diagnostic x-ray tests, diagnostic laboratory tests, and 
other diagnostic tests (including outpatient diagnostic laboratory 
tests paid through intermediaries).
    <bullet> X-ray, radium, and radioactive isotope therapy.
    <bullet> Surgical dressings, splints, casts, and other devices used 
for the reduction of fractures and dislocations.
    <bullet> Bone mass measurements.
    <bullet> An initial preventive physical exam.
    <bullet> Cardiovascular screening blood tests.
    <bullet> Diabetes screening tests.
    <bullet> Telehealth services.
    <bullet> Physician work and resources to establish and document the 
need for a power mobility device.
    <bullet> Additional preventive services.
    <bullet> Pulmonary rehabilitation.
    <bullet> Cardiac rehabilitation.
    <bullet> Intensive cardiac rehabilitation.
    <bullet> Kidney disease education services.
    <bullet> Personalized prevention plan services.
3. Preliminary Estimate of the SGR for 2011
    Our preliminary estimate of the CY 2011 SGR is -13.4 percent. We 
first estimated the CY 2011 SGR in March

[[Page 73278]]

2010, and we made the estimate available to the MedPAC and on our Web 
site. Table 35 shows the March 2010 estimate and our current estimates 
of the factors included in the CY 2011 SGR. The majority of the 
difference between the March estimate and our current estimate of the 
CY 2011 SGR is explained by adjustments to reflect several intervening 
legislative changes that occurred after our March estimate was 
prepared.

                                        Table 35--CY 2011 SGR Calculation
----------------------------------------------------------------------------------------------------------------
            Statutory factors                    March estimate                     Current estimate
----------------------------------------------------------------------------------------------------------------
Fees....................................  0.2 percent (1.002)........  0.2 percent (1.002)
Enrollment..............................  3.1 percent (1.031)........  2.4 percent (1.024)
Real Per Capita GDP.....................  0.8 percent (1.008)........  0.7 percent (1.007)
Law and Regulation......................  -4.4 percent (0.956).......  -16.2 percent (0.838)
                                         -----------------------------------------------------------------------
    Total...............................  -0.4 percent (0.996).......  -13.4 percent (0.866)
----------------------------------------------------------------------------------------------------------------
Note: Consistent with section 1848(f)(2) of the Act, the statutory factors are multiplied, not added, to produce
  the total (that is, 1.002 x 1.024 x 1.007 x 0.838 = 0.866). A more detailed explanation of each figure is
  provided in section II.F.6.a. of this final rule with comment period.

4. Revised Sustainable Growth Rate for CY 2010
    Our current estimate of the CY 2010 SGR is 8.3 percent. Table 36 
shows our preliminary estimate of the CY 2010 SGR that was published in 
the CY 2010 PFS final rule with comment period (74 FR 61965) and our 
current estimate. The majority of the difference between the 
preliminary estimate and our current estimate of the CY 2010 SGR is 
explained by adjustments to reflect several intervening legislative 
changes that have occurred since publication of the CY 2010 final rule 
with comment period.

                                        Table 36--CY 2010 SGR Calculation
----------------------------------------------------------------------------------------------------------------
                                          Estimate from CY 2010 final
            Statutory factors                         rule                          Current estimate
----------------------------------------------------------------------------------------------------------------
Fees....................................  0.9 percent (1.009)........  0.9 percent (1.009)
Enrollment..............................  1.2 percent (1.012)........  1.6 percent (1.016)
Real Per Capita GDP.....................  0.7 percent (1.007)........  0.7 percent (1.007)
Law and Regulation......................  -11.3 percent (0.887)......  4.9 percent (1.049)
                                         -----------------------------------------------------------------------
    Total...............................  -8.8 percent (0.912).......  8.3 percent (1.083)
----------------------------------------------------------------------------------------------------------------
Note: A more detailed explanation of each figure is provided in section II.F.6.b. of this final rule with
  comment period.

5. Final Sustainable Growth Rate for CY 2009
    The SGR for CY 2009 is 6.4 percent. Table 37 shows our preliminary 
estimate of the CY 2009 SGR from the CY 2009 PFS final rule with 
comment period (73 FR 69904), our revised estimate from the CY 2010 PFS 
final rule with comment period (74 FR 61966), and the final figures 
determined using the best available data as of September 1, 2010.

                                        Table 37--CY 2009 SGR Calculation
----------------------------------------------------------------------------------------------------------------
                                      Estimate from CY      Estimate from CY
         Statutory factors             2009 final rule       2010 final rule                  Final
----------------------------------------------------------------------------------------------------------------
Fees..............................  2.1 percent (1.021).  1.8 percent (1.018).  1.8 percent (1.018)
Enrollment........................  -0.2 percent (0.998)  -0.8 percent (0.992)  -0.6 percent (0.994)
Real Per Capita GDP...............  1.2 percent (1.012).  0.9 percent (1.009).  1.0 percent (1.010)
Law and Regulation................  4.2 percent (1.042).  4.1 percent (1.041).  4.1 percent (1.041)
                                   -----------------------------------------------------------------------------
    Total.........................  7.4 percent (1.074).  6.1 percent (1.061).  6.4 percent (1.064)
----------------------------------------------------------------------------------------------------------------
Note: A more detailed explanation of each figure is provided in section II.F.6.b. of this final rule with
  comment period.

6. Calculation of CYs 2011, 2010, and 2009 Sustainable Growth Rates
a. Detail on the CY 2011 SGR
    All of the figures used to determine the CY 2011 SGR are estimates 
that will be revised based on subsequent data. Any differences between 
these estimates and the actual measurement of these figures will be 
included in future revisions of the SGR and allowed expenditures and 
incorporated into subsequent PFS updates.
(1) Factor 1--Changes in Fees for Physicians' Services (Before Applying 
Legislative Adjustments) for CY 2011
    This factor is calculated as a weighted-average of the CY 2011 
changes in fees for the different types of services included in the 
definition of physicians' services for the SGR. Medical and other 
health services paid using the PFS are estimated to account for 
approximately 89.4 percent of total allowed charges included in the SGR 
in CY 2011 and are updated using the MEI. The MEI for CY 2011 is 0.4 
percent. Diagnostic laboratory tests are estimated to represent 
approximately 10.6 percent of Medicare allowed charges included in the 
SGR for CY 2011. Medicare payments for these tests are updated by the 
Consumer Price Index for Urban Areas (CPI-U), which is 1.1 percent for 
CY 2011. However, section 3401 of the ACA reduces the CPI-U update 
applied to clinical laboratory tests by a productivity adjustment, but 
does not allow this adjustment to cause the

[[Page 73279]]

update to be negative. The applicable productivity adjustment for CY 
2011 is 1.2 percent. Adjusting the CPI-U update by the productivity 
adjustment results in a -0.1 percent (1.1 percent-1.2 percent) update 
for CY 2011. However, since section 3401 of the ACA does not allow the 
productivity adjustment to result in a negative CLFS update, the result 
is that the CLFS update for CY 2011 is 0.0 percent. Additionally, 
section 3401 of the ACA reduces the update applied to clinical 
laboratory tests by 1.75 percent for CYs 2011 through 2015. Therefore, 
for CY 2011, diagnostic laboratory tests will receive an update of -
1.75 percent. Additionally, as discussed in the CY 2010 PFS final rule 
with comment period (74 FR 61961), we removed physician-administered 
drugs from the definition of ``physicians' services'' in section 
1848(f)(4)(A) of the Act for purposes of computing the SGR and the 
levels of allowed expenditures and actual expenditures beginning with 
CY 2010, and for all subsequent years. Therefore, drugs represent 0.0 
percent of Medicare allowed charges included in the SGR in CY 2011.
    Table 38 shows the weighted-average of the MEI and laboratory price 
changes for CY 2010.

 Table 38--Weighted-Average of the MEI and Laboratory Price Changes for
                                 CY 2011
------------------------------------------------------------------------
                                              Weight          Update
------------------------------------------------------------------------
Physician...............................           0.894             0.4
Laboratory..............................           0.106            -1.8
Weighted-average........................           1.000             0.2
------------------------------------------------------------------------

    We estimate that the weighted-average increase in fees for 
physicians' services in CY 2011 under the SGR (before applying any 
legislative adjustments) will be 0.2 percent.
(2) Factor 2--The Percentage Change in the Average Number of Part B 
Enrollees From CY 2010 to CY 2011
    This factor is our estimate of the percent change in the average 
number of fee-for-service enrollees from CY 2010 to CY 2011. Services 
provided to Medicare Advantage (MA) plan enrollees are outside the 
scope of the SGR and are excluded from this estimate. We estimate that 
the average number of Medicare Part B fee-for-service enrollees will 
increase by 2.4 percent from CY 2010 to CY 2011. Table 39 illustrates 
how this figure was determined.

  Table 39--Average Number of Medicare Part B Fee-for-Service Enrollees
                         From CY 2010 to CY 2011
             [Excluding beneficiaries enrolled in MA plans]
------------------------------------------------------------------------
                                       2010                 2011
------------------------------------------------------------------------
Overall.......................  43.932 million...  45.010 million
Medicare Advantage (MA).......  11.683 million...  11.998 million
Net...........................  32.249 million...  33.012 million
Percent Increase..............  .................  2.4 percent
------------------------------------------------------------------------

    An important factor affecting fee-for-service enrollment is 
beneficiary enrollment in MA plans. Because it is difficult to estimate 
the size of the MA enrollee population before the start of a CY, at 
this time we do not know how actual enrollment in MA plans will compare 
to current estimates. For this reason, the estimate may change 
substantially as actual Medicare fee-for-service enrollment for CY 2011 
becomes known.
(3) Factor 3--Estimated Real Gross Domestic Product Per Capita Growth 
in 2011
    We estimate that the growth in real GDP per capita from CY 2010 to 
CY 2011 will be 0.7 percent (based on the 10-year average GDP over the 
10 years of 2002 through 2011). Our past experience indicates that 
there have also been changes in estimates of real per capita GDP growth 
made before the year begins and the actual change in GDP computed after 
the year is complete. Thus, it is possible that this figure will change 
as actual information on economic performance becomes available to us 
in CY 2011.
(4) Factor 4--Percentage Change in Expenditures for Physicians' 
Services Resulting From Changes in Statute or Regulations in CY 2011 
Compared With CY 2010
    The statutory and regulatory provisions that will affect 
expenditures in CY 2011 relative to CY 2010 are estimated to have an 
impact on expenditures of -16.2 percent. These include the Department 
of Defense Appropriations Act (DODAA), the Temporary Extension Act 
(TEA), and the Preservation of Access to Care for Medicare 
Beneficiaries and Pension Relief Act (PACMBPRA) which provided for 
physician updates.
    Furthermore, the ACA contained provisions regarding the policy on 
equipment utilization for imaging services, the multiple procedure 
payment reduction policy for imaging services, and the annual wellness 
visit providing personalized prevention plan services.
b. Detail on the CY 2010 SGR
    A more detailed discussion of our revised estimates of the four 
elements of the CY 2010 SGR follows.
(1) Factor 1--Changes in Fees for Physicians' Services (Before Applying 
Legislative Adjustments) for CY 2010
    This factor was calculated as a weighted-average of the CY 2010 
changes in fees that apply for the different types of services included 
in the definition of physicians' services for the SGR in CY 2010.
    We estimate that services paid using the PFS account for 
approximately 91.1 percent of total allowed charges included in the SGR 
in CY 2010. These services were updated using the CY 2010 MEI of 1.2 
percent. We estimate that diagnostic laboratory tests represent 
approximately 8.9 percent of total allowed charges included in the SGR 
in CY 2010. Medicare payments for these tests are updated by the CPI-U, 
which is -1.4 percent for CY 2010. However, section 145 of the MIPPA, 
as modified

[[Page 73280]]

by section 3401 of the ACA, reduced the update applied to clinical 
laboratory tests by 0.5 percent for CY 2009 and CY 2010. Therefore, for 
CY 2010, diagnostic laboratory tests received an update of -1.9 
percent. Since we removed physician-administered drugs from the 
definition of ``physicians' services'' for purposes of computing the 
SGR and the levels of allowed expenditures and actual expenditures 
beginning with CY 2010, and for all subsequent years, drugs represent 
0.0 percent of Medicare allowed charges included in the SGR in CY 2010.
    Table 40 shows the weighted-average of the MEI, laboratory, and 
drug price changes for CY 2010.

    Table 40--Weighted-Average of the MEI, Laboratory, and Drug Price
                           Changes for CY 2010
------------------------------------------------------------------------
                                              Weight          Update
------------------------------------------------------------------------
Physician...............................           0.911             1.2
Laboratory..............................           0.089            -1.9
Drugs...................................           0.000             0.0
Weighted-average........................           1.000             0.9
------------------------------------------------------------------------

    After considering the elements described in Table 40, we estimate 
that the weighted-average increase in fees for physicians' services in 
CY 2010 under the SGR (before applying any legislative adjustments) 
will be 0.9 percent. Our estimate of this factor in the CY 2010 PFS 
final rule with comment period was 0.9 percent (74 FR 61966).
(2) Factor 2--The Percentage Change in the Average Number of Part B 
Enrollees From CY 2009 to CY 2010
    We estimate that the average number of Medicare Part B fee-for-
service enrollees (excluding beneficiaries enrolled in Medicare 
Advantage plans) increased by 1.6 percent in CY 2010. Table 41 
illustrates how we determined this figure.

  Table 41--Average Number of Medicare Part B Fee-for-Service Enrollees
                         From CY 2009 to CY 2010
             [Excluding beneficiaries enrolled in MA plans]
------------------------------------------------------------------------
                                       2009                 2010
------------------------------------------------------------------------
Overall.......................  42.846 million...  43.932 million
Medicare Advantage (MA).......  11.098 million...  11.683 million
Net...........................  31.748 million...  32.249 million
Percent Increase..............  .................  1.6 percent
------------------------------------------------------------------------

    Our estimate of the 1.6 percent change in the number of fee-for-
service enrollees, net of Medicare Advantage enrollment for CY 2010 
compared to CY 2009, is a larger change than our original estimate of 
1.2 percent in the CY 2010 PFS final rule with comment period (74 FR 
61967). While our current projection based on data from 8 months of CY 
2010 differs from our original estimate of 1.2 percent when we had no 
actual data, it is still possible that our final estimate of this 
figure will be different once we have complete information on CY 2010 
fee-for-service enrollment.
(3) Factor 3--Estimated Real Gross Domestic Product Per Capita Growth 
in CY 2010
    We estimate that the growth in real GDP per capita will be 0.7 
percent for CY 2010 (based on the 10-year average GDP over the 10 years 
of CY 2001 through CY 2010). Our past experience indicates that there 
have also been differences between our estimates of real per capita GDP 
growth made prior to the year's end and the actual change in this 
factor. Thus, it is possible that this figure will change further as 
complete actual information on CY 2010 economic performance becomes 
available to us in CY 2011.
(4) Factor 4--Percentage Change in Expenditures for Physicians' 
Services Resulting From Changes in Statute or Regulations in CY 2010 
Compared With CY 2009
    The statutory and regulatory provisions that will affect 
expenditures in CY 2010 relative to CY 2009 are estimated to have an 
impact on expenditures of 4.9 percent. These include the DODAA, TEA, 
and PACMBPRA which provided for physician updates. Also included are 
the MIPPA provisions regarding the physician update, Physician Quality 
Reporting Initiative (PQRI) and e-prescribing bonuses, the work GPCIs, 
and payment provisions related to certain pathology services. 
Additionally, the ACA contained provisions regarding the work GPCIs, 
the policy on equipment utilization for imaging services, coverage of 
preventive services, and a physician enrollment requirement.
c. Detail on the CY 2009 SGR
    A more detailed discussion of our final revised estimates of the 
four elements of the CY 2009 SGR follows.
(1) Factor 1--Changes in Fees for Physicians' Services (Before Applying 
Legislative Adjustments) for CY 2009
    This factor was calculated as a weighted-average of the CY 2009 
changes in fees that apply for the different types of services included 
in the definition of physicians' services for the SGR in CY 2009. As we 
stated in the CY 2010 PFS final rule with comment period (74 FR 61965), 
although we removed drugs from the calculation of allowed and actual 
expenditures under sections 1848(d)(3)(C) and 1848(d)(4) of the Act 
retrospectively to the 1996/1997 base year, we determined that we were 
only authorized to remove drugs from the calculation of the SGR 
beginning with CY 2010. Therefore, we did not remove drugs from the SGR 
calculations for previous years, including CY 2009. Consistent with 
this determination, the revisions to our estimate of the CY 2009 SGR 
will be limited to revisions to reflect later data available as of 
September 1, 2010, that were not available when we published our 
previous estimates.
    Services paid using the PFS accounted for approximately 82.3 
percent of total Medicare-allowed charges included in the SGR for CY

[[Page 73281]]

2009 and are updated using the MEI. The MEI for CY 2009 was 1.6 
percent. Diagnostic laboratory tests represented approximately 8.0 
percent of total CY 2009 Medicare allowed charges included in the SGR 
and were updated by the CPI-U, which was 5.0 percent for CY 2009. 
However, section 145 of the MIPPA, as modified by section 3401 of the 
ACA, reduced the update applied to clinical laboratory tests by 0.5 
percent for CYs 2009 and 2010. Therefore, for CY 2009, diagnostic 
laboratory tests received an update of 4.5 percent. Drugs represented 
approximately 9.7 percent of total Medicare-allowed charges included in 
the SGR for CY 2009. We estimate a weighted-average change in fees for 
drugs included in the SGR of 1.6 percent for CY 2009. Table 42 shows 
the weighted-average of the MEI, laboratory, and drug price changes for 
CY 2009.

    Table 42--Weighted-Average of the MEI, Laboratory, and Drug Price
                           Changes for CY 2009
------------------------------------------------------------------------
                                              Weight          Update
------------------------------------------------------------------------
Physician...............................           0.823             1.6
Laboratory..............................           0.080             4.5
Drugs...................................           0.097             1.6
Weighted-average........................           1.000             1.8
------------------------------------------------------------------------

    After considering the elements described in Table 42, we estimate 
that the weighted-average increase in fees for physicians' services in 
CY 2009 under the SGR (before applying any legislative adjustments) was 
1.8 percent. This figure is a final one based on complete data for CY 
2009.
(2) Factor 2--The Percentage Change in the Average Number of Part B 
Enrollees From CY 2008 to CY 2009
    We estimate the change in the number of fee-for-service enrollees 
(excluding beneficiaries enrolled in MA plans) from CY 2009 to CY 2010 
was -0.6 percent. Our calculation of this factor is based on complete 
data from CY 2009. Table 43 illustrates the calculation of this factor.

   Table 43--Average Number of Medicare Part B From CY 2008 to CY 2009
             [Excluding beneficiaries enrolled in MA plans]
------------------------------------------------------------------------
                                      2008                 2009
------------------------------------------------------------------------
Overall.......................  41.958 million..  42.846 million
Medicare Advantage (MA).......  10.008 million..  11.098 million
Net...........................  31.950 million..  31.748 million
Percent Change................  ................  -0.6 percent
------------------------------------------------------------------------

 (3) Factor 3--Estimated Real Gross Domestic Product Per Capita Growth 
in CY 2009
    We estimate that the growth in real per capita GDP was 1.0 percent 
in CY 2009 (based on the 10-year average GDP over the 10 years of CY 
2000 through CY 2009). This figure is a final one based on complete 
data for CY 2009.
(4) Factor 4--Percentage Change in Expenditures for Physicians' 
Services Resulting From Changes in Statute or Regulations in CY 2009 
Compared With CY 2008
    Our final estimate for the net impact on expenditures from the 
statutory and regulatory provisions that affect expenditures in CY 2009 
relative to CY 2008 is 4.1 percent. These include the DRA provision 
regarding payments for imaging services, the Medicare, Medicaid, and 
SCHIP Extension Act of 2007 (Pub. L. 110-173) (MMSEA) provision 
regarding the PQRI bonuses payable in CY 2009, and the MIPPA provisions 
regarding the physician update, mental health services, and the change 
in application of budget neutrality to the CF.

G. The Update Adjustment Factor (UAF)

    Section 1848(d) of the Act provides that the PFS update is equal to 
the product of the MEI and the UAF. The UAF is applied to make actual 
and target expenditures (referred to in the statute as ``allowed 
expenditures'') equal. As discussed previously, allowed expenditures 
are equal to actual expenditures in a base period updated each year by 
the SGR. The SGR sets the annual rate of growth in allowed expenditures 
and is determined by a formula specified in section 1848(f) of the Act.
1. Calculation Under Current Law
    Under section 1848(d)(4)(B) of the Act, the UAF for a year 
beginning with CY 2001 is equal to the sum of the following--
    <bullet> Prior Year Adjustment Component. An amount determined by--
    + Computing the difference (which may be positive or negative) 
between the amount of the allowed expenditures for physicians' services 
for the prior year (the year prior to the year for which the update is 
being determined) and the amount of the actual expenditures for those 
services for that year;
    + Dividing that difference by the amount of the actual expenditures 
for those services for that year; and
    + Multiplying that quotient by 0.75.
    <bullet> Cumulative Adjustment Component. An amount determined by--
    + Computing the difference (which may be positive or negative) 
between the amount of the allowed expenditures for physicians' services 
from April 1, 1996, through the end of the prior year and the amount of 
the actual expenditures for those services during that period;
    + Dividing that difference by actual expenditures for those 
services for the prior year as increased by the SGR for the year for 
which the UAF is to be determined; and
    + Multiplying that quotient by 0.33.
    Section 1848(d)(4)(E) of the Act requires the Secretary to 
recalculate allowed expenditures consistent with section 1848(f)(3) of 
the Act. As discussed previously, section 1848(f)(3) specifies that the 
SGR (and, in turn, allowed expenditures) for the upcoming CY (CY 2011 
in this case), the current

[[Page 73282]]

CY (that is, CY 2010) and the preceding CY (that is, CY 2009) are to be 
determined on the basis of the best data available as of September 1 of 
the current year. Allowed expenditures for a year generally are 
estimated initially and subsequently revised twice. The second revision 
occurs after the CY has ended (that is, we are making the second 
revision to CY 2009 allowed expenditures in this final rule with 
comment).
    Table 44 shows the historical SGRs corresponding to each period 
through CY 2011.

Table 44--Annual and Cumulative Allowed and Actual Expenditures for Physicians' Services From April 1, 1996 through the End of the Current Calendar Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Cumulative        Cumulative
                                                          Annual allowed     Annual actual        allowed           actual
                         Period                           expenditures ($   expenditures ($   expenditures ($   expenditures ($       FY/CY SGR (%)
                                                           in billions)      in billions)      in billions)      in billions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
4/1/96-3/31/97.........................................         \1\ $46.8             $46.8             $46.8             $46.8                      N/A
4/1/97-3/31/98.........................................              48.3              47.0              95.2              93.9              FY 1998=3.2
4/1/98-3/31/99.........................................              50.4              47.8             145.6             141.7              FY 1999=4.2
1/1/99-3/31/99.........................................              12.7              12.4             \(2)\             141.7              FY 1999=4.2
4/1/99-12/31/99........................................              40.3              37.0             \(3)\             178.8              FY 2000=6.9
1/1/99-12/31/99........................................              53.0              49.5             185.8             178.8             FY 1999/2000
1/1/00-12/31/00........................................              56.8              54.1             242.7             232.9              CY 2000=7.3
1/1/01-12/31/01........................................              59.4              61.2             302.1             294.2              CY 2001=4.5
1/1/02-12/31/02........................................              64.3              64.6             366.4             358.7              CY 2002=8.3
1/1/03-12/31/03........................................              69.0              70.2             435.4             429.0              CY 2003=7.3
1/1/04-12/31/04........................................              73.6              78.3             509.0             507.2              CY 2004=6.6
1/1/05-12/31/05........................................              76.7              83.5             585.7             590.7              CY 2005=4.2
1/1/06-12/31/06........................................              77.8              84.6             663.5             675.3              CY 2006=1.5
1/1/07-12/31/07........................................              80.5              84.5             744.0             759.8              CY 2007=3.5
1/1/08-12/31/08........................................              84.2              86.7             828.2             846.4              CY 2008=4.5
1/1/09-12/31/09........................................              89.6              90.6             917.8             937.0              CY 2009=6.4
1/1/10-12/31/10........................................              97.0              92.9           1,014.7           1,029.9              CY 2010=8.3
1/1/11-12/31/11........................................              84.0                NA           1,098.7                NA            CY 2011=-13.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\(1)\ Allowed expenditures in the first year (April 1, 1996-March 31, 1997) are equal to actual expenditures. All subsequent figures are equal to
  quarterly allowed expenditure figures increased by the applicable SGR. Cumulative allowed expenditures are equal to the sum of annual allowed
  expenditures. We provide more detailed quarterly allowed and actual expenditure data on our Web site at the following address: http://www.cms.hhs.gov/SustainableGRatesConFact/ SustainableGRatesConFact/. We expect to update the web site with the most current information later this month.
\(2)\ Allowed expenditures for the first quarter of 1999 are based on the FY 1999 SGR.
\(3)\ Allowed expenditures for the last three quarters of 1999 are based on the FY 2000 SGR.

    Consistent with section 1848(d)(4)(E) of the Act, Table 44 includes 
our second revision of allowed expenditures for CY 2009, a 
recalculation of allowed expenditures for CY 2010, and our initial 
estimate of allowed expenditures for CY 2011. To determine the UAF for 
CY 2011, the statute requires that we use allowed and actual 
expenditures from April 1, 1996 through December 31, 2010 and the CY 
2011 SGR. Consistent with section 1848(d)(4)(E) of the Act, we will be 
making revisions to the CY 2010 and CY 2011 SGRs and CY 2010 and CY 
2011 allowed expenditures. Because we have incomplete actual 
expenditure data for CY 2010, we are using an estimate for this period. 
Any difference between current estimates and final figures will be 
taken into account in determining the UAF for future years.
    We are using figures from Table 44 in the following statutory 
formula:
[GRAPHIC] [TIFF OMITTED] TR29NO10.231

UAF<INF>11</INF> = Update Adjustment Factor for CY 2011 = -2.9 percent
Target<INF>10</INF> = Allowed Expenditures for CY 2010 = $97.0 billion
Actual<INF>10</INF> = Estimated Actual Expenditures for CY 2010 = $92.9 
billion
Target <INF>4/96-12/10</INF> = Allowed Expenditures from 4/1/1996-12/
31/2010 = $1,014.7 billion
Actual <INF>4/96-12/10</INF> = Estimated Actual Expenditures from 4/1/
1996-12/31/2010 = $1,029.9 billion
SGR<INF>11</INF> = -13.4 percent (0.866)
[GRAPHIC] [TIFF OMITTED] TR29NO10.232

    Section 1848(d)(4)(D) of the Act indicates that the UAF determined 
under section 1848(d)(4)(B) of the Act for a year may not be less than 
-0.07 or greater than 0.03. Since -0.029 is between -0.07 and 0.03, the 
UAF for CY 2010 will be -0.029.
    Section 1848(d)(4)(A)(ii) of the Act indicates that 1.0 should be 
added to the UAF determined under section 1848(d)(4)(B) of the Act. 
Thus, adding

[[Page 73283]]

1.0 to -0.029 makes the UAF equal to 0.971.

H. Physician and Anesthesia Fee Schedule Conversion Factors for CY 2011

    The CY 2011 PFS CF is $25.5217. The CY 2011 national average 
anesthesia CF is $15.8085.
1. Physician Fee Schedule Update and Conversion Factor
a. CY 2011 PFS Update
    The formula for calculating the PFS update is set forth in section 
1848(d)(4)(A) of the Act. In general, the PFS update is determined by 
multiplying the CF for the previous year by the percentage increase in 
the MEI times the UAF, which is calculated as specified under section 
1848(d)(4)(B) of the Act.
b. CY 2011 PFS Conversion Factor
    Generally, the PFS CF for a year is calculated in accordance with 
section 1848(d)(1)(A) of the Act by multiplying the previous year's CF 
by the PFS update.
    We note section 101 of the MIEA-TRHCA provided a 1-year increase in 
the CY 2008 CF and specified that the CF for CY 2009 must be computed 
as if the 1-year increase had never applied. Section 101 of the MMSEA 
provided a 6-month increase in the CY 2009 CF, from January 1, 2009, 
through June 30, 2009, and specified that the CF for the remaining 
portion of CY 2009 and the CFs for CY 2010 and subsequent years must be 
computed as if the 6-month increase had never applied. Section 131 of 
the MIPPA extended the increase in the CY 2009 CF that applied during 
the first half of the year to the entire year, provided for a 1.1 
percent increase to the CY 2010 CF, and specified that the CFs for CY 
2011 and subsequent years must be computed as if the increases for CYs 
2008, 2009, and 2010 had never applied. Section 1011(a) of the DODAA 
and section 5 of the TEA specified a zero percent update for CY 2010, 
effective January 1, 2010 through May 31, 2010. Subsequently, section 
101(a)(2) of the PACMBPRA provided for a 2.2 percent update to the CF, 
effective from June 1, 2010 to November 30, 2010. Therefore, under 
current law, the CF in effect in December 2010 is $28.3868.
    In addition, when calculating the PFS CF for a year, section 
1848(c)(2)(B)(ii)(II) of the Act requires that increases or decreases 
in RVUs may not cause the amount of expenditures for the year to differ 
more than $20 million from what it would have been in the absence of 
these changes. If this threshold is exceeded, we must make adjustments 
to preserve budget neutrality. We estimate that CY 2011 RVU changes 
would result in a decrease in Medicare physician expenditures of more 
than $20 million. Accordingly, we are increasing the CF by 1.0045 to 
offset this estimated decrease in Medicare physician expenditures due 
to the CY 2011 RVU changes. Furthermore, as discussed in section II.E.6 
of this final rule with comment period, we are decreasing the CF by 
0.9181 in order to offset the increase in Medicare physician payments 
due to the CY 2011 rescaling of the RVUs so that the proportions of 
total payments for the work, PE, and malpractice RVUs match the 
proportions in the final revised and rebased MEI for CY 2011. 
Accordingly, we calculate the CY 2011 PFS CF to be $25.5217. This final 
rule with comment period announces a reduction to payment rates for 
physicians' services in CY 2011 under the SGR formula. These payment 
rates are currently scheduled to be reduced under the SGR system on 
December 1, 2010, and then again on January 1, 2011. The total 
reduction in MPFS rates between November 2010 and January 2011 under 
the SGR system will be 24.9 percent. By law, we are required to make 
these reductions in accordance with section 1848(d) and (f) of the Act, 
and these reductions can only be averted by an Act of Congress. While 
Congress has provided temporary relief from these reductions every year 
since 2003, a long-term solution is critical. We are committed to 
permanently reforming the Medicare payment formula.
    We illustrate the calculation of the CY 2011 PFS CF in Table 45.

               Table 45--Calculation of the CY 2011 PFS CF
------------------------------------------------------------------------
 
------------------------------------------------------------------------
December 2010 Conversion Factor....  ......................     $28.3868
CY 2011 Medicare Economic Index....  0.4 percent (1.0040)    ...........
CY 2011 Update Adjustment Factor...  -2.9 percent (0.9710)   ...........
CY 2011 RVU Budget Neutrality        0.5 percent (1.0045)    ...........
 Adjustment.
CY 2011 Rescaling to Match MEI       -8.2 percent (0.9181)   ...........
 Weights Budget Neutrality
 Adjustment.
CY 2011 Conversion Factor..........  ......................     $25.5217
------------------------------------------------------------------------

    We note payment for services under the PFS will be calculated as 
follows:
    Payment = [(RVU work x GPCI work) + (RVU PE x GPCI PE) + (RVU 
malpractice x GPCI malpractice)] x CF.
2. Anesthesia Conversion Factor
    We calculate the anesthesia CF as indicated in Table 45. Anesthesia 
services do not have RVUs like other PFS services. Therefore, we 
account for any necessary RVU adjustments through an adjustment to the 
anesthesia CF to simulate changes to RVUs. More specifically, if there 
is an adjustment to the work, PE, or malpractice RVUs, these 
adjustments are applied to the respective shares of the anesthesia CF 
as these shares are proxies for the work, PE, and malpractice RVUs for 
anesthesia services. Furthermore, as discussed in section II.E.6 of 
this final rule with comment period, we are rescaling the RVUs so that 
the proportions of total payments for the work, PE, and malpractice 
RVUs match the proportions in the final revised and rebased MEI for CY 
2011. Accordingly, we are adjusting the anesthesia CF to reflect the 
RVUs adjustments being made to all other physician fee schedule 
services to match the revised and rebased MEI weights.
    As explained previously, in order to calculate the CY 2011 PFS CF, 
the statute requires us to calculate the CFs for CYs 2009, 2010, and 
2011 as if the various legislative changes to the CFs for those years 
had not occurred. Accordingly, under current law, the anesthesia CF in 
effect in December 2010 is $16.6058. We illustrate the calculation of 
the CY 2011 anesthesia CF in Table 46.

    Table 46--Calculation of the CY 2011 Anesthesia Conversion Factor
------------------------------------------------------------------------
 
------------------------------------------------------------------------
December 2010 Anesthesia Conversion  ......................     $16.6058
 Factor.
CY 2011 Medicare Economic Index....  0.4 percent (1.0040)    ...........

[[Page 73284]]

 
CY 2011 Update Adjustment Factor...  -2.9 percent (0.9710)   ...........
CY 2011 Anesthesia Adjustment......  -2.3 percent (0.97651)  ...........
CY 2011 Anesthesia Conversion        ......................     $15.8085
 Factor.
------------------------------------------------------------------------

III. Code-Specific Issues for the PFS

A. Therapy Services

1. Outpatient Therapy Caps for CY 2011
    Section 1833(g) of the Act applies an annual, per beneficiary 
combined cap on expenses incurred for outpatient physical therapy and 
speech-language pathology services under Medicare Part B. A similar 
separate cap for outpatient occupational therapy services under 
Medicare Part B also applies. The caps apply to expenses incurred for 
therapy services furnished in outpatient settings, other than in an 
outpatient hospital setting which is described under section 
1833(a)(8)(B) of the Act. The caps were in effect during 1999, from 
September 1, 2003 through December 7, 2003, and continuously beginning 
January 1, 2006. The caps are a permanent provision, that is, there is 
no end date specified in the statute for therapy caps. Beginning 
January 1, 2006, the DRA provided for exceptions to the therapy caps 
until December 31, 2006. The exceptions process for therapy caps has 
been extended through December 31, 2009 pursuant to three subsequent 
amendments (in MEIA-TRHCA, MMSEA, and MIPPA).
    Section 1833(g)(5) of the Act (as amended by section 3103 of the 
ACA) extended the exceptions process for therapy caps through December 
31, 2010. The annual change in the therapy cap is computed by 
multiplying the cap amount for CY 2010, which is $1,860, by the MEI for 
CY 2011, and rounding to the nearest $10. This amount is added to the 
CY 2010 cap to obtain the CY 2011 cap. Since the MEI for CY 2011 is 0.4 
percent, the therapy cap amount for CY 2011 is $1870.
    The agency's authority to provide for exceptions to therapy caps 
(independent of the outpatient hospital exception) will expire on 
December 31, 2010, unless the Congress acts to extend it. If the 
current exceptions process expires, the caps will be applicable in 
accordance with the statute, except for services furnished and billed 
by outpatient hospital departments.
    Comment: The commenters unanimously requested repeal of the therapy 
caps, while characterizing caps as arbitrary and medically unfounded 
and the combination of cap amounts for PT and SLP services as 
groundless. A number of commenters argued that therapy caps restrict 
provision of medically necessary services to beneficiaries. Several 
commenters reported that patients are discharged for care prior to 
recovery due to payment restrictions and this leads to increased 
medical costs for Medicare.
    Response: Therapy caps are mandated by statute. We have no 
authority to repeal the caps, or to restructure the grouping of therapy 
disciplines to which the caps apply. However, we understand the 
concerns of the commenters, and we are actively exploring alternatives 
to therapy caps to inform the discussions about approaches to identify 
and pay for those therapy services that are necessary for patients to 
attain the best outcomes with the most efficient use of resources.
2. Alternatives to Therapy Caps
a. Background
    In section 4541 of the Balanced Budget Act of 1997 (Pub. L. 105-33) 
(BBA), the Congress enacted the financial limitations on outpatient 
therapy services (the ``therapy caps'' discussed above for physical 
therapy, occupational therapy, and speech-language pathology). At the 
same time, the Congress requested that the Secretary submit a Report to 
Congress that included recommendations on the establishment of a 
revised coverage policy for outpatient physical therapy services and 
outpatient occupational therapy services under the statute. The 
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113) (BBRA) placed 
the first of a series of moratoria on implementation of the limits. In 
addition, it required focused medical review of claims and revised the 
report requirements in section 4541(d)(2) of the BBA to request a 
report that included recommendations on the following: (A) The 
establishment of a mechanism for assuring appropriate utilization of 
outpatient physical therapy services, outpatient occupational therapy 
services, and speech-language pathology services; and (B) the 
establishment of an alternative payment policy for such services based 
on classification of individuals by diagnostic category, functional 
status, prior use of services (in both inpatient and outpatient 
settings), and such other criteria as the Secretary determines 
appropriate, in place of the limits. In 1999, therapy services were not 
defined, but services documented as therapy were billed and reported 
when furnished by a variety of individuals in many different settings. 
These services were not identified in a way that would allow analysis 
of utilization or development of alternative payment policies. Since 
that time, we have clarified the definition of therapy services and 
applied the qualifications of therapists consistently to outpatient 
settings, which have facilitated analysis of therapy services.
    We have studied therapy services with the assistance of a number of 
contractors over the past 11 years. Reports of these projects are 
available on the CMS Web site at http://www.cms.gov/TherapyServices/. 
On November 9, 2004, we delivered the Report to Congress, Number 
137953, ``Medicare Financial Limitations on Outpatient Therapy 
Services'' that referenced two utilization analyses. We periodically 
updated the utilization analyses and posted other contracted reports on 
the CMS web site in order to further respond to the requirements of the 
BBRA. Subsequent reports highlighted the expected effects of limiting 
services in various ways and presented plans to collect data about 
patient condition using available tools. The general belief was that if 
patient condition could be reliably described, that approach would 
ensure appropriate payment for appropriately utilized services.
    Over the past decade, significant progress has been made in 
identifying the outpatient therapy services that are billed to 
Medicare, the demographics of the beneficiaries who utilize those 
services, the types of services, the HCPCS codes used to bill the 
services, the allowed and paid amounts of the services, and the 
settings, geographic locations, and provider or supplier types where 
services are furnished.
    Some of the information that is necessary to ensure appropriate 
utilization and develop objective and equitable payment alternatives to 
therapy caps based on patient condition has proven difficult to 
develop. The influence of prior use of inpatient services on outpatient 
use of therapy services was not accessible due to systems issues and 
differences in the policies, billing, and reporting practices for 
inpatient and outpatient therapy

[[Page 73285]]

services. The weakness of the ICD-9-CM diagnostic codes in describing 
the condition of the rehabilitation patient obscured analyses of claims 
to assess the need for therapy services. The primary diagnosis on the 
claim is a poor predictor for the type and duration of therapy services 
required, which complicates assignment of patient cohorts for analysis. 
Although changes to the guidance in the Medicare Benefit Policy Manual 
(Pub. 100-02) on documentation of therapy services in 2005 improved the 
consistency of records and facilitated chart review, it became 
increasingly obvious that neither claims analysis nor chart review 
could serve as a reliable and valid method to determine a patient's 
need for services or to form the basis for equitable payment. We 
concluded that in order to develop alternative payment approaches to 
the therapy caps, we needed a method to identify patients with similar 
risk-adjusted conditions (cohorts) and then we would identify the 
therapy services that are necessary for the patients to attain the best 
outcomes with the most efficient use of resources.
    While we studied therapy utilization, a number of proprietary tools 
were developed by researchers in the professional community to assess 
the outcomes of therapy. Some tool sponsors collected sufficient 
information to predict with good reliability the amount or length of 
treatment that would result in the best expected outcomes. We 
encouraged the use of these proprietary tools in manual instructions, 
but proprietary tools do not serve our purposes because modification of 
proprietary tools may only be done by the tool sponsor. There now are 
some versions of the tools in the public domain and they are being 
utilized widely to identify patient conditions and, by some insurers, 
to pay for efficient and effective treatment. Examples of such tools 
include the National Outcomes Measurement System (NOMS) by the American 
Speech-Language Hearing Association and Patient Inquiry by Focus On 
Therapeutic Outcomes, Inc. (FOTO).
    In 2006, Focus on Therapeutic Outcomes, Inc. delivered to CMS a 
report titled, ``Pay for Performance for Physical Therapy and 
Occupational Therapy,'' which is also available on the CMS Web site at 
http://www.cms.gov/TherapyServices. The purpose of this project was to 
simulate a pay-for-performance implementation, designed to align 
financial incentives with the achievement of better clinical outcomes 
from services that were delivered efficiently. The project, funded by 
HHS/CMS Grant 18-P-93066/9-01, demonstrated the predictive validity of 
the risk-adjusted pay-for-performance model and the feasibility of 
reducing payments without affecting services to beneficiaries who need 
them.
b. Current Activities
    The Tax Relief and Health Care Act of 2006 (TRHCA) extended the 
therapy cap exceptions process through December 31, 2007 and provided 
funds used for two CMS projects related to developing alternative 
payment approaches for therapy services that are based on beneficiary 
needs. A 5-year project titled ``Development of Outpatient Therapy 
Alternatives'' (DOTPA), awarded to RTI International, was initiated in 
order to develop a comprehensive and uniform therapy-related data 
collection instrument, assess its feasibility, and determine the subset 
of the measures that we could routinely and reliably collect in support 
of payment alternatives. While DOTPA will identify measurement items 
relevant to payment, the project will not deliver a standardized 
measurement tool. We may either develop a tool or allow other tools to 
be used for payment purposes when they include those items that 
identify the following: (1) Beneficiary need; and (2) outcomes (that is 
effectiveness of therapy services). In addition to therapy caps, the 
DOTPA project considers our interest in value-based purchasing by 
identifying components of value, including beneficiary need and the 
effectiveness of therapy services. The DOTPA project reports are 
available on the contractor's Web site at http://optherapy.rti.org/. 
The data collection design and instrument development have been 
completed, and a Paperwork Reduction Act (PRA) package was submitted 
for approval of the data collection forms by the Office of Management 
and Budget (OMB). The Federal Register notice for the second round of 
public comment on this package was published on April 23, 2010 (75 FR 
21296). The PRA package has been approved; the contractor is recruiting 
potential participants in the data collection, developing training 
materials for participants, and updating the project web site. We did 
not seek public comments on the DOTPA project in the proposed rule.
    The TRCHA also funded the 2-year project contracted to Computer 
Sciences Corporation (CSC) entitled ``Short Term Alternatives for 
Therapy Services'' (STATS). STATS has provided recommendations 
regarding alternative payment approaches to therapy caps that could be 
considered before completion of the DOTPA project. The STATS project 
draws upon the analytical and clinical expertise of contractors and 
stakeholders to consider policies, measurement tools, and claims data 
that are currently available to provide further information about 
patient condition and the outcomes of therapy services. The final 
report, received September 13, 2010, included recommended actions we 
could take within 2 or 3 calendar years to replace the current cap 
limits on therapy services with a policy that pays appropriately for 
necessary therapy services.
c. Potential Short-Term Approaches to Therapy Caps
    On June 30, 2009, we received a draft of the CSC report titled 
``STATS Outpatient Therapy Practice Guidelines,'' a summary of expert 
workgroup discussions, and several short-term payment alternatives for 
consideration. CSC discussed options based on the assumption that 
short-term policy changes should facilitate the development of adequate 
function and/or outcomes reporting tools. In the longterm, CSC 
recommended that payment be based on function or quality measurements 
that adequately perform risk adjustment for episode-based payment 
purposes.
    Based on the draft report, additional stakeholder input, and 
subsequent communications with the contractor, in the CY 2011 PFS 
proposed rule (75 FR 40097 through 40099) we discussed several 
potential alternatives to the therapy caps that could lead to more 
appropriate payment for medically necessary and effective therapy 
services that are furnished efficiently. We solicited public comments 
on the proposed rule regarding all aspects of these alternatives, 
including the potential associated benefits or problems, clinical 
concerns, practitioner administrative burden, consistency with other 
Medicare and private payer payment policies, and claims processing 
considerations. We did not propose either short-term or long-term 
payment alternatives to the therapy caps. However, we referred readers 
to section II.C.4.(c) of the proposed rule for our CY 2011 proposal to 
expand the MPPR policy to ``always therapy'' services furnished in a 
single session in order to pay more appropriately for therapy services, 
taking into consideration the expected efficiencies when services are 
furnished together. While we did not propose the adoption of an MPPR 
policy for therapy services specifically as an alternative to the 
therapy caps, we acknowledged that by paying more appropriately for 
combinations of

[[Page 73286]]

therapy services that are commonly furnished in a single session, 
practitioners would be able to furnish more medically necessary therapy 
services to a given beneficiary before surpassing the caps. We noted 
that the proposed MPPR policy would have the potential to reduce the 
number of beneficiaries impacted by the therapy caps in a given year.
    Comment: Many commenters stated that use of the financial cap on 
therapy services as a rationale for the proposed MPPR was unacceptable 
and not a sound basis for such a significant policy proposal. Quite a 
few commenters contrasted the cap alternatives research with the MPPR 
which, in the commenters' opinion, did not reflect a similar level of 
analysis. Instead of implementing the proposed MPPR, a large majority 
of the commenters urged CMS to place a high priority in resources and 
funding for research to identify alternatives to the cap that would 
ensure patients receive medically necessary therapy services.
    While the commenters agreed that more therapy could be furnished to 
a beneficiary before surpassing the caps if the payments were reduced, 
the commenters believe that other, more serious access problems would 
result from arbitrary payment reductions under an MPPR. Many commenters 
were concerned that the proposed MPPR policy might restrict access to 
therapy services for patients with more severe problems, especially 
neurological problems and complex medical conditions. Less payment, 
explained the commenters, would force therapists to spend less time 
with patients, incentivize cutting corners, and encourage greater fraud 
and abuse. The commenters argued that the shortage of therapists, 
particularly physical therapists, would be exacerbated and access to 
therapy services would be severely jeopardized.
    Response: We appreciate the effort and resources contributed by 
stakeholders to the discussion and development of alternatives to 
therapy caps. We look forward to the continued cooperation of 
stakeholders as we continue our work in this area over the coming 
years. We refer readers to section II.C.4.(c) of this final rule with 
comment period for a detailed discussion of the public comments and our 
responses regarding the proposed therapy MPPR.
    The three specific short-term options that we discussed in the CY 
2011 PFS proposed rule would not have required statutory changes when 
CSC originally delivered them. In CY 2011, some would require extension 
of the therapy cap exceptions process. Some would require moderate 
reporting changes that would yield more detailed information about 
patient function and progress to inform future payment approaches and 
facilitate the medical review of services above the therapy caps at the 
present time. Others require new coding and bundled per-session payment 
that would be a first step toward episode-based payment. They are not 
necessarily independent of each other.
    Under each of these alternatives, administrative simplification 
with respect to current policies, such as HCPCS code edits and ``ICD-9-
CM to HCPCS code'' crosswalk edits that serve to limit utilization 
without regard to the patient's clinical presentation, could be pursued 
in the context of these options.
    The first option would modify the current therapy caps exceptions 
process to capture additional clinical information regarding therapy 
patient severity and complexity in order to facilitate medical review. 
This approach would complement the DOTPA project, which is identifying 
items to measure patient condition and outcomes. We believe the first 
option may have the greatest potential for rapid implementation that 
could yield useful information in the short-term. In the CY 2011 PFS 
proposed rule (75 FR 40097), we indicated that we were especially 
interested in detailed public comments on this option that could inform 
a potential proposal to adopt such an alternative through future 
rulemaking. The second option would involve introducing additional 
claims edits regarding medical necessity, in order to reduce 
overutilization. The third option would be to adopt a per-session 
bundled payment that would vary based on patient characteristics and 
the complexity of evaluation and treatment services furnished in the 
session. Each option would require significant provider and contractor 
education, and all would necessitate major claims processing systems 
changes. Moreover, some of the options may affect beneficiaries by 
changing the type or amount of services covered by Medicare or the 
beneficiary's cost sharing obligations.
    Comment: Many commenters agreed that a long term solution to the 
therapy caps is desirable. Generally, the commenters supported an 
evidence-based payment system grounded in accurate, comprehensive 
analysis of the clinical characteristics of the wide range of therapy 
patients in diverse settings and the concept of bundled payment for 
episodes of care based on clinical characteristics of patients. Many 
commenters urged CMS to place a high priority in resources and funding 
for research to identify alternatives to the cap that would ensure 
patients receive medically necessary therapy services. The commenters 
asserted that such research would be a key factor in identifying 
clinically appropriate ways to control spending. Those who commented on 
this issue commended CMS for proposing alternatives that reflect in-
depth analytical work, expressing appreciation to CMS and its 
contractor for the opportunity to participate on task forces and 
pledging continued assistance in trials of alternatives. The commenters 
also commend CMS for recommending better clinical information be 
included in payment decisions.
    MedPAC and some other commenters supported all three alternatives 
as reasonable steps consistent with the end goals of value for 
purchases based on the care needs of beneficiaries. Many commenters 
supported the first option or the third option, and very few supported 
the second option. Regardless of the alternative chosen, commenters 
consistently recommended further study and analysis, with a national 
demonstration or pilot project to test any alternative prior to 
implementation.
    Response: We continue to believe that the advice and assistance of 
stakeholders, including clinicians and practice administrators, are 
essential to the development of policies that are appropriate, 
realistic, and effective in allowing necessary therapy care while 
limiting overutilization. We appreciate the time and effort provided by 
the dedicated professionals involved in the STATS workgroups and DOTPA 
technical advisory panels.
    Comment: A commenter suggested that diagnoses cannot be used to 
predict medical necessity. The same commenter argued that if the 
patient were assessed using self-reported functional status measures 
that are risk-adjusted using many variables, it would be possible to 
predict outcomes, identify ineffective treatment, and reduce gaming 
without relying on clinician-generated estimates known to be biased and 
fraught with poor reliability and validity.
    Several other commenters stated that clinicians' judgment is 
essential to accurate outcomes assessment, and these commenters 
provided examples of clinical judgments believed essential to 
appropriate care planning.
    Response: None of the alternatives discussed in the proposed rule 
would require a measurement tool scored by either a clinician or the 
patient. We note the disagreement among the commenters on this point.

[[Page 73287]]

    Comment: While generally supportive of the development of 
alternatives to therapy caps, many commenters expressed concern that 
there were insufficient data and details of the options discussed in 
the proposed rule to develop a rational payment system based on the 
options at this time. Several commenters suggested that sophisticated 
multivariate statistical methods with a long list of clinically 
appropriate risk-adjustment variables would be required. Another 
commenter recommended using risk-adjustment models built on large 
aggregate datasets to develop efficiency and effectiveness projections 
on which payments could be based.
    Response: We agree that the alternatives presented were not fully 
developed and that statistically sound methods of evaluation of the 
fully developed alternatives would be appropriate. We made no specific 
proposal to adopt an alternative beginning in CY 2011, but instead 
presented three potential options in order to gather additional public 
input on the overall concepts and the details to inform our future 
developmental work in this area. We will continue to review and 
consider all the information provided to us and acknowledge that, in 
the context of any future proposal, we would need to provide further 
detail as part of notice and comment rulemaking in order for the public 
to provide meaningful comment prior to the adoption of changes to 
therapy payment.
    Comment: Many commenters complained that therapy payments have 
decreased relative to inflation over the past 10 years. The commenters 
described the practitioner's struggle to provide appropriate care and 
noted their fear of alternatives that could result in fewer resources 
with which to treat beneficiaries. Some commenters stated that Medicaid 
payments also decreased, leaving them with less flexibility to provide 
covered services to Medicare beneficiaries. Several commenters warned 
that those who bill therapy services will find ``creative'' ways to 
manage patients in the future, leading to reduced quality of care, or 
that therapists will be laid off, leading to access problems for 
beneficiaries.
    Some commenters recommended that CMS take time to consider the 
potential alternatives to therapy caps from all angles related to cost, 
including the costs of different health outcomes. Several commenters 
reported that outpatient physical therapy saves Medicare spending by 
preventing more expensive procedures and surgeries.
    Response: Achieving appropriate payment for quality services that 
quickly lead to good health outcomes is among the major goals of our 
payment policy. It is also our goal to limit overutilization of 
services, and to discourage the provision of services that are not 
medically reasonable and necessary or represent an abuse of Medicare 
funds. To that end, we will continue to develop policies aimed at 
paying for those therapy services that meet patients' needs. The clear 
challenge is to identify those needs and the services required.
    Comment: One commenter was concerned that underlying therapy 
utilization data are flawed due to inconsistent coverage and payment 
policies that also negatively affect good clinical practice by 
restricting the therapist's clinical judgment. The commenter provided 
detailed examples to illustrate inconsistencies in forms and billing 
rules between Part A and B providers and suppliers which in the 
aggregate, the commenter argued, impede CMS' ability to analyze claims 
data for comparison purposes. Differences due to National Correct 
Coding Initiative (NCCI) and Medically Unlikely Edit (MUE) policies and 
most particularly local coverage determinations (LCDs) were also 
identified by the commenter as creating significant variations among 
contractors. The commenter was particularly concerned about 
requirements for specific ICD-9-CM and CPT code combinations, which 
limit therapy diagnoses or require specific diagnoses as primary.
    Response: We develop national and local policies and guidelines as 
needed to interpret statutory requirements and to limit, whenever 
possible, abusive behaviors while encouraging high quality care and 
good outcomes for beneficiaries. Since no one method is entirely 
effective in curbing incorrect or fraudulent billing practices, a 
number of approaches have been adopted. We attempt to coordinate these 
policies and we recognize that it is sometimes difficult for providers 
and suppliers to stay informed about changes, especially when they 
treat beneficiaries whose services are impacted by different payment 
policies. We will continue to work cooperatively with interested 
stakeholders, as we did with the STATS project, to identify and resolve 
concerns or conflicts regarding our policies. We intend that any claims 
data collected in a pilot study would be unencumbered by conflicts that 
have been identified.
    Comment: Many commenters stated that the options are identified as 
alternatives to the cap exceptions process, which expires December 31, 
2010.
    Response: The short-term alternatives discussed are potential 
alternatives to the therapy caps, and while it may be possible to 
implement some as modifications to the exceptions process, we recognize 
that Congress would have to act to extend the authority for a therapy 
cap exceptions process or to otherwise provide for certain alternatives 
to therapy caps.
    Option (1): Revise therapy caps exceptions process by requiring the 
reporting of new patient function-related Level II HCPCS codes and 
severity modifiers.
    This option would require that clinicians submit beneficiary 
function-related nonpayable HCPCS codes to replace the -KX modifier 
(Specific required documentation on file). Codes would not be submitted 
on every claim, but at episode onset and at periodic intervals (for 
example, progress report intervals of 12 sessions or 30 days--whichever 
is less). Codes would be submitted for all patients in order for the 
claims to be paid and not only those claims approaching or surpassing 
the therapy caps. The current -KX modifier is not useful to identify 
claims exceeding therapy caps, because it is used for services both 
before and after the caps are exceeded, and it must be used on the 
entire claim for facilities. New codes also would not identify claims 
above the cap, but they would perform the same function as the current 
-KX modifier to signal that documentation in the medical record 
supported medical necessity that should lead to an exception to the 
therapy caps. The codes would also provide more information for medical 
review.
    Six Level II HCPCS G-codes representing functions addressed in the 
plan of care and 5 (or 7) modifiers representing severity/complexity 
would be utilized to report information on the claim. Examples of six 
new function-related G-codes:
    <bullet> GXXXU--Impairments to body functions and/or structures--
current.
    <bullet> GXXXV--Impairments to body functions and/or structures--
goal.
    <bullet> GXXXW--Activity limitations and/or participation 
restrictions--current.
    <bullet> GXXXX--Activity limitations and/or participation 
restrictions--goal.
    <bullet> GXXXY--Environmental barriers--current.
    <bullet> GXXXZ--Environmental barriers--goal.
    Two potential severity/complexity scales have been suggested that 
would require the adoption of 5 or 7 new severity modifiers, 
respectively. Under one scenario, modifiers based on the

[[Page 73288]]

International Classification of Function would identify severity as 
follows:
    <bullet> None (0 to 4 percent).
    <bullet> MILD (5 to 24 percent).
    <bullet> MODERATE (25 to 49 percent).
    <bullet> SEVERE (50 to 95 percent).
    <bullet> COMPLETE (96 to 100 percent).
    Alternatively, a proportional severity/complexity scale would use 7 
modifiers to describe impairments, limitations, or barriers--
    <bullet> 0 percent;
    <bullet> 1 to 19 percent;
    <bullet> 20 to 39 percent;
    <bullet> 40 to 59 percent;
    <bullet> 50 to 79 percent;
    <bullet> 80 to 99 percent; or
    <bullet> 100 percent.
    Implementation of this general approach might require 6 months to 2 
years to modify claims processing for the current therapy caps and 
exceptions processing of claims, and to develop, pilot test, and refine 
coding before applying the approach nationally. While therapists 
initially would need to learn the new codes and update their billing 
systems, ultimately their reporting burden might be reduced because the 
-KX modifier would not be required on each claim line for patients with 
expenditures approaching or exceeding the therapy caps. This option 
could potentially result in a small reduction in outpatient therapy 
expenditures due to increased Medicare contractor scrutiny of episodes 
where functional severity scores did not change over time, or to other 
atypical reporting patterns associated with the new codes.
    In the longterm, these codes and modifiers could be mapped to 
reliable and validated measurement tools (either currently available 
tools in the public domain or newly developed tools from items on the 
DOTPA instrument or the Continuity Assessment Record and Evaluation 
(CARE) tool). If statistically robust patient condition information 
were collected from claims data, it may be possible to develop Medicare 
payment approaches for outpatient therapy services that could pay 
appropriately and similarly for efficient and effective services 
furnished to beneficiaries with similar conditions who have good 
potential to benefit from the services furnished. At a minimum, the new 
codes could allow contractors to more easily identify and limit the 
claims for beneficiaries who show no improvement over reasonable 
periods of time.
    Comment: Most commenters supported the concept of Option (1) 
although often not without concerns about the details of 
implementation. The commenters generally endorsed the concept of 
describing patients' goals in terms of activity participation and 
environmental barriers, in addition to impairments based on the World 
Health Organization's (WHO's) International Classification of 
Functioning, Disability and Health (ICF). Some supported Option (1) as 
the best of the three options as it could begin providing a national 
overview of functional status and severity of patients which would be 
essential if CMS were to pursue future episode-based payment. The 
majority of commenters agreed with the concept of developing an 
infrastructure to work toward payment reform based on episodes of care, 
patient characteristics, functional status, rehabilitation complexity, 
severity, and outcomes. Many commenters supported Option (1) as the 
first step in a plan to move toward Option (3) that would introduce 
per-session codes to bundle payment, as described in detail below, and 
ultimately episode-based payments, although a few suggested the 
severity codes could be used, after adequate testing and definition, to 
inform appropriate payment. Some commenters recommended developing 
Option (1) and suggested that further development should include: 
definition of terms (including the ICD-10 diagnosis codes in 2013), 
input from therapists, field testing, and data analysis to ensure that 
payment appropriately reflects patient complexity and risk before 
application of the codes to individual therapy disciplines.
    The commenters in favor of this option supported the use of ICF 
language in descriptions, but consistently preferred a 7-point rating 
scale for severity over the 5-point scale based on the ICF. Several 
commenters also noted that sufficient training would be required for 
contractors and providers of service under this option.
    Response: We appreciate the perspectives of the commenters who see 
Option (1) as a first step in the process of exploring alternatives to 
the therapy caps that could move toward payment based on the needs of 
beneficiaries.
    Comment: Many commenters opposed this option as burdensome, easy to 
``game,'' and lacking the potential for saving money. The commenters in 
opposition to the option claimed it could require a great deal of 
research to establish, validate and value codes, and then pilot test, 
refine, establish inter-tester reliability, and modify the claims 
processing process, which could take 2 years. Instead, the same 
commenters recommended the use of valid and reliable measurement tools 
currently in the public domain and in use by clinicians. One commenter 
requested that CMS not use clinician-graded single item assessment 
scales of patient severity or complexity, unless such methodology 
possessed published reliability and validity on the selection and 
grading processes because there are more psychometrically sound 
published scales available that include a risk adjustment process to 
predict treatment success and number of visits and are less vulnerable 
to gaming. If scales were used, several commenters recommended that 
they must be sensitive and cardinal so each change would represent an 
equal increment.
    Response: We recognize that Option (1) is not yet fully developed 
and would require further study. As we consider this option further, we 
will also assess the feasibility of using currently available validated 
measurement scales in the public domain. The issues of ``gaming'' and 
savings remain of interest in relationship to this and the other 
options.
    Comment: Several commenters voiced serious concerns about the 
concept of using function-related codes and severity modifiers on the 
claim to monitor patient improvement. The commenters were alarmed that 
contractors would deny services when improvement was insufficiently 
demonstrated, or when the beneficiary's goal was to prevent 
deterioration of function. Several commenters were concerned that a 
contractor's attention to function and severity modifiers might cause 
the contractor to unduly limit the therapy sessions a patient needed to 
maintain or increase functionality.
    A few commenters interpreted the statute to require only that a 
service be medically necessary to treat the underlying illness or 
condition, and not to require that the service lead to improvement. 
According to the commenters, a service required to maintain current 
function is medically necessary but the focus on identifying 
improvement would prevent those patients with progressive diseases from 
receiving therapy to prevent further decline in function when there is 
little probability of meeting an undefined improvement standard. A few 
commenters provided citations of court cases that rejected Medicare 
policies and practices that denied therapy services based on arbitrary 
rules of thumb without consideration of the patient's individual 
condition. Therefore, the same commenters recommended that CMS omit 
reference to improvement standards in any proposal related to Option 
(1).
    Response: The policies for Medicare Part B outpatient therapy 
services require payment for therapy services that require the skills 
of a therapist. In

[[Page 73289]]

contrast, ``Unskilled services are palliative procedures that are 
repetitive or reinforce previously learned skills, or maintain function 
after a maintenance program has been developed * * *. services related 
to activities for the general good and welfare of patients, for 
example, general exercises to promote overall fitness and flexibility 
and activities to provide diversion or general motivation, do not 
constitute therapy services for Medicare purposes'' (Medicare Benefit 
Policy Manual, Pub. 100-02, chapter 15, section 220.2.A.). We note that 
when the goal of therapy is to halt degeneration of function due to 
disease, therapy is not palliative or related to general welfare, but 
may be an active treatment with measurable outcomes. For that reason, 
we do not anticipate that function-related codes and severity modifiers 
would be used exclusively as a proxy for the determination of medical 
necessity.
    The Medicare policy goes on to state, `` * * * services must be 
necessary for the establishment of a safe and effective maintenance 
program required in connection with a specific disease state. In the 
case of a progressive degenerative disease, service may be 
intermittently necessary to determine the need for assistive equipment 
and/or establish a program to maximize function * * *.'' (Pub. L. 100-
02, chapter 15, section 220.2.A.). Further details concerning 
maintenance therapy and examples of covered services to patients with 
degenerative neurological diseases are found in Pub. 100-02, chapter 
15, section 220.2.D.
    Option (2): Enhance existing therapy caps exceptions process by 
applying medical necessity edits when per-beneficiary expenditures 
reach a predetermined value.
    The existing automatic process for exceptions, and the revised 
exceptions process described in Option (1) above, pay practitioners 
indefinitely for services if they attest on the claim by appending a 
specific modifier to therapy HCPCS codes that the services being 
furnished are medically necessary and that supporting documentation is 
included in the medical record. Unless the local contractor uses claims 
edits or does post-payment review, these processes do not identify or 
limit unusually high annual per-beneficiary utilization. High 
utilization is not limited to beneficiaries with multiple or complex 
conditions. We would use existing therapy utilization data to develop 
annual per-beneficiary medical necessity payment edits, such as limits 
to the number of services per-session, per-episode, or per-diagnostic 
grouping, for exceptions to the therapy caps which would be set at 
benchmark payment levels that only a small percentage of beneficiaries 
would surpass in a single year. Once these levels were reached, 
additional claims would be denied and practitioners would need to 
appeal those denials if they wished to challenge Medicare's nonpayment.
    This alternative would require 1 to 2 years to implement as an 
expansion of existing policy, and its effects would be anticipated by 
analysis of the current utilization of therapy services. Additional 
practitioner burden would be incurred in the small number of cases 
exceeding the per beneficiary expenditure edits if the practitioner 
chose to appeal the medical necessity denial.
    Comment: Few commenters preferred Option (2) over the other two. In 
addition, the commenters stated that they were familiar with this 
approach because other insurers use a similar system of edits, so the 
adoption of Option (2) for Medicare patients would not represent an 
additional administrative burden. The commenters who favored this 
option reported that it would be the easiest for CMS to implement and 
would be the only option likely to save money in the very short-term. 
Some commenters who favored this option would still prefer the use of 
existing measurement tools to gather data about therapy services. One 
commenter pointed out that limits per-diagnosis should be based on 
reasonable data that reflect good patient outcomes.
    Most of the commenters who supported Option (2) also noted that 
this option could influence therapy utilization and possibly outcomes, 
creating flawed data that were not representative of needed services. 
The commenters were concerned that future payment policy decisions 
might later be based on those flawed data.
    Response: We agree that Option (2) has the benefit of being 
relatively easy to implement and we appreciate the perspective of some 
commenters on the low anticipated burden. We also recognize that a 
database of limited services would not be appropriate to use for 
estimating the full cost of medically necessary services.
    Comment: Some commenters took a neutral position on this option, 
finding that it could be part of a viable alternative to therapy caps 
but only after considerable study and development. MedPAC noted that 
Option (2) would implement more meaningful therapy caps in the interim, 
while longer-term solutions were being developed and tested. At the 
same time, MedPAC supported CMS' efforts to identify medically 
unnecessary care and to implement payment systems that ensure that the 
program obtains value for its purchases. Other commenters were 
concerned that the benchmark levels for edits be realistic and not 
arbitrary. The commenters requested that CMS consider a method to deal 
with outliers without forcing denials and appeals.
    Response: Option (2) could be used in combination with other 
options. We recognize the description we provided was not specific 
about the edit levels and that further deliberation would be 
appropriate before edits could be implemented.
    Comment: The majority of commenters opposed Option (2). Although 
some commenters agreed that edits for medically unlikely services are 
useful and appropriate, they expressed concerns about this approach 
because edits can often be arbitrary, are not based on patient needs, 
and may improperly limit necessary services. Some commenters asserted 
that individuals with degenerative conditions may require shorter 
sessions over longer periods of time to address functional loss and 
slow deterioration and to maximize health outcomes. The commenters also 
opposed edits that would fail to address the affects of cognitive 
impairment on treatment. Several commenters cited the existing ICD-9-
CPT code crosswalks, LCDs, NCCI edits, and MUEs as examples of similar 
edits that commenters often found to be clinically inappropriate. The 
commenters argued that current edits and policies based on unsupported 
information led to denials and appeals that were costly to therapists 
and CMS. The commenters urged CMS to avoid edits that lack clinical 
relevance or a scientific basis and create anomalies in claims data.
    Response: Option (2) was developed with input from therapy 
professionals based on their review of therapy utilization data. If 
this option were to be implemented, we would, at a minimum, review the 
advice and recommendations of stakeholders, along with any available 
utilization data to inform our decisions regarding the edit levels.
    Comment: A few commenters criticized Option (2) as scientifically 
flawed. One commenter reported that use of a combined effectiveness 
(that is, functional status change) and efficiency (that is, number of 
treatment visits) algorithm in a value-based payment process is one of 
the few methods where one could determine if the patient needs more or 
less treatment to reach optimal risk-adjusted gains in functional 
status. The same commenter referenced numerous research efforts that 
have analyzed functional status outcomes in

[[Page 73290]]

rehabilitation using sophisticated risk-adjustment methods and 
requested that CMS use these as a basis for a new payment policy.
    Other commenters asserted that currently available utilization data 
are inadequate to develop predetermined edit values, citing studies of 
therapy utilization under contract to CMS and studies performed by 
industry that demonstrate why ICD-9 coding, lack of function/severity 
data, and lack of a definition for ``episode'' are problematic.
    Response: Current therapy utilization data reveal that one percent 
of beneficiaries who receive services incur costs that proportionately 
far exceed those of the other 99 percent of beneficiaries. However, we 
are also aware that without some knowledge of the condition of the 
beneficiary, it is impossible to determine which, if any, of those 
services were medically necessary. While it would be desirable to 
analyze more detailed utilization data that include patient function/
severity outcomes for setting edit values, those data are not available 
to us in the short-term. We believe that the existing limited 
utilization data, albeit not fully descriptive of patients, could 
inform potential future edit values for therapy services.
    Comment: If CMS plans to move forward with edits, many commenters 
strongly requested that professional organizations be consulted to 
determine whether such edits are clinically appropriate and realistic. 
Some commenters specifically urged CMS to await the results of the 
DOTPA pilot in the hope of capturing meaningful clinical differences 
between patients before applying edits. Before such edits could 
reliably be applied to payment, other commenters recommended that CMS 
design, test, and evaluate additional data on functional status and 
barriers to participation. Many commenters indicated that more data are 
needed; especially thresholds based on episodes, condition groupings, 
and similar criteria that could trigger medical review, but not support 
denial. To that end, some commenters stated that it might be possible 
to support this approach under Option (2), but after Option (1) was 
implemented.
    Response: We understand the commitment of stakeholders to the 
development of alternatives to the therapy caps based on clinically 
appropriate policies. We will consider the potential benefit of Option 
(1) to develop data on which to base the edits required under Option 
(2) as we further contemplate alternatives to the therapy caps.
    Comment: A few commenters opposed Option (2) edits because the 
edits would virtually eliminate the exceptions process mandated by law 
and replace it with denial of claims at a predetermined value, which 
may be inconsistent with the statutory requirement for an exceptions 
process. The same commenters stated that there would be no basis for 
edits until Option (1) was implemented to provide more detailed claims-
based information. Several commenters reported research showing 10 
percent of Part B patients in nursing facilities have highly complex 
problems, with multidisciplinary needs and inconsistent patterns of 
therapy service use. The commenters were concerned that denials would 
interfere with treatment of these complex patients with special needs.
    Response: Option (2) would require an existing exception to the 
therapy caps, which would be enhanced to allow limited billing and 
payment for medically necessary services that exceed the caps. The 
option could not be used if the exceptions process were not extended. 
However, the Deficit Reduction Act of 2005 that established exceptions 
to the caps for medically necessary therapy services also required 
implementation of clinically appropriate code edits in order to 
identify and eliminate improper payments for therapy services. CMS 
currently applies NCCI and MUE edits to therapy services that fail to 
meet a reasonable assumption of medical necessity. We view 
implementation of Option (2) as consistent with our current authority 
to create edits to control inappropriate billings.
    Benchmark levels for Option (2) would be based on existing therapy 
utilization data and limits would be set at levels that a high 
percentage of beneficiaries would not exceed. While it may be helpful 
to have more data related to patient condition as described in Option 
(1) before implementing Option (2), we do not consider such information 
vital to the development of limits that affect a very small percentage 
of beneficiaries whose service payments would so far exceed average 
payments that they would be likely to include inappropriate billings 
and would be unlikely to interfere with the delivery of medically 
necessary services.
    Comment: If the option of implementing edits were pursued, several 
commenters indicated that the edits should be variable based on 
clinical criteria, result in medical review instead of denials, and 
reflect issues of multidisciplinary care, care coordination, and 
clinical issues.
    Response: If Option (2) were to be further developed, we would 
consider the commenters' suggestions prior to finalizing a plan for 
implementation, along with any new information available from 
additional research studies, OIG reports, or other sources.
    Option (3): Introduce per-session ``Evaluation/Assessment and 
Intervention'' (E&I) codes to bundle payment for groups of current 
therapy HCPCS codes into a single per-session payment.
    As discussed in section II.C.4.(c) of this final rule with comment 
period, multiple therapy services are often furnished in a single 
session, and we proposed to expand the MPPR policy to ``always 
therapy'' services in CY 2011 in order to take into consideration the 
efficiencies that occur when multiple services (the typical therapy 
scenario) are furnished in one session to a beneficiary. Furthermore, 
we note that section 1848(c)(2)(K) of the Act (as added by section 3134 
of the ACA) regarding potentially misvalued codes under the PFS 
specifies that the Secretary may make appropriate coding changes, which 
may include consolidation of individual services into bundled codes for 
payment under the PFS, as part of her review and adjustment of the 
relative values for services identified as potentially misvalued.
    This option would require that practitioners submit a single new 
Level II HCPCS code to represent all the therapy services currently 
reported and paid separately for an outpatient therapy session. Payment 
for the HCPCS code would be based on patient characteristics (as 
identified through prior CMS contractor analyses) and the complexity of 
the evaluation/assessment and intervention services furnished during 
the session. The new coding requirements would not necessarily disrupt 
the current exceptions process or the revised exceptions process 
described in Option (1) above. Approximately 12 E&I codes would be 
needed for each discipline, taking into consideration the basic 
algorithm shown in Table 47.

[[Page 73291]]



                                           Table 47--Evaluation/Assessment & Intervention Level II HCPCS Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Evaluation/assessment complexity
                                                                  --------------------------------------------------------------------------------------
                                                                             Minimal                      Moderate                   Significant
--------------------------------------------------------------------------------------------------------------------------------------------------------
Intervention level..................  None.......................  E&I Code <greek-i>1........  E&I Code <greek-i>2........  E&I Code <greek-i>3.
                                      Minimal....................  E&I Code <greek-i>4........  E&I Code <greek-i>5........  E&I Code <greek-i>6.
                                      Moderate...................  E&I Code <greek-i>7........  E&I Code <greek-i>8........  E&I Code <greek-i>9.
                                      Significant................  E&I Code <greek-i>10.......  E&I Code <greek-i>11.......  E&I Code <greek-i>12.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We would need to develop and test operational definitions for each 
E&I code so that practitioners would be able to properly report 
services and appropriate relative values could be established for each 
per-session code. We believe that a pilot study might reveal that the 
different practice patterns for the three therapy professions (physical 
therapy, occupational therapy, and speech-language pathology) could 
necessitate separate relative value determinations for each E&I code by 
type of therapy service furnished. As a result, up to 36 total new 
Level II HCPCS codes could be needed (12 per discipline).
    We anticipate that the definitions of E&I codes 1 through 3 and 7 
through 12 would describe services that may only be furnished by a 
``clinician'' (therapist, physician, or non-physician practitioner). 
E&I codes 1 through 3 would be reported for sessions that consisted 
only of evaluations. In addition, the definitions of E&I codes 4 
through 6 would describe services that could be furnished by or under 
the permissible supervision of all qualified outpatient therapy 
professionals. Based upon historical therapy utilization patterns, the 
vast majority of E&I codes submitted would likely fall in the 4 through 
9 code range. We would expect the RVUs under the PFS for all E&I codes 
to take into consideration the efficiencies when multiple services 
(those that would be currently reported under multiple CPT codes) are 
furnished.
    This option would require 2 to 4 years to add new codes and conduct 
a short-term pilot study to refine coding and value the 12 new HCPCS 
codes (or 36 if they are specific to each therapy discipline). There 
would be significant initial practitioner administrative burden to 
learn new codes and update billing systems. However, ultimately, with 
elimination of the practitioner's reporting of 76 different codes and 
many of the associated claims processing edits, the administrative 
burden of reporting therapy services to Medicare would be minimized.
    This bundled approach to reporting and payment could result in more 
appropriate valuation of therapy services that reflects efficiencies 
when individually reported services are furnished in the same session. 
As a result, it could lead to reduced therapy expenditures, as well as 
a reduction in the number of beneficiaries affected by the therapy caps 
in a given year.
    Comment: The vast majority of commenters concurred that provider 
payments should be influenced by underlying beneficiary 
characteristics. Most commenters agreed that following research and 
development, an episode-based payment alternative would be the most 
feasible payment model for outpatient therapy services in the longterm, 
and some recommended it be developed in a performance-based model. The 
commenters generally supported this option as a foundation to those 
goals, but recommended expert therapist input into the process and 
further study to determine how such an approach might affect different 
therapy types and settings. Several commenters noted that it would be 
critical to ensure clear nomenclature, the availability of an 
appropriate reporting methodology, and adequate payment for these codes 
that reflects the resources used to provide these services.
    To assure appropriate payment for needed services, the commenters 
agreed that the outcomes resulting from provider interventions must be 
incorporated in payment models. The commenters believe that experience 
gained in a transparent development process could be carried over into 
future payment system reform. Therefore, the majority of commenters who 
supported Option (3) also requested that there be a transparent process 
of development and testing in which expert therapists from various 
settings were included. Many also argued that Option (3) should be 
developed only after Option (1) had been implemented and function and 
severity data had been collected to inform the development of Option 
(3).
    Response: We appreciate the support of commenters for Option (3) 
and their interest in moving toward long-term goals by implementing 
short-term approaches as an incremental step. We agree that the 
information presented in the proposed rule was limited regarding Option 
(3) and that further study would be necessary before a bundled per-
session payment approach could be implemented. We will consider the 
commenters' recommendations to develop an episode-based payment 
alternative in the future.
    Comment: The concept of moving toward per-session codes that would 
be based on the severity of the patient and intensity of therapist 
clinical judgment and work involved in the provision of the therapy 
service was welcomed by many commenters. Those commenters who 
encouraged CMS to use this option to reduce the administrative burden 
of counting minutes and eliminate NCCI edits and MUEs anticipated 
corresponding improvement in the effective and efficient delivery of 
clinical interventions. The commenters urged CMS to ensure compliance 
of policies related to Option (3) with other payment policies, such as 
the delivery of medically necessary care driven by the development of 
an appropriate functional goal-based plan of care.
    Response: While a per-session payment methodology could result in 
modification of current policies regarding counting treatment time, it 
would not necessarily result in deleting claims edits. If we were to 
adopt such a methodology, we would assess the current claims processing 
edits and determine whether they continued to be appropriate and/or 
implement new edits to address potential issues under the revised 
payment approach.
    Comment: Some commenters suggested a modified definition of 
severity. The commenters recommended two separate severity tables of 
``severity or complexity,'' one for evaluation and the other for 
intervention. For each table separately, severity/complexity of 
clinical presentation would be rated as low, moderate, or high. In all 
cases, the commenters believe CMS should identify the factors to be 
used to determine severity for both evaluations and interventions. The 
commenters urged that CMS defer to professional standards of practice 
and state law with respect to the provision of services in each 
category. Other commenters

[[Page 73292]]

recommended modifiers for complex patients and comprehensive 
multidisciplinary rehabilitation settings to facilitate application of 
special policies for those circumstances.
    Response: The tables presented in the proposed rule were 
illustrative of the potential Level II per-session HCPCS codes, and 
these codes would require further development prior to implementation. 
We appreciate the commenters' suggestions and will consider them as we 
weigh this option.
    Comment: Some commenters who supported the general premise of 
Option (3) and some commenters who opposed it were not optimistic that 
per-session payment could be developed in a reliable and valid manner 
in the shortterm.
    Response: This alternative was developed as a short-term action 
that would start the process toward bundled payments for therapy 
episodes. The work completed by expert therapist advisors to the STATS 
workgroups laid a foundation that could facilitate development of the 
initial per-session HCPCS codes, which could reasonably be based on 
utilization data that demonstrated which services were historically 
billed together most of the time. We have analyzed data regarding 
common therapy code combinations. While a per-session payment approach 
could have a significant impact on payment for therapy services, we 
would not expect that developing and valuing per-session E&I codes 
would be a particularly lengthy or complex process. We note that over 
the past several years, the CPT Editorial Panel has bundled multiple 
services into a single code numerous times in different medical 
specialty areas and the AMA RUC has then valued the new comprehensive 
service by taking into account the expected efficiencies in the 
physician work and/or practice expense.
    Comment: Rather than consign the code definition and valuation 
processes integral to Option (3) to the CPT Editorial Panel and AMC RUC 
processes, which have little transparency, several commenters 
recommended that CMS develop Level II HCPCS codes for this purpose and 
allow for continued stakeholder input as to their valuation. Some 
commenters expressed appreciation for being included in the STATS 
process and suggested it as a model for future transparency in 
developing payment policies.
    Response: We appreciate the confidence stakeholders expressed 
regarding our capacity to develop HCPCS codes and values using a 
transparent process that includes input from stakeholders. If we were 
to move toward per-session payment in the future, we would need to 
consider the most appropriate approach to the development and valuation 
of new codes to describe those services. In the meantime, we note that 
if the CPT Editorial Panel were to develop new codes for comprehensive 
therapy services, as they have developed new CY 2011 comprehensive 
codes for cardiac catheterization and lower extremity endovascular 
revascularization services that bundle services that are commonly 
furnished together, we would consider those therapy codes for adoption 
under the PFS and would value them if we recognized them for PFS 
payment.
    Comment: Due to the nature of certain services when assessment and 
intervention are inseparable, some commenters asserted that 
interventions should not be included in this model but should be 
separately identified. The commenters provided the examples of active 
wound care management and prosthetic/orthotic management.
    Response: The details of therapy E&I codes have not been proposed 
or finalized. We appreciate the perspective of the commenters and will 
keep it in mind if we were to pursue the creation of per-session 
therapy codes in the future.
    Comment: While some commenters stated that Option (3) has the 
potential to simplify and increase consistency in coding for therapy 
services, several commenters who opposed this option and Option (1) 
mentioned that providers would learn to ``game the system'' and that 
all patients would be documented as severe on initial intake.
    Response: We too are concerned about approaches where providers 
could learn to game the system. The commenters who criticized this 
option generally preferred the edits in Option (2).
    Restriction on utilization of certain codes sometimes increases the 
risk of billing different codes, billing more of the same codes, or 
increasing patient visits, resulting in the same or greater cost to the 
Medicare program. The edits described in Option (2) would prevent high 
payments for individual beneficiaries, but might have little or no 
effect on the payments to providers or suppliers who increase the 
number of beneficiaries treated. Generally, we apply a number of 
different methods concurrently to reduce risk.
    At times, it may be difficult to know whether the clinical judgment 
and objective measurements have been accurately reported or documented 
in the record and whether the service furnished is appropriately 
represented by the billed HCPCS code. Providers focused on billing 
inappropriately may also document inappropriately. In the long term, we 
hope to incentivize honest and ethical providers and suppliers of 
services to furnish effective and efficient, high quality services. 
Possible fraudulent activity may be identified by aberrant billing 
patterns, and the new codes could facilitate the identification of such 
patterns.
    Several commenters expanded on the options presented as 
alternatives to the therapy caps or recommended options of their own. A 
few presented their own analyses of utilization to support their 
recommendations.
    Comment: Several commenters recommended incorporation of currently 
and publicly available validated tools to inform the collection of 
patient-specific information and move toward performance-based payment. 
A few commenters suggested that the study ``Pay-for-Performance for 
Outpatient Physical Therapy and Occupational Therapy'' that Focus On 
Therapeutic Outcomes (FOTO) completed in 2006 under Grant <greek-i>18-
P-93066-/0-01 might be a good template from which to start a process to 
replace caps and ultimately develop a value-based purchasing process. 
The commenters suggested the FOTO predictive model could be used, after 
pilot testing, to develop a reimbursement process where care is based 
on need and payment is based on results.
    Response: We recognize the importance of demonstrating the 
application of a value-based purchasing approach to physical and 
occupational therapy services. We posted the FOTO study on the CMS Web 
site at: http://www.cms.gov/TherapyServices/downloads/P4PFinalReport06-01-06.pdf.
    We are aware that research continues on the functional status 
indicator and that other measurement tools are also available in the 
public domain. The STATS discussions resulted in some improvements in 
the feasibility of matching outcomes data to claims. However, there are 
a number of problems that would have to be resolved before any of the 
currently available versions of therapy outcomes tools could be 
incorporated into payment policy. The FOTO study did not address value-
based purchasing for speech-language pathology services and there 
remain questions about applying the FOTO functional status indicator, 
or any self-reported measure, to certain cognitively impaired patients 
or to the Medicare population without further refinement.

[[Page 73293]]

    As we continue to explore various options, we would be interested 
in the feasibility of using historical research, existing electronic 
input systems, and registry information to provide a conceptual 
framework for alternative payment systems.
    Comment: Although CMS did not discuss the option of establishing 
therapy payments based on episodes in the discussion of short-term 
options, many commenters encouraged CMS to pursue that goal. Using data 
obtained from the severity/complexity codes described in Option (1), 
DOTPA, and other data initiatives, several commenters urged CMS to 
undertake research to develop a new episodic prospective payment system 
for Part B therapy services. Some commenters described the details of a 
plan to base therapy episode payment on groups based on patient 
clinical characteristics, considering mean episode costs, adjusting for 
high and low outliers or interrupted episodes, setting a default 
payment for unmapped episode groups, and also adjusting for local wage 
indices and providing an annual market basket payment rate update.
    The opportunity for CMS to define sessions and episodes more 
clearly and the potential to support the overall goal of payment reform 
was eagerly anticipated by several commenters. The commenters applauded 
CMS for recognizing the potential opportunity to gather these data on 
episodes for payment of therapy services furnished in the institutional 
setting.
    Episode-based payment was recommended as an alternative to the 
proposed therapy MPPR by numerous commenters. The commenters explained 
that the fundamental problem with fee-for-service payment is the 
incentive to over utilize therapy services in the outpatient setting 
and limit institutional providers from using resources flexibly. The 
commenters described analysis of a large database of Medicare 
beneficiaries as the basis for a methodology for grouping diagnosis 
codes to create episodes of care on which therapy payment would be 
based. The commenters noted that adjustment would be needed to payments 
for complex patients and readmissions. The same commenters supported 
episode payments for separate therapy disciplines based on a patient's 
medical diagnosis and goals. A critical goal for these commenters was 
to identify and account for differences in the conditions and needs of 
patients in skilled nursing facilities as opposed to other outpatient 
therapy settings.
    Response: We did not discuss development of episode-based payments 
as an option in the CY 2011 PFS proposed rule because we recognize that 
substantially more research would be necessary to define the episodes 
and determine what resources would be needed for different groups or 
categories of patients before the episodes could be incorporated into a 
payment system, particularly one that also addressed quality, 
efficiency, and good health outcomes. However, the absence of 
discussion in our proposed rule of an episode-based payment methodology 
as a short-term therapy cap alternatives option should not be 
interpreted as our reluctance to pursue the definition of episodes or 
the refinement of the concept of episode-based payments.
    Comment: A number of commenters supported testing variables they 
believe to be important in making a clinical judgment concerning a 
patient's severity, including: general type of patient (orthopedic, 
neurological, medical, etc.); impairment (body part treated); intake 
functional status; patient age; symptom acuity; surgical history; 
payer; gender; level of fear-avoidance of physical activities; and 
number of co-morbid conditions. Other commenters urged inclusion of 
clinical judgment of severity based on medical condition, physical 
impairments resulting from these conditions, patient function, and 
ability to participate in activities of daily living.
    Response: As we progress in the analysis of payment alternatives to 
the therapy caps, we appreciate the information on variables believed 
to be critical by stakeholders who have conducted related research and/
or furnished therapy services to a wide array of patients in different 
clinical settings. We welcome their expert contributions and 
collaboration with us on this important issue.
    In conclusion, we emphasize that we continue to be committed to 
developing alternatives to the therapy caps that would provide 
appropriate payment for medically necessary and effective therapy 
services furnished to Medicare beneficiaries based on patient needs, 
rather than the current therapy caps which establish financial 
limitations on Medicare payment for therapy services in some outpatient 
settings regardless of medical necessity. The Congress has repeatedly 
intervened to allow exceptions to these caps for certain time periods, 
and the current exceptions are automatically processed based on a 
practitioner's attestation that medical necessity is documented in the 
chart for an individual patient. We believe that, ultimately, payment 
for therapy services should incentivize the most effective and 
efficient care, consistent with Medicare's focus on value in its 
purchasing.
    The STATS contractor has worked closely with a broad variety of 
clinicians, administrators, scientists, researchers, and other 
contractors to develop the three alternatives presented in this 
discussion in CY 2011 rulemaking for the PFS. We are grateful for all 
public comments on the proposed rule from interested stakeholders, 
including individual therapists from both facility and nonfacility 
outpatient settings paid under Medicare Part B.
    We are committed to finding alternatives to the current therapy cap 
limitations on expenditures for outpatient therapy services that will 
ensure that beneficiaries continue to receive those medically necessary 
therapy services that maximize their health outcomes. We continue to 
dedicate our resources to identifying alternatives that would encourage 
the most efficient and cost-effective treatments. We believe motivated 
therapists, with attention to the most cost-effective practices, can 
incorporate practice efficiencies that benefit patients by achieving 
the best possible results at the lowest cost. Our STATS and DOTPA 
projects, which are currently engaged in data collection and analysis 
to inform short-term and long-term alternatives to the therapy caps, 
respectively, lay the foundation for future payment alternatives for 
outpatient therapy services. We are optimistic that the STATS project 
has identified short-term, feasible alternatives that may be tested in 
the future. The DOTPA project will create a tool and test its use to 
collect patient condition information that could then be applied to 
identify patient need for therapy services. Together, these projects 
may provide the basis for a long-term plan to reshape Medicare's 
payment policy for outpatient therapy services to align with the value-
based purchasing principles that are now guiding principles of the 
Medicare program.

B. Diabetes Self-Management Training (DSMT) Services (HCPCS Codes G0108 
and G0109)

1. Background
    Section 1861(s)(2)(S) of the Act provides for coverage of DSMT in 
outpatient settings without limiting this coverage to hospital 
outpatient departments. DSMT services consist of educational and 
training services furnished to an individual with diabetes by a 
certified provider in an outpatient setting.
    Section 1861(qq)(2)(A) of the Act stipulates that training must be

[[Page 73294]]

furnished by a ``certified provider'' which is a physician or other 
individual or entity that also provides other items or services for 
which payment may be made under Medicare. This program is intended to 
educate beneficiaries in the successful self-management of diabetes. 
The program includes instructions in self-monitoring of blood glucose; 
education about diet and exercise; an insulin treatment plan developed 
specifically for the patient who is insulin-dependent; and motivation 
for patients to use the skills for self-management. DSMT services are 
reported under HCPCS codes G0108 (Diabetes outpatient self-management 
training services, individual, per 30 minutes) and G0109 (Diabetes 
outpatient self-management training services, group session (2 or 
more), per 30 minutes).
2. Payment for DSMT Services
    In accordance with section 1848(j)(3), Medicare payment for 
outpatient DSMT services is made under the PFS as specified in Sec.  
414.1 through Sec.  414.48. When we created HCPCS codes G0108 and 
G0109, the only direct costs included in the PE were registered nurse 
labor. Section 410.144(a)(4)(a) states that the DSMT team includes at 
least a registered dietitian and a certified diabetes educator. We 
initially did not establish work RVUs for DSMT services because we 
believed training would typically be performed by individuals other 
than a physician, such as a registered nurse (65 FR 83130). However, 
since that time, we have received requests from a number of 
stakeholders, including the American Association of Clinical 
Endocrinologists (AACE), the American Association of Diabetes Educators 
(AADE), and the Juvenile Diabetes Research Foundation, to include 
physician work in valuing DSMT services that is similar to the 
physician work that has been included in medical nutrition therapy 
(MNT) services since CY 2007 and kidney disease education (KDE) 
services since CY 2010. The stakeholders argued that because physicians 
coordinate DSMT programs, provide patient instruction, and communicate 
with referring physicians, physician work should be included in the 
RVUs for DSMT services. The stakeholders also requested that we 
reconsider the direct PE inputs for DMST services and include clinical 
labor for diabetes educators at a higher hourly rate instead of 
registered nurse labor. In addition, they stated that the supplies and 
equipment in the PE for DSMT services should be the same as for KDE 
services, with additional direct PE inputs for a diabetes educator 
curriculum, data tracking software, and DSMT program accreditation.
    For CY 2011, we proposed the following:
    <bullet> To assign physician work RVUs to DSMT services that are 
comparable, as adjusted for the service times of the HCPCS codes, to 
the work RVUs for MNT services. The rationale for the proposed work 
RVUs for the DSMT HCPCS G-codes was based on the similarity of DSMT 
services to MNT services in the individual (CPT code 97803) and group 
(CPT code 97804) setting.
    <bullet> That HCPCS G0108 for 30 minutes of individual DSMT 
services would be crosswalked to CPT code 97803 (Medical nutrition 
therapy; re-assessment and intervention, individual, face-to-face with 
the patient, each 15 minutes) for purposes of assigning work RVUs, with 
the physician work RVUs for CPT code 97803 multiplied by two to account 
for the greater time associated with HCPCS code G0108 (that is, 30 
minutes).
    <bullet> That HCPCS G0109 for 30 minutes of group DSMT services 
would be crosswalked to CPT code 97804 (Medical nutrition therapy; 
group (2 or more individuals(s)), each 30 minutes) for purposes of 
assigning work RVUs.
    <bullet> To modify the PE inputs for DSMT services to reflect the 
current equipment and supplies for the KDE HCPCS G-codes implemented in 
the CY 2010 PFS final rule with comment period (74 FR 61901) (that is, 
HCPCS codes G0420 (Face-to-face educational services related to the 
care of chronic kidney disease; individual, per session, per one hour) 
and G0421 (Face-to-face educational services related to the care of 
chronic kidney disease; group, per session, per one hour)), based on 
the similarity in the equipment and supplies necessary for DSMT and KDE 
services. We made adjustments to some of the equipment times for the 30 
minute DSMT individual and group services as compared to the one hour 
individual and group KDE services.
    <bullet> To include a diabetes educator curriculum and data 
tracking software in the PE inputs for DSMT services, while noting that 
we did not include the DSMT program accreditation costs because it is 
our general practice not to include these costs in the PE inputs.
    <bullet> To utilize the same approach for clinical labor as we 
adopted for MNT services when we provided physician work RVUs for those 
services in CY 2007 (71 FR 69645), rather than changing the current 
labor type for DSMT services. Specifically, we removed all of the 
clinical labor from the group DSMT code and most of the clinical labor 
from the individual DSMT code, given that we proposed work RVUs for 
both DSMT HCPCS codes for CY 2011.
    In the CY 2011 PFS proposed rule (75 FR 40100), we stated our 
belief that these proposals would value DSMT services more consistently 
with other similar services that are paid under the PFS. As a result of 
our proposed CY 2011 changes, the proposed work RVUs for HCPCS codes 
G0108 and G0109 were 0.90 and 0.25, respectively. As described above, 
we also proposed to modify the direct PE inputs for these codes for CY 
2011.
    Comment: Numerous commenters specifically supported the 
establishment of work RVUs for the DSMT services based on the work RVUs 
of the similar MNT services, CPT codes 97803 for 15 minutes of 
individual MNT services and 97804 for 30 minutes of group MNT services. 
Some commenters explained that addition of work RVUs would lead to 
higher payment rates for DSMT services, resulting in a significant 
positive impact on diabetes education practices and increased patient 
access to care for DSMT services. Several commenters suggested that 
this change would appropriately recognize the active role many 
physicians contribute to ensuring that their patients have access to 
DSMT services and providing care coordination and communication with 
the multidisciplinary DSMT team members. One commenter concurred with 
the proposal to update the direct PE inputs for the DSMT HCPCS codes 
based on those assigned to the HCPCS codes for KDE services.
    Response: We appreciate the commenters' support for our proposal to 
establish work RVUs and to update the direct PE inputs for the DSMT 
services.
    In conducting our review of the public comments on this issue for 
this final rule with comment period, we examined newly available PFS 
claims data for same day billings from one provider for a single 
Medicare beneficiary. In response to that analysis and in accordance 
with our PFS methodology which values services as delivered to the 
typical patient, we note that we have made minor adjustments to some of 
the direct PE inputs for supplies and equipment times for both HCPCS G-
codes for DSMT services, G0108 and G0109, under our final CY 2011 
policy. We made these refinements after a review of our PFS utilization 
data indicated that 2 units of HCPCS code G0108 (a total of 60 minutes) 
were typically billed together on the same day for the same patient, 
instead of the one unit of HCPCS code G0108 (30

[[Page 73295]]

minutes) which was used as the assumption for the typical session at 
the time of our CY 2011 proposal. As a result, we have assigned half of 
the amount of the direct inputs for supplies and equipment time in 
HCPCS code G0420 (60 minutes individual KDE services) to HCPCS code 
G0108 (30 minutes individual DSMT services). Regarding the direct PE 
inputs for HCPCS code G0109, we continue to believe that there is a 
similarity among the group and individual DSMT and KDE services and the 
education practices when these services are delivered, as reflected in 
their PFS utilization patterns. For this reason, we have made minor 
modifications to the PE inputs for HCPCS code G0109 (30 minutes of 
group DSMT services) to reflect half of each input for HCPCS code G0421 
(60 minutes of group KDE services) that parallel the modifications we 
made for the individual DSMT HCPCS code described previously. We 
further note that these refinements to the direct PE inputs for DSMT 
services are based on the final adjustments that were made to the 
direct PE inputs for HCPCS codes G0420 and G0421 for KDE services, 
discussed in section V. B.2.e. of this final rule with comment period, 
because our approach to establishing the direct PE inputs for the DMST 
HCPCS G-codes is based on the inputs for KDE services.
    As a result, the modifications we made to the supplies and 
equipment inputs for the DSMT HCPCS G-codes, G0108 and G0109, equal 
half of the same supply and equipment times in the one hour HCPCS G-
codes for KDE services, G0420 and G0421.
    In addition, because the $200 price of the diabetes educator 
curriculum does not meet the $500 floor we established for inclusion in 
the equipment database, we have bundled the diabetes educator 
curriculum price with the $500 data tracking software one because the 
patient's curriculum information is typically recorded in the tracking 
software. The equipment descriptor for the data tracking software was 
modified to read: Diabetes education data tracking software, includes 
curriculum. Accordingly, we changed the price input from $500 to $700 
and assigned the bundled equipment a total of 4 minutes. In this way, 
we are including the cost of the curriculum in the direct PE inputs for 
DSMT services as we proposed for CY 2011, while remaining consistent 
with the established $500 floor on inclusion of equipment in the PE 
database.
    After consideration of the public comments we received, we are 
finalizing the proposed work RVUs and direct PE input for DSMT 
services, with modification to make the PE adjustments described 
previously. The final CY 2011 direct PE database that lists the direct 
PE inputs is available on the CMS Web site under the downloads for the 
CY 2011 PFS final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage. The final CY 2011 RVUs for 
HCPCS codes G0108 and G0109 are displayed in Addendum B to this final 
rule with comment period.

C. End-Stage Renal Disease Related Services for Home Dialysis (CPT 
codes 90963, 90964, 90965, and 90966)

1. End-Stage Renal Disease Home Dialysis Monthly Capitation Payment 
Services (CPT codes 90963, 90964, 90965, and 90966)
    In the CY 2004 PFS final rule with comment period (68 FR 63216), we 
established new Level II HCPCS G-codes for end-stage renal disease 
(ESRD) monthly capitation payment (MCP) services. For center-based 
patients, payment for the G-codes varied based on the age of the 
beneficiary and the number of face-to-face visits furnished each month 
(for example, 1 visit, 2-3 visits and 4 or more visits). Under the MCP 
methodology, the lowest payment applied when a physician provided one 
visit per month; a higher payment was provided for two to three visits 
per month. To receive the highest payment, a physician would have to 
provide at least four ESRD-related visits per month. However, payment 
for home dialysis MCP services only varied by the age of beneficiary. 
Although we did not initially specify a frequency of required visits 
for home dialysis MCP services, we stated that we ``expect physicians 
to provide clinically appropriate care to manage the home dialysis 
patient'' (68 FR 63219).
    Effective January 1, 2009, the CPT Editorial Panel created new CPT 
codes to replace the G-codes for monthly ESRD-related services, and we 
accepted the new codes for use under the PFS in CY 2009. The CPT codes 
for monthly ESRD-related services for home dialysis patients include 
the following, as displayed in Table 32 of the CY 2011 PFS proposed 
rule (75 FR 40101) and reprinted as Table 48 below: 90963, 90964, 
90965, and 90966. In addition, the clinical vignettes used for the 
valuation of CPT codes 90963, 90964, 90965, and 90966 include scheduled 
(and unscheduled) examinations of the ESRD patient.
    Given that we pay for a physician (or nonphysician practitioner 
(NPP)) to evaluate the ESRD patient over the course of an entire month 
under the MCP, we believe that it is clinically appropriate for the 
physician (or NPP) to have at least one in-person, face-to-face 
encounter with the patient per month. As such, for CY 2011 we proposed 
to require the MCP physician (or NPP) to furnish at least one in-person 
patient visit per month for home dialysis MCP services (as described by 
CPT codes 90963 through 90966). The proposed requirement would be 
effective for home dialysis MCP services beginning January 1, 2011. As 
stated in the CY 2011 PFS proposed rule (75 FR 40100), we believe this 
requirement reflects appropriate, high quality medical care for ESRD 
patients being dialyzed at home and generally would be consistent with 
the current standards of medical practice.
    Comment: Many commenters stated that a monthly visit embodies the 
standard of care for home dialysis patients. However, many of the same 
commenters also stated that it may not always be feasible to furnish a 
face-to-face visit every month for home dialysis patients due to 
extenuating circumstances. A number of commenters explained that, in 
contrast to patients who dialyze in a dialysis center, home dialysis 
patients would need to travel to the doctor's office (or the physician 
would need to visit the patient's home) which would be an undue burden 
on both the physician and the patient. To that end, several commenters 
urged CMS to provide flexibility in cases where a patient does not show 
up for their scheduled appointment and for those that cannot travel due 
to significant geographic distance between the patient and the 
nephrologist. For example, some specialty societies stated that 
pediatric home dialysis patients may experience exceptional 
circumstances due to the scarcity of pediatric nephrologists and remote 
geographic locations, making the monthly face-to-face visit requirement 
harder to fulfill. In these circumstances, one commenter requested that 
CMS consider allowing the MCP physician to furnish at least 1 visit 
every 3 months and allowing the other monthly visits to be furnished as 
a telehealth service. Additionally, several commenters explained that 
the monthly management of a home dialysis patient involves many tasks 
(in addition to face-to-face visits) including: Reviewing lab tests, 
treatment data and the dialysis prescription; monitoring the patient's 
vascular access; and overseeing quality improvement activities (as well 
as incurring the practice expense

[[Page 73296]]

associated with managing the patient's care). The commenters stated 
that the MCP physician should not be ``penalized'' if the patient 
chooses not to attend the monthly visit. Moreover, many of the 
commenters who agreed that monthly visits are optimal care did not 
support a monthly visit requirement for the home dialysis MCP service. 
The commenters stated that the frequency of face-to-face visits should 
remain at the discretion of the nephrologist and patient. Several of 
the commenters who did not support a policy change also stated that 
requiring a monthly visit could create disincentives for providing 
beneficiaries with home dialysis therapy in circumstances where it may 
be difficult for the MCP physician to furnish a visit every month. The 
commenters explained that nephrologists may not want to encourage home 
dialysis therapy if they will not get paid as a result of a patient 
``opting out'' of a scheduled visit.
    Response: We continue to believe that furnishing monthly face-to-
face visits is an important component of high quality medical care for 
ESRD patients being dialyzed at home and generally would be consistent 
with the current standards of medical practice. However, we also 
acknowledge that extenuating circumstances may arise that make it 
difficult for the MCP physician (or NPP) to furnish a visit to a home 
dialysis patient every month. Therefore, we will allow Medicare 
contractors the discretion to waive the requirement for a monthly face-
to- face visit for the home dialysis MCP service on a case-by-case 
basis, for example, when the MCP physician's (or NPP's) notes indicate 
that the MCP physician (or NPP) actively and adequately managed the 
care of the home dialysis patient throughout the month. Additionally, 
as we explained in the CY 2004 PFS final rule with comment period (68 
FR 63219 through 63220), we also believe that the use of other 
practitioners working with the MCP physician (or NPP) to furnish the 
required monthly visit for the home dialysis MCP service could help 
alleviate scheduling issues and problems related to geographic 
distance.
    With regard to the comment on furnishing the proposed required 
visit for the home dialysis MCP as a telehealth service, we note that 
any interested parties may submit requests to add services to the list 
of Medicare telehealth services. Requests submitted before the end of 
CY 2010 will be considered for the CY 2012 PFS proposed rule. 
Requestors should be advised that each request to add a service to the 
list of Medicare telehealth services must include any supporting 
documentation the requestor wishes us to consider as we review the 
request. For more information on submitting a request for an addition 
to the list of Medicare telehealth services, including where to 
directly mail these requests, we refer readers to section IV.B. of this 
final rule with comment period and the CMS Web site at: http://www.cms.hhs.gov/telehealth.
    Comment: Several commenters stated that the conditions for coverage 
for dialysis facilities require a monthly interaction between a 
clinician representing the facility and the home dialysis patient. The 
commenters believe that the conditions for coverage for dialysis 
facilities permit flexibility in the monthly visit requirement if the 
patient chooses to opt out of the monthly visit and requested that CMS 
align the proposed visit requirement for the home dialysis MCP service 
with the ``flexibility'' permitted under the conditions for coverage 
for dialysis facilities.
    Response: With regard to conditions for coverage for dialysis 
facilities, Sec.  494.90(b)(4) of the regulations specifies that the 
dialysis facility must ensure that all dialysis patients are seen by a 
physician, nurse practitioner, clinical nurse specialist, or 
physician's assistant providing ESRD care at least monthly. Section 
494.100 requires ``a dialysis facility that is certified to provide 
service to home patients to ensure that home dialysis services are at 
least equivalent to those provided to in-facility patients and meet all 
applicable conditions of this part.'' In addition, the interpretive 
guidance for part 494 entitled ``Conditions for Coverage for ESRD 
Facilities'' specifies that a monthly visit is required for each home 
patient by a physician, an advanced practice registered nurse, or a 
physician assistant. The visit may be conducted in the dialysis 
facility, at the physician's office, or in the patient's home. The 
guidelines state that ``any patient may choose not to be seen by a 
physician every month'' but also specify that if there is a pattern of 
a patient consistently missing physician and or practitioner visits, 
the lack of medical oversight should be addressed with the patient in 
the plan of care.
    The requirement for at least one monthly visit with a clinician 
associated with the dialysis facility is a condition for coverage for 
the dialysis facility for purposes of participating in the Medicare 
program and not a direct factor in determining the payment amount for 
the dialysis facility. In other words, the clinician visit is not a 
component of the facility's composite rate. However, as mentioned in 
the background section, the clinical vignettes used for the valuation 
of the home dialysis MCP service under the PFS include scheduled (and 
unscheduled) examinations of the ESRD patient. Given that physician or 
NPP visits are a factor in determining the PFS payment amount for the 
home MCP service that is furnished to the typical Medicare beneficiary, 
we do not believe that the monthly visit requirement for the home 
dialysis MCP service is analogous to the visit requirement under the 
conditions for coverage for dialysis facilities that has no 
implications for setting payment rates under the PFS. Therefore, we do 
not agree that the visit requirement for the home dialysis MCP service 
necessarily should be ``aligned'' with the conditions for coverage for 
dialysis facilities.
    Comment: One commenter suggested that CMS consider structuring the 
home dialysis MCP similar to the center-based MCP. Under this approach, 
the commenter suggested that a higher payment amount could be made for 
home dialysis MCP services with at least one in person, face-to-face 
visit per month.
    Response: We will consider the commenter's suggestion as we 
continue to develop and refine Medicare payment policy for physicians 
and practitioners managing patients on dialysis. In the event we decide 
to make changes in the payment amount(s) for the home dialysis MCP 
services, we would do so in a future proposed rule where the public 
would have the opportunity to provide comments as afforded by the 
rulemaking process.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal, with modification. We will require the 
MCP physician (or NPP) to furnish at least one in-person patient visit 
per month for home dialysis MCP services (as described by CPT codes 
90963 through 90966). However, Medicare contractors will have the 
discretion to waive the monthly visit requirement for the home dialysis 
MCP service on a case-by-case basis.
2. Daily and Monthly ESRD-Related Services (CPT Codes 90951 Through 
90970)
    In CY 2008, the AMA RUC submitted recommendations for valuing the 
new CY 2009 CPT codes displayed in Table 48 that replaced the MCP HCPCS 
G-codes for monthly ESRD-related services. We accepted these codes for 
use under the PFS.

[[Page 73297]]



                                  Table 48--MCP Codes Recognized Under the PFS
----------------------------------------------------------------------------------------------------------------
                MCP Code                                             Long descriptor
----------------------------------------------------------------------------------------------------------------
90951..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          younger than 2 years of age to include monitoring for the adequacy of
                                          nutrition, assessment of growth and development, and counseling of
                                          parents; with 4 or more face-to-face physician visits per month.
90952..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          younger than 2 years of age to include monitoring for the adequacy of
                                          nutrition, assessment of growth and development, and counseling of
                                          parents; with 2-3 face-to-face physician visits per month.
90953..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          younger than 2 years of age to include monitoring for the adequacy of
                                          nutrition, assessment of growth and development, and counseling of
                                          parents; with 1 face-to-face physician visit per month.
90954..................................  End-stage renal disease (ESRD) related services monthly, for patients 2-
                                          11 years of age to include monitoring for the adequacy of nutrition,
                                          assessment of growth and development, and counseling of parents; with
                                          4 or more face-to-face physician visits per month.
90955..................................  End-stage renal disease (ESRD) related services monthly, for patients 2-
                                          11 years of age to include monitoring for the adequacy of nutrition,
                                          assessment of growth and development, and counseling of parents; with
                                          2-3 face-to-face physician visits per month.
90956..................................  End-stage renal disease (ESRD) related services monthly, for patients 2-
                                          11 years of age to include monitoring for the adequacy of nutrition,
                                          assessment of growth and development, and counseling of parents; with
                                          1 face-to-face physician visit per month.
90957..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          12-19 years of age to include monitoring for the adequacy of
                                          nutrition, assessment of growth and development, and counseling of
                                          parents; with 4 or more face-to-face physician visits per month.
90958..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          12-19 years of age to include monitoring for the adequacy of
                                          nutrition, assessment of growth and development, and counseling of
                                          parents; with 2-3 face-to-face physician visits per month.
90959..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          12-19 years of age to include monitoring for the adequacy of
                                          nutrition, assessment of growth and development, and counseling of
                                          parents; with 1 face-to-face physician visit per month.
90960..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          20 years of age and older; with 4 or more face-to-face physician
                                          visits per month.
90961..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          20 years of age and older; with 2-3 face-to-face physician visits per
                                          month.
90962..................................  End-stage renal disease (ESRD) related services monthly, for patients
                                          20 years of age and older; with 1 face-to-face physician visit per
                                          month.
90963..................................  End-stage renal disease (ESRD) related services for home dialysis per
                                          full month, for patients younger than 2 years of age to include
                                          monitoring for the adequacy of nutrition, assessment of growth and
                                          development, and counseling of parents.
90964..................................  End-stage renal disease (ESRD) related services for home dialysis per
                                          full month, for patients 2-11 years of age to include monitoring for
                                          the adequacy of nutrition, assessment of growth and development, and
                                          counseling of parents.
90965..................................  End-stage renal disease (ESRD) related services for home dialysis per
                                          full month, for patients 12-19 years of age to include monitoring for
                                          the adequacy of nutrition, assessment of growth and development, and
                                          counseling of parents.
90966..................................  End-stage renal disease (ESRD) related services for home dialysis per
                                          full month, for patients 20 years of age and older.
----------------------------------------------------------------------------------------------------------------

    There are four additional CPT codes for ESRD-related services that 
are reported on a per-day basis. These daily CPT codes are: 90967 (End-
stage renal disease (ESRD) related services for dialysis less than a 
full month of service, per day; for patients younger than 2 years of 
age); 90968 (End-stage renal disease (ESRD) related services for 
dialysis less than a full month of service, per day; for patients 2-11 
years of age); 90969 (End-stage renal disease (ESRD) related services 
for dialysis less than a full month of service, per day; for patients 
12-19 years of age); and 90970 (End-stage renal disease (ESRD) related 
services for dialysis less than a full month of service, per day; for 
patients 20 years of age and older).
    For the MCP codes displayed in Table 32 of the CY 2011 PFS proposed 
rule, the AMA RUC initially recommended 36 minutes of clinical labor 
time for the pre-service period. They also recommended an additional 6 
minutes in the post-period for CPT codes 90960, 90961, 90962, and 
90966. For the four codes describing daily services (CPT codes 90967 
through 90970), the AMA RUC recommended including 1.2 minutes of 
clinical labor per day, which is the prorated amount of pre-service 
clinical labor included in the monthly codes. The AMA RUC also 
recommended that CPT codes 90952 and 90953 be contractor-priced.
    In the CY 2009 PFS final rule with comment period (73 FR 69898), we 
asked the AMA RUC to reconsider their recommended PE inputs in the 
interest of making certain that they accurately reflected the typical 
direct PE resources required for these services. In addition, we asked 
the AMA RUC to review the physician times for CPT codes 90960 and 90961 
that are used in the calculation of the PE RVUs. We accepted the work 
values for the new CPT codes for ESRD-related services that were 
recommended by the AMA RUC.
    Since CY 2009, we have continued to calculate the PE RVUs for the 
entire series of MCP codes displayed in Table 32 of the CY 2011 PFS 
proposed rule (75 FR 40101) by using the direct PE inputs from the 
predecessor HCPCS G-codes, except for CPT codes 90952 and 90953 which 
are contractor-priced. We have also continued to use the physician time 
associated with the predecessor HCPCS G-codes for CPT codes 90960 and 
90961 for purposes of calculating the PE RVUs.
    In CY 2009, the AMA RUC submitted new recommendations for CPT codes 
90951 and 90954 through 90970. For each of the MCP codes (CPT code 
90951 and CPT codes 90954 through 90966), the AMA RUC recommended an 
increased pre-service clinical staff time of 60 minutes. For each of 
the daily dialysis service codes (CPT codes 90967 through 90970), the 
AMA RUC

[[Page 73298]]

recommended an increased clinical labor time of two minutes, which is 
the prorated amount of clinical labor included in the monthly codes. 
The AMA RUC also recommended an additional 38 minutes of physician time 
for CPT codes 90960 and 90961. This resulted in a total physician time 
of 128 minutes and 113 minutes, respectively, for these codes. The AMA 
RUC continued to recommend that CPT codes 90952 and 90953 be 
contractor-priced.
    For CY 2011, we proposed to accept these AMA RUC recommendations as 
more accurate reflections of the typical direct PE resources required 
for these services. Therefore, we proposed to develop the PE RVUs for 
CPT code 90951 and CPT codes 90954 through 90970 using the direct PE 
inputs as recommended by the AMA RUC and reflected in the proposed CY 
2011 PE database, which is available on the CMS Web site under the 
supporting data files for the CY 2011 PFS proposed rule at: http://www.cms.gov/PhysicianFeeSched/. We also proposed to use the AMA RUC-
recommended physician times for CPT codes 90960 and 90961. Consistent 
with the AMA RUC's recommendations, we proposed to continue to 
contractor-price CPT codes 90952 and 90953.
    We did not receive public comment on our proposal to accept these 
AMA RUC recommendations as more accurate reflections of the typical 
direct PE resources required for these services. Therefore, we are 
finalizing our CY 2011 proposal to develop the PE RVUs for CPT code 
90951 and CPT codes 90954 through 90970 using the direct PE inputs as 
recommended by the AMA RUC and reflected in the CY 2011 direct PE 
database, which is available on the CMS Web site under the supporting 
data files for the CY 2011 PFS final rule with comment period at: 
http://www.cms.gov/PhysicianFeeSched/. We will also use the AMA RUC-
recommended physician times for CPT codes 90960 and 90961. Consistent 
with the AMA RUC's recommendations, we will continue to contractor-
price CPT codes 90952 and 90953.

D. Portable X-Ray Set-Up (HCPCS Code Q0092)

    When a portable x-ray is furnished to a single patient, as many as 
four component HCPCS codes may be billed and paid for the service, 
including the portable x-ray transportation (HCPCS code R0070 
(Transportation of portable x-ray equipment and personnel to home or 
nursing home, per trip to facility or location, one patient seen)); the 
portable x-ray set-up (HCPCS code Q0092 (Set-up of portable x-ray 
equipment)); and the professional and technical components of the x-ray 
service itself (CPT 70000 series). Currently, the direct PE database 
contains x-ray equipment in both the radiology codes in the 70000 
series of CPT and HCPCS code Q0092, the code for the set-up of a 
portable x-ray. In the technical component of the x-ray service is the 
direct PE input of a radiology room which contains x-ray equipment for 
the various radiology codes in the 70000 series of CPT. In addition, 
portable x-ray equipment is included as a direct PE input for HCPCS 
code Q0092. Thus, x-ray equipment currently is recognized within the 
direct PE values for two of the HCPCS codes that would be reported for 
the portable x-ray service, resulting in an overvaluation of the 
comprehensive portable x-ray service.
    Therefore, for CY 2011 we proposed to remove portable x-ray 
equipment as a direct PE input for HCPCS code Q0092, in order to pay 
more appropriately for the x-ray equipment used to furnish a portable 
x-ray service. We believe the resulting payment for the comprehensive 
portable x-ray service would more appropriately reflect the resources 
used to furnish portable x-ray services by providing payment for the x-
ray equipment solely through payment for the technical component of the 
x-ray service that is furnished.
    Comment: Several commenters opposed the removal of portable x-ray 
equipment as a direct PE input for HCPCS code Q0092. The commenters 
believe the elimination of the equipment from HCPCS code Q0092 is 
inconsistent with longstanding CMS payment policy recognizing the 
unique and additional costs incurred by portable x-ray suppliers in 
furnishing services that involve special equipment requiring extra 
assembly and disassembly time. In addition, the commenters believe that 
the proposed equipment elimination conflicts with the statutory mandate 
of section 1848(c) of the Act that CMS calculate the PFS RVUs based on 
the actual resources used in furnishing a service because equipment is 
a legitimate direct PE component of the set-up component service (HCPCS 
code Q0092).
    Response: We agree that x-ray equipment is used to furnish a 
portable x-ray service and the equipment set-up is reported with HCPCS 
code Q0092. However, because the portable x-ray set-up service would 
always be reported along with the technical component of the x-ray 
service (CPT 70000 series) that already includes x-ray equipment as a 
direct PE input, to include x-ray equipment again in the PE of the set-
up code would clearly be duplicative. Only one item of equipment, that 
is, a single x-ray machine, is used in furnishing the portable x-ray 
service. We are, therefore, eliminating the portable x-ray equipment 
from HCPCS code Q0092 and, instead, recognizing the cost of such 
equipment in the direct PE for the technical component of the x-ray 
service.
    Comment: According to several commenters, because CMS has not 
undertaken a review of all combinations of services paid under the PFS 
that together might comprise a ``comprehensive service'' to identify 
potentially duplicative direct PE inputs when the services are 
furnished together, CMS should refrain from applying the proposed 
policy to suppliers of portable x-ray services.
    Response: While it would require an extensive analysis to review 
all combinations of PFS services that may be furnished together and 
identify potentially duplicative PE inputs, the PFS has several 
longstanding policies that were adopted to provide appropriate payment 
when certain services are furnished together. For example, existing 
multiple procedure payment reduction policies reduce payment for the 
second and subsequent surgical procedures or technical components of 
imaging services when furnished to the same patient by the same 
physician on the same day, based partly on the presence of efficiencies 
in the PE under such circumstances. Furthermore, as discussed in 
section II.C.4. of this final rule with comment period, we are adopting 
a new multiple procedure payment reduction policy for CY 2011 for 
therapy services because of the duplication in the PE when therapy 
services are furnished together. Finally, we note that for those CPT 
codes that are designated as add-on codes to primary services, we 
ensure that the direct PE inputs do not duplicate inputs in the primary 
services. Given our ongoing efforts to more appropriately value 
services furnished together, we believe that HCPCS code Q0092 
essentially functions as an ``add-on'' code to the primary service that 
it generally accompanies, which is the technical component of an x-ray 
service. Therefore, we believe it is fully consistent with our ongoing 
efforts to recognize efficiencies through payment policy when multiple 
services are furnished together to remove the duplicative x-ray 
equipment from the direct PE inputs for HCPCS code Q0092.
    Comment: A few commenters believe that elimination of x-ray 
equipment in HCPCS code Q0092 would have a negative impact on the 
financial status

[[Page 73299]]

of portable x-ray suppliers who are typically small business owners. 
According to the commenters, CMS should heed the statutory mandates of 
the Regulatory Flexibility Act (RFA) which require mitigation of such 
adverse effects.
    Response: We note that the RFA requires only that we analyze 
regulatory options for small businesses that include a justification 
for the reason action is being taken, the kinds and number of small 
entities the rule affects, and an explanation of any meaningful options 
that achieve the objectives with less significant adverse economic 
impact on the small entities. The CY 2011 PFS proposed rule included a 
regulatory impact analysis (75 FR 40230 through 40245), as does section 
XI.A. of this final rule with comment period. As a specialty, the 
aggregate impact on portable x-ray suppliers from the PFS changes 
proposed for CY 2011 was an increase of 8 percent in the proposed rule 
(75 FR 40232), and it is an increase of 6 percent for CY 2011 as 
displayed in Table 101 of this final rule with comment period. 
Therefore, the combined effect of all final PFS policies for CY 2011 
will not adversely impact portable x-ray suppliers.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to remove portable x-ray equipment as a 
direct PE input for HCPCS code Q0092.

E. Pulmonary Rehabilitation Services (HCPCS Code G0424)

    In the CY 2010 PFS proposed rule (74 FR 33614), we proposed to 
create new HCPCS G-code G0424 (Pulmonary rehabilitation, including 
aerobic exercise (includes monitoring), per session, per day) to 
describe the services of a pulmonary rehabilitation (PR) program as 
specified in section 144(a) of the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA). Using CPT code 93797 (Cardiac rehab 
without telemetry) as a reference code, we proposed to assign 0.18 work 
RVUs and 0.01 malpractice RVUs to G0424. To establish PE RVUs, we 
reviewed the PE inputs of similar services, particularly those of the 
respiratory therapy HCPCS codes G0237 (Therapeutic procedures to 
increase strength or endurance or respiratory muscles, face to face, 
one on one, each 15 minutes (includes monitoring)) and G0238 
(Therapeutic procedures to improve respiratory function, other than 
described by G0237, one on one, face to face, per 15 minutes (includes 
monitoring)), as well as the cardiac rehabilitation codes, CPT codes 
93797 and 93798 (Physician services for outpatient cardiac 
rehabilitation; with continuous ECG monitoring (per session)). In the 
CY 2010 PFS final rule with comment period (74 FR 61886), we finalized 
our proposal with modifications to the code descriptor and PE inputs, 
as recommended by some commenters.
    Based on commenters' recommendations from the CY 2010 PFS final 
rule with comment period and further information furnished by 
stakeholders, for CY 2011 we proposed to increase the work RVUs for 
HCPCS code G0424 to 0.28 for CY 2011 to be comparable to the work RVUs 
for cardiac rehabilitation with monitoring (CPT code 93798) in view of 
the monitoring required for HCPCS code G0424.
    We also proposed to increase the clinical labor time for the 
respiratory therapist from 15 minutes to 30 minutes and to crosswalk 
the PE equipment inputs for HCPCS code G0424 to those for respiratory 
treatment services (HCPCS code G0238), which include a 1-channel ECG 
and a pulse oximeter. We retained the treadmill currently assigned to 
HCPCS code G0424 and adjusted the equipment time to 45 minutes. While 
several public commenters recommended this equipment, these commenters 
also requested a full 60 minutes of respiratory therapist time be 
included in the PE for HCPCS code G0424, comparable to the 15 minutes 
of respiratory therapist time included in the one-on-one codes for 15 
minutes of respiratory treatment services (HCPCS codes G0237 and 
G0238). However, because pulmonary rehabilitation services reported 
under HCPCS code G0424 can be furnished either individually or in 
groups, we believe that 30 minutes of respiratory therapist time would 
be more appropriate for valuing the typical pulmonary rehabilitation 
service.
    Comment: Many commenters applauded CMS for its proposal to increase 
the work RVUs for HCPCS code G0424 to 0.28. While the commenters 
supported the increase in work RVUs in the short term, they believe 
that an accurate, independent assessment of the work value associated 
with physician's office-based pulmonary rehabilitation is the only 
reasonable way to determine actual physician work. The commenters 
stated that continuing to rely on work values related to cardiac 
rehabilitation is flawed, noting that the clinical characteristics of 
the cardiac rehabilitation patient are different from the pulmonary 
rehabilitation patient. Due to the expected frequency and duration of 
acute events, the commenters explained that the pulmonary 
rehabilitation patient would require greater physician involvement.
    Response: Until we gain more data and experience on the use of this 
code to report pulmonary rehabilitation services furnished to Medicare 
beneficiaries under the new comprehensive benefit, we believe using the 
work RVUs for cardiac rehabilitation with monitoring (CPT code 93798) 
as a crosswalk is appropriate for this service. We further note that 
the crosswalk methodology is commonly used by the AMA RUC in 
recommending work RVUs to us for new or revised codes.
    Comment: A number of commenters generally supported the increase in 
the clinical labor time for a respiratory therapist from 15 minutes to 
30 minutes. While the commenters generally agreed with CMS' reasoning 
for not increasing the respiratory therapist time to 60 minutes, the 
commenters noted that in the physician's office setting, pulmonary 
therapy items and services are routinely provided one-on-one, face-to-
face, requiring 60 minutes of individualized therapy services by a 
respiratory therapist. Some commenters believe that the proposal to 
increase the respiratory therapist time to only 30 minutes would place 
physicians at an economic disadvantage in the provision of pulmonary 
rehabilitation items and services when furnished in an office setting 
due to the limited amount of office space available to treat more than 
one patient in the same time period. One commenter suggested that the 
respiratory therapist time be increased to 45 minutes or that CMS 
consider the development of a HCPCS code for the provision of pulmonary 
rehabilitation items and services to patients on a one-on-one, face-to-
face per 15 minute basis to ensure that physicians can provide this 
service in the office setting. Another commenter believed that HCPCS 
code G0424 is undervalued at 0.46 PE RVUs in comparison to the PE RVUs 
for other PFS services that are conceptually similar but do not include 
a treadmill, arm ergometer, monitoring devices, or emergency carts.
    Response: Payment for services under the PFS is resource-based, and 
individual services are valued based upon the resources needed to 
provide the typical service. As we noted in the CY 2011 PFS proposed 
rule (75 FR 40103), pulmonary rehabilitation services reported under 
HCPCS code G0424 can be furnished either individually or in groups and 
we continue to believe that 30 minutes of respiratory therapist time is 
appropriate for valuing the typical pulmonary rehabilitation service. 
We believe that

[[Page 73300]]

pulmonary rehabilitation in the physician's office is most commonly 
furnished to a group of patients, rather than one-on-one for 60 minutes 
of respiratory therapist time. Regarding the commenter who was 
concerned that the PE for HCPCS code G0424 was undervalued in 
comparison to similar services that do not use the equipment necessary 
for HCPCS code G0424, we note that we have utilized the standard PFS PE 
methodology to develop the PE RVUs for HCPCS code G0424 based on the 
direct PE inputs we consider to be appropriate.
    Comment: One commenter suggested that the valuing of HCPCS code 
G0424 is flawed and does not fully account for the inclusion of all 
professionals who are involved in the pulmonary rehabilitation program, 
specifically physical therapists. In addition, the commenter referenced 
the CY 2010 PFS final rule with comment (74 FR 61884) where CMS stated 
and recognized that physical therapists provide pulmonary 
rehabilitation services. The commenter believes that by only basing the 
value on services performed by respiratory therapists, CMS has 
miscalculated the payment for the comprehensive, multidisciplinary 
pulmonary rehabilitation program and recommended that CMS create a 
separate HCPCS code with a higher value that could be used to delineate 
those patients who require individualized physical therapy within the 
pulmonary rehabilitation program.
    Response: Like all services paid under the PFS, pulmonary 
rehabilitation is valued based on the staff type who would typically 
perform this service, a respiratory therapist. Because the items and 
services furnished by a pulmonary rehabilitation program are 
individualized, we expect that evaluations and individualized 
treatments would be conducted by one or more members of the 
multidisciplinary team of the pulmonary rehabilitation program with the 
appropriate expertise. Therefore, individualized treatment by a 
physical therapist would be furnished when required by the patient as 
part of the pulmonary rehabilitation plan of care. However, we do not 
believe individualized treatment would be typical and, therefore, we do 
not believe the creation of a separate HCPCS code with a higher value 
is necessary to recognize those cases that require individualized 
physical therapy as part of a pulmonary rehabilitation program.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to increase the work RVUs for HCPCS 
code G0424 to 0.28 for CY 2011 to be comparable to the work RVUs for 
cardiac rehabilitation with monitoring (CPT code 93798). In addition, 
we are finalizing our CY 2011 proposal to increase the clinical labor 
time for the respiratory therapist from 15 minutes to 30 minutes and to 
crosswalk the PE equipment inputs for HCPCS code G0424 to those for 
respiratory treatment services (HCPCS code G0238), which include a 1-
channel ECG and a pulse oximeter.

F. Application of Tissue Cultured Skin Substitutes to Lower Extremities 
(HCPCS Codes G0440 and G0441)

    There are currently two biological products, Apligraf and 
Dermagraft, which are FDA-approved for the treatment of diabetic foot 
ulcers. While commonly used by podiatrists for this purpose, these 
products are also used by other specialists in the treatment of other 
clinical conditions, such as burns.
    Many Medicare contractors have established local coverage 
determinations specifying the circumstances under which these services 
are covered. In the case of diabetic foot ulcers, clinical studies of 
Apligraf application were based on up to 5 treatments over a 12-week 
period. In contrast, Dermagraft was applied weekly, up to 8 treatments 
over a 12-week period.
    The skin substitute CPT codes were reviewed and new codes were last 
created by the CPT Editorial Panel for CY 2006. There are currently 2 
skin repair CPT codes that describe Apligraf application, one primary 
code, CPT code 15340 (Tissue cultured allogeneic skin substitute; first 
25 sq cm or less) and one add-on code, CPT code 15341 (Tissue cultured 
allogeneic skin substitute; each additional 25 sq cm, or part thereof 
(List separately in addition to code for primary procedure)) and 4 
codes that describe Dermagraft application, two initial codes based on 
body area, CPT codes 15360 (Tissue cultured allogeneic dermal 
substitute, trunk, arms, legs; first 100 sq cm or less, or 1% of body 
area of infants and children) and 15365 (Tissue cultured allogeneic 
dermal substitute, face, scalp, eyelids, mouth, neck, ears, orbits, 
genitalia, hands, feet, and/or multiple digits; first 100 sq cm or 
less, or 1% of body area of infants and children) and two add-on codes, 
CPT codes 15361 (Tissue cultured allogeneic dermal substitute, trunk, 
arms, legs; each additional 100 sq cm, or each additional 1% of body 
area of infants and children, or part thereof (List separately in 
addition to code for primary procedure)) and 15366 (Tissue cultured 
allogeneic dermal substitute, face, scalp, eyelids, mouth, neck, ears, 
orbits, genitalia, hands, feet, and/or multiple digits; each additional 
100 sq cm, or each additional 1% of body area of infants and children, 
or part thereof (List separately in addition to code for primary 
procedure)).
    In the CY 2011 PFS proposed rule (75 FR 40103), we noted that 
several stakeholders had expressed concern about the appropriateness 
and equity of the coding and payment for these services, given their 
similar uses and the office resources required when the products are 
applied repeatedly over a number of weeks for treatment of lower 
extremity ulcers. They were concerned that current coding, with the 
associated payment policies and relative values, does not provide for 
appropriate payment for the services based on how they are furnished. 
In addition, some stakeholders believe that the current coding and 
payment provides a financial incentive for the selection of one tissue 
cultured product over another, rather than facilitating clinical 
decision-making based solely on the most clinically appropriate product 
for the patient's case. For example, the Dermagraft and Apligraf 
application codes have 90-day and 10-day global periods, respectively, 
and their current values include several follow-up office visits. When 
patients are treated periodically with repeated applications of the 
products over several weeks, the patients may be seen in follow-up by 
the physician. However, those encounters would not be evaluation and 
management visits but, instead, would be procedural encounters that 
would typically be valued differently under the PFS than the follow-up 
office visits currently included in the values for the Dermagraft and 
Apligraf application codes. Furthermore, while different stakeholders 
indicated that debridement and site preparation are variably performed 
when these products are applied, the CPT codes for Dermagraft 
application allow separate reporting of these preparation services when 
they are performed, while the Apligraf application codes bundle these 
services. Since CY 2006, the PFS has accepted the AMA RUC work and PE 
recommendations for the Dermagraft and Apligraf application codes and 
has paid accordingly.
    With respect to Medicare payment policy, some Medicare contractors 
allow the use of modifier -58 (Staged or related procedure or service 
by the same physician during the postoperative period) to be reported 
with the skin substitute application codes and provide full payment for 
the service

[[Page 73301]]

each time it is performed, even if the subsequent application(s) is 
within the global period of the service. Other contractors do not allow 
the use of modifier -58 and, therefore, provide a single payment for a 
series of applications over 90 days or 10 days, as applicable to the 
particular code reported for the product's initial application.
    Because of the current inconsistencies in valuing similar skin 
substitute application services and the common clinical scenarios for 
their use for Medicare beneficiaries, in the CY 2011 PFS proposed rule 
(75 FR 40103), we stated that we believe it would be appropriate to 
temporarily create Level II HCPCS G-codes to report application of 
tissue cultured skin substitutes applied to the lower extremities in 
order to provide appropriate and consistent payment for the services as 
they are commonly furnished. Therefore, we proposed to create two new 
HCPCS G-codes for CY 2011, GXXX1 (Application of tissue cultured 
allogeneic skin substitute or dermal substitute; for use on lower limb, 
includes the site preparation and debridement if performed; first 25 sq 
cm or less) and GXXX2 (Application of tissue cultured allogeneic skin 
or dermal substitute; for use on lower limb, includes the site 
preparation and debridement if performed; each additional 25 sq cm), 
that would be recognized for payment under the PFS for the application 
of Apligraf or Dermagraft to the lower limb. These codes would not 
allow separate reporting of CPT codes for site preparation or 
debridement. We emphasized that we would expect that the use of these 
HCPCS G-codes for payment under Medicare would be temporary, while 
stakeholders work through the usual channels to establish appropriate 
coding for these services that reflects the current common clinical 
scenarios in which the skin substitutes are applied. Furthermore, we 
stated that we would expect to receive recommendations from the AMA RUC 
for appropriate work values and direct practice expense inputs for the 
applicable codes, according to the usual process for new or revised 
codes.
    Under the PFS, as a temporary measure, the HCPCS G-codes would be 
assigned a 0-day global period so payment would be made each a time a 
covered service was furnished. We proposed to base payment on the 
physician work relative values and the direct PE inputs for the 
existing CPT codes for Apligraf application, with adjustments for the 
global period differences because the HCPCS G-codes and the Apligraf 
application CPT codes. These CPT codes resemble the new HCPCS G-codes 
in terms of wound size description and the inclusion of site 
preparation and debridement in their current values so we believe they 
appropriately represent the physician work involved in the proposed 
HPCPCS G-codes. However, we proposed to adjust the work RVUs of the 
Apligraf application codes to derive the HCPCS G-code proposed CY 2011 
work values by extracting the values for any office visits and 
discharge day management services because the HCPCS G-codes have a 0-
day global period. In addition, we proposed to adjust the direct PE 
inputs of the Apligraf application codes to develop the proposed CY 
2011 direct PE inputs of the HPCPS G-codes that have a 0-day global 
period.
    Our crosswalks and adjustments resulted in proposed CY 2011 work 
RVUs of 2.22 for HPCPCS code GXXX1 and 0.50 for HCPCPS GXXX2. The 
proposed direct PE inputs for HCPCS codes GXXX1 and GXXX2 are included 
in the direct PE database for the CY 2011 proposed rule that is posted 
on the CMS Web site at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp.
    We noted that many Medicare contractors currently have local 
coverage policies that specify the circumstances under which Medicare 
covers the application of skin substitutes. The local coverage policies 
may include diagnostic or prior treatment requirements, as well as 
frequency limitations on the number and periodicity of treatments. We 
stated our expectation that these policies would be updated in the 
context of the temporary new HCPCS G-codes that we proposed for use in 
CY 2011 to report the application of tissue cultured allogeneic skin or 
dermal substitutes. We proposed to establish the HCPCS G-codes for 
temporary use in CY 2011 in order to improve the consistency and 
resource-based nature of PFS payments for skin substitute application 
services that require similar resources. However, we noted our 
continued interest in ensuring that skin substitutes are properly 
utilized for Medicare beneficiaries who will benefit from that 
treatment. We indicated that we would continue to monitor the 
utilization of these services and plan to identify any concerning 
trends in utilization that contractors may want to examine further 
through medical review or other approaches.
    Comment: While acknowledging concerns with the existing CPT codes 
for the application of skin substitutes, several commenters opposed the 
proposed HCPCS G-codes because the commenters believe that CMS should 
wait for new codes to be created by the CPT Editorial Panel and the 
associated recommendations to be developed by the AMA RUC for physician 
work and direct PE inputs for any new codes. The commenters argued that 
CMS' proposal to create new temporary codes would circumvent or 
otherwise influence the well-established processes already underway to 
address issues identified by the stakeholders. Several commenters 
pointed out that CMS' proposal would not treat the application of skin 
substitutes that are not tissue cultured similarly to the procedures 
for the application of Apligraf and Dermagraft. Because these 
commenters argued that inconsistencies in coding and payment for the 
other products would continue, several commenters recommended that CMS 
await a more comprehensive solution from the CPT Editorial Panel.
    On the other hand, a number of commenters supported the proposal to 
establish the two new HCPCS G-codes, and a few of these commenters 
recommended no changes to the proposed HCPCS code descriptors. However, 
one commenter who generally supported the proposal recommended that CMS 
expand the proposed HCPCS code descriptors to incorporate the 
application of a broader range of skin substitutes that were not tissue 
cultured, specifically to include the application of biologically 
active skin substitutes.
    Another commenter requested that CMS clarify the meaning of 
``dermal substitute.'' This commenter also requested that CMS delete 
the words ``for use on lower limb'' and allow the new codes to be used 
for application of tissue cultured skin or dermal substitutes on 
locations other than the lower limb. Consistent with this perspective, 
the commenter further recommended that CMS not recognize the existing 
CPT codes for application of Apligraf and Dermagraft on other areas of 
the body. The commenter argued that, as proposed, the HCPCS G-codes 
would lead to confusion and the potential for fraudulent billing 
because both a HCPCS G-code and a CPT code could describe the 
application of the same product to the lower extremities. The commenter 
believes that CMS should only recognize the proposed G-codes under the 
PFS for the application of tissue cultured skin or dermal substitutes 
to any body site, to allow for consistency in reporting and payment of 
these services.
    Several commenters requested that CMS provide guidance on the 
proper use of the current CPT codes and new HCPCS G-codes for reporting 
the application of skin substitutes. Other

[[Page 73302]]

commenters were concerned that the temporary HCPCS G-codes could create 
confusion, disrupt physician's office billing policies, and otherwise 
burden coding staff and advised CMS to not finalize the proposal.
    Response: We appreciate the perspectives of stakeholders and we 
share the commenters' desire for appropriate and consistent payment 
that is resource-based for the application of skin substitutes as these 
services are commonly furnished for appropriate clinical indications. 
We appreciate and value the work of the CPT Editorial Panel in 
evaluating the complexities and nuances in this area and look forward 
to reviewing any new codes created for CY 2012 or later years and the 
AMA RUC recommendations for the physician work and direct PE inputs for 
those new codes. We note that there are no new codes for CY 2011 that 
describe the application of skin substitutes and, therefore, new codes 
would not be available before CY 2012 at the earliest.
    In proposing to create two temporary HCPCS G-codes for CY 2011, we 
sought a fair and balanced temporary alternative to provide appropriate 
and equitable payment for the application of tissue cultured skin or 
dermal substitutes to the lower extremities. While we understand from 
stakeholders that the work of the CPT Editorial Panel is ongoing in 
this area, our proposal was specifically to establish temporary HCPCS 
G-codes that would allow for more appropriate reporting and payment 
under certain scenarios in the short term while a more comprehensive 
solution is being developed and refined by expert advisors. Because our 
proposal was so limited in scope and temporary, clearly it was not our 
intention to circumvent or unduly influence the CPT Editorial Panel or 
the AMA RUC as these groups proceed in their comprehensive work to 
establish new codes and values for the application of skin substitutes. 
We would also not expect that the characteristics of the temporary 
HCPCS G-codes, in terms of terminology in the code descriptors, global 
periods, work values, or direct PE inputs, should shape or otherwise 
affect the ongoing work of stakeholders who are developing a complete 
approach to coding for the application of skin substitutes. We 
acknowledge that new CPT codes and their AMA RUC-recommended values and 
direct PE inputs arising from these processes may appropriately differ 
in one or multiple characteristics from the temporary HCPCS G-codes.
    With regard to the commenters who were concerned about the limited 
scope of our proposal and suggested that we not proceed or that we 
broaden the scope of the proposed code descriptors to address 
inequities and inconsistencies that the commenters believe would 
persist under our proposal, we believe that the limited proposal 
continues to be the most appropriate temporary approach for CY 2011. 
First, it was not our intention to comprehensively address the issue of 
coding revisions for the application of skin substitutes because we are 
aware of the ongoing work of the CPT Editorial Panel in this area and 
would not want to undermine its deliberative process. Moreover, based 
on the public comments we received, we have reason to believe that a 
revised coding structure for the application of skin substitutes will 
be available soon. Second, the HCPCS G-codes that we proposed had a 0-
day global period based on the FDA-approved indications and regimens 
for the application of the tissue cultured products to which the codes 
would apply, and we are not certain to what extent a 0-day global 
period would be appropriate for the application of other skin 
substitutes. Third, while several commenters provided suggestions 
regarding alternative language that could be used in the HCPCS G-code 
descriptors, it is unclear which skin substitutes products would be 
incorporated under the revised terms. Some of the suggested 
alternatives would use phrases such as ``biologically active'' that, as 
far as we know, are not fully defined in the medical community and are 
not currently used in the CPT code descriptors that describe the 
application of skin substitutes. Because of our uncertainty in this 
regard, we would be hesitant to make such significant revisions to the 
HCPCS G-code descriptors without the opportunity for public notice and 
comment, which would allow stakeholders the opportunity to provide 
input about revised code descriptors and the appropriateness of the 
values for the HCPCS G-codes. In contrast, our proposal relied upon the 
use of terms in the HCPCS G-code descriptors that are already included 
in the descriptors for established CPT codes and, therefore, we do not 
believe we would be setting a precedent that would affect the current 
work of the CPT Editorial Panel on this issue. Finally, we do not see a 
need to further clarify terms, such as ``dermal substitute,'' in the 
HCPCS G-code descriptors because these are currently used in the CPT 
code descriptors and the same definitions would apply to the G-codes.
    Furthermore, we believe it would continue to be appropriate to 
recognize the existing CPT codes for the application of tissue cultured 
skin or dermal substitutes to areas of the body other than the lower 
extremities. We established the 0-day global period, the physician work 
values, and the direct PE inputs for the proposed HCPCS G-codes based 
on the specific clinical scenarios where Apligraf or Dermagraft would 
be applied to treat lower extremity ulcers. We do not necessarily 
believe that the same global periods and values would be appropriate 
for the application of these products to other body areas under 
different clinical scenarios. The usual coding guidance that providers 
should report the most specific HCPCS code that describes the service 
furnished would apply in the case of the application of Apligraf or 
Dermagraft. If one of these products were applied to the lower 
extremities, we would expect the HCPCS G-codes to be reported, rather 
than the CPT codes, as the HCPCS G-codes are more specific to 
application in that body area.
    Finally, because it is our common practice to create one or more 
new HCPCS G-codes for payment under the PFS each year, we believe that 
physicians' offices are experienced in integrating new codes into the 
reporting of services furnished and paid under the PFS. Not only are 
local coverage determinations commonly applicable to the application of 
skin substitutes, we also understand that there are a subset of 
physicians who regularly apply tissue cultured skin or dermal 
substitutes to lower extremities to treat ulcers. In this context, we 
believe that our national educational efforts, in addition to education 
by local contractors, will quickly disseminate information to the 
relevant practitioners about these new HCPCS G-codes and their 
appropriate use in CY 2011.
    After consideration of the public comments we received, we are 
finalizing our proposal, with editorial modification, to create two new 
HCPCS G-codes for reporting the application of tissue cultured skin 
substitutes and dermal substitutes to the lower extremities in CY 2011. 
For internal consistency, we are changing the descriptors of HCPCS 
codes GXXX1 and GXXX2 from the proposed language to both refer to 
``skin substitute or dermal substitute.'' HCPCS code GXXX2 as proposed 
read ``Application of tissue cultured allogeneic skin or dermal 
substitute; for use on lower limb, includes the site preparation and 
debridement if performed; each additional 25 sq cm.'' The final codes 
are HCPCS code G0440 (Application of

[[Page 73303]]

tissue cultured allogeneic skin substitute or dermal substitute; for 
use on lower limb, includes the site preparation and debridement if 
performed; first 25 sq cm or less) and HCPCS code G0441 (Application of 
tissue cultured allogeneic skin substitute or dermal substitute; for 
use on lower limb, includes the site preparation and debridement if 
performed; each additional 25 sq cm) that will be recognized for 
payment under the PFS in CY 2011.
    Comment: A number of commenters supported the assignment of a 0-day 
global period to the application of tissue cultured skin or dermal 
substitutes. Many expressed the view that assigning a 0-day global 
period to the codes would allow the products to be prescribed and 
administered based on their clinical value, without concern for payment 
differences between products. The commenters who did not support the 0-
day global period were those who believe that the proposal would 
further payment inequities between products used similarly. For 
example, one commenter reasoned that, insofar as a patient is likely to 
require multiple administrations of a skin substitute product during a 
90-day period, providers would have a significant incentive to use the 
products whose application would be reported under the proposed codes 
rather than a product whose application procedure continues to have a 
90-day global period.
    Another commenter addressed the bundling of site preparation and 
debridement into the proposed HCPCS codes GXXX1 and GXXX2. The 
commenter argued that the proposed values for the new codes HCPCS G-
codes would not be sufficient to account for this work. The commenter 
recommended that the proposed values should be adjusted upward or 
separate payment should be allowed for site preparation and/or 
debridement.
    In reviewing CMS' proposed methodology for setting the physician 
work values for the HCPCS G-codes, one commenter contended that CMS 
should finalize a total of 2.86 works RVUs for GXXX1 instead of the 
proposed 2.22 work RVUs. The commenter claimed that the work RVUs for 
GXXX1 should be crosswalked from CPT code 15340 less only the physician 
work for the two post-procedure visits in CPT code 15340 which are not 
included in HCPCS code GXXX1.
    Another commenter recommended that CMS review the proposed PE 
inputs for the new HCPCS G-codes. Specifically, the commenter explained 
that the only difference in clinical labor time between CPT code 15340 
and HCPCS code GXXX1 should be an adjustment to account for the 
difference in the global period (10 days for CPT code 15340 and 0 days 
for HCPCS code GXXX1). The commenter also stated that HCPCS code GXXX1 
should include all the pre-service clinical staff time in CPT code 
15340, yet did not for the proposed rule. The commenter was unclear on 
whether the post-service clinical labor time was properly adjusted to 
account for the change in global period from CPT code 15340 to HCPCS 
code GXXX1.
    Response: We agree with the commenters that a 0-day global period 
is the most appropriate for the application of tissue cultured skin 
substitutes or dermal substitutes to the lower limb for purposes of the 
temporary HCPCS G-codes, pending a comprehensive change in coding 
established by the CPT Editorial Panel. As discussed in the previous 
response, we sought a fair and balanced temporary solution to provide 
appropriate and consistent payment for the application of tissue 
cultured skin substitutes or dermal substitutes to the lower limb. The 
commenters who did not support the 0-day global period were those who 
were more broadly against the creation of the new HCPCS G-codes codes 
because of potential payment imbalances between products that would be 
included in the new codes and those that would not be. No commenters 
asserted that the 0-day global period would be inappropriate for the 
codes to which we proposed to apply that period.
    The proposed physician work values for HCPSC G-codes G0440 and 
G0441 (proposed as HCPCS codes GXXX1 and GXXX2, respectively) were 
crosswalked, with adjustment for the different global periods, from CPT 
codes 15340 and 15341. CPT codes 15340 and 15341 currently include site 
preparation and debridement and, as such, the additional reporting of a 
separate CPT code for these activities, if performed on the same site 
as the skin substitute application procedure, is not permitted. We 
believe that the values for both the current CPT codes and the HCPCS G-
codes are clinically appropriate for the services they describe, with 
payment for site preparation and debridement bundled if furnished.
    In response to a commenter's concern, we reviewed the proposed 
valuation of the physician work for HCPCS codes G0440 and G0441 to 
ensure consistency with our proposed methodology, and we continue to 
believe that the appropriate work value for HCPCS code G0440 is 2.22 
RVUs as we proposed. HCPCS code G0440 was crosswalked to CPT code 
15340, with adjustments to account for the 0-day global period of the 
HCPCS G-code. CPT code 15340, with a 10-day global period, is currently 
valued to include two CPT code 99212 (level 2 established patient 
office or other outpatient visit) post-operative visits (0.48 RVUs 
each, 0.96 RVUs total) and half of one CPT code 99238 (Hospital 
discharge day management; 30 minutes or less) visit (1.28 RVUs each, 
0.64 RVUs total). CPT code 15340 has a current total physician work 
value of 3.82 RVUs. To adjust for the 0-day global period for the minor 
procedure described by HCPCS code G0440, we believe it would be 
appropriate to deduct the value of both the two post-operative office 
visits and the discharge day visit. In the case of post-operative 
office visits, these may be separately reported and paid if medically 
reasonable and necessary. In addition, we also do not believe that a 
half discharge day visit should be a building block based on the 
clinical characteristics of the procedure described by HCPCS code 
G0440. When we make these adjustments to the work value of 3.82 RVUs 
for CPT code 15340, 2.22 work RVUs, the value we proposed for HCPCS 
code G0440, remain.
    We also reviewed the proposed PE inputs included in the direct PE 
database for the CY 2011 PFS proposed rule. Like the physician work 
values, to determine the PE inputs we crosswalked HCPCS code G0440 from 
CPT code 15340 and HCPCS code G0441 from CPT code 15341. As one 
commenter observed, the difference in the values should reflect the 
shift from a 10-day global period to a 0-day global period. However, 
for PE inputs, the change in global period typically affects both the 
pre- and post-service PE inputs. To establish the post-operative 
clinical labor time for HCPCS code G0440, we subtracted out the time 
associated with the two CPT code 99212 visits that were removed (32 
minutes total) and the half discharge day visit (19 minutes total) that 
was eliminated, bringing the post-operative clinical labor time down 
from 54 minutes to three minutes. For the pre-service activities, while 
0-day global period procedures generally have 0 minutes of pre-service 
clinical labor time allocated to them, we believe that 5 minutes in the 
nonfacility setting and 10 minutes in the facility setting reflect more 
appropriate pre-service clinical labor times in the instance of HCPCS 
code G0440. These revised pre- and post-service clinical labor times 
were reflected in the proposed CY 2011 direct PE database for HCPCS 
code G0440.
    While we valued the physician work and clinical labor time PE 
inputs

[[Page 73304]]

according to the crosswalk methodology as described in the CY 2011 PFS 
proposed rule (75 FR 40103 through 40104), upon review of the new CY 
2011 HCPCS G-codes for this final rule with comment period, we noticed 
that we had not applied the proposed methodology to the PE inputs for 
equipment and supplies. Therefore, consistent with our proposal, we 
have adjusted the supply and equipment PE inputs for HCPCS codes G0440 
and G0441 in the final CY 2011 PE database to reflect the shift to a 0-
day global period from a 10-day global period for these HCPCS codes. As 
the equipment and supply PE inputs for the 10-day global period CPT 
codes reflect those necessary for multiple visits to the provider, the 
equipment and supply inputs for the new HCPCS G-codes codes should 
reflect more appropriate values for codes with a 0-day global period.
    After consideration of the public comments we received, we are 
finalizing our proposal to value HCPCS codes G0440 and G0441 as 0-day 
global procedures into which site preparation and debridement are 
bundled. As we proposed, under our final policy we have crosswalked the 
physician work RVUs and direct PE inputs from CPT codes 15340 and 15341 
to HCPCS codes G0440 and G0441, respectively, with adjustments. We have 
adjusted the work RVUs and the direct PE inputs (clinical labor, 
equipment, and supplies) to reflect the shift from a 10-day global 
period to a 0-day global period for the new HCPCS G-codes.
    Comment: Several commenters were concerned about the use of the -58 
modifier for 10-day and 90-day global surgical procedures for the 
application of skin substitutes when repeated application of a product 
within the global period is the typical case. The commenters were 
largely supportive of eliminating the use of the -58 modifier for the 
two new HCPCS codes which, the commenters remarked, has been the source 
of some confusion and has been interpreted inconsistently by Medicare 
contractors. The commenters explained that the change to a 0-day global 
period would result in no need for the -58 modifier to be reported with 
the HCPCS G-codes. Several commenters recommended that CMS provide 
guidance on use of the -58 modifier with the existing CPT codes for the 
application of skin substitutes, most of which have 90-day global 
period and all of which would continue to be recognized for payment 
under the PFS.
    Response: Assignment of a 0-day global period for the two HCPCS G-
codes eliminates the need for use of the -58 modifier with these two 
new codes. We recognize that the -58 modifier may continue to be used 
in conjunction with the other CPT codes with 10-day or 90-day global 
periods for the application of skin substitutes. Specific 
determinations of the appropriate use of the -58 modifier will continue 
to be the responsibility of individual Medicare contractors.
    In summary, after consideration of the public comments we received, 
we are finalizing our CY 2011 proposal, with modification to adjust the 
supply and equipment direct PE inputs, as well as editorial 
modification to the code descriptors for consistency, to create two new 
HCPCS G-codes for CY 2011, G0440 (Application of tissue cultured 
allogeneic skin substitute or dermal substitute; for use on lower limb, 
includes the site preparation and debridement if performed; first 25 sq 
cm or less) and G0441 (Application of tissue cultured allogeneic skin 
substitute or dermal substitute; for use on lower limb, includes the 
site preparation and debridement if performed; each additional 25 sq 
cm), that will be recognized for payment under the PFS for the 
application of products described by the codes to the lower limb. These 
codes do not allow separate reporting of CPT codes for site preparation 
or debridement. Providers reporting the application of tissue cultured 
allogeneic skin substitute or dermal substitutes to the lower limb for 
payment under the PFS in CY 2011 should report HCPCS code G0440, along 
with HCPCS code G0441 if applicable based on wound size, and not CPT 
code 15340, 15341, 15360, 16361, 15365, or 15366.
    Under the PFS, as a temporary measure, the HCPCS G-codes are 
assigned a 0-day global period so payment is made each a time a covered 
service is furnished. As proposed, we are basing payment on the 
physician work relative values and the direct PE inputs for the 
existing CPT codes 15340 and 15341 for Apligraf application, with 
adjustments for the global period differences between the HCPCS G-codes 
and the Apligraf application CPT codes. However, as we proposed, we 
have adjusted the work RVUs of the Apligraf application codes to derive 
the final CY 2011 HCPCS G-code work values by extracting the values for 
any office visits and discharge day management services because the 
HCPCS G-codes have a 0-day global period. In addition, with 
modifications of our proposed PE equipment and supply inputs to be 
fully consistent with our crosswalk proposal, we have adjusted the 
direct PE inputs of the Apligraf application codes to develop the final 
CY 2011 direct PE inputs for the HPCPS G-codes that have a 0-day global 
period.
    Our crosswalks and adjustments result in CY 2011 final work RVUs of 
2.22 for HCPCS code G0440 and 0.50 for HCPCS G0441. The final direct PE 
inputs for HCPCS codes G0440 and G0442 are included in the direct PE 
database for the CY 2011 PFS final rule with comment period rule.

G. Canalith Repositioning (CPT code 95992)

    For CY 2009, CPT created a new code for canalith repositioning, 
specifically CPT code 95992 (Canalith repositioning procedure(s) (eg, 
Epley maneuver, Semont maneuver), per day). This service may be 
furnished by both physicians and therapists. Although we accepted the 
AMA RUC-recommended work RVUs and PE inputs, we initially bundled this 
procedure on an interim basis in the CY 2009 PFS final rule with 
comment period (73 FR 69896), indicating that we believed it would be 
paid through the E/M service that it would accompany. Subsequently, in 
view of concerns from therapists who cannot furnish E/M services, we 
clarified that therapists could report one of the generally defined 
therapy CPT codes when canalith repositioning was furnished. In the CY 
2010 PFS final rule with comment period (74 FR 61766), we changed the 
code's status under the PFS to ``not recognized for payment under 
Medicare,'' consistent with our expectation that another payable code 
would be reported when the service was furnished.
    Based on further information from stakeholders regarding the 
distinct and separate nature of this procedure from an E/M service and 
their request that we recognize this CPT code for payment, similar to 
our separate payment for most other procedures commonly furnished in 
association with an E/M service, we proposed to recognize CPT code 
95992 for payment under the CY 2011 PFS, consistent with our typical 
treatment of most other codes for minor procedures. In doing so, we 
proposed to change the code's status to ``A'' and utilize the CY 2009 
RUC recommendations for work RVUs (0.75) and PE inputs for establishing 
its payment in CY 2011. (That is, status ``A'' means Active code. These 
codes are separately payable under the PFS if covered.) Because 
canalith repositioning (CPT code 95992) can be furnished by physicians 
or therapists as a therapy service under a therapy plan of care or by 
physicians as physicians' services outside of a therapy plan of care, 
we would add CPT code

[[Page 73305]]

95992 to the ``sometimes therapy'' list on the therapy code abstract 
file.
    Comment: Many commenters supported CMS' proposal to acknowledge the 
distinct and separate nature of CPT code 95992 from an E/M service by 
recognizing CPT code 95992 for separate payment and agreed with the 
proposed use of the AMA RUC- recommended values for work RVUs (0.75) 
and PE inputs for establishing payment in CY 2011.
    Response: We appreciate the commenters' support for our proposal.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to recognize CPT code 95992 for payment 
under the PFS. As a result, the code's status has been changed to ``A'' 
in Addendum B to this final rule with comment period and the CY 2009 
AMA RUC recommendations for work RVUs (0.75) and PE inputs will be used 
for establishing its payment in CY 2011. (That is, status ``A'' means 
Active code. These codes are separately payable under the PFS if 
covered.) CPT code 95992 has also been added to the ``sometimes 
therapy'' list on the therapy code abstract file.

H. Intranasal/Oral Immunization Codes (CPT codes 90467, 90468, 90473, 
and 90474)

    To ensure that the PE RVUs are consistent between the intranasal/
oral and injectable immunization administration CPT codes that describe 
services that utilize similar PE resources, we proposed to crosswalk 
the PE values for CPT code 90471 (Immunization administration (includes 
percutaneous, intradermal, subcutaneous, or intramuscular injections); 
one vaccine (single or combination vaccine/toxoid)) to CPT codes 90467 
(Immunization administration younger than age 8 years (includes 
intranasal or oral routes of administration) when the physician 
counsels the patient/family; first administration (single or 
combination vaccine/toxoid), per day) and 90473 (Immunization 
administration by intranasal or oral route; one vaccine (single or 
combination vaccine/toxoid)).
    Similarly, we also proposed to crosswalk the PE values for CPT code 
90472 (Immunization administration (includes percutaneous, intradermal, 
subcutaneous, or intramuscular injections); each additional vaccine 
(single or combination vaccine/toxoid) (List separately in addition to 
code for primary procedure)) to CPT codes 90468 (Immunization 
administration younger than age 8 years (includes intranasal or oral 
routes of administration) when the physician counsels the patient/
family; each additional administration (single or combination vaccine/
toxoid), per day (List separately in addition to code for primary 
procedure)) and 90474 (Immunization administration by intranasal or 
oral route; each additional vaccine (single or combination vaccine/
toxoid) (List separately in addition to code for primary procedure)).
    Comment: Many commenters expressed support for the proposal. One 
commenter questioned why the PE values are currently different and 
several other commenters urged CMS to utilize the AMA RUC 
recommendations and the resource-based methodology to develop PE RVUs 
for these services in CY 2011, rather than crosswalk the PE RVUs.
    Response: We appreciate the support from the commenters for our 
proposal. We would note that, even with the same direct PE inputs, 
somewhat different PE RVUs for the various CPT codes may result from 
our PE methodology that relies upon the historical specialty mix, as 
reflected in the most recent PFS utilization data, of providers who 
furnished the services to allocate the indirect PE. Therefore, because 
we believe it is especially important to have consistent PE values for 
payment of these similar services under the PFS, we are unable to 
utilize the AMA RUC direct PE input recommendations and the resource-
based methodology to develop PE RVUs for these services. While in 
general we value services under the PFS with reference to the direct PE 
inputs recommended by the AMA RUC and our standard resource-based 
approach to establishing PE RVUs, we note that we also commonly use 
crosswalks to other similar codes to establish the values for services 
in certain circumstances. In this instance, we believe a crosswalk is 
particularly appropriate in order to maintain appropriate relativity 
between similar services and avoid the potential for non-clinically-
based bias in favor of one vaccine administration technique over 
another.
    Comment: A few commenters questioned why the CY 2011 proposed rule 
referenced ``physician'' counseling when identifying CPT codes 90467 
and 90468 and requested clarification that nurse practitioners (NPs) 
and physician assistants (PAs) also be included within the scope of 
this proposal.
    Response: We would like to clarify that the reference to 
``physician'' counseling noted by the commenters is part of the 
official CPT code descriptors for CPT codes 90467 and 90468. Consistent 
with our usual interpretation of CPT codes that include the term 
physician in the code descriptor, for Medicare payment purposes this 
specificity does not exclude NPs or PAs from providing counseling to 
the patient/family that is within the NP's or PA's scope of practice.
    Comment: Several commenters recommended modifying the proposal by 
crosswalking the PE RVUs for CPT code 90466 (Immunization 
administration younger than age 8 years of age (includes percutaneous, 
intradermal, subcutaneous, or intramuscular injections) when the 
physician counsels the patient/family; each addition injection (single 
or combination vaccine/toxoid) per day (List separately in addition to 
code for primary procedure)) to CPT code 90468 to achieve parity and 
reflect the additional clinical time and other practice expenses 
expended to provide immunizations to young children.
    Response: For CY 2011, the CPT Editorial Panel revised the 
reporting of immunization administration services for the pediatric 
population. As a result, CPT codes 90466 and 90468 have been deleted 
and replaced with CPT code 90461 (Immunization administration through 
18 years of age via any route of administration, with counseling by 
physician or other qualified health professional; each additional 
vaccine/toxoid component (List separately in addition to code for 
primary procedure)). In addition, CPT codes 90465 (Immunization 
administration younger than 8 years of age (includes percutaneous, 
intradermal, subcutaneous, or intramuscular injections) when the 
physician counsels the patient/family; first injection (single or 
combination vaccine/toxoid), per day) and 90467 were deleted and 
replaced with CPT code 90460 (Immunization administration through 18 
years of age via any route of administration, with counseling by 
physician or other qualified health care professional; first vaccine/
toxoid component).
    We agree with the commenters who believe that consistency in the PE 
RVUs across CPT codes with different code descriptors reflecting 
immunization services to different populations or using different 
routes of administration is desirable. As a matter of longstanding 
policy (69 FR 66307), we have crosswalked the nonfacility PE value from 
CPT code 96372 (Therapeutic, prophylactic, or diagnostic injection 
(specify substance or drug); subcutaneous or intramuscular) 
[predecessor CPT codes 90782 and 90772] to the PE values for CPT code 
90471 and to the HCPCS G-codes for administration of specific vaccines. 
We

[[Page 73306]]

will continue this crosswalk for CY 2011 and, as we proposed, also 
crosswalk the nonfacility PE value of CPT code 90471 to CPT code 90473. 
The PE value for CPT code 90472 is based on the direct PE inputs for 
that code, according to the usual PFS methodology. We will crosswalk 
the nonfacility PE value of CPT code 90472 to CPT code 90474 for CY 
2011 as we proposed. Finally, we are modifying our CY 2011 proposal and 
crosswalking the nonfacility PE RVUs for CPT codes 90472 and 90474 to 
new CPT code 90461 (replacement code for CPT codes 90466 and 90468) for 
CY 2011. In addition, we will crosswalk the nonfacility PE RVUs for CPT 
codes 90471 and 90473 to new CPT code 90460 (replacement code for CPT 
codes 90465 and 90467).
    After consideration of the public comments we received and the CY 
2011 changes in codes for pediatric immunization services by the CPT 
Editorial Panel, we are finalizing our CY 2011 proposals, with the 
following modifications. In summary, for CY 2011 we will--
    <bullet> Crosswalk the nonfacility PE RVUs for CPT codes 90472 and 
90474 to new CPT code 90461; and
    <bullet> Crosswalk the nonfacility PE RVUs for CPT codes 90471 to 
90473 to new CPT code 90460.

I. Refinement Panel Process

    As discussed in the 1993 PFS final rule with comment period (57 FR 
55938), we adopted a refinement panel process to assist us in reviewing 
the public comments on interim physician work RVUs for CPT codes with 
an interim final status in each year and developing final work values 
for the subsequent year. We decided that the panel would be comprised 
of a multispecialty group of physicians who would review and discuss 
the work involved in each procedure under review, and then each 
individual would individually rate the work of the procedure. We 
believed that establishing the panel with a multispecialty group would 
balance the interests of those who commented on the work RVUs against 
the budgetary and redistributive effects that could occur if we 
accepted extensive increases in work RVUs across a broad range of 
services. Historically, the refinement panel has based its 
recommendation to change a work value or to retain the interim value 
has hinged solely on the outcome of a statistical test on the ratings 
(an F-test).
    Depending on the number and range of codes that public commenters, 
typically specialty societies, request be subject to refinement, we 
establish refinement panels with representatives from 4 groups of 
physicians: Clinicians representing the specialty most identified with 
the procedures in question; physicians with practices in related 
specialties; primary care physicians; and contractor medical directors 
(CMDs). Typically the refinement panels meet in the summer prior to the 
promulgation of the final rule finalizing the RVUs for the codes. 
Typical panels have included 8 to 10 physicians across the 4 groups. 
Over time, the statistical test used to evaluate the RVU ratings of 
individual panel members have become less reliable as the physicians in 
each group have tended to select a previously discussed value, rather 
than independently evaluating the work. In addition, the resulting RVUs 
have occasionally exhibited rank order anomalies (that is, a more 
complex procedure is assigned lower RVUs than a less complex 
procedure).
    Recently, section 1848(c)(2)(K) of the Act (as added by section 
3134 of the ACA) authorized the Secretary to review potentially 
misvalued codes and make appropriate adjustments to the relative 
values. In addition, MedPAC has encouraged CMS to critically review the 
values assigned to the services under the PFS. MedPAC has stated its 
belief that CMS has historically relied too heavily on specialty 
societies to identify services that are misvalued by accepting a high 
proportion of the recommendations of the AMA RUC.
    We believe the refinement panel process continues to provide 
stakeholders with a meaningful opportunity to review and discuss the 
interim work RVUs with a clinically diverse group of experts which then 
provides informed recommendations to CMS. Therefore, in the CY 2011 
proposed rule (75 FR 40105), we indicated that we would like to 
continue the refinement process, including the established composition 
that includes representatives from the 4 groups of physicians, but with 
administrative modification and clarification. Specifically, for 
refinement panels beginning in CY 2011 (that is, for those codes with 
CY 2011 interim values that would be subject to refinement during CY 
2011), we proposed to eliminate the use of the F-test and instead base 
revised RVUs on the median work value of the panel members' ratings. We 
believe this approach will simplify the refinement process 
administratively, while resulting in a final panel recommendation that 
reflects the summary opinion of the panel members based on a commonly 
used measure of central tendency that is not significantly affected by 
outlier values. In addition, we clarified that we have the final 
authority to set the RVUs and, therefore, may make adjustments to the 
work RVUs resulting from refinement if policy concerns warrant their 
modification.
    Comment: Most commenters expressed support for the proposal to 
eliminate the F-test, including the increased transparency of the 
refinement panel process that the commenters believe would result from 
this change. Many commenters, including the AMA RUC, agreed with the 
use of the median work value of the panel members' ratings and believe 
the median would provide a clearer view of the central tendency of the 
estimates provided by the survey respondents. On the other hand, 
several commenters believe the current process is effective and 
eliminates the effects of agreement between the panel members' ratings.
    The AMA RUC recommended that CMS be mindful when assigning 
individuals to the refinement panel to ensure that all members, 
including CMDs, are not from the same specialties that were involved in 
the public comment originating the issue under review. Another 
commenter cautioned CMS that the refinement panels need to be balanced 
and should ensure that there is at least one representative on the 
panel who has direct experience with the procedure or service under 
review.
    Response: We appreciate the support of the commenters regarding our 
proposal to use the median work value of the panel members' ratings and 
will move forward to finalize our proposal for refinement panels 
beginning in CY 2011 (refinement of CY 2011 new/revised codes with 
interim values).
    When identifying individuals for the refinement panel, including 
CMDs, we attempt to select individuals from each of the different 
specialties with an interest in the codes being refined, not just the 
specialty or specialties responsible for the public comment originating 
the request for refinement. We also take steps to ensure that the panel 
members have direct experience and knowledge of the procedure or 
service under review. We will certainly continue our efforts in this 
regard. However, we note that in recent years the number of physicians 
who are available to participate in the refinement panel has been 
limited at times, and some specialty societies have had difficulty 
obtaining representation for the panel.

[[Page 73307]]

    Comment: Several commenters urged CMS to use a methodology that 
would allow the AMA RUC-recommended value to prevail when appropriately 
supported by the pertinent specialty societies and when the value is 
strongly supported by the rank order and resources of the procedure, 
since the PFS final rule with comment period is the first opportunity 
for the public to see the RVUs for the coming calendar year. These 
commenters also believe a full and fair review process is warranted 
prior to the publication of these values in the final rule with comment 
period.
    Response: We note that PFS payments for services are resource-
based. When reviewing the AMA RUC recommendations, our decisions to 
value services are based on the resources needed to perform the typical 
service and, therefore, these decisions are based upon a thorough 
review of the AMA RUC recommendations in the context of the specific 
new or revised codes. In those cases where we reject the AMA RUC 
recommendations, we publish our rationale in the PFS final rule with 
comment period where we first make the values public. These values are 
published as interim final values that are subject to public comment. 
The public comment period serves as the opportunity for public review 
and we see no other alternative to this timing, given the timeframes in 
which the new or revised CPT codes and the AMA RUC recommendations 
regarding their values are available to us and in which the new or 
revised CPT codes must be incorporated into the PFS for payment.
    Comment: Several commenters expressed concerns about the proposal 
to allow CMS to have the final authority to set the work RVUs if policy 
concerns warrant modifications to the values derived from the 
refinement process. These commenters opposed this proposal and 
recommended that the decisions of the refinement panels remain 
unchanged by CMS. The commenters believe a major strength of the 
current process is that is gives stakeholders a strong incentive to 
participate, knowing that the outcomes of the process will not be 
overturned by CMS.
    Response: Although we appreciate the concerns raised by the 
commenters, by law, we retain the final responsibility and authority to 
set the RVUs and, therefore, may make adjustments to the work RVUs 
resulting from refinement if policy concerns (such as a rank order 
anomaly) warrant their modifications.
    Comment: One commenter urged CMS to make the refinement process 
transparent and open to the public.
    Response: We believe our proposal would make the refinement process 
more transparent, as noted by some commenters. We further believe that 
representation from specialty societies as part of the AMA RUC process 
for valuing the codes allows the input of physicians who have direct 
experience with the procedure or service under review.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to eliminate the use of the F-test for 
the refinement panels and, instead, we will base the revised RVUs on 
the median work value of the panel members' ratings. In addition, we 
note that CMS retains the final authority to set the RVUs and, 
therefore, make adjustments to the work RVUs resulting from refinement 
if policy concerns warrant their modification.

J. Remote Cardiac Monitoring Services (CPT codes 93012, 93229, 93268, 
and 93271)

    In the CY 2011 PFS proposed rule (75 FR 40105), we reiterated our 
concerns about the issue of developing PE RVUs for services that are 
utilized 24 hours a day, 7 days a week (24/7), such as those that 
require certain centralized monitoring system equipment and which have 
been discussed in earlier PFS rulemaking cycles, most recently in the 
CY 2010 PFS final rule with comment period (74 FR 61755). We stated 
that the PE equipment methodology was developed for equipment that is 
in use during standard physician's office business hours and not 
equipment that is used in furnishing such continuous services, and that 
we would conduct further analysis of this issue. We indicated that 
services that were contractor-priced in CY 2009 remained contractor-
priced in CY 2010 and that any proposed changes would be communicated 
through future rulemaking.
    In the CY 2011 PFS proposed rule (75 FR 40105), we explained that 
since publication of the CY 2010 PFS final rule with comment period, we 
focused our additional analysis on 4 of the CPT codes that commenters 
have brought to our attention because they involve concurrent, remote, 
24/7 attended monitoring of multiple patients from a central location: 
CPT code 93012 (Telephonic transmission of post-symptom 
electrocardiogram rhythm strip(s); 24-hour attended monitoring, per 30 
day period of time; tracing only); CPT code 93229 (Wearable mobile 
cardiovascular telemetry with electrocardiographic recording, 
concurrent computerized real time data analysis and greater than 24 
hours of accessible ECG data storage (retrievable with query) with ECG 
triggered and patient selected events transmitted to a remote attended 
surveillance center for up to 30 days; technical support for connection 
and patient instructions for use, attended surveillance, analysis and 
physician prescribed transmission of daily and emergent data reports); 
CPT code 93268 (Wearable patient activated electrocardiographic rhythm 
derived event recording with presymptom memory loop, 24-hour attended 
monitoring, per 30 day period of time; includes transmission, physician 
review and interpretation); and CPT 93271 code (Wearable patient 
activated electrocardiographic rhythm derived event recording with 
presymptom memory loop, 24-hour attended monitoring, per 30 day period 
of time; monitoring, receipt of transmissions, and analysis).
    We pointed out that of these four codes, CPT code 93229 is 
currently contractor-priced in CY 2010, meaning that the local Medicare 
contractors determine payment rates for the service within the PFS 
geographic areas in their jurisdiction. The three services that are 
currently nationally-priced on the PFS are in the first year of a 4-
year transition to lower payment rates based on the use of the PPIS 
data adopted in the CY 2010 PFS final rule with comment period. We 
refer readers to section II.A.2. of this final rule with comment period 
for a description of the general PFS PE methodology that is the basis 
for the following discussion of approaches to establishing PE RVUs for 
these four CPT codes.
    In the CY 2011 PFS proposed rule, we explained that we examined 
several alternative methods for developing PE RVUS upon which PFS 
payment rates for these four CPT codes could be based. Each of these 
services involves transmission of information from multiple patients 
who wear individual monitoring devices that transmit patient-specific 
information to centralized equipment that is simultaneously in use for 
multiple patients. We stated that we believed it would be most 
consistent with the principles underlying the PFS PE methodology to 
classify the centralized monitoring equipment as an indirect cost since 
it is servicing multiple patients at the same time. We explained that 
after classifying this equipment as an indirect cost, we used our 
standard methodology to calculate an indirect practice cost index value 
for each code based on the PE/HR survey data of the historical mix of 
specialties providing these services. We went on to state that

[[Page 73308]]

establishing payment rates for these codes based on this approach would 
result in decreases in the payment rates for these services, including 
the typical contractor's price for CPT code 93229. For the three 
services that are nationally priced, these decreases would be relative 
to the lower payment rates based on the use of the PPIS data after the 
4-year transition.
    In the CY 2011 PFS proposed rule, we acknowledged that we had also 
received PE/HR data from the Remote Cardiac Services Provider Group 
(RCSPG), a group of Independent Diagnostic Testing Facility (IDTF) 
suppliers of these types of services. We explained that for sensitivity 
analysis purposes, we substituted these data for the PE/HR data of the 
specialties performing these services, while continuing to treat the 
centralized monitoring equipment as an indirect cost. We stated that we 
found that establishing payment rates for these codes based on the 
approach of using the submitted RCSPG PE/HR data would again result in 
decreases in the payment rates for these services, including the 
typical contractor's price for CPT code 93229. As in the prior 
alternative, the decreases for the nationally priced codes would be 
relative to the payment rates reflecting the 4-year transition to the 
PPIS data.
    We indicated that although we believed that it would be most 
consistent with the principles underlying the PE methodology to 
classify the centralized monitoring equipment as an indirect cost, we 
also performed a sensitivity analysis of the payment rates if the 
centralized monitoring equipment were classified as a direct cost. In 
this simulation, we assumed that the centralized monitoring equipment 
was in year-round use, 7 days per week for 24 hours per day. We found 
that establishing payment rates for these codes based on the approach 
of classifying the centralized monitoring equipment as a direct cost 
would again result in decreases in the payment rates for the nationally 
priced services relative to their payment rates after the 4-year 
transition to the use of the PPIS data, as well as to the typical 
current contractor's price for CPT code 93229.
    Finally, we explained that we considered proposing contractor-
pricing for all four of these services for CY 2011 but were cognizant 
of past public comments on this issue that had requested that all of 
these services be priced nationally on the PFS, including the one 
service (CPT code 93229) that is currently contractor-priced.
    In the CY 2011 PFS proposed rule, we also considered that the 
services currently priced nationally on the PFS were scheduled to 
receive lower payment rates under the 4-year transition to the PPIS 
data and that the contractor's price for CPT 93229 was recently reduced 
in the area where the majority of the billings for this service 
currently occur.
    We concluded that after taking all these factors into 
consideration, we were not proposing CY 2011 methodological or direct 
cost input changes for CPT codes 93012, 93268, or 93271--the services 
that are nationally priced under the PFS. We proposed to continue 
contractor-pricing for CPT 93229 for CY 2011. We solicited public 
comments on this issue, including responses to our analysis of 
alternative approaches to establishing PE RVUs for 24/7 services, and 
further discussion of the issues we identified in our alternative 
pricing methodologies. In addition, while we had focused the 24/7 
services analysis up until that point in time on developing the PE RVUS 
for remote cardiac monitoring services, we observed that there may be 
24/7 services in other areas of medicine, either currently paid under 
the PFS or in development for the future. Therefore, we also solicited 
public comments on these current or emerging 24/7 services, including 
descriptions of the similarities or differences between these other 
services and remote cardiac monitoring services, particularly with 
respect to the issues we identified in our analysis of alternative 
approaches to establishing PE RVUs for remote cardiac monitoring 
services under the PFS.
    Comment: Several commenters expressed concerns regarding CMS' 
discussion of PFS payment for remote cardiac monitoring, which included 
no proposal of changes for CY 2011. The commenters pointed out the 
benefits of 24/7 remote monitoring services for cardiac and other 
specialty services and argued that these types of services can differ 
in complexity and frequency from one another and from traditional 
medical services. In general, the commenters expressed interest in CMS 
accurately capturing the cost components for all of these services, 
primarily arguing for the consideration of these costs as direct costs.
    One commenter explained that the current methodology for assigning 
PE RVUs does not work for remote cardiac providers whose businesses are 
structured differently from physicians' practices and, as a result, the 
RVUs assigned to the services do not reflect their proper relative 
cost. Although CMS focused its analysis on services characterized by 
concurrent, remote, 24/7 attended monitoring of multiple patients from 
a single location, the commenter addressed cardiac event monitoring, 
pacemaker monitoring, Holter monitoring, International Normalized Ratio 
(INR) monitoring, and a number of new monitoring technologies such as 
cardiac telemetry under the umbrella term of remote cardiac monitoring. 
The commenter asserted that the IDTF providers of remote cardiac 
monitoring services operate on a 24/7 basis because the services that 
they furnish require round-the-clock service and are, therefore, 
structured very differently from physicians' offices and other IDTFs. 
The commenter argued that CMS should utilize PE/HR data submitted by 
RCSPG, a group of IDTF suppliers of these types of services, to the 
entire ranging of cardiac monitoring services furnished by these 
providers. Alternatively, the commenter indicated that CMS could use 
the all physician indirect percentage, use an indirect practice cost 
index (IPCI) of one, and add equipment costs to the PE formula for 
allocating indirect costs in setting the PE RVUs for cardiac monitoring 
services. Finally, the commenter requested that if CMS did not adopt 
one of the previous two suggestions, then CMS should temporarily 
suspend the phase-in of the use of PPIS data for cardiac monitoring 
services. Several other commenters also requested that CMS suspend the 
PPIS transition for remote cardiac monitoring services.
    Several commenters disagreed with CMS regarding the appropriateness 
of treating the centralized monitoring equipment as an indirect cost, 
arguing that the equipment is used specifically for patients that are 
receiving a specific service and, therefore, represents a direct cost 
like other medical equipment. The commenters contended that the 
centralized equipment is inherently different from other indirect 
practice expenses that are used to run a practice and are not tied 
directly to any one particular service. One commenter speculated that 
considering the cardiac monitoring equipment as an indirect expense 
would dilute the payment for this cardiac telemetry by distributing it 
to many people who are not providing it. Another commenter expressed 
concern that an indirect cost approach does not appropriately account 
for the significant differences in remote monitoring services and thus 
cannot accurately capture the cost components of each.
    With respect to the remote cardiac monitoring service described by 
CPT code 93229 which is contractor-priced, one commenter made several 
specific requests, namely that CMS: (1) Nationally price CPT code 93229 
rather

[[Page 73309]]

than contractor-price the service; (2) consider the centralized 
monitoring equipment associated with CPT code 93229 as a direct cost; 
(3) adjust the equipment utilization assumption for the centralized 
monitoring equipment from 100 percent to 50 percent; (4) use new direct 
cost inputs (for example, the cost of the monitoring device worn by 
patient) supplied by the commenter; (5) incorporate a new PE/HR, based 
on the cardiac monitoring industry-wide RCSPG PE/HR data applied to all 
cardiac monitoring services, based on data from two telemetry providers 
for CPT code 93229 that yields a PE/HR of $243.22 that would be applied 
to CPT code 93229, or based on data for telemetry and cardiac event 
monitoring (CEM) which results in a PE/HR of $214.79 that would be 
applied to telemetry and CEM services; and (6) apply an additional 
indirect allocation in the CMS PE methodology based on the equipment 
direct costs as previously recommended by one telemetry provider. The 
commenter provided equipment inputs and the associated prices and 
further recommended that CMS should continue to apply the clinical 
labor and supply input items associated with this services as 
recommended by the AMA RUC.
    Response: We appreciate the continuing interest of the commenters 
in the pricing of cardiac monitoring services under the PFS. After 
further review of this issue, while we continue to recognize there are 
some unique aspects to the services, we do not agree with the 
commenters that the PE for cardiac monitoring services cannot be 
appropriately valued using the PFS PE methodology. After our review, we 
believe that we can appropriately identify and price the direct cost 
inputs for these services. Furthermore, we note that the PPIS data for 
allocating indirect costs is from a multispecialty, nationally 
representative PE survey of both physicians and NPPS and, as the most 
comprehensive source of PE information available to date, appropriate 
for use for cardiac monitoring services. Therefore, we disagree that we 
should suspend the PE transition to the PPIS data or otherwise change 
our established methodology for setting the PE RVUs furnished by a 
subset of providers in a certain specialty area.
    We continue to believe that it is more appropriate to classify the 
costs associated with the centralized monitoring equipment, including 
the hardware and software, workstation, webserver, and call recording 
system, as indirect costs since it is difficult to allocate those costs 
to services furnished to individual patients in a manner that 
adequately reflects the number of patients being tested. This would be 
true for CPT code 93229 which has not previously been nationally 
priced. We believe that the ability to appropriately allocate costs to 
individual services is a key concept that should guide our adoption of 
the direct PE inputs for services paid under the PFS. Having drawn this 
conclusion, we plan to review the direct PE inputs for other nationally 
priced services that include centralized monitoring equipment under the 
PFS and, if we find that we have not consistently treated that 
equipment as an indirect cost, we may propose changes to the direct PE 
inputs for existing codes in a future PFS rulemaking cycle.
    We agree with several commenters that it would be appropriate at 
this time to nationally price CPT code 93229, especially in light of 
our conclusion regarding how the centralized monitoring system should 
be treated under the PFS PE methodology and the fact that the 
commenters have provided current prices and associated documentation 
for the direct PE inputs used in the typical case. Therefore, we are 
accepting the AMA RUC recommendations originally made for CY 2009 (73 
FR 69896) for clinical labor and supplies for CPT code 93229 and are 
utilizing these direct PE inputs for CY 2011. With respect to the 
equipment inputs provided to us by one commenter who currently 
furnishes the majority of services described by CPT code 93229, under 
our final CY 2011 policy the only piece of equipment that would be 
appropriately treated as a direct PE input is the cardiac telemetry 
monitoring device worn by the patient. The other equipment items, 
including the monitoring system software and hardware, workstation, 
webserver, and call recording system are indirect practice costs. 
Therefore, we are accepting the commenter's submission of $21,575 as 
the price for this device in the typical case, and applying a 50 
percent utilization rate and useful life of 3 years as recommended by 
the commenter.
    We do not believe it would be appropriate to deviate from our 
standard PFS PE methodology to adopt a PE/HR that is specific to CPT 
code 93229 or any other set of cardiac monitoring codes based on data 
from two telemetry providers, from a subset of services provided by 
certain specialty cardiac monitoring providers, or from a certain group 
of specialty providers that overall furnish only a portion of cardiac 
monitoring services, nor to change our established indirect PE 
allocation methodology. We believe the current PE methodology 
appropriately captures the relative costs of these services in setting 
their PE RVUs, based on the conclusion we have drawn following our 
assessment of the centralized monitoring system that is especially 
characteristic of services such as CPT code 93229. We note that these 
direct PE inputs are included in the final CY 2011 direct PE database 
that is posted on the CMS Web site under downloads for this CY 2011 PFS 
final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage. We further note that the 
CY 2011 payment for CPT code 93229 (without considering the negative 
PFS update that will apply for CY 2011 under current law) is close to 
the current typical contractor's price for the service in CY 2010.
    After consideration of the public comments we received, we are 
establishing a national price for CPT code 93229 based on nationally 
set RVUs, instead of maintaining the code as contractor-priced as we 
proposed. We are adopting the AMA RUC's recommendations for the 
clinical labor and supply inputs, and utilizing price, utilization, and 
useful life information provided by the commenters as equipment inputs 
for the cardiac telemetry monitoring device worn by the patient. The 
final CY 2011 RVUs for CPT code 93229 are displayed in Addendum B to 
this final rule with comment period. While we are making no changes to 
the direct PE inputs for other remote cardiac monitoring CPT codes for 
CY 2011, we will consider in the future whether changes could be 
appropriate if we conclude that these services utilize a centralized 
monitoring system that would most appropriately be treated an indirect 
cost.
    Comment: While most of the commenters addressed remote cardiac 
monitoring services specifically discussed in the CY 2011 PFS proposed 
rule, several commenters addressed other types of emerging 24/7 
services. One commenter described a pilot program that utilizes 
telehealth to monitor certain health status indicators for cardiac 
patients. This monitoring occurs during the day and night and includes 
an assessment by a nurse. The commenter stated that the initial results 
of the pilot show a lower rate of hospital readmissions for 
participants. The commenter asserted that there is currently no payment 
for this service, and urged CMS to consider funding for these types of 
programs.
    Outside of cardiac monitoring, another commenter noted that there 
are many types of remote monitoring

[[Page 73310]]

services that provide important benefits, especially for chronically 
ill patients. The commenter explained that these may include health 
status monitoring services, activity and sensor monitoring services, 
and medication dispensing and monitoring services. The commenter 
asserted that the resource requirements for these types of services can 
differ in complexity and frequency and may involve varied resources, 
including equipment and other fees; training and coaching; data 
collection, monitoring and documentation; and personal emergency 
response. As such, the commenter recommended that CMS' PE methodology 
for remote monitoring services be as transparent and flexible as 
possible to allow for these differences, and to accurately capture the 
cost components for each. Therefore, the commenter, concluded that a 
direct cost approach would be the most appropriate approach in most 
cases.
    Response: We thank the commenters for providing information on 
other current and emerging 24/7 services. We will consider appropriate 
payment for other 24/7 services under the PFS as specific codes for 
such services are created by the CPT Editorial Panel. Regarding direct 
PE inputs for other remote monitoring services, we acknowledge 
diversity in the direct and indirect costs to providers for furnishing 
various monitoring services--and all services--and believe that our 
current PE methodology, as discussed earlier in this section, is able 
to yield appropriate values across this wide range. As stated earlier 
in the context of remote cardiac monitoring, we believe that the 
ability to appropriately allocate costs to the services furnished to 
individual patients is a key concept that should guide our adoption of 
the direct PE inputs for services paid under the PFS, including remote 
monitoring and other 24/7 services.
    We look forward to continuing a dialogue with stakeholders involved 
in developing and furnishing 24/7 services as medical practice evolves 
in order to ensure that the PFS pays appropriately for those 24/7 
services that are covered by Medicare and paid as physicians' services.

IV. Medicare Telehealth Services for the Physician Fee Schedule

A. Billing and Payment for Telehealth Services

1. History
    Prior to January 1, 1999, Medicare coverage for services delivered 
via a telecommunications system was limited to services that did not 
require a face-to-face encounter under the traditional model of medical 
care. Examples of these services included interpretation of an x-ray or 
electrocardiogram or electroencephalogram tracing, and cardiac 
pacemaker analysis.
    Section 4206 of the BBA provided for coverage of, and payment for, 
consultation services delivered via a telecommunications system to 
Medicare beneficiaries residing in rural health professional shortage 
areas (HPSAs) as defined by the Public Health Service Act. 
Additionally, the BBA required that a Medicare practitioner 
(telepresenter) be with the patient at the time of a teleconsultation. 
Further, the BBA specified that payment for a teleconsultation had to 
be shared between the consulting practitioner and the referring 
practitioner and could not exceed the fee schedule payment which would 
have been made to the consultant for the service provided. The BBA 
prohibited payment for any telephone line charges or facility fees 
associated with the teleconsultation. We implemented this provision in 
the CY 1999 PFS final rule with comment period (63 FR 58814).
    Effective October 1, 2001, section 223 of the Medicare, Medicaid 
and SCHIP Benefits Improvement Protection Act of 2000 (Pub. L. 106-554) 
(BIPA) added a new section 1834(m) to the Act which significantly 
expanded Medicare telehealth services. Section 1834(m)(4)(F)(i) of the 
Act defines Medicare telehealth services to include consultations, 
office visits, office psychiatry services, and any additional service 
specified by the Secretary, when delivered via a telecommunications 
system. We first implemented this provision in the CY 2002 PFS final 
rule with comment period (66 FR 55246). Section 1834(m)(4)(F)(ii) of 
the Act required the Secretary to establish a process that provides for 
annual updates to the list of Medicare telehealth services. We 
established this process in the CY 2003 PFS final rule with comment 
period (67 FR 79988).
    As specified in regulations at Sec.  410.78(b), we generally 
require that a telehealth service be furnished via an interactive 
telecommunications system. Under Sec.  410.78(a)(3), an interactive 
telecommunications system is defined as multimedia communications 
equipment that includes, at a minimum, audio and video equipment 
permitting two-way, real-time interactive communication between the 
patient and the practitioner at the distant site. Telephones, facsimile 
machines, and electronic mail systems do not meet the definition of an 
interactive telecommunications system. An interactive 
telecommunications system is generally required as a condition of 
payment; however, section 1834(m)(1) of the statute does allow the use 
of asynchronous ``store-and-forward'' technology in delivering these 
services when the originating site is a Federal telemedicine 
demonstration program in Alaska or Hawaii. As specified in regulations 
at Sec.  410.78(a)(1), store and forward means the asynchronous 
transmission of medical information from an originating site to be 
reviewed at a later time by the practitioner at the distant site.
    Medicare telehealth services may be provided to an eligible 
telehealth individual notwithstanding the fact that the individual 
practitioner providing the telehealth service is not at the same 
location as the beneficiary. An eligible telehealth individual means an 
individual enrolled under Part B who receives a telehealth service 
furnished at an originating site. As specified in BIPA, originating 
sites are limited under section 1834(m)(3)(C) of the statute to 
specified medical facilities located in specific geographic areas. The 
initial list of telehealth originating sites included the office of a 
practitioner, a critical access hospital (CAH), a rural health clinic 
(RHC), a federally qualified health center (FQHC) and a hospital. More 
recently, section 149 of the Medicare Improvements for Patients and 
Providers Act of 2008 (Pub. L. 110-275) (MIPPA) expanded the list of 
telehealth originating sites to include hospital-based renal dialysis 
centers, skilled nursing facilities (SNFs), and community mental health 
centers (CMHCs). In order to serve as a telehealth originating site, 
these sites must be located in an area designated as a rural HPSA, in a 
county that is not in a metropolitan statistical area (MSA), or must be 
an entity that participate in a Federal telemedicine demonstration 
project that has been approved by (or receives funding from) the 
Secretary as of December 31, 2000. Finally, section 1834(m) of the 
statute does not require the eligible telehealth individual to be 
presented by a practitioner at the originating site.
2. Current Telehealth Billing and Payment Policies
    As noted above, Medicare telehealth services can only be furnished 
to an eligible telehealth beneficiary in an originating site. An 
originating site is defined as one of the specified sites where an 
eligible telehealth individual is located at the time the service is 
being furnished via a telecommunications system. In general, 
originating sites must be located in a rural HPSA or in a county 
outside of an MSA. The

[[Page 73311]]

originating sites authorized by the statute are as follows:
    <bullet> Offices of a physician or practitioner
    <bullet> Hospitals
    <bullet> CAHs
    <bullet> RHCs
    <bullet> FQHCs
    <bullet> Hospital-Based or Critical Access Hospital-Based Renal 
Dialysis Centers (including Satellites)
    <bullet> SNFs
    <bullet> CMHCs
    Currently approved Medicare telehealth services include the 
following:
    <bullet> Initial inpatient consultations
    <bullet> Follow-up inpatient consultations
    <bullet> Office or other outpatient visits
    <bullet> Individual psychotherapy
    <bullet> Pharmacologic management
    <bullet> Psychiatric diagnostic interview examination
    <bullet> End Stage Renal Disease (ESRD) related services
    <bullet> Individual medical nutrition therapy (MNT)
    <bullet> Neurobehavioral status exam
    <bullet> Individual health and behavior assessment and intervention 
(HBAI).
    In general, the practitioner at the distant site may be any of the 
following, provided that the practitioner is licensed under State law 
to furnish the service being furnished via a telecommunications system:
    <bullet> Physician
    <bullet> Physician assistant (PA)
    <bullet> Nurse practitioner (NP)
    <bullet> Clinical nurse specialist (CNS)
    <bullet> Nurse midwife
    <bullet> Clinical psychologist
    <bullet> Clinical social worker
    <bullet> Registered dietitian or nutrition professional.
    Practitioners furnishing Medicare telehealth services are located 
at a distant site, and they submit claims for telehealth services to 
the Medicare contractors that process claims for the service area where 
their distant site is located. Section 1834(m)(2)(A) of the Act 
requires that a practitioner who furnishes a telehealth service to an 
eligible telehealth individual be paid an amount equal to the amount 
that the practitioner would have been paid if the service had been 
furnished without the use of a telecommunications system. Distant site 
practitioners must submit the appropriate HCPCS procedure code for a 
covered professional telehealth service, appended with the -GT (Via 
interactive audio and video telecommunications system) or -GQ (Via 
asynchronous telecommunications system) modifier. By reporting the -GT 
or -GQ modifier with a covered telehealth procedure code, the distant 
site practitioner certifies that the beneficiary was present at a 
telehealth originating site when the telehealth service was furnished. 
The usual Medicare deductible and coinsurance policies apply to the 
telehealth services reported by distant site practitioners.
    Section 1834(m)(2)(B) of the Act provides for payment of a facility 
fee to the originating site. To be paid the originating site facility 
fee, the provider or supplier where the eligible telehealth individual 
is located must submit a claim with HCPCS code Q3014 (Telehealth 
originating site facility fee), and the provider or supplier is paid 
according to the applicable payment methodology for that facility or 
location. The usual Medicare deductible and coinsurance policies apply 
to HCPCS code Q3014. By submitting HCPCS code Q3014, the originating 
site authenticates that it is located in either a rural HPSA or non-MSA 
county or is an entity that participates in a Federal telemedicine 
demonstration project that has been approved by (or receives funding 
from) the Secretary as of December 31, 2000 as specified in section 
1834(m)(4)(C)(i)(III) of the Act.
    As described above, certain professional services that are commonly 
furnished remotely using telecommunications technology, but that do not 
require the patient to be present in-person with the practitioner when 
they are furnished, are covered and paid in the same way as services 
delivered without the use of telecommunications technology when the 
practitioner is in-person at the medical facility furnishing care to 
the patient. Such services typically involve circumstances where a 
practitioner is able to visualize some aspect of the patient's 
condition without the patient being present and without the 
interposition of a third person's judgment. Visualization by the 
practitioner can be possible by means of x-rays, electrocardiogram or 
electroencephalogram tracings, tissue samples, etc. For example, the 
interpretation by a physician of an actual electrocardiogram or 
electroencephalogram tracing that has been transmitted via telephone 
(that is, electronically, rather than by means of a verbal description) 
is a covered physician's service. These remote services are not 
Medicare telehealth services as defined under section 1834(m) of the 
Act. Rather, these remote services that utilize telecommunications 
technology are considered physicians' services in the same way as 
services that are furnished in-person without the use of 
telecommunications technology; they are paid under the same conditions 
as in-person physicians' services (with no requirements regarding 
permissible originating sites), and should be reported in the same way 
(that is, without the -GT or -GQ modifier appended).

B. Requests for Adding Services to the List of Medicare Telehealth 
Services

    As noted above, in the December 31, 2002 Federal Register (67 FR 
79988), we established a process for adding services to or deleting 
services from the list of Medicare telehealth services. This process 
provides the public with an ongoing opportunity to submit requests for 
adding services. We assign any request to make additions to the list of 
Medicare telehealth services to one of the following categories:
    <bullet> Category 1: Services that are similar to professional 
consultations, office visits, and office psychiatry services. In 
reviewing these requests, we look for similarities between the 
requested and existing telehealth services for the roles of, and 
interactions among, the beneficiary, the physician (or other 
practitioner) at the distant site and, if necessary, the telepresenter. 
We also look for similarities in the telecommunications system used to 
deliver the proposed service, for example, the use of interactive audio 
and video equipment.
    <bullet> Category 2: Services that are not similar to the current 
list of telehealth services. Our review of these requests includes an 
assessment of whether the use of a telecommunications system to deliver 
the service produces similar diagnostic findings or therapeutic 
interventions as compared with the in-person delivery of the same 
service. Requestors should submit evidence showing that the use of a 
telecommunications system does not affect the diagnosis or treatment 
plan as compared to in-person delivery of the requested service.
    Since establishing the process to add or remove services from the 
list of approved telehealth services, we have added the following to 
the list of Medicare telehealth services: individual HBAI services; 
psychiatric diagnostic interview examination; ESRD services with 2 to 3 
visits per month and 4 or more visits per month (although we require at 
least 1 visit a month to be furnished in-person by a physician, CNS, 
NP, or PA in order to examine the vascular access site); individual 
MNT; neurobehavioral status exam; and initial and follow-up inpatient 
telehealth consultations for beneficiaries in hospitals and skilled 
nursing facilities (SNFs).

[[Page 73312]]

    Requests to add services to the list of Medicare telehealth 
services must be submitted and received no later than December 31 of 
each calendar year to be considered for the next rulemaking cycle. For 
example, requests submitted before the end of CY 2010 are considered 
for the CY 2012 proposed rule. Each request for adding a service to the 
list of Medicare telehealth services must include any supporting 
documentation the requester wishes us to consider as we review the 
request. Because we use the annual PFS rulemaking process as a vehicle 
for making changes to the list of Medicare telehealth services, 
requestors should be advised that any information submitted is subject 
to public disclosure for this purpose. For more information on 
submitting a request for an addition to the list of Medicare telehealth 
services, including where to mail these requests, we refer readers to 
the CMS Web site at http://www.cms.gov/telehealth/.

C. Submitted Requests for Addition to the List of Telehealth Services 
for CY 2011

    We received requests in CY 2009 to add the following services as 
Medicare telehealth services effective for CY 2011: (1) Individual 
kidney disease education (KDE) services; (2) individual diabetes self-
management training (DSMT) services; (3) group KDE, DSMT, MNT, and HBAI 
services; (4) initial, subsequent, and discharge day management 
hospital care services; (5) initial, subsequent, discharge day 
management, and other nursing facility care services; (6) 
neuropsychological testing services; (7) speech-language pathology 
services; and (8) home wound care services. The following presents a 
discussion of these requests, including our proposed additions to the 
CY 2011 telehealth list.
1. Individual KDE Services
    The American Society of Nephrology, Dialysis Patient Citizens, 
AMGEN, and Kidney Care Partners submitted requests to add individual 
KDE services, reported by HCPCS code G0420 (Face-to-face educational 
services related to the care of chronic kidney disease; individual, per 
session, per one hour), to the list of approved telehealth services for 
CY 2011 on a category 1 basis.
    Individual KDE services, covered under the new Medicare KDE benefit 
effective for services furnished beginning in CY 2010, are defined as 
face-to-face educational services provided to a patient with stage IV 
chronic kidney disease (CKD). We believe the interaction between a 
practitioner and a beneficiary receiving individual KDE services is 
similar to the education, assessment, and counseling elements of 
individual MNT services, reported by HCPCS code G0270 (Medical 
nutrition therapy; reassessment and subsequent intervention(s) 
following second referral in same year for change in diagnosis, medical 
condition or treatment regimen (including additional hours needed for 
renal disease), individual, face to face with the patient, each 15 
minutes); CPT code 97802 (Medical nutrition therapy; initial assessment 
and intervention, individual, face-to-face with the patient, each 15 
minutes); and CPT code 97803 (Medical nutrition therapy; re-assessment 
and intervention, individual, face-to-face with the patient, each 15 
minutes), all services that are currently on the telehealth list.
    Therefore, we proposed to add HCPCS code G0420 to the list of 
telehealth services for CY 2011 on a category 1 basis and to revise our 
regulations at Sec.  410.78(b) and Sec.  414.65(a)(1) to include 
individual KDE as a Medicare telehealth service.
    Comment: Several commenters expressed support for CMS' proposal to 
add KDE services to the list of Medicare telehealth services for CY 
2011. One commenter stated that the proposal would provide patients at 
risk for developing chronic kidney disease and ESRD with access to 
educational services that may help in controlling the progression of 
disease. Another commenter suggested that delivery of KDE services 
through telehealth would provide beneficiaries with the flexibility to 
interact with practitioners in a manner tailored to their needs, thus 
facilitating a more patient-centered approach. Another commenter noted 
that greater flexibility in the provision of KDE services is 
particularly important in rural areas where individuals do not have as 
much access to dialysis centers.
    Response: We agree with the commenters that adding KDE services to 
the list of Medicare telehealth services may be valuable to Medicare 
beneficiaries, especially insofar as it helps provide greater access to 
the services for beneficiaries in rural or other isolated areas.
    Comment: One commenter who supported the proposal also encouraged 
the CMS to maintain its existing policy regarding the qualified 
providers for KDE services in order to appropriately ensure the quality 
and content conveyed to patients in educational sessions and remain 
concordant with the intent of MIPPA.
    Response: We note that the addition of KDE to the list of Medicare 
telehealth services does not alter the qualifications for providers of 
KDE services as specified in Sec.  410.48 of the regulations.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to add HCPCS code G0420 to the list of 
telehealth services for CY 2011 on a category 1 basis and to revise our 
regulations at Sec.  410.78(b) and Sec.  414.65(a)(1) to include 
individual KDE as a Medicare telehealth service.
2. Individual DSMT Services
    The Tahoe Forest Health System and the Marshfield Clinic submitted 
requests to add individual DSMT services, reported by HCPCS code G0108 
(Diabetes outpatient self-management training services, individual, per 
30 minutes), to the list of telehealth services for CY 2011 on a 
category 1 basis. In the CY 2009 PFS final rule with comment period (73 
FR 69743), we stated that we believe individual DSMT services are not 
analogous to individual MNT services because of the element of skill-
based training that is encompassed within individual DSMT services that 
is not an aspect of individual MNT services (or any other services 
currently approved for telehealth). Due to the statutory requirement 
that DSMT services include teaching beneficiaries the skills necessary 
for the self-administration of injectable drugs, we have stated our 
belief that DSMT, whether provided to an individual or a group, must be 
evaluated as a category 2 service as specified in the CY 2009 PFS 
proposed rule (73 FR 38516). Prior to CY 2011 rulemaking, we had 
considered several previous requests to add DSMT to the list of 
Medicare telehealth services. We had not added individual DSMT to the 
list of telehealth services because we believe that skill-based 
training, such as teaching patients how to inject insulin, would be 
difficult to accomplish effectively without the physical presence of 
the teaching practitioner (70 FR 45787 and 70157, and 73 FR 38516 and 
69743).
    In considering the new request to add individual DSMT services to 
the list of telehealth services in CY 2011, we took into account 
requestors' argument that individual DSMT services are highly similar 
to individual MNT services and that injection training constitutes just 
a small proportion of DSMT services. Except for the component of 
individual DSMT services that involves instruction in self-
administration of injectable drugs for eligible beneficiaries, we 
agreed with the requestors that individual DSMT

[[Page 73313]]

services are similar to individual MNT services, which are currently on 
the list of Medicare telehealth services. We note that Medicare 
coverage of DSMT services was initially authorized in the BBA. After 
more than a decade of Medicare coverage, the most recent information 
shows that DSMT continues to be significantly underutilized in the 
context of the eligible population of Medicare beneficiaries. While we 
are uncertain to what extent geographic barriers to care contribute to 
this underutilization, given the morbidity associated with poorly 
managed diabetes and the growing evidence-base regarding effective DSMT 
services, we believe it is very important to facilitate Medicare 
beneficiary access to these underutilized services. While we were 
previously concerned about treating the components of DSMT services 
differently in the context of considering DSMT services for the 
telehealth list, in the CY 2011 PFS proposed rule (75 FR 40108), we 
stated our belief that our concern regarding the skill-based injection 
training component of DSMT services could be addressed by imposing a 
requirement that a minimum portion of the training be furnished in-
person. We noted that for beneficiaries who meet the coverage criteria, 
Medicare covers 10 hours of DSMT services in the year following the 
initial training, as described in the Medicare Benefit Policy Manual 
(Pub. 100-02, Chapter 15, Section 300.3). Taking into consideration the 
initial year coverage of DSMT services, for CY 2011 we proposed that a 
minimum of 1 hour of instruction in injection training must be 
furnished in-person during the year following the initial DSMT service. 
Imposing this condition would allow us to expand access to DSMT 
services by adding individual DSMT services to the list of telehealth 
services, while ensuring effective injection training for 
beneficiaries.
    Therefore, we proposed to add HCPCS code G0108 to the list of 
telehealth services beginning in CY 2011. We also proposed that, as a 
condition of payment for individual DSMT services furnished as 
telehealth services to an eligible telehealth individual, a minimum of 
1 hour of in-person instruction in the self-administration of 
injectable drugs must be furnished to the individual during the year 
following the initial DSMT service. The injection training may be 
furnished through either individual or group DSMT services. By 
reporting the -GT or -GQ modifier with HCPCS code G0108 as a telehealth 
service, the distant site practitioner would certify that the 
beneficiary has received or will receive 1 hour of in-person DSMT 
services for purposes of injection training during the year following 
the initial DSMT service. Consistent with this proposal, we proposed to 
revise our regulations at Sec.  410.78(b) and Sec.  414.65(a)(1) to 
include individual DSMT services as a Medicare telehealth service, with 
the exception of 1 hour of in-person instruction in self-administration 
of injectable drugs which must be furnished to the eligible telehealth 
individual as individual or group DSMT services during the year 
following the initial DSMT service.
    Comment: A number of commenters expressed support for CMS' proposal 
to add DSMT services to the list of Medicare telehealth services. One 
commenter requested that CMS clarify that this proposal would permit 
NPs and PAs in all patient care settings to provide and bill for DSMT 
services furnished through telehealth technologies.
    Response: As we stated in the CY 2011 PFS proposed rule (75 FR 
40109), our proposal is consistent with the statutory requirements of 
section 1834(m)(1) of the Act and as provided in Sec.  410.141(e) that 
individual DSMT services may be furnished by a physician, individual, 
or entity that furnishes other services for which direct Medicare 
payment may be made and that submits necessary documentation to, and is 
accredited by, an accreditation organization approved by us as 
described in the Benefit Policy Manual (Pub. 100-04, chapter 15, 
section 300.2). However, consistent with the statutory requirements of 
section 1834(m)(1) of the Act and as provided in Sec.  410.78(b)(1) and 
(b)(2) of our regulations, Medicare telehealth services, including 
individual DSMT furnished as a telehealth service, can only be 
furnished by a licensed physician, PA, NP, CNS, certified nurse-
midwife, clinical psychologist, clinical social worker, or registered 
dietitian or nutrition professional. Additionally, the site of the 
beneficiary must conform with the statutory requirements of telehealth 
originating sites from section 1834(m)(3)(C) of the Act and described 
in section IV.A. 2. of this final rule with comment period.
    Comment: One commenter requested that pharmacists be added to the 
list of eligible Medicare telehealth distant site practitioners. The 
commenter stated that since pharmacists are already providing valuable 
DSMT services to patients in-person, these practitioners should not be 
excluded from providing those same valuable services via telehealth.
    Response: Under section 1834(m) of the Act, payment is made for a 
Medicare telehealth service furnished by a physician or practitioner in 
a distant site. For purposes of Medicare telehealth services, the 
physician or practitioner must either be a physician as defined in 
section 1861(r) of the Act or another practitioner as defined in 
section 1842(b)(18)(C) of the Act. Because pharmacists do not fall 
within these statutory definitions, we do not have the authority to 
make payment to pharmacists as eligible distant site practitioners for 
Medicare telehealth services.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to add HCPCS code G0108 to the list of 
telehealth services beginning in CY 2011. As a condition of payment for 
individual DSMT services furnished as telehealth services to an 
eligible telehealth individual, a minimum of 1 hour of in-person 
instruction in the self-administration of injectable drugs must be 
furnished to the individual during the year following the initial DSMT 
service. The injection training may be furnished through either 
individual or group DSMT services. By reporting the -GT or -GQ modifier 
with HCPCS code G0108 as a telehealth service, the distant site 
practitioner certifies that the beneficiary has received or will 
receive 1 hour of in-person DSMT services for purposes of injection 
training during the year following the initial DSMT service. Consistent 
with this final policy, we are revising our regulations at Sec.  
410.78(b) and Sec.  414.65(a)(1) to include individual DSMT services as 
a Medicare telehealth service, with the exception of 1 hour of in-
person instruction in self-administration of injectable drugs which 
must be furnished to the eligible telehealth individual as individual 
or group DSMT services during the year following the initial DSMT 
service.
    We note that, as specified in Sec.  410.141(e), individual DSMT 
services may be furnished by a physician, individual, or entity that 
furnishes other services for which direct Medicare payment may be made 
and that submits necessary documentation to, and is accredited by, an 
accreditation organization approved by CMS. However, consistent with 
the statutory requirements of section 1834(m)(1) of the Act and as 
provided in Sec.  410.78(b)(1) and (b)(2) of our regulations, Medicare 
telehealth services, including individual DSMT furnished as a 
telehealth service, can only be furnished by a licensed physician, PA, 
NP, CNS, certified nurse-midwife, clinical psychologist, clinical 
social worker, or registered dietitian or nutrition professional.

[[Page 73314]]

3. Group KDE, MNT, DSMT, and HBAI Services
    The American Society of Nephrology, Dialysis Patient Citizens, 
AMGEN, Tahoe Forest Health Systems, Kidney Care Partners, the American 
Telemedicine Association, and the Marshfield Clinic submitted requests 
to add one or more of the following group services to the telehealth 
list for CY 2011:
    <bullet> Group KDE services, reported by HCPCS code G0421 (Face-to-
face educational services related to the care of chronic kidney 
disease; group, per session, per one hour);
    <bullet> Group MNT services, reported by CPT code 97804 (Medical 
nutrition therapy; group (2 or more individual(s)), each 30 minutes);
    <bullet> Group DSMT services, reported by HCPCS code G0109 
(Diabetes outpatient self-management training services, group session 
(2 or more), per 30 minutes); and/or
    <bullet> Group HBAI services, reported by CPT code 96153 (Health 
and behavior intervention, each 15 minutes, face-to-face; group (2 or 
more patients)) and 96154 (Health and behavior intervention, each 15 
minutes, face-to-face; family (with the patient present)).
    When furnished as individual services, HBAI and MNT services are 
currently on the list of Medicare telehealth services. Furthermore, we 
proposed to add individual KDE and DSMT services to the list of 
Medicare telehealth services beginning in CY 2011 as described above.
    In the CY 2007 and CY 2010 PFS rulemaking cycles (70 FR 45787 and 
70157, and 74 FR 33543 and 61764), we stated that we did not believe 
that group services could be appropriately delivered through 
telehealth. In the CY 2011 PFS proposed rule (75 FR 40109), we observed 
that currently there are no group services approved as Medicare 
telehealth services and that there is a different interactive dynamic 
between the practitioner and his or her patients in group services as 
compared to individual services. We previously had considered requests 
to add various group services to the list of Medicare telehealth 
services on a category 2 basis because we had believed that, especially 
given the interactive dynamic between practitioners and their patients, 
group services were not similar to other services on the list of 
Medicare telehealth services. Therefore, we had maintained that it was 
necessary to evaluate the addition of group services by comparing 
diagnostic findings or therapeutic interventions when services are 
furnished via telehealth versus when services are furnished in-person.
    In the CY 2011 proposed rule (75 FR 40109), we stated that we 
continue to believe that the group dynamic may be a critical and 
defining element for certain services, and that this characteristic 
precludes many group services from being considered on a category 1 
basis for addition to the list of Medicare telehealth services. For 
example, we believe that due to the therapeutic nature of the group 
dynamic that is integral to group psychotherapy, group psychotherapy is 
fundamentally different from other Medicare telehealth services and, 
therefore, could not be considered on a category 1 basis for addition 
to the telehealth services list. For the same reason, in the absence of 
evidence to the contrary, we do not believe group psychotherapy 
services could be appropriately delivered through telehealth.
    However, upon further consideration, with regard to the particular 
group education and training services for which we received requests 
for addition to the Medicare telehealth services list, for CY 2011 we 
concluded that we believe the group dynamic is not central to the core 
education and training components of these particular services, 
specifically DSMT, MNT, KDE, and HBAI services. We believe that these 
group services are sufficiently similar to the individual, related 
services that are already on the telehealth services list or were 
proposed for addition beginning in CY 2011. Specifically, we believe 
that for these group services, which consist principally of an 
information exchange for the purpose of education and training, the 
roles of, and interactions between, the patients and the practitioner 
are sufficiently similar to the related individual education and 
training services that the services can be furnished appropriately as a 
telehealth service.
    Therefore, we proposed to add HCPCS code G0421 for group KDE 
services, CPT code 97804 for group MNT services, HCPCS code G0109 for 
group DSMT services, and CPT codes 96153 and 96154 for group HBAI 
services to the Medicare telehealth services list on a category 1 basis 
for CY 2011. Furthermore, because the concerns we raised above 
regarding adequate injection training with the addition of individual 
DSMT are also present for group DSMT, we proposed to require the same 
minimum of 1 hour of in-person instruction for injection training 
within the year following the initial DSMT service for any beneficiary 
that receives DSMT services via telehealth. By reporting the -GT or -GQ 
modifier with HCPCS code G0109, the distant site practitioner would 
certify that the beneficiary has received or will receive 1 hour of in-
person instruction in self-administration of injectable drugs which 
must be furnished to the eligible telehealth individual as individual 
or group DSMT services during the year following the initial DSMT 
service. Consistent with this proposal to add these group education and 
training services, we also proposed to revise our regulations at Sec.  
410.78(b) and Sec.  414.65(a)(1) to include group KDE, MNT, DSMT, and 
HBAI services as Medicare telehealth services, with the exception of 1 
hour of in-person instruction in self-administration of injectable 
drugs which must be furnished to the eligible telehealth individual as 
individual or group DSMT services in the year following the initial 
DSMT service.
    Comment: Many commenters agreed with CMS' proposal to add group 
KDE, MNT, DSMT, and HBAI to the list of Medicare telehealth services 
for CY 2011. Some commenters commended CMS' willingness to expand the 
list of Medicare telehealth services and explained that the additions 
would facilitate beneficiary access to care.
    Many commenters also urged CMS to make further additions to the 
list of Medicare telehealth services beyond those proposed for CY 2011.
    Response: We believe adding these group services to the list of 
Medicare telehealth services will facilitate beneficiary access to 
care, and we appreciate the commenters' shared interest in that goal.
    The process for requesting additional services to be added to the 
list of Medicare telehealth services is described in section IV.B. of 
this final rule with comment period. Requests for additions for CY 2012 
must be received by the end of CY 2010. Further information is 
available about the process on the CMS web site at: http://www.cms.gov/telehealth/.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to add HCPCS code G0421 for group KDE 
services, CPT code 97804 for group MNT services, HCPCS code G0109 for 
group DSMT services, and CPT codes 96153 and 96154 for group HBAI 
services to the Medicare telehealth services list on a category 1 
basis. Furthermore, because we have the same concerns for group DSMT 
services that we raised above regarding adequate injection training for 
individual DSMT services, we are requiring the same minimum of 1 hour 
of in-person instruction for injection training within

[[Page 73315]]

the year following the initial DSMT service for any beneficiary that 
receives DSMT services via telehealth. By reporting the -GT or -GQ 
modifier with HCPCS code G0109, the distant site practitioner would 
certify that the beneficiary has received or will receive 1 hour of in-
person DSMT services for purposes of injection training during the year 
following the initial DSMT service. Consistent with the addition of 
these group education and training services, we are also revising our 
regulations at Sec.  410.78(b) and Sec.  414.65(a)(1) to include group 
KDE, MNT, DSMT, and HBAI services as Medicare telehealth services, with 
the exception of 1 hour of in-person instruction for injection training 
within the year following the initial DSMT service.
    As described above for individual DSMT services, we note that group 
DSMT services may be furnished by a physician, individual, or entity 
that furnishes other services for which direct Medicare payment may be 
made and that submits necessary documentation to, and is accredited by, 
an accreditation organization approved by CMS, as specified in Sec.  
410.141(e) for DSMT services. However, consistent with the statutory 
requirements of section 1834(m)(1) of the Act and as provided in Sec.  
410.78(b)(1) and (b)(2) of our regulations, Medicare telehealth 
services, including group DSMT furnished as a telehealth service, can 
only be furnished by a licensed physician, PA, NP, CNS, certified 
nurse-midwife, clinical psychologist, clinical social worker, or 
registered dietitian or nutrition professional.
4. Initial, Subsequent, and Discharge Day Management Hospital Care 
Services
    The University of Louisville School of Medicine, the American 
Telemedicine Association, and Mille Lacs Health System submitted 
various requests to add initial hospital care services (reported by CPT 
codes 99221 (Level 1 initial hospital care), 99222 (Level 2 initial 
hospital care), and 99223 (Level 3 initial hospital care)); subsequent 
hospital care services (reported by CPT codes 99231 (Level 1 subsequent 
hospital care), 99232 (Level 2 subsequent hospital care), and 99233 
(Level 3 subsequent hospital care)); and/or hospital discharge day 
management services (reported by CPT codes 99238 (Hospital discharge 
day management; 30 minutes or less) and 99239 (Hospital discharge day 
management; more than 30 minutes) to the Medicare telehealth services 
list beginning in CY 2011, generally on a category 1 basis. Some of the 
requestors also recommended that we limit the delivery of these 
services through telehealth to the provision of services to patients 
with a psychiatric diagnosis or to those treated in a psychiatric 
hospital or licensed psychiatric bed.
    We appreciate the recommendations of the requestors to 
substantially expand the list of Medicare telehealth services. The 
requestors submitted a number of studies regarding the outcomes of 
telehealth services in caring for patients with psychiatric diagnoses. 
However, we note that the CPT codes for hospital care services are used 
to report care for hospitalized patients with a variety of diagnoses, 
including psychiatric diagnoses. In the CY 2011 PFS proposed rule (75 
FR 40110), we stated our belief that it would not be appropriate to add 
services to the telehealth list only for certain diagnoses because the 
service described by a HCPCS code is essentially the same service, 
regardless of the patient's diagnosis. When evaluating the addition of 
services for telehealth on a category 1 basis, our focus is on the 
roles of, and interactions among, the beneficiary, the physician or 
practitioner, and the telepresenter (if applicable), which generally 
are similar across diagnoses for services that may be reported with the 
same HCPCS codes. Even in the unique case of certain ESRD services, we 
limited additions to the list of Medicare telehealth services based on 
the appropriateness of certain specific codes, taking into 
consideration the full service descriptions (69 FR 47511). Therefore, 
we continue to believe that it is most appropriate to consider 
additions to the list of telehealth services based on the overall 
suitability of the services described by the relevant HCPCS codes to 
delivery through telehealth.
    In the CY 2005, CY 2008, and CY 2009 PFS rulemakings (69 FR 47510 
and 66276, 72 FR 38144 and 66250, and 73 FR 38517 and 69745, 
respectively), we did not add initial, subsequent, or discharge day 
management hospital care services to the list of approved telehealth 
services because of our concern regarding the use of telehealth for the 
ongoing evaluation and management (E/M) for the generally high acuity 
of hospital inpatients. While we continue to have some concern in this 
area, we also share the requestors' interest in improving access for 
hospitalized patients to care furnished by treating practitioners. 
Therefore, we reevaluated these services in the context of the CY 2011 
requests, including considering the possibility that these services 
could be added on a category 1 basis based on their resemblance to 
services currently on the telehealth list, such as initial and follow-
up inpatient telehealth consultations. The following presents a 
discussion of our review for the CY 2011 proposed rule of the 
subcategories of hospital care services included in these requests.
    Currently, one of the three codes for an initial hospital care 
service (specifically CPT codes 99221, 99222, or 99223) is reported for 
the first hospital inpatient E/M visit to the patient by the admitting 
or a consulting practitioner when that visit is furnished in person. In 
addition, we note that currently there are several HCPCS G-codes on the 
Medicare telehealth services list that may be reported for initial and 
follow-up inpatient consultations through telehealth, specifically 
HCPCS codes G0406 (Follow-up inpatient telehealth consultation, 
limited, physicians typically spend 15 minutes communicating with the 
patient via telehealth); G0407 (Follow-up inpatient telehealth 
consultation, intermediate, physicians typically spend 25 minutes 
communicating with the patient via telehealth); G0408 (Follow-up 
inpatient telehealth consultation, complex, physicians typically spend 
35 minutes or more communicating with the patient via telehealth); 
G0425 (Initial inpatient telehealth consultation, typically 30 minutes 
communicating with the patient via telehealth); G0426 (Initial 
inpatient telehealth consultation, typically 50 minutes communicating 
with the patient via telehealth); and G0427 (Initial inpatient 
telehealth consultation, typically 70 minutes or more communicating 
with the patient via telehealth).
    While initial inpatient consultation services are currently on the 
list of approved telehealth services, there are no services on the 
current list of telehealth services that resemble initial hospital care 
for an acutely ill patient by the admitting practitioner who has 
ongoing responsibility for the patient's treatment during the hospital 
course. Therefore, we were unable to consider initial hospital care 
services on a category 1 basis for the telehealth list for CY 2011.
    We reviewed the documentation submitted in support of adding the 
initial hospital care codes to the Medicare telehealth services list as 
category 2 requests. Most of the studies provided by the requestors 
were specific to the treatment of patients with particular diagnoses. 
Additionally, the studies were not specific to initial hospital care 
visits by admitting practitioners. Finally, most of the studies 
concluded that more research was required in order to establish medical 
equivalence between telehealth

[[Page 73316]]

and in-person services. Therefore, we received no information that 
provides robust support for the addition of initial hospital care 
services to the approved telehealth list on a category 2 basis. The 
initial hospital care codes describe the first visit to the 
hospitalized patient by the admitting practitioner who may or may not 
have seen the patient in the decision-making phase regarding 
hospitalization. We believe it is critical that the initial hospital 
visit by the admitting practitioner be conducted in-person to ensure 
that the practitioner with ongoing treatment responsibility 
comprehensively assesses the patient's condition upon admission to the 
hospital through a thorough in-person examination. Therefore, we did 
not propose to add initial hospital care services to the Medicare 
telehealth services list for CY 2011.
    We again considered adding subsequent hospital care services 
reported by CPT codes 99231 through 99233 to the telehealth list for CY 
2011 on a category 1 basis. In the CY 2005 and CY 2008 PFS proposed 
rules (69 FR 47511 and 72 FR 38155), we stated that the potential 
acuity of patients in the hospital setting precludes consideration of 
subsequent hospital visits as similar to existing telehealth services. 
However, as stated earlier, we also note that HCPCS codes for initial 
and follow-up inpatient consultation services are on the list of 
telehealth services. These E/M services are furnished to high acuity 
hospitalized patients, although not by the admitting practitioner 
himself or herself. However, in light of the increasingly prevalent 
care model that entails multidisciplinary team care for patients with 
complex medical illnesses that involve multiple body systems, 
consulting practitioners may often play a key, intensive, and ongoing 
role in caring for hospitalized patients. Therefore, we believe that 
subsequent hospital care visits by a patient's admitting practitioner 
may sufficiently resemble follow-up inpatient consultation services to 
consider these subsequent hospital care services on a category 1 basis 
for the telehealth list. While we still believe the potential acuity of 
hospital inpatients is greater than those patients likely to receive 
currently approved Medicare telehealth services, we also believe that 
it would be appropriate to permit some subsequent hospital care 
services to be furnished through telehealth in order to ensure that 
hospitalized patients have frequent encounters with their admitting 
practitioner. However, we also continue to believe that the majority of 
these visits should be in-person to facilitate the comprehensive, 
coordinated, and personal care that medically volatile, acutely ill 
patients require on an ongoing basis.
    Therefore, for CY 2011 we proposed that subsequent hospital care 
services, specifically CPT codes 99231, 99232, and 99233, be added to 
the list of telehealth services on a category 1 basis for CY 2011, but 
with some limitations on the frequency with which these services may be 
furnished through telehealth. Because of our concerns regarding the 
potential acuity of hospital inpatients, we proposed to limit the 
provision of subsequent hospital care services through telehealth to 
once every 3 days. We were confident that admitting practitioners would 
continue to make appropriate in-person visits to all patients who need 
such care during their hospitalization. Consulting practitioners should 
continue to use the inpatient telehealth consultation HCPCS G-codes, 
specifically G0406, G0407, G0408, G0425, G0426, or G0427 when reporting 
consultations furnished to inpatients via telehealth.
    Consistent with this proposal, we proposed to revise Sec.  
410.78(b) and Sec.  414.65(a)(1) to include subsequent hospital care 
services as Medicare telehealth services, with the limitation of one 
telehealth subsequent hospital care service every 3 days.
    We also considered adding hospital discharge day management 
services to the list of telehealth services. These services, reported 
by CPT codes 99238 and 99239, include the final examination of the 
patient, discussion of the hospital stay, instructions for continuing 
care to all relevant caregivers, and preparation of discharge records, 
prescriptions, and referral forms. These services are furnished when a 
practitioner deems it medically reasonable and necessary to assess a 
patient's readiness for discharge and to prepare a patient for 
discharge from an acute care environment to a less intensive setting. 
There are no services on the current list of telehealth services that 
resemble such preparation of a patient for discharge. We believe it is 
especially important that, if a practitioner furnishes a discharge day 
management service, the service be furnished in-person in order to 
allow the practitioner to comprehensively assess the patient's status 
in preparation for discharge so that the patient will have a higher 
likelihood of making a successful transition to the less intensive 
setting. Therefore, we did not consider hospital discharge day 
management services for addition to the Medicare telehealth services 
list on a category 1 basis.
    We reviewed the documentation submitted by requestors in support of 
adding these codes to the Medicare telehealth services list on a 
category 2 basis. Most of the submitted studies were specific to the 
treatment of patients with specific diagnoses and were not specific to 
discharge services. Additionally, most of the studies concluded that 
more research was required in order to establish medical equivalence 
between telehealth and in-person services. The submitted documentation 
did not provide the necessary evidence to alter our previous conclusion 
that hospital discharge day management services should be provided in-
person in light of the acuity of hospitalized patients, their typically 
complex post-hospitalization care needs, and the importance of patient 
education by the admitting practitioner who had ongoing responsibility 
for the patient's treatment during the hospital stay. Therefore, we did 
not propose to add hospital discharge day management services to the 
list of telehealth services for CY 2011.
    Comment: Many commenters expressed support for all of CMS' proposed 
additions to the list of Medicare telehealth services, including 
subsequent hospital care services. One commenter urged CMS to focus on 
adding services where research demonstrates that technology can 
facilitate medically equivalent services and improve beneficiary access 
to providers, and to carefully monitor implementation of any new 
telehealth services to ensure that patients' experience of the care is 
positive and that patient outcomes are not compromised. The commenter 
encouraged CMS' continued attention to the evidence and the role of 
patient needs as CMS evaluates telehealth requests. The commenter cited 
CMS' decision not to propose the addition of hospital discharge day 
management services as a Medicare telehealth service as an example of 
the agency applying appropriate rigor to best reflect patient needs and 
preferences.
    Response: We appreciate the support for our proposed additions, as 
well as our consideration and decisions regarding requested additions 
to telehealth services that we did not propose to add to the list of 
telehealth services for CY 2011.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to add subsequent hospital care 
services, specifically CPT codes 99231, 99232, and 99233, to the list 
of telehealth services on a category 1 basis for CY 2011, but with the 
limitation of one

[[Page 73317]]

subsequent hospital care service furnished through telehealth every 3 
days. We are revising Sec.  410.78(b) and Sec.  414.65(a)(1) 
accordingly to include subsequent hospital care services as Medicare 
telehealth services, with the limitation of one telehealth subsequent 
hospital care service every 3 days. We are also finalizing our decision 
not to add initial or discharge day management hospital care services 
to the list of Medicare telehealth services.
5. Initial, Subsequent, Discharge Day Management, and Other Nursing 
Facility Care Services
    The American Telemedicine Association and the Marshfield Clinic 
submitted requests to add nursing facility care codes, covering the 
spectrum of initial (reported by CPT codes 99304 (Level 1 initial 
nursing facility care), 99305 (Level 2 initial nursing facility care) 
and 99306 (Level 3 initial nursing facility care)); subsequent 
(reported by CPT codes 99307 (Level 1 subsequent nursing facility 
care), 99308 (Level 2 subsequent nursing facility care), 99309 (Level 3 
subsequent nursing facility care), and 99310 (Level 4 subsequent 
nursing facility care)); discharge day management (reported by CPT 
codes 99315 (Nursing facility discharge day management; 30 minutes or 
less) and 99316 (Nursing facility discharge day management; more than 
30 minutes)); and other (reported by CPT code 99318 (Evaluation and 
management of a patient involving an annual nursing facility 
assessment)) services, to the Medicare telehealth services list 
beginning in CY 2011. The commenters requesting the addition of these 
services expressed concerns regarding limited access to care if we did 
not allow these services to be furnished through telehealth, and 
requested that CMS acknowledge the recent Congressional inclusion of 
nursing facilities as telehealth originating sites by adding these 
codes to the list of Medicare telehealth services.
    In the CY 2010 PFS proposed and final rules (74 FR 33544 and 74 FR 
61762), we discussed concerns about potential disparities in patient 
acuity between nursing facility services and the current list of 
Medicare telehealth services. We also declined to add HCPCS codes to 
the Medicare telehealth services list that are used exclusively to 
describe Federally-mandated nursing facility visits. As discussed in 
the CY 2010 PFS proposed rule (74 FR 33543), the long-term care 
regulations at Sec.  483.40(c) require that residents of SNFs receive 
initial and periodic personal visits. These regulations ensure that at 
least a minimal degree of personal contact between a practitioner and a 
SNF resident is maintained, both at the point of admission to the 
facility and periodically during the course of the resident's stay. We 
continue to believe that these Federally-mandated visits should be 
conducted in-person, and not as Medicare telehealth services. 
Therefore, in the CY 2010 PFS final rule with comment period, we 
revised Sec.  410.78 to preclude physicians and other practitioners 
from furnishing the physician visits required under Sec.  483.40(c) 
through telehealth.
    We reviewed the use of telehealth for each of the subcategories of 
nursing facility services included in the requests for CY 2011. We 
identified the E/M services that fulfill Federal requirements for 
personal visits under Sec.  483.40(c), and we did not propose for CY 
2011 to add any HCPCS codes to the Medicare telehealth services list 
that are used exclusively to describe these Federally-mandated visits. 
These codes include the CPT codes for initial nursing facility care 
(CPT codes 99304 through 99306) that are used to report the initial E/M 
visit that fulfills Federally-mandated requirements under Sec.  
483.40(c) and other nursing facility service (CPT code 99318) that is 
only payable by Medicare if the visit is substituted for a Federally-
mandated visit under Sec.  483.40(c).
    The nursing facility discharge day management services reported 
under CPT code 99315 and 99316 are E/M visits that prepare a nursing 
facility resident for discharge from the facility. There are no 
Medicare requirements that such a service be furnished. If a 
practitioner chooses to furnish this service, we continue to believe 
that an in-person visit is most appropriate in order to ensure the 
resident is prepared for discharge from the nursing facility. These 
services are furnished when a practitioner deems it medically 
reasonable and necessary to assess a patient's readiness for and to 
prepare a patient being discharged from the monitored nursing facility 
environment to another typically less intensive setting. There are no 
services on the current list of telehealth services that resemble such 
preparation of a patient for discharge. As in the case of hospital 
discharge day management services, we believe it is especially 
important that, if a practitioner furnishes a nursing facility 
discharge day management service, the service be furnished in-person. 
The practitioner must be able to comprehensively assess the patient's 
status in preparation for discharge so that the patient will have a 
higher likelihood of making a successful transition from the nursing 
facility to another setting. Therefore, we did not consider nursing 
facility discharge day management services for addition to the Medicare 
telehealth services list on a category 1 basis for CY 2011. When we 
considered the addition of these services under category 2, we had no 
evidence that nursing facility discharge services furnished through 
telehealth are equivalent to in-person discharge services. Therefore, 
we did not propose to add nursing facility discharge day management 
services to the CY 2011 telehealth list.
    Subsequent nursing facility services, reported by CPT codes 99307 
through 99310, may be used to report either a Federally-mandated 
periodic visit under Sec.  483.40(c) or another E/M visit, prior to or 
after the initial nursing facility care visit, as long as the 
subsequent nursing facility care visit is medically reasonable and 
necessary for the resident's care. While we continue to believe that 
many SNF residents have complex medical care needs, we believe that it 
is appropriate to consider the addition of these codes to the 
telehealth list on a category 1 basis. As we state above in the context 
of our discussion of subsequent hospital care services, the HCPCS codes 
for initial and follow-up inpatient consultation services for nursing 
facility patients are on the list of Medicare telehealth services, and 
subsequent nursing facility services are similar to those services. 
These E/M services are furnished to high acuity, complex SNF patients, 
although not by the admitting practitioner himself or herself. 
Therefore, we believe that subsequent nursing facility visits by a 
patient's admitting practitioner sufficiently resemble follow-up 
inpatient consultation services to consider them on a category 1 basis 
for the telehealth list. We concluded for CY 2011 that it would be 
appropriate to permit some subsequent nursing facility care services to 
be furnished through telehealth to ensure that complex nursing facility 
patients have frequent encounters with their admitting practitioner, 
although we continue to believe that the Federally-mandated visits 
should be in-person to facilitate the comprehensive, coordinated, and 
personal care that these complex patients require on an ongoing basis.
    Therefore, we proposed that subsequent nursing facility care 
services, specifically CPT codes 99307, 99308, 99309 and 99310, be 
added to the list of Medicare telehealth services on a category 1 basis 
beginning in CY 2011, with some limitations on furnishing these 
services through telehealth. Because of our concerns regarding the 
potential acuity and

[[Page 73318]]

complexity of SNF inpatients, we proposed to limit the provision of 
subsequent nursing facility care services furnished through telehealth 
to once every 30 days. We were especially interested in public 
comments, including any evidence regarding patterns of high quality 
care and clinical outcomes, regarding this proposal to limit the 
provision of subsequent nursing facility care services furnished 
through telehealth to once every 30 days. We remain committed to 
ensuring that SNF inpatients receive appropriate in-person visits and 
that Medicare pays only for medically reasonable and necessary care. 
Currently and continuing in CY 2011, an unlimited number of initial and 
follow-up consultation services may be furnished through telehealth to 
these patients, so we believe that only a limited number of subsequent 
nursing facility care services by the admitting practitioner would be 
appropriate for SNF inpatients. Finally, we specified that subsequent 
nursing facility care services reported for a Federally-mandated 
periodic visit under Sec.  483.40(c) may not be furnished through 
telehealth. In light of this CY 2011 proposal, we were confident that 
admitting practitioners would continue to make appropriate in-person 
visits to all patients who need such care during their SNF stay.
    Consistent with our proposal, we proposed to revise Sec.  410.78(b) 
and Sec.  414.65(a)(1) to include subsequent nursing facility care 
services as Medicare telehealth services, with the limitation of one 
telehealth subsequent nursing facility care service every 30 days. 
Federally-mandated periodic visits may not be furnished through 
telehealth, as specified currently in Sec.  410.78(e)(2).
    Comment: One commenter recommended that CMS limit the use of 
telehealth for subsequent nursing facility care services to CPT codes 
99307 and 99308, the lower two levels of care. The commenter stated 
that the subsequent nursing facility care services described by CPT 
codes 99309 and 99310, the higher two levels of care, require a 
detailed to comprehensive history and examination, along with moderate 
to complex decisionmaking that warrant an in-person visit with the 
physician. The same commenter disagreed with the limitation of one 
telehealth subsequent nursing facility care service every 30 days and 
suggested that unless and until evidence of overutilization is 
obtained, the limit could hinder access to appropriate care under the 
telehealth benefit. The commenter agreed with the CMS policy that all 
Federally-mandated visits as defined by the long-term care regulations 
Sec.  483.40(c) should be conducted in-person and not as Medicare 
telehealth services.
    Response: We appreciate the response to our specific request for 
public comment regarding the addition of subsequent nursing facility 
care services to the list of Medicare telehealth services with the 
limitation of one telehealth subsequent nursing facility care service 
every 30 days. As we stated in the proposed rule (75 FR 40112), we 
remain committed to ensuring that SNF inpatients receive appropriate 
in-person visits and that Medicare pays only for medically reasonable 
and necessary care. We received no new evidence from the commenter 
regarding patterns of high quality care and clinical outcomes in terms 
of our proposal to limit the provision of subsequent nursing facility 
care services furnished through telehealth to once every 30 days. 
Because we want to ensure that nursing facility patients with complex 
medical conditions have appropriately frequent medically reasonable and 
necessary encounters with their admitting practitioner, we continue to 
believe that it would be appropriate to permit the full range of 
subsequent nursing facility care services to be furnished through 
telehealth. At the same time, because of our concerns regarding the 
potential acuity and complexity of SNF inpatients, we want to ensure 
that these patients continue to receive in-person visits as appropriate 
to manage their care. We are adding these services as Medicare 
telehealth services with the limitation as we proposed, and we remain 
confident that admitting practitioners will continue to make 
appropriate in-person visits to all patients who need such care during 
their SNF stay.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to add subsequent nursing facility care 
services, specifically CPT codes 99307, 99308, 99309 and 99310, to the 
list of Medicare telehealth services on a category 1 basis beginning in 
CY 2011, with limits to the provision of subsequent nursing facility 
care services furnished through telehealth to once every 30 days. We 
are revising Sec.  410.78(b) and Sec.  414.65(a)(1) to include 
subsequent nursing facility care services as Medicare telehealth 
services, with the limitation of one telehealth subsequent nursing 
facility care service every 30 days. Federally-mandated periodic visits 
may not be furnished through telehealth, as specified currently in 
Sec.  410.78(e)(2).
6. Neuropsychological Testing Services
    The American Telemedicine Association submitted a request to add 
neuropsychological testing services, described by CPT codes 96119 
(Neuropsychological testing (for example, Halstead-Reitan 
Neuropsychological Battery, Wechsler Memory Scales and Wisconsin Card 
Sorting Test), per hour of the psychologist's or physician's time, both 
face-to-face time administering tests to the patient and time 
interpreting these test results and preparing the report); and 96119 
(Neuropsychological testing (for example, Halstead-Reitan 
Neuropsychological Battery, Wechsler Memory scales and Wisconsin Card 
Sorting Test), with qualified health care professional interpretation 
and report, administered by technician, per hour of technician time, 
face-to-face), to the list of telehealth services for CY 2011 based on 
their similarity to other telehealth services.
    In the CY 2008 PFS final rule with comment period (72 FR 66251), we 
stated that we have received conflicting comments and data regarding 
the appropriateness of furnishing neuropsychological testing via 
telehealth. While we appreciate the recent request for addition of 
these same services to the Medicare telehealth services list, we did 
not believe that these services are similar to services currently on 
the Medicare telehealth services list and, therefore, we concluded that 
they would not be appropriate for consideration or addition under 
category 1 for CY 2011. In the CY 2011 request for the addition of the 
these services, we received no information to indicate that the 
diagnostic findings of neuropsychological testing through telehealth 
are similar to those based upon in-person testing, and therefore that 
testing through telehealth does not affect the patient's diagnosis. 
Consequently, we did not propose to add neuropsychological testing 
services to the list of approved Medicare telehealth services for CY 
2011.
    We received no public comments regarding our discussion of the 
request to add neuropsychological testing to the list of Medicare 
telehealth services. Therefore, we are finalizing our decision not to 
add neuropsychological testing to the list of Medicare telehealth 
services for CY2011.
7. Speech-Language Pathology Services
    The Marshfield Clinic submitted a request to add various speech-
language pathology services to the list of approved telehealth services 
for CY

[[Page 73319]]

2011. Speech-language pathologists are not permitted under section 
1842(b)(18)(C) of the Act to furnish and receive payment for Medicare 
telehealth services. Therefore, we did not propose to add any speech-
language pathology services to the list of Medicare telehealth services 
for CY 2011. For further discussion of these services in the context of 
telehealth, we refer readers to the CY 2005 and CY 2007 PFS proposed 
and final rules with comment period (69 FR 47512 and 66276, and 71 FR 
48995 and 69657).
    Comment: One commenter stated that research has proven that 
audiology procedures offered via telehealth services have great 
potential. The commenter also stated that CMS should use its broad 
discretion in implementing programs to expand the list of available 
telehealth services to include audiology.
    Response: It is not within our administrative authority to pay 
speech language pathologists and audiologists for services furnished 
via telehealth. The statute authorizes the Secretary to pay for 
telehealth services only when furnished by a physician or a 
practitioner as those terms are defined in section 1834(m)(4)(D) and 
(E) of the Act.
    After consideration of the public comment we received, we are 
finalizing our decision not to add various speech-language pathology 
services to the list of approved telehealth services for CY 2011.
8. Home Wound Care Services
    Wound Care Associates, LLC, submitted a request to add wound care 
in the home setting to the list of Medicare telehealth services. A 
patient's home is not permitted under current statute to serve as an 
originating site for Medicare telehealth services. Therefore, we did 
not propose to add home wound care services to the list of Medicare 
telehealth services for CY 2011.
    We received no public comments regarding our discussion of the 
request to add wound care in the home setting to the list of Medicare 
telehealth services. Therefore, we are finalizing our decision not to 
add wound care in the home setting to the list of Medicare telehealth 
services for CY2011.
9. Other Issues
    We received other public comments on matters related to Medicare 
telehealth services that were not the subject of proposals in the CY 
2011 PFS proposed rule. We thank the commenters for sharing their views 
and suggestions. Because we did not make any proposals regarding these 
matters, we do not generally summarize or respond to such comments in 
this final rule with comment period. However, we are summarizing and 
responding to the following comments in order to reiterate certain 
information.
    Comment: One commenter requested an explanation of the acceptable 
time and format to request or recommend changes to the criteria set in 
2003 by which CMS considers specific services for Medicare coverage 
when furnished through telehealth.
    Response: As we discussed in the CY 2010 PFS final rule with 
comment period (74 FR 61766), our established criteria and process for 
reviewing requests to add to the list of approved Medicare telehealth 
services were subject to full notice and comment procedures in the CY 
2003 PFS proposed and final rules. Since we did not make any proposals 
relating to the criteria or process for CY 2011, any potential 
revisions to the process for adding or deleting services from the list 
of approved Medicare telehealth services are outside the scope of this 
CY 2011 final rule with comment period.
    Throughout the year, we regularly meet with parties who want to 
share their views on topics of interest to them. These discussions may 
provide us with information regarding changes in medical practice and 
afford opportunities for the public to bring to our attention issues 
they believe we should consider for future rulemaking. Thus, we 
encourage stakeholders to contact us at any time if there are topics 
related to physician payment policy that they would like to discuss.
    Comment: One commenter requested an explanation regarding how the 
payment rates for telehealth consultations are set in a manner that is 
consistent with section 1834(m)(2)(A) of the Act that requires Medicare 
to pay a practitioner who furnishes a telehealth service an amount 
equal to the amount that the practitioner would have been paid if the 
service had been furnished without the use of a telecommunications 
system.
    Response: As we stated in the CY 2009 PFS final rule with comment 
period (73 FR 69745), we established the RVUs for follow-up inpatient 
telehealth consultations at the same level as the RVUs established for 
subsequent hospital care (as described by CPT codes 99231 through 
99233). For CY 2010, we established the RVUs for initial inpatient 
telehealth consultations at the same level as the RVUs for initial 
hospital care (as described by CPT codes 99221 through 99223) (75 FR 
61775). We believe this is appropriate because a physician or 
practitioner furnishing a telehealth service is paid an amount equal to 
the amount that would have been paid if the service had been furnished 
without the use of a telecommunication system. Since physicians and 
practitioners furnishing follow-up inpatient consultations in an in-
person encounter must continue to utilize subsequent hospital care 
codes (as described by CPT codes 99231 through 99233) and those 
furnishing initial inpatient consultations in an in-person encounter 
must generally utilize initial hospital care codes (as described by CPT 
codes 99221 through 99223), we believe it is appropriate that the RVUs 
for the subsequent and initial telehealth HCPCS G-codes are set at the 
same level as the subsequent and initial hospital care codes, 
respectively.

D. Summary of CY 2011 Telehealth Policies

    In summary, we are finalizing our proposals to add the following 
requested services to the list of Medicare telehealth services for CY 
2011:
    <bullet> Individual and group KDE services (HCPCS codes G0420 and 
G0421, respectively);
    <bullet> Individual and group DSMT services, with a minimum of 1 
hour of in-person instruction to be furnished in the year following the 
initial DSMT service to ensure effective injection training (HCPCS 
codes G0108 and G0109, respectively);
    <bullet> Group MNT and HBAI services (CPT codes 97804, and 96153 
and 96154, respectively);
    <bullet> Subsequent hospital care services, with the limitation for 
the patient's admitting practitioner of one telehealth visit every 3 
days (CPT codes 99231, 99232, and 99233); and
    <bullet> Subsequent nursing facility care services, with the 
limitation for the patient's admitting practitioner of one telehealth 
visit every 30 days (CPT codes 99307, 99308, 99309, and 99310).
    Furthermore, we are revising Sec.  410.78(b) and Sec.  414.65(a)(1) 
accordingly. Specifically, we are adding individual and group KDE 
services, individual and group DSMT services, group MNT services, group 
HBAI services, and subsequent hospital care and nursing facility care 
services to the list of telehealth services for which payment will be 
made at the applicable PFS payment amount for the service of the 
practitioner. In addition, we have reordered the listing of services in 
these two sections and removed ``initial and follow-up inpatient 
telehealth consultations furnished to beneficiaries in hospitals and 
SNFs'' in Sec.  410.78(b) because these are described by the more 
general term ``professional

[[Page 73320]]

consultations'' that is in the same section. Finally, we are continuing 
to specify that the physician visits required under Sec.  483.40(c) may 
not be furnished as telehealth services.

E. Telehealth Originating Site Facility Fee Payment Amount Update

    Section 1834(m) of the Act establishes the payment amount for the 
Medicare telehealth originating site facility fee for telehealth 
services provided from October 1, 2001, through December 31 2002, at 
$20. For telehealth services provided on or after January 1 of each 
subsequent calendar year, the telehealth originating site facility fee 
is increased by the percentage increase in the MEI as defined in 
section 1842(i)(3) of the Act. The MEI increase for 2011 is 0.4 
percent. Therefore, for CY 2011, the payment amount for HCPCS code 
Q3014 (Telehealth originating site facility fee) is 80 percent of the 
lesser of the actual charge or $24.10. The Medicare telehealth 
originating site facility fee and MEI increase by the applicable time 
period is shown in Table 49.

 Table 49--The Medicare Telehealth Originating Site Facility Fee and MEI
                 Increase by the Applicable Time Period
------------------------------------------------------------------------
              MEI
 Facility   increase                        Period
   fee        (%)
------------------------------------------------------------------------
   $20.00        N/A  10/01/2001-12/31/2002
   $20.60        3.0  01/01/2003-12/31/2003
   $21.20        2.9  01/01/2004-12/31/2004
   $21.86        3.1  01/01/2005-12/31/2005
   $22.47        2.8  01/01/2006-12/31/2006
   $22.94        2.1  01/01/2007-12/31/2007
   $23.35        1.8  01/01/2008-12/31/2008
   $23.72        1.6  01/01/2009-12/31/2009
   $24.00        1.2  01/01/2010-12/31/2010
   $24.10        0.4  01/01/2011-12/31/2011
------------------------------------------------------------------------

V. Addressing Interim Final Relative Value Units From CY 2010 and 
Establishing Interim Relative Value Units for CY 2011

A. Background

    In accordance with section 1848(c) of the Act, CMS determines work, 
PE, and malpractice RVUs for each service paid under the PFS. On an 
annual basis, the AMA RUC provides CMS with recommendations regarding 
physician work values for new, revised, and potentially misvalued 
codes. Over the last several years, CMS, in conjunction with the AMA 
RUC, has identified and reviewed numerous potentially misvalued CPT 
codes. In 2006, the AMA RUC established the Five-Year Review 
Identification Workgroup to identify potentially misvalued services 
using the following screens: ``New Technology;'' ``Site-of-Service 
Anomalies;'' `` High Volume Growth;'' ``CMS Fastest Growing;'' ``High 
Intra-Service Work per Unit Time (IWPUT);'' ``Services Surveyed by One 
Specialty--Now Performed by a Different Specialty;'' ``Harvard-Valued, 
Utilization over 1 Million;'' ``Harvard Valued, Utilization over 
100,000;'' and ``Codes Reported Together/Bundled CPT Services.'' In 
addition to providing recommendations to CMS for work RVUs, the AMA 
RUC's Practice Expense Subcommittee reviews and then the AMA RUC 
recommends direct PE inputs (clinical labor, medical supplies, and 
medical equipment) for individual services. To guide the establishment 
of malpractice RVUs for new and revised codes before the next 5-Year 
Review of Malpractice, the AMA RUC also provides crosswalk 
recommendations, that is, ``source'' codes with a similar specialty mix 
of practitioners furnishing the source code and the new/revised code. 
CMS reviews the AMA RUC recommendations on a code-by-code basis. For 
AMA RUC recommendations regarding physician work RVUs, we determine 
whether we agree with the recommended work RVUs for a service (that is, 
we agree the valuation is accurate), or, if we disagree, we determine 
an alternative value that better reflects our estimate of the physician 
work for the service. Because of the timing of the CPT Editorial Panel 
decisions, AMA RUC recommendations, and our rulemaking cycle, we 
publish these work RVUs in the PFS final rule with comment period as 
interim final values, subject to public comment. Similarly, we assess 
the AMA RUC's recommendations for direct PE inputs and malpractice 
crosswalks, and establish PE and malpractice interim final values, 
which are also subject to comment. We note that, with respect to 
interim final PE RVUs, the main aspect of our valuation that is open 
for public comment for a new, revised, or potentially misvalued code is 
the direct PE inputs and not the other elements of the PE valuation 
methodology, such as the indirect cost allocation methodology, that 
also contribute to establishing the PE RVUs for a code. The public 
comment period on the PFS final rule with comment period remains open 
for 60 days after the rule is issued.
    If we receive public comments on the interim final work RVUs for a 
specific code indicating that refinement of the interim final work 
value is warranted based on sufficient information from the commenters 
concerning the clinical aspects of the physician work associated with 
the service (57 FR 55917), we refer the service to a refinement panel, 
as discussed in further detail in sections III.I. and V.B.1. of this 
final rule with comment period.
    In the interval between closure of the comment period and the 
subsequent year's PFS final rule with comment period, we consider all 
of the public comments on the interim final work, PE, and malpractice 
RVUs for the new, revised, and potentially misvalued codes and the 
results of the refinement panel, if applicable. Finally, we address the 
interim final RVUs (including the interim final direct PE inputs) by 
providing a summary of the public comments and our responses to those 
comments, including a discussion of any changes to the interim final 
work or malpractice RVUs or direct PE inputs, in the following year's 
PFS final rule with comment period. We then typically finalize the 
direct PE inputs and the work, PE, and malpractice RVUs for the service 
in that year's PFS final rule with comment period, unless we determine 
it would be more appropriate to continue their interim final status for 
another year and solicit further public comment.

B. Addressing Interim Final RVUs From CY 2010

    In this section, we address the interim final values published in 
Appendix C of the CY 2010 PFS final rule with comment period (74 FR 
62144 through 62146), as subsequently corrected in the December 10, 
2009 (74 FR 65449) and May 11, 2010 correction notices (75 FR 26350). 
We discuss the results of the CY 2010 refinement panel, respond to 
public comments received on specific interim final values (including 
direct PE inputs) from CY 2010, address the status of the interim final 
values of a number of potentially misvalued codes from CY 2009 and CY 
2010, and address the other new, revised, or potentially misvalued 
codes with interim final values for CY 2010 that are not specifically 
discussed elsewhere in this final rule with comment period.
    We note that the final CY 2011 direct PE database that lists the 
direct PE inputs is available on the CMS Web site under the downloads 
for the CY 2011 PFS final rule with comment period at: http://
www.cms.gov/PhysicianFeeSched/PFSFRN/

[[Page 73321]]

list.asp<greek-i>TopOfPage. The final CY 2011 work, PE, and malpractice 
RVUs are displayed in Addendum B to this final rule with comment 
period.
1. CY 2010 Interim Final Work RVUs Referred to the Refinement Panel
    We received public comments on 4 CPT codes with CY 2010 interim 
final work values. We referred these services to the CY 2010 refinement 
panel for further review. For ease of discussion, we will be referring 
to these services as ``refinement codes.'' Consistent with past 
practice (62 FR 59084), we convened a multispecialty panel of 
physicians to assist us in the review of the comments. The panel was 
moderated by our physician advisors, and consisted of the following 
voting members:
    <bullet> One or two clinicians representing the commenting 
organization.
    <bullet> Two primary care clinicians nominated by the American 
Academy of Family Physicians and the American College of Physicians.
    <bullet> Three contractor medical directors (CMDs).
    <bullet> Clinicians with practices in related specialties who were 
expected to have knowledge of the services under review.
    We assembled a set of 300 reference services and asked the panel 
members to compare the clinical aspects of physician work for the 
refinement code to one or more of the reference services. In compiling 
the set of reference services, we attempted to include: (1) Services 
that are commonly performed for which the work RVUs are not 
controversial; (2) services that span the spectrum of work intensity; 
and (3) at least three services performed by each of the major 
specialties that furnish the refinement codes so that the perspective 
of relevant specialties would be represented. The panel process was 
designed to capture each participant's independent judgment and his or 
her clinical experience which informed and drove the discussion of the 
refinement code during the refinement panel proceedings. Following the 
discussion, each voting participant rated the physician work of the 
refinement code. Ratings were obtained individually and confidentially, 
with no attempt to achieve consensus among the panel members.
    We then analyzed the ratings for each refinement code based on a 
presumption that the interim final work RVUs were correct unless the 
ratings clearly indicated a different result. Ratings of work were 
analyzed for consistency among the four different groups (commenting 
organization, primary care physicians, CMDs, and related clinicians) 
represented on the panel. In addition, we used statistical tests to 
determine whether there was sufficient agreement among the groups of 
the panel and whether the agreed-upon RVUs differed significantly from 
the interim final RVUs published in Addendum C of the CY 2010 final 
rule with comment period. We did not modify the interim final RVUs 
unless there was clear agreement for a change. If there was agreement 
across groups for change, but the groups did not agree on what the new 
RVUs should be, we eliminated the outlier group and looked for 
agreement among the remaining groups as the basis for new RVUs for the 
refinement code. This methodology is consistent with the historical 
refinement process as established in the November 25, 1992 PFS final 
rule with comment period (57 FR 55938).
    Our decision to convene multispecialty panels of physicians and to 
apply the statistical tests described above has historically been based 
on our need to balance the interests of those who commented on the 
interim final work values with the redistributive effects that would 
occur in other specialties if the work values were changed. We refer 
readers to section III.I. of this final rule with comment period for a 
full discussion of the changes to the refinement process that we are 
adopting for refinement panels beginning in CY 2011.
    Table 50 lists those refinement codes reviewed under the CY 2010 
refinement panel process described in this section. The table includes 
the following information:
    <bullet> CPT Code. This is the CPT code for a service.
    <bullet> Short Descriptor. This is an abbreviated version of the 
narrative description of the code.
    <bullet> CY 2010 Interim Final Work RVUs. The interim final work 
RVUs that appeared in the CY 2010 PFS final rule with comment period 
(74 FR 61949 through 61953), as subsequently corrected in the December 
10, 2009 (74 FR 65449) and May 11, 2010 correction notices (75 FR 
26350), are shown for each reviewed code.
    <bullet> Requested Work RVUs. This column identifies the work RVUs 
requested by the commenters.
    <bullet> CY 2011 Final Work RVUs. This column contains the final 
work RVUs after consideration by the refinement panel.
    We note that we are accepting the results of the CY 2010 refinement 
panel for all of these codes as the final work RVUs for CY 2011. These 
final values are also displayed in Addendum B to this final rule with 
comment period.

                     Table 50--CPT Codes Reviewed Under the CY 2010 Refinement Panel Process
----------------------------------------------------------------------------------------------------------------
                                                               CY 2010 interim   Requested work   CY 2011 final
             CPT Code               Mod     Short descriptor   final work RVUs        RVUs          work RVUs
----------------------------------------------------------------------------------------------------------------
74261............................     26  Ct colonography, w/             2.28             2.40             2.40
                                           o dye.
78451............................     26  Ht muscle image                 1.38             1.40             1.38
                                           spect, sing.
78452............................     26  Ht muscle image                 1.62             1.75             1.62
                                           spect, mult.
95905............................     26  Motor/sens nrve                 0.05             0.15             0.05
                                           conduct test.
----------------------------------------------------------------------------------------------------------------

2. CY 2010 Interim Final RVUs for Which Public Comments Were Received
a. Insertion of Breast Prosthesis (CPT Code 19340)
    CPT code 19340 (Immediate insertion of breast prosthesis following 
mastopexy, mastectomy or in reconstruction) was identified by CMS for 
AMA RUC review as requested by the specialty society. The AMA RUC 
recommended 13.78 work RVUs for CY 2010, which CMS accepted. However, 
as noted by a public comment on the CY 2010 PFS final rule with comment 
period, the interim final CY 2010 work RVUs published in the CY 2010 
PFS final rule with comment period (74 FR 61779, 62023 and 62144) for 
this service did not reflect the increases in the evaluation and 
management services for the post-operative visits associated with this 
service that resulted from the CY 2010 changes to the consultation code 
policy. The work RVUs for CPT code 19340 with these increases included 
are 13.99 RVUs. This correction was included in the May 11, 2010 
correction notice to the CY 2010 final rule with comment period (75 FR 
26356). We are finalizing the interim work RVUs for CPT code 19340 of 
13.99 for CY 2011.

[[Page 73322]]

b. Computed Tomographic Colonography (CPT Code 74261)
    For CPT code 74261, (Computed tomographic (CT) colonography, 
diagnostic, including image postprocessing; without contrast material), 
the AMA RUC recommended 2.40 work RVUs. During the AMA RUC meeting, 
this code was compared to two CPT codes: 75635 (Computed tomographic 
angiography, abdominal aorta and bilateral iliofemoral lower extremity 
runoff, with contrast material(s), including noncontrast images, if 
performed, and image postprocessing (work RVUs = 2.40)) and 78815 
(Positron emission tomography (PET) with concurrently acquired computed 
tomography (CT) for attenuation correction and anatomical localization 
imaging; skull base to mid-thigh (work RVUs = 2.44)). Based on the 
comparisons of similar physician work, physician time, and intensity/
complexity measures, the AMA RUC determined that work RVUs of 2.40 were 
appropriate for CPT code 74261. We disagreed with the AMA RUC-
recommended work RVUs and believe CPT code 74263 (Computed tomographic 
(CT) colonography, screening, including image postprocessing) 
represents a more comparable service because it has virtually the same 
description of work, pre-, intra-, and post-service time for which the 
AMA RUC recommended work RVUs of 2.28. Therefore, we assigned interim 
final work RVUs of 2.28 to CPT code 74261 for CY 2010.
    Comment: Several commenters disagreed with the interim final work 
RVUs assigned by CMS and believe that equalizing the work RVUs for 
diagnostic and screening computed tomographic colonography ignores the 
reality that patients referred for diagnostic study, by definition, 
have greater complexity. These commenters believed that for this reason 
and the increased time involved with a diagnostic study, higher work 
RVUs are necessary to maintain the proper relativity with the 
corresponding screening CPT code 74263. The commenters recommended that 
CMS accept the AMA RUC-recommended work RVUs of 2.40 for CPT code 74261 
and refer this code to the CY 2010 refinement panel for review.
    Response: Based on the concerns expressed by the commenters, we 
referred this code to the CY 2010 refinement panel for review. As a 
result of the statistical analysis of the CY 2010 refinement panel 
ratings, we are assigning 2.40 work RVUs to CPT code 74261 as the final 
value for CY 2011.
c. Myocardial Perfusion Imaging (CPT Codes 78451, 78452, 78453, and 
78454)
    For CPT code 78451 (Myocardial perfusion imaging, tomographic 
(SPECT) (including attenuation correction, qualitative or quantitative 
wall motion, ejection fraction by first pass or gated technique, 
additional quantification, when performed); single study, at rest or 
stress (exercise or pharmacologic)), the AMA RUC recommended 1.40 work 
RVUs, while the AMA RUC recommended 1.75 work RVUs for CPT code 78452 
(Myocardial perfusion imaging, tomographic (SPECT) (including 
attenuation correction, qualitative or quantitative wall motion, 
ejection fraction by first pass or gated technique, additional 
quantification, when performed); multiple studies, at rest and/or 
stress (exercise or pharmacologic) and/or redistribution and/or rest 
reinjection).
    Upon review of the AMA RUC recommendations for these codes, it was 
unclear what methodology the AMA RUC used to calculate the recommended 
work RVUs for CPT code 78451. Therefore, we disagreed with the AMA RUC-
recommended work RVUs of 1.40 for CPT code 78451 and believe the work 
RVUs for the survey 25th percentile were more appropriate. Therefore, 
we assigned interim final work RVUs of 1.38 to CPT code 78451 for CY 
2010.
    For CPT code 78452, we disagreed with the reference code used, CPT 
code 70496 (Computed tomographic angiography, head, with contrast 
material(s), including noncontrast images, if performed, and image 
postprocessing (work RVUs = 1.75)). We believe CPT code 78452 is 
comparable to CPT code 73219 (Magnetic resonance (eg, proton) imaging, 
upper extremity, other than joint; with contrast material(s) (work RVUs 
= 1.62)), which has the same pre-, intra-, and post-service time. 
Therefore, we assigned interim final work RVUs of 1.62 to CPT code 
78452 for CY 2010.
    We accepted the CY 2010 recommendations of the AMA RUC for the 
direct PE inputs for CPT codes 78451, 78452, 78453, and 78454 (75 FR 
61955).
    Comment: Several commenters disagreed with the interim final work 
RVUs assigned by CMS for these two services. The commenters pointed out 
that the specialty and AMA RUC recommendations for both of these 
services already reflected a tremendous reduction from the work RVUs 
for the services as reported by multiple component codes in previous 
years and expressed disappointment that additional reductions were made 
by CMS. The commenters explained that in an effort to maintain 
relativity between CPT codes 78451 and 78452, the recommended RVUs for 
78451 were derived by calculating the relationship between the median 
survey RVUs for CPT codes 78451 and 78452 and maintaining this 
relationship between the recommended RVUs for CPT codes 78451 and 
78452. That is, the survey work RVU relationship between CPT code 
78451: 78452 is [1.50: 1.87], leading to the same relationship between 
the AMA RUC-recommended RVUs for 78451: 78452 of [1.40: 1.75]. The AMA 
RUC agreed that the computed work RVUs, 1.40 for CPT code 78451, 
maintain the relativity of the original survey data and provide an 
appropriate measure of the work for CPT code 78451.
    The commenters believe that CMS does not have the special expertise 
necessary to choose a different reference code than the code selected 
by the multispecialty AMA RUC panel and disagreed with the reference 
code used by CMS for establishing work RVUs for CPT code 78452. The AMA 
RUC pointed out that the reference code has no associated computer 
post-processing analysis, requires the interpretation of fewer images, 
and has no additional cine-motion images to analyze and interpret, all 
of which are included in the myocardial perfusion imaging procedures.
    The commenters requested that CMS accept the AMA RUC 
recommendations of 1.40 work RVUs for CPT code 78451 and 1.75 work RVUs 
for CPT code 78452 and refer these codes to the CY 2010 refinement 
panel for review.
    Response: Based on the concerns expressed by the commenters, these 
codes were referred to the CY 2010 refinement panel for review. As a 
result of the statistical analysis of CY 2010 refinement panel ratings, 
the work RVUs for these codes were unchanged. Therefore, we are 
adopting the interim final values for these codes as final, with 1.38 
work RVUs for CPT code 78451 and 1.62 work RVUs for CPT code 78452 for 
CY 2011.
    Comment: Several commenters asserted that CMS had incorrectly 
crosswalked equipment time inputs for several myocardial perfusion 
imaging codes (CPT codes 78451, 78452, 78453, and 78454), rather than 
accepting the AMA RUC recommendations for these codes as CMS had stated 
in the CY 2010 PFS final rule with comment period (74 FR 61955). One 
commenter further suggested that the useful life of 5 years for the 
Cobalt-57 flood source was incorrect.

[[Page 73323]]

    Response: We appreciate the commenters' assistance, and we 
corrected the equipment times in the May 11, 2010 correction notice to 
the CY 2010 PFS final rule with comment period (75 FR 26356 and 26570). 
We are finalizing these direct PE inputs for CY 2011. We also proposed 
to change the useful life of the Cobalt-57 flood source from 5 to 2 
years for CY 2011 (75 FR 40056). We address our final policies 
regarding this proposal in section II.A.3.b.(4) of this final rule with 
comment period.
    Comment: Several commenters expressed concern that CMS applied 
fully transitioned PE RVUs to the new and revised CY 2010 CPT codes, 
specifically CPT codes 78451, 78452, 78453, and 78554. The commenters 
argued that the result of the lack of a transition to use of the PPIS 
data was an immediate 26 percent reduction for myocardial perfusion 
imaging services, simply because the CPT code descriptors had been 
revised to capture multiple procedure components. The commenters 
requested that the new CPT codes follow the same blend of new and 
previous PE RVUs that was applied to the existing CPT codes in CY 2010 
and later years.
    Response: Our longstanding policy is that if the CPT Editorial 
Panel creates a new code for a given year, the new code would be paid 
at its fully implemented PFS amount and not at a transition rate for 
that year. Consistent with this policy, the new CY 2010 myocardial 
perfusion imaging codes, and all other new CY 2010 CPT codes, are not 
being paid based on transitional PE RVUs in CY 2010. We will continue 
to pay these services based on the fully implemented PE RVUs in CY 
2011, the same approach we are applying to other CPT codes that were 
new for CY 2010 or CY 2011.
d. Nerve Conduction Test (CPT Code 95905)
    For CPT code 95905 (Motor and/or sensory nerve conduction, using 
preconfigured electrode array(s), amplitude and latency/velocity study, 
each limb, includes F-wave study when performed, with interpretation 
and report), the AMA RUC recommended 0.05 work RVUs, which we accepted 
in the CY 2010 PFS final rule with comment (74 FR 61953).
    Comment: One commenter requested that CMS refer CPT code 95905 to 
the CY 2010 refinement panel for review. The commenter believes the AMA 
RUC erred in its recommendation to CMS in regard to the physician work 
involved. The commenter noted that when this code was discussed at the 
AMA RUC meeting, the commenter and other specialty societies that 
presented this code to the AMA RUC recommended assignment of 0.15 work 
RVUs. The commenter also believes that the undervaluation of the 
physician work for this service may undermine the ability of physicians 
to provide the service.
    Response: Based on the concerns expressed by the commenter, this 
code was referred to the CY 2010 refinement panel for review. As a 
result of the statistical analysis of the CY 2010 refinement panel 
ratings, the work RVUs for this code were unchanged. Therefore, we are 
finalizing the interim final values for CPT code 95905 as 0.05 work 
RVUs for CY 2011.
e. Kidney Disease Education Services (HCPCS Codes G0420 and G0421)
    During rulemaking for CY 2010, we adopted policies to provide for 
the implementation of section 152(b) of the MIPPA which created a new 
benefit category for kidney disease education (KDE) services for 
Medicare beneficiaries diagnosed with Stage IV chronic kidney disease 
(CKD). The MIPPA also amended section 1848(j)(3) of the Act which 
allows for payment of KDE services under the PFS. For CY 2010, we 
proposed and finalized the RVUs for the two HCPCS G-codes established 
for the payment of KDE services (74 FR 61901), G0420 (Face-to-face 
educational services related to the care of chronic kidney disease; 
individual, per session, per one hour) and G0421 (Face-to-face 
educational services related to the care of chronic kidney disease; 
group, per session, per one hour). For purposes of valuing the HCPCS 
codes for KDE services, we based the work RVUs and the PE inputs, with 
minor modifications, on CPT codes for medical nutrition therapy (MNT) 
services, specifically CPT code 97802 (Medical nutrition therapy; 
initial assessment and intervention, individual, face-to-face with the 
patient, each 15 minutes) and CPT code 97804 (Medical nutrition 
therapy; group (2 or more individual(s)), each 30 minutes), because we 
believed these services to be similar. We crosswalked the work RVUs for 
HCPCS code G0420 from CPT code 97802 and for HCPCS code G0421 from CPT 
code 97804. We multiplied the work RVUs for HCPCS code G0420 by four 
and the work RVUs for HCPCS code G0421 by two to account for the fact 
that we crosswalked a 15 minute code to a 60 minute code (CPT code 
97802 to HCPCS code G0420) and a 30 minute code to a 60 minute code 
(CPT code 97804 to HCPCS code G0421). In order to determine the direct 
PE inputs for the KDE services, we indicated that we did not perform 
straight multiplication of the actual MNT inputs because we did not 
believe that the required equipment and supplies for the KDE services 
would increase in direct proportion to the increased time for the 
codes. For both HCPCS codes G0420 and G0421, we noted that we did not 
increase the equipment time-in-use for the body analysis machine, 
printer, or scale, and that we did increase the inputs for the table, 
computer, paper, and other printed materials.
    Comment: Several commenters expressed support for the CY 2010 work 
RVUs for the KDE HCPCS codes G0420 and G0421. However, one commenter 
requested that CMS include the supplies for the KDE services as 
directly proportional multiple units of the MNT services in order to 
appropriately pay for the costs of care, noting that HCPCS code G0420 
(60 minutes) should have 4 times as many supplies as those in CPT code 
97802 (15 minutes) and HCPCS code G0421 (60 minutes) should have 2 
times as many as those in CPT code 97804 (30 minutes).
    Response: We appreciate the commenters' support for the interim 
final work
    Response: We appreciate the commenters' support for the interim 
final work RVUs we established for HCPCS codes G0420 and G0421 for KDE 
services and we are finalizing those work RVUs for CY 2011. After 
reviewing the direct PE inputs for supplies in both the KDE HCPCS G-
codes (G0420 and G0421) and the MNT CPT codes (CPT codes 97802 and 
97804), we agree with the commenter that we had not increased the 
number of sheets of paper for either HCPCS code G0420 or G0421 as we 
indicated we would (74 FR 61901). Therefore, we have increased the 
number of paper sheets from 2 in CPT code 97802 (15 minutes) to 8 in 
HCPCS code G0420 (60 minutes) and from 2 in CPT code 97804 (30 minutes) 
to 4 in HCPCS code G0421 (60 minutes). We have also made conforming 
changes to the printer times for both KDE HCPCS G-codes in the 
equipment file because we base the printer time on the number of sheets 
of paper. We are adopting these modified direct PE inputs for HCPCS 
codes G0420 and G0421 as final for CY 2011.

[[Page 73324]]

f. Excision of Soft Tissue and Bone Tumors (CPT codes 21011 through 
21016, 21552, 21554 through 21558, 21930 through 21933, 21395, 21936, 
22900 through 22905, 23071, 23073, 23075 through 23078, 23200, 23210, 
23220, 24071, 24073, 24075 through 24077, 24079, 24150 through 24153, 
25071, 25073, 25075 through 25078, 25170, 26111, 26113, 26115 through 
26118, 26250, 26255, 26260, 26262, 27043, 27045, 27047 through 27049, 
27059, 27075 through 27078, 27327 through 27329, 27337, 27339, 27364, 
27365, 27615, 27616, 27618, 27619, 27632, 27634, 27619, 27645 through 
27647, 28039, 28041, 28043, 28045 through 28047, 28171, 28173, and 
28175)
    For CY 2010, the CPT Editorial Panel split 31 excision codes into 
62 codes differentiated by the size of the excised lesion, 18 codes 
were revised, and 12 additional codes were created. Although we had 
significant concerns with the pre-service times and the AMA RUC-
recommended work RVUs for these codes for CY 2010, in the context of 
public comments on the CY 2010 proposed rule regarding the site-of-
service anomaly codes, we agreed to accept the AMA RUC-recommended work 
values for these codes on an interim final basis for CY 2010 (74 FR 
61954). We also requested that the AMA RUC reexamine the minutes 
allocated for positioning of the patient for these codes. We noted that 
we would work with the AMA RUC to address our concerns about the 
valuation of these codes and would consider whether it would be 
appropriate to propose further changes in future rulemaking. We 
indicated that we did not agree with the AMA RUC's recommendations for 
the inclusion of inpatient hospital care services in these codes, 
particularly in the cases of codes that would be reported for the 
smaller-sized tumors. As a result, we stated that we would monitor the 
frequency data for these codes and may propose further changes to the 
work RVUs in the future based on these data. We emphasized that the AMA 
RUC itself recommended that these services be re-reviewed to determine 
the accuracy of the utilization assumptions once 2 years of utilization 
data were available.
    In addition, we noted that the CPT 2010 instructions regarding the 
use of the excision and resection of soft tissue and bone tumor codes 
advised that a complex repair may be separately reported. However, 
longstanding Medicare policy generally includes payment for all simple, 
intermediate, and complex repairs of procedural incisions and, 
therefore, Medicare would not separately pay for complex repairs 
associated with procedures reported by these codes.
    Comment: Several commenters were pleased that CMS agreed to accept 
the AMA RUC-recommended values for these new and revised codes. One 
commenter endorsed CMS' decision to closely monitor the utilization 
rates for these codes and believes this would be important to ensure 
accurate payment. The commenters did not see a need for CMS or the AMA 
RUC to review the pre-service times assigned to the codes and stated 
that all of these times were derived from the AMA RUC's pre-service 
time package methodology, a methodology that CMS has historically 
supported. The commenters asserted that the times assigned are 
reflective of the actual patient positioning times. Therefore, the 
commenters urged CMS to withdraw the request that the AMA RUC revisit 
the pre-service times for these codes. The commenters asserted that 
further review would add extra time and work to the already significant 
workload of the AMA RUC and would not result in any changes.
    Response: We appreciate the commenters' support for our acceptance 
of the AMA RUC-recommended values for these new and revised codes and 
we are finalizing the interim final work RVUs for these codes for CY 
2011. As we stated in the CY 2010 PFS final rule with comment period, 
we will continue to monitor the frequency data for these codes and work 
with the AMA RUC to address our concerns and, if appropriate, propose 
further changes in future rulemaking. In addition, we are reiterating 
our request originally made in the CY 2010 PFS final rule with comment 
period (74 FR 61954) that the AMA RUC review the pre-service times for 
these codes and provide their recommendations to us.
g. Cryoablation of Prostate (CPT code 55873)
    In June 2008, CMS requested that the AMA RUC review the nonfacility 
direct PE inputs for CPT code 55873 (Cryosurgical ablation of the 
prostate (includes ultrasonic guidance for interstitial cryosurgical 
probe placement). During this review, the AMA RUC recognized that this 
service was initially reviewed as a new code by the AMA RUC in February 
2001. The AMA RUC believed that the intra-service physician time since 
the initial review had declined (from 200 minutes) as the service is 
now more commonly performed. The AMA RUC agreed with the specialty 
society that the service should be surveyed for physician work and also 
recommended revisions in the direct PE inputs. As a result of the AMA 
RUC review and input from the specialty society, the AMA RUC 
recommended 13.45 work RVUs and revisions to the direct PE inputs for 
this service for CY 2010. We reviewed these recommendations and 
accepted the AMA RUC-recommended work RVUs for this code and the direct 
PE inputs in the CY 2010 PFS final rule with comment (74 FR 61954 and 
61955).
    Comment: One commenter expressed concern about the reduction in the 
work RVUs for CPT code 55873 and the lack of public notice given prior 
to the reduction. The commenter believes that the intra-service time 
was underestimated and could vary based on the skill set of the 
physician. The commenter requested that CMS reinstate the work RVUs as 
included in the CY 2010 PFS proposed rule for CY 2010 (74 FR 33740).
    Response: While we originally requested that the AMA RUC review the 
nonfacility direct PE inputs for CPT code 55873, we believe that it is 
appropriate for the AMA RUC to respond to its findings during a limited 
review by taking other actions that it believes to be appropriate for 
the particular circumstances, such as requesting that procedures be 
resurveyed. We followed our usual methodology for revised codes whereby 
we respond to the AMA RUC work recommendations and adopt interim final 
values in the final rule with comment period for the upcoming year. In 
this way, we facilitate appropriate payment for the services on an 
interim final basis while providing public notice and the opportunity 
for public comment prior to finalizing the values in the following 
year.
    We note that the RVUs for services paid under the PFS are resource-
based, and individual services are valued based upon the typical 
resources used to provide the service. Because clinical utilization of 
this service has increased over the last several years and information 
from the current AMA RUC survey suggests there has been a decrease in 
intra-service time from 200 to 100 minutes, we continue to believe the 
reduction in intra-service time and the revised work RVUs as 
recommended to us by the AMA RUC are clinically appropriate for this 
service. We commonly expect greater work efficiency as clinical 
experience with a new service increases over time, and this service 
fits that profile. Therefore, we are finalizing the interim final work 
RVUs of 13.60 for CPT code 55873 for CY 2011.

[[Page 73325]]

    Comment: One commenter stated that the 162 minutes of clinical 
labor time for CPT code 55873 in the final CY 2010 PFS direct PE 
database should be 168 minutes. The commenter also indicated that 
supply code SD074 be included as an input for CPT code 55873 based on 
the AMA RUC's CY 2010 recommendations.
    Response: We appreciate the commenter bringing this information to 
our attention and agree with the commenter's assessment. The 6 minutes 
of clinical labor time missing from the direct PE inputs for CPT code 
55873 have now been included, as has the filiform, and these changes 
are reflected in the final CY 2011 PFS direct PE database. We are 
finalizing these direct PE inputs for CPT code 55873 for CY 2011.
h. Urodynamics Studies (CPT Codes 51728 and 51729)
    In February 2008, the AMA RUC identified CPT codes 51726 (Complex 
cystometrogram (ie, calibrated electronic equipment)); 51772 (Urethral 
pressure profile studies (UPP) (urethral closure pressure profile), any 
technique); 51795 (Voiding pressure studies (VP); bladder voiding 
pressure, any technique); and 51797 (Voiding pressure studies, intra-
abdominal (ie, rectal, gastric, intraperitoneal) (List separately in 
addition to code for primary procedure)) through the ``Codes Reported 
Together'' potentially misvalued codes screen as combinations of codes 
that were reported together more than 95 percent of the time. The AMA 
RUC referred all four codes to the CPT Editorial Panel for creation of 
CPT codes for new comprehensive services and for reorganization of the 
coding structure to reflect the typical procedures performed. As a 
result, CPT codes 51772 and 51795 were deleted, CPT code 51797 was 
revised, and CPT codes 51727 (Complex cystometrogram (ie, calibrated 
electronic equipment); with urethral pressure profile studies (ie, 
urethral closure pressure profile), any technique); 51728 (Complex 
cystometrogram (ie, calibrated electronic equipment); with voiding 
pressure studies (i.e., bladder voiding pressure), any technique); and 
51729 (Complex cystometrogram (i.e., calibrated electronic equipment); 
with voiding pressure studies (ie, bladder voiding pressure) and 
urethral pressure profile studies (i.e., urethral closure pressure 
profile), any technique) were created for CY 2010. Accordingly, the AMA 
RUC reviewed the clinical labor inputs for the typical patient and made 
minor edits regarding the intra-service time for these services. In 
addition, the AMA RUC made adjustments to the medical supplies and 
equipment. As noted in the CY 2010 PFS final rule with comment period 
(74 FR 61955), we accepted these recommendations for the direct PE 
inputs on an interim final basis.
    Comment: Several commenters asserted that CPT codes 51728 and 51729 
should have additional clinical labor inputs, including a greater 
number of minutes during the intra-service period and minutes during 
the pre-service period. These commenters also requested revisions to 
the PE supply inputs for the codes.
    Response: We discuss our CY 2011 proposal and the final CY 2011 
policy with respect to the direct PE inputs for CPT codes 51728 and 
51729 in section II.A.3.c.(5) of this final rule with comment period. 
As we state there, we reviewed the direct PE inputs for these two CPT 
codes and three related CPT codes following revised AMA RUC 
recommendations for CY 2011. We agreed with the AMA RUC recommendations 
regarding changes for CY 2011. Specifically, we believe the pre-service 
nonfacility clinical labor time for the 0-day global period CPT codes 
51725 (simple cystometrogram (CMG) (eg, spinal manometer)) and 51726 
should be removed and the intra-service clinical labor time for CPT 
code 51726 should also be reduced, consistent with the usual treatment 
of other 0-day global codes. We believe the AMA RUC provided 
recommendations to us regarding the direct PE inputs for these 
cystometrogram services that accurately reflect the costs of the 
resources (that is, the clinical labor, equipment, and supplies) 
typically required to furnish these services to Medicare beneficiaries.
    Comment: Several additional commenters alerted CMS to incorrect 
supply inputs for CPT codes 51728 and 51729. The commenters noted that 
the AMA RUC direct PE recommendations for CPT code 51728 included an 
additional beaker. In the case of CPT code 51729, the commenters stated 
that CMS did not include the recommended beaker and tubing in the 
direct PE database for the CY 2010 final rule with comment period.
    Response: We appreciate the commenters' assistance, and we made 
these corrections in the May 11, 2010 correction notice to the CY 2010 
PFS final rule with comment period (75 FR 26356 and 26478). We are 
finalizing these direct PE inputs, as corrected, for CPT codes 51728 
and 51239 for CY 2011.
i. Coronary Computed Tomographic Angiography (CPT Codes 75571, 75572, 
75573, and 75574)
    In October 2008, the CPT Editorial Panel deleted eight Category III 
CPT codes (0144T through 0151T) and created four new codes for CY 2010, 
specifically CPT codes 75571 (Computed tomography, heart, without 
contrast material, with quantitative evaluation of coronary calcium); 
75572 (Computed tomography, heart, with contrast material, for 
evaluation of cardiac structure and morphology (including 3D image 
postprocessing, assessment of cardiac function, and evaluation of 
venous structures, if performed)); 75573 (Computed tomography, heart, 
with contrast material, for evaluation of cardiac structure and 
morphology in the setting of congenital heart disease (including 3D 
image postprocessing, assessment of LV cardiac function, RV structure 
and function and evaluation of venous structures, if performed)); and 
75574 (Computed tomographic angiography, heart, coronary arteries and 
bypass grafts (when present), with contrast material, including 3D 
image postprocessing (including evaluation of cardiac structure and 
morphology, assessment of cardiac function, and evaluation of venous 
structures, if performed)) to describe the evolution of the performance 
of cardiac and coronary computed tomography for specific clinical 
scenarios. We accepted the AMA RUC recommendations for direct PE inputs 
for these codes on an interim final basis for CY 2010 (74 FR 61955).
    Comment: Several commenters stated that the final CY 2010 PFS 
direct PE database included incomplete direct PE inputs for CPT codes 
75572 and 75573. The commenters also submitted updated pricing 
information for the 64-slice CT scanner.
    Response: We appreciate the commenters' assistance, and we 
corrected these errors in the May 11, 2010 correction notice to the CY 
2010 PFS final rule with comment period (75 FR 26356 and 26543). We are 
finalizing the direct PE inputs for CPT codes 75571, 75572, 75573, and 
75574, as corrected, for CY 2011. Additionally, we proposed an updated 
price for the 64-slice CT scanner and its accompanying software in the 
CY 2011 PFS proposed rule (75 FR 40062). We address that proposal and 
our final CY 2011 policy in section II.A.3.c.(2) of this final rule 
with comment period.

[[Page 73326]]

j. Adjacent Tissue Transfer or Rearrangement (CPT Codes 14301 and 
14302)
    CPT code 14300 (Adjacent tissue transfer or rearrangement, more 
than 30 sq cm, unusual or complicated, any area) was identified by the 
Five-Year Review Identification Workgroup through its ``Site-of-Service 
Anomalies'' screen for potentially misvalued codes and subsequently 
identified through the ``CMS Fastest Growing'' screen. The service was 
referred to the CPT Editorial Panel to clarify the coding for tissue 
transfers involving different size areas. As a result, CPT code 14300 
was deleted and two new codes, CPT codes 14301 (Adjacent tissue 
transfer or rearrangement, any area; defect 30.1 sq cm to 60.0 sq cm) 
and 14302 (Adjacent tissue transfer or rearrangement, any area; each 
additional 30.0 sq cm, or part thereof (List separately in addition to 
code for primary procedure)) were created. We accepted the AMA RUC 
recommendations for direct PE inputs on an interim final basis for CY 
2010 (74 FR 61955).
    Comment: One commenter stated that there were discrepancies between 
the AMA RUC recommendations and the direct PE inputs for CPT codes 
14301 and 14302.
    Response: We appreciate the commenters' assistance, and we 
corrected these errors in the May 11, 2010 correction notice to the CY 
2010 PFS final rule with comment period (75 FR 26356 and 26368). Upon 
additional review of the direct PE inputs for consistency with the CY 
2010 AMA RUC recommendations for this CY 2011 final rule with comment 
period, we also found that the instrument pack for CPT code 14301 
should be EQ138 (instrument pack, medium ($1500 and up)) instead of 
EQ137 (instrument pack, basic ($500-$1499)). Furthermore, CPT code 
14301 should have one SA054 (pack, post-op incision care (suture)) as a 
supply input in both the nonfacility and facility settings. The final 
CY 2011 PFS direct PE database reflects these additional corrections. 
We are finalizing the direct PE inputs for CPT codes 14301 and 14302 
for CY 2011.
k. Insertion of a Temporary Prostatic Urethral Stent (CPT code 53855)
    CPT code 53855 (Insertion of a temporary prostatic urethral stent, 
including urethral measurement) was created for CY 2010 to describe the 
service previously reported under the Category III CPT code 0084T. We 
accepted the AMA RUC recommendations for direct PE inputs on an interim 
final basis for CY 2010 (74 FR 61955).
    Comment: One commenter stated that CPT code 53855 was incorrectly 
missing supply codes SD074 and SH050 as inputs in the final CY 2010 PFS 
direct PE database. The commenter also noted that SJ038 was incorrectly 
substituted for SJ032.
    Response: We appreciate the commenter bringing these items to our 
attention and agree with the commenter's assessment. The supply items 
for CPT code 53588 (filiform and one unit of lidocaine) have been 
included in the direct PE inputs and we have replaced petroleum jelly 
with lubricating jelly. These changes are reflected in the final CY 
2011 PFS direct PE database. We are finalizing the revised direct PE 
inputs for CPT code 53855 for CY 2011.
l. High Dose Rate Brachytherapy (CPT codes 77785, 77786, and 77787)
    CPT codes 77785 (Remote afterloading high dose rate radionuclide 
brachytherapy; 1 channel); 77786 (Remote afterloading high dose rate 
radionuclide brachytherapy; 2-12 channels); and 77787 (Remote 
afterloading high dose rate radionuclide brachytherapy; over 12 
channels) were identified by the Five-Year Review Identification 
Workgroup through the ``CMS Fastest Growing'' and ``High Volume 
Growth'' potentially misvalued codes screens and later revised by the 
CPT Editorial Panel for CY 2009. As a result, the AMA RUC made 
recommendations for physician work and direct PE inputs for these 
revised services for CY 2009, which we accepted in the CY 2009 PFS 
final rule with comment period (73 FR 69892). Upon acceptance of the 
AMA RUC recommendations, we received several comments concerning the 
direct PE direct inputs (for example, supply costs and the useful life 
of the renewable sources) related to several high dose radiation 
therapy and placement CPT codes. In the CY 2010 PFS proposed rule (74 
FR 33532), we requested that the AMA RUC revisit the direct PE inputs 
for these services. In response to our request, the AMA RUC reviewed 
the direct PE inputs for these services and made adjustments to the 
clinical labor staff type, changed the time for some activities, and 
edited the medical supplies and equipment for the typical patient 
scenario. In addition, the AMA RUC also recommended further discussion 
between the specialty and CMS regarding appropriate resolution of the 
PE input price for the Iridium-192 brachytherapy source typically used 
in CPT codes 77785, 77786, and 77787. We accepted these direct PE 
recommendations for CY 2010 on an interim final basis (74 FR 61782).
    Comment: One commenter informed CMS of two concerns regarding CPT 
codes 77785, 77786, and 77787. The commenter stated that the AMA RUC 
summary direct PE output table included incorrectly doubled PE inputs 
for each of the codes. The commenter also pointed out that the medical 
physicist clinical labor time for CPT code 77786 should be 54 minutes 
instead of 29 minutes.
    Response: We appreciate the commenters' assistance, and we 
corrected these errors in the May 11, 2010 correction notice to the CY 
2010 PFS final rule with comment period (75 FR 26356 and 26564). We are 
finalizing the direct PE inputs for CPT codes 77785, 77786, and 77787, 
as corrected, for CY 2011.
m. Injection of Facet Joint (CPT Codes 64490, 64491, 64492, 64493, 
64494, and 64495)
    Facet joint injection services were identified by the Five-Year 
Review Identification Workgroup ``High Volume Growth'' potentially 
misvalued codes screen and referred to the CPT Editorial Panel to 
create an appropriate coding structure to report primary and additional 
injections. As a result, the four existing codes describing these 
services were deleted and CPT codes 66490 (Injection(s), diagnostic or 
therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves 
innervating that joint) with image guidance (fluoroscopy or CT), 
cervical or thoracic; single level); 64491 (Injection(s), diagnostic or 
therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves 
innervating that joint) with image guidance (fluoroscopy or CT), 
cervical or thoracic; second level (List separately in addition to code 
for primary procedure)); 64492 (Injection(s), diagnostic or therapeutic 
agent, paravertebral facet (zygapophyseal) joint (or nerves innervating 
that joint) with image guidance (fluoroscopy or CT), cervical or 
thoracic; third and any additional level(s) (List separately in 
addition to code for primary procedure)); 64493 (Injection(s), 
diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) 
joint (or nerves innervating that joint) with image guidance 
(fluoroscopy or CT), lumbar or sacral; single level); 64494 
(Injection(s), diagnostic or therapeutic agent, paravertebral facet 
(zygapophyseal) joint (or nerves innervating that joint) with image 
guidance (fluoroscopy or CT), lumbar or

[[Page 73327]]

sacral; second level (List separately in addition to code for primary 
procedure)); and 64495 (Injection(s), diagnostic or therapeutic agent, 
paravertebral facet (zygapophyseal) joint (or nerves innervating that 
joint) with image guidance (fluoroscopy or CT), lumbar or sacral; third 
and any additional level(s) (List separately in addition to code for 
primary procedure)) were created for CY 2010. Accordingly, the AMA RUC 
reviewed the direct PE inputs as recommended by the specialty and made 
some minor edits to the clinical labor and medical supplies to reflect 
the typical patient service, which we accepted in the CY 2010 PFS final 
rule with comment on an interim final basis (74 FR 61955).
    Comment: Several commenters stated that the equipment and supplies 
listed in the final CY 2010 PFS direct PE database for CPT codes 64490, 
64491, 64492, 64493, 64494, and 64495 were incorrect and not consistent 
with the AMA RUC's recommendations.
    Response: We verified that the equipment and supplies listed as 
direct inputs for these codes in the final CY 2011 direct PE database 
match the CY 2010 recommendations provided to us by the AMA RUC. We 
encourage stakeholders who believe a change is required in the direct 
PE inputs associated with a particular service in the typical case that 
is furnished in the facility or nonfacility setting to address these 
concerns with the AMA RUC. We are finalizing these direct PE inputs for 
CPT codes 64490, 64491, 64492, 64493, 64494, and 64495 for CY 2011.
n. Knee Arthroscopy (CPT Code 29870)
    In the CY 2008 PFS final rule (72 FR 66238), we deferred the 
establishment of nonfacility direct PE inputs for CPT code 29870 
(Arthroscopy, knee, diagnostic, with or without synovial biopsy 
(separate procedure)) and stated that the physicians performing 
arthroscopic services in the nonfacility setting should be given the 
opportunity to have a multispecialty review by the AMA RUC. We accepted 
the AMA RUC recommendations for nonfacility direct PE inputs in the CY 
2010 PFS final rule with comment period on an interim final basis (74 
FR 61955).
    Comment: One commenter indicated that the wrong arthroscopic system 
was approved by the AMA RUC for CPT code 29870.
    Response: We verified that the equipment input for this code in the 
final CY 2011 PFS direct PE database matches the recommendation 
provided to us by the AMA RUC. We encourage stakeholders who believe a 
change is required in the direct PE inputs associated with a particular 
service in the typical case that is furnished in the facility or 
nonfacility setting to address these concerns with the AMA RUC. We are 
finalizing the direct PE inputs for CPT code 298770 for CY 2011.
3. Status of Interim Final Work RVUs for Potentially Misvalued Site-of-
Service Anomaly Codes From CY 2009 and CY 2010
    In previous years, we have requested that the AMA RUC review codes 
that, according to Medicare claims data, have experienced a change in 
the typical site-of-service since the original valuation of the code. 
The AMA RUC reviewed and recommended to CMS revised work RVUs for 29 
codes for CY 2009 and 11 codes for CY 2010 that were identified as 
having site-of-service anomalies. In the CYs 2009 and 2010 PFS final 
rules with comment period (73 FR 69883 and 74 FR 61776 through 61778, 
respectively), we indicated that although we would accept the AMA RUC 
valuations for these site-of-service anomaly codes on an interim final 
basis through CY 2010, we had ongoing concerns about the methodologies 
used by the AMA RUC to review these services. We requested that the AMA 
RUC reexamine the site-of-service anomaly codes and use the building 
block methodology to revalue the services (74 FR 61777).
    For CY 2011, as discussed in more detail in section II.C.3.d. of 
this final rule with comment period, we are requesting that the AMA RUC 
reconsider its previously recommended values, which have been applied 
on an interim final basis in CYs 2009 and 2010, and revise the work 
RVUs to better reflect the intensity of the services and the revised 
physician times and post-procedure visits included in the valuation of 
these codes. Until we receive the revised values from the AMA RUC for 
CY 2012 and can make a determination regarding them, we are continuing 
to accept the existing AMA RUC-recommended work RVUs listed in Tables 
14 and 15 in section II.C.3.d. of this final rule with comment period 
on an interim final basis for CY 2011.
4. Other New, Revised, or Potentially Misvalued Codes With CY 2010 
Interim Final RVUs Not Specifically Discussed in the CY 2011 Final Rule 
With Comment Period
    For all other CY 2010 new, revised, or potentially misvalued codes 
with CY 2010 interim final RVUs that are not specifically discussed in 
this final rule with comment period, we are finalizing, without 
modification, the interim final work and malpractice RVUs and direct PE 
inputs that we initially adopted for CY 2010.

C. Establishment of Interim Final RVUs for CY 2011

    In this section, we discuss the establishment of work, PE, and 
malpractice interim final RVUs for CY 2011 and issues related to the 
processes for establishing these values. These CY 2011 work, PE, and 
malpractice interim final RVUs, and the associated direct PE inputs, 
are open to comment on this CY 2011 final rule with comment period. In 
general, the work, PE, and malpractice RVUs and the associated direct 
PE inputs for the CY 2011 new and revised codes will be finalized in 
the CY 2012 PFS final rule with comment period, where we will also 
respond to the public comments received on the values and direct PE 
inputs that are adopted on an interim final basis in this CY 2011 final 
rule with comment period. The final CY 2011 PFS direct PE database and 
the crosswalks for the malpractice RVUs for new and revised codes are 
posted on the CMS Web site under the downloads for the CY 2011 PFS 
final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
    For CY 2011, we received AMA RUC recommendations for 325 new, 
revised, and potentially misvalued CPT codes and 93 recommended 
deletions. Of the 325 codes, 84 were identified as potentially 
misvalued, 125 as new, and 116 as revised. After subtracting out CPT 
codes for which no work RVU recommendation were given--including codes 
listed on the Clinical Lab Fee Schedule (CLFS), vaccine codes, and 
technical component only codes--there were 291 codes for which the AMA 
RUC provided work RVU recommendations for CY 2011: 82 CPT codes 
classified by the AMA RUC as potentially misvalued, 108 as new, and 101 
as revised. Of note, as displayed in Table 53, we consider 204 of the 
AMA RUC work recommendations for CY 2011 new and established CPT codes 
to be for codes identified through, created as a result of, or valued 
in association with service(s) identified through a potentially 
misvalued code screen. Additionally, we received direct PE input 
recommendations from the AMA RUC for 325 CPT codes for CY 2011.
    For CY 2011, we note that the CPT Editorial Panel deleted CPT codes 
0160T (Therapeutic repetitive transcranial magnetic stimulation 
treatment planning) and 0161T (Therapeutic repetitive transcranial 
magnetic stimulation treatment delivery and management, per session) 
and created two new CPT codes, 90867

[[Page 73328]]

(Therapeutic repetitive transcranial magnetic stimulation treatment; 
planning) and 90868 (Therapeutic repetitive transcranial magnetic 
stimulation treatment; delivery and management, per session). Due to 
the timing of the creation of these codes, the AMA RUC was unable to 
provide work and PE recommendations for CY 2011. As a result, these 
codes will be contractor-priced for CY 2011.
1. Establishment of Interim Final Work RVUs for CY 2011
a. Background
    As we previously explained in section V.A. of this final rule with 
comment period, on an annual basis, the AMA RUC provides CMS with 
recommendations regarding physician work values for new, revised, and 
potentially misvalued codes. We review the AMA RUC-recommended work 
RVUs on a code-by-code basis. We determine whether we agree with the 
AMA RUC's recommended work RVUs for a service (that is, we agree the 
valuation is accurate), or, if we disagree, we determine an alternative 
value that better reflects our estimate of the physician work for the 
service.
    As stated earlier, the AMA RUC provided work RVU recommendations 
for 291 CPT codes. Of the 291, we are accepting 207 (71 percent) of the 
AMA RUC-recommended values and providing alternative values for the 
remaining 84 (29 percent). Over the last several years our rate of 
acceptance of the AMA RUC recommendations has been higher, at 90 
percent or greater. However, in response to concerns expressed by 
MedPAC, the Congress, and other stakeholders regarding the accurate 
valuation of services under the PFS, we have intensified our scrutiny 
of the work valuations of new, revised, and potentially misvalued 
codes. We note that most recently, the law was amended (section 
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA)) to add 
a new requirement which specifies that the Secretary shall establish a 
formal process to validate RVUs under the PFS. The validation process 
may include validation of work elements (such as time, mental effort 
and professional judgment, technical skill and physical effort, and 
stress due to risk) involved with furnishing a service and may include 
validation of the pre-, post-, and intra-service components of work. 
Furthermore, the Secretary is directed to validate a sampling of the 
work RVUs of codes identified through any of the seven categories of 
potentially misvalued codes specified by section 1848(c)(2)(K)(ii) of 
the Act (as added by section 3134 of the ACA). While we are currently 
in the planning stage of developing a formal validation process, we 
believe we should be incorporating, where appropriate, the validation 
principles specified in the law. That is, in reviewing the CY 2011 AMA 
RUC recommendations for valuing the work of new, revised, and 
potentially misvalued services, we have expended significant effort in 
evaluating whether the recommended values reflect the work elements, 
such as time, mental effort, and professional judgment, technical skill 
and physical effort, and stress due to risk, involved with furnishing 
the service. We subjected each of the CY 2011 codes to a rigorous 
clinical review, examining the pre-, post-, and intra-service 
components of the work. If we concluded that the AMA RUC's recommended 
value for a code was not accurate, we looked for comparisons with other 
established reference codes with clinical similarity or analogous pre-, 
post-, and intra-service times, and, where applicable, employed the 
building block approach to inform our interim final decision to 
establish an alternative value that we believe is more appropriate.
    The AMA RUC has emphasized the need to value services ``relative'' 
to other services, explaining in its public comment on the CY 2011 PFS 
proposed rule that it will ``continue to employ magnitude estimation in 
developing relative value recommendations as it is the cornerstone of 
the RBRVS (resource-based relative value scale).'' We agree that 
services paid under the PFS should be reviewed and valued in manner 
consistent with Medicare payment policy to maintain appropriate 
relativity between services and promote accurate pricing. In our review 
of the 291 CY 2011 AMA RUC recommendations for work values, we noted 
that the AMA RUC used a variety of approaches and methodologies to 
arrive at the recommended work values. For some codes, the AMA RUC used 
magnitude estimation in conjunction with survey data from physician 
surveys conducted by the specialty societies to support the values. For 
other codes, the AMA RUC used magnitude estimation to override the 
results of the survey data, recommending to CMS a value that was not 
based on survey data but rather, justified in terms of its appropriate 
relativity within the system to other similar services. The AMA RUC may 
also elect to use a crosswalk approach in valuing a code by applying a 
work value from a currently valued code to the code under review based 
on the clinical similarity of the procedures or explicit considerations 
of pre-, intra-, and post-service times. In some instances, the AMA RUC 
asserted that it used the building block methodology to value the code, 
a methodology CMS has historically supported (74 FR 61776).
    We understand that the AMA RUC believes that it must approach 
valuation on a code-by-code basis, and depending on the context of the 
particular code, some methodologies may be better suited than others 
for valuation purposes. However, we remain concerned over the 
variations and some applications of the AMA RUC's methodologies which, 
if we continue to accept them, could contribute to inaccuracy in the 
relativity of physician work valued under the PFS for different 
services. Our concerns at this time include the following 
methodological issues which we observed during our review of the CY 
2011 AMA RUC work recommendations:
    <bullet> AMA RUC-recommended values without benefit of a survey: 
For a number of codes, the AMA RUC justified the work RVUs by 
crosswalking the codes to existing codes deemed comparable by the AMA 
RUC. Since the specialty society did not conduct a survey for these 
codes, there are no survey data to back up the recommended work RVUs.
    <bullet> Surveys conducted on existing codes produced predictable 
results: In providing recommendations for existing potentially 
misvalued codes, the AMA RUC often recommended maintaining the current 
work RVUs and supported this valuation by citing the survey results. 
Upon clinical review of a number of these cases, we are concerned over 
the validity of the survey results since the survey values often are 
very close to the current code values. Increasingly, rather than 
recommending the median survey value that has historically been most 
commonly used, the AMA RUC is choosing to recommend the 25th percentile 
value, potentially responding to the same concern we have identified.
    <bullet> AMA RUC deviated significantly or disregarded survey 
results completely: For the majority of codes, the AMA RUC cited the 
survey results in support of the work RVU recommendations and in many 
instances adopted either the survey median or 25th percentile value as 
the AMA RUC-recommended value. However, in some instances, the AMA RUC 
recommended work RVUs which deviated significantly from the survey 
results. Rather than using the survey data, the AMA RUC appears to have 
relied on another methodology to value the code, such as ``magnitude

[[Page 73329]]

estimation'' or crosswalk to a comparable code.
    In reviewing the 291 work RVU recommendations from the AMA RUC for 
CY 2011, we concluded that the strongest support for the valuation of a 
code occurred when the AMA RUC cited multiple germane methodologies 
that all yielded a similar value that was also supported by the survey. 
We tended to accept the AMA RUC-recommended values in these instances. 
However, we found the weakest and least convincing valuations occurred 
in cases where the AMA RUC either deviated significantly or disregarded 
the survey results in favor of tweaking various components of the code 
in order to justify a value which the AMA RUC believed was correct due 
to perceived ``magnitude estimation'' for that code. We are concerned 
that such actions by the AMA RUC may create problems for any systematic 
validation processes that could be implemented in the future as 
required by section 1848(c)(2)(L) of the Act (as added by section 3134 
of the ACA).
    Accordingly, for those CY 2011 codes for which we did not accept 
the AMA RUC recommendations and are instead establishing alternative 
interim final values, we discuss our decisions based on groupings of 
codes in the following sections. Table GG4 at the end of this section 
displays the AMA RUC recommendations and interim final work RVUs for CY 
2011 new, revised, and potentially misvalued codes. b. CY 2011 Interim 
Final Work RVUs for New and Revised Codes (1) CY 2011 New and Revised 
Codes that Do Not Represent Major New Comprehensive Services
    We provide an explanation in the following sections of our 
rationale for not accepting particular AMA RUC-recommended or Health 
Care Professional Advisory Committee (HCPAC)-recommended work RVUs for 
CY 2011 new and revised CPT codes that do not represent major new 
comprehensive services that are listed in Table 51 and discussed in the 
subsequent section. The issues are arranged by type of service in CPT 
code order and address only work RVUs. These codes are listed in Table 
53, which includes a complete list of all new, revised, and potentially 
misvalued CPT codes with CY 2011 AMA RUC work RVU recommendations and 
CMS' interim final decisions for CY 2011.
(A) Excision and Debridement (CPT Codes 11010, 11011, 11012, 11042, 
11043, 10144, 11045, 11046, 11047, and 97598)
    CPT codes 11043 (Debridement; skin, subcutaneous tissue, and 
muscle) and 11044 (Debridement; skin, subcutaneous tissue, muscle, and 
bone) were identified by the AMA RUC's Five-Year Review Identification 
Workgroup through the ``Site-of-Service Anomalies'' potentially 
misvalued codes screen in September 2007. The AMA RUC recommended that 
the entire family of services described by CPT codes 11040 through 
11044 and 97597 and 97598 be referred to the CPT Editorial Panel 
because the current descriptors allowed reporting of the codes for a 
bimodal distribution of patients and also to better define the terms 
excision and debridement. These codes were included with many other 
codes under review by the CPT Excision and Debridement Workgroup. CPT 
codes 11010, 11011, 11012, and 11042 through 11047 were reviewed by the 
AMA RUC and CPT codes 97597 and 97598 were reviewed by the HCPAC.
    The code descriptors for CPT codes 11010 (Debridement including 
removal of foreign material at the site of an open fracture and/or an 
open dislocation (e.g., excisional debridement); skin and subcutaneous 
tissues); 11011 (Debridement including removal of foreign material at 
the site of an open fracture and/or an open dislocation (e.g., 
excisional debridement); skin, subcutaneous tissue, muscle fascia, and 
muscle); and 11012 (Debridement including removal of foreign material 
at the site of an open fracture and/or an open dislocation (e.g., 
excisional debridement); skin, subcutaneous tissue, muscle fascia, 
muscle, and bone) were revised to clarify to payors and providers that 
these codes describe debridement of a single traumatic wound caused by 
an open fracture which creates a single exposure, despite the number of 
fractures or dislocations in the same anatomic site. The AMA RUC and 
the specialty society agreed that the revisions made to these 
descriptors were editorial and the current work RVUs for these services 
correctly related to the typical patient and should be maintained, 
recommendations which we have accepted on an interim final basis for CY 
2011.
    The CPT Editorial Panel revised the descriptor for CPT code 11042 
(Debridement subcutaneous tissue (includes epidermis and dermis, if 
performed); first 20 square centimeters or less). As a result, the AMA 
RUC reviewed the specialty-recommended work RVUs for this service, 1.12 
work RVUs (the previous AMA RUC HCPAC recommendation as valued during 
the CY 2005 Five-Year Review of Work), and noted that they were higher 
than the current PFS value for this service (0.80 work RVUs). The AMA 
RUC determined that there was compelling evidence to consider new work 
RVUs for this service. The AMA RUC also reviewed the survey data for 
CPT code 11042 and made slight changes to the pre-, intra-, and post-
service times. This service was compared to the key reference CPT code 
16020 (Dressings and/or debridement of partial-thickness burns, initial 
or subsequent; small (less than 5% total body surface area)) (work RVUs 
= 0.80) and MPC CPT code 56605 (Biopsy of vulva or perineum (separate 
procedure); 1 lesion) (work RVUs = 1.10). Based on these comparisons, 
the AMA RUC agreed that the previous AMA RUC HCPAC recommendation of 
1.12 work RVUs was an appropriate value as it would maintain relativity 
between the key reference code and the surveyed code. The AMA RUC 
recommended work RVUs of 1.12 for CPT code 11042.
    We disagree with the AMA RUC-recommended value for this service and 
are maintaining the current work RVUs of 0.80. We believe the AMA RUC-
recommended value (1.12 work RVUs) was based on the old surveyed value. 
The reference code, CPT code 16020, has more overall time but is valued 
at 0.80 work RVUs. In addition, the reference code has a size 
limitation that varies by individual body size, but the surveyed CPT 
code 11042 has an add-on code (CPT code 11045) for each additional 20 
square centimeters. Therefore, we are not accepting the AMA RUC 
recommendation and are assigning an alternative value of 0.80 work RVUs 
to CPT code 11042 on an interim final basis for CY 2011.
    For CPT code 11045 (Debridement subcutaneous tissue (includes 
epidermis and dermis, if performed); each additional 20 square 
centimeters, or part thereof (List separately in addition to code for 
primary procedure)), which is the add-on code to CPT code 11042, the 
AMA RUC recommended 0.69 work RVUs. This value was obtained by applying 
a 14 percent reduction to the median work value of 0.80 to maintain the 
relativity between CPT codes 11042 and 11045 of the survey data 
collected. Due to the reduction in work RVUs to CPT code 11042 by CMS, 
we reduced the AMA RUC-recommended work RVUs of 0.69 for CPT code 11045 
and assigned 0.33 work RVUs to this service. This value was obtained by 
removing

[[Page 73330]]

the pre- and post-service time from the interim final RVUs of 0.80 for 
the primary procedure (CPT code 11042). Therefore, we are assigning an 
alternative value of 0.33 work RVUs to CPT code 11045 on an interim 
final basis for CY 2011.
    CPT codes 11043 (Debridement, muscle and/or fascia (includes 
epidermis, dermis, and subcutaneous tissue, if performed); first 20 
square centimeters or less) and 11044 (Debridement, bone (includes 
epidermis, dermis, subcutaneous tissue, muscle and/or fascia, if 
performed); first 20 square centimeters or less) were surveyed as 90-
day global codes. However, due to disagreement with the survey 
vignettes and the new global period (90 days), in addition to broad 
variations in surveyed facility length of stay, the AMA RUC requested 
that CMS change the global period to 0 days. CMS agreed and the codes 
were resurveyed as 0-day global codes.
    For CPT code 11043, the AMA RUC recommended 3.00 work RVUs. The AMA 
RUC reviewed the survey data and compared the surveyed code to the key 
reference CPT code 15002 (Surgical preparation or creation of recipient 
site by excision of open wounds, burn eschar, or scar (including 
subcutaneous tissues), or incisional release of scar contracture, 
trunk, arms, le.g.s; first 100 sq cm or 1% of body area of infants and 
children) (work RVUs = 3.65). The AMA RUC noted that the reference code 
had significantly more total service time as compared to the surveyed 
code and that the surveyed code was less intense to perform in 
comparison to the reference code. Based on this comparison, the AMA RUC 
recommended work RVUs of 3.00, the survey 25th percentile for this 
service.
    The AMA RUC-recommended work inputs for this service include less 
clinical time and fewer follow-up E/M visits than are currently 
attributed to the performance of this service; however, the AMA RUC-
recommended work RVU value decreased by only 0.14 RVUs. We disagree 
with the AMA RUC-recommended RVUs for this service and believe 2.00 
work RVUs, the survey low value, reflects a more appropriate decrease 
in work RVU value given the recommended decrease in clinical time and 
follow-up E/M visits. Therefore, we are assigning an alternative value 
of 2.00 work RVUs to CPT code 11043 on an interim final basis for CY 
2011.
    For CPT code 11046 (Debridement, muscle and/or fascia (includes 
epidermis, dermis, and subcutaneous tissue, if performed); each 
additional 20 square centimeters, or part thereof (List separately in 
addition to code for primary procedure)), which is the add-on code to 
CPT code 11043, the RUC recommended 1.29 work RVUs, the survey 25th 
percentile. To maintain consistency and relativity between this add-on 
code and its primary code (CPT code 11043), for which we are 
recommending the survey low value as discussed above, and given the 
time and intensity the AMA RUC recommended to perform this service, we 
disagree with the AMA RUC-recommended work RVUs for this service and 
believe 0.70 work RVUs, the survey low value, are more appropriate. 
Therefore, we are assigning an alternative value of 0.70 work RVUs to 
CPT code 11046 on an interim final basis for CY 2011.
    For CPT code 11044, the AMA RUC recommended 4.56 work RVUs. The AMA 
RUC reviewed the survey data and compared the surveyed code to the 
reference CPT code 15004 (Surgical preparation or creation of recipient 
site by excision of open wounds, burn eschar, or scar (including 
subcutaneous tissues), or incisional release of scar contracture, face, 
scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/
or multiple digits; first 100 sq cm or 1% of body area of infants and 
children) (work RVUs = 4.58). The AMA RUC noted that the reference code 
had the same intra-service time and that the surveyed code and the 
reference code required similar mental effort and judgment to perform. 
Based on this comparison, the AMA RUC recommended work RVUs of 4.56, 
the survey 25th percentile, and believes this value accurately reflects 
the relative physician work to perform this service and maintains 
proper rank order with CPT codes 11042 and 11043. The AMA RUC-
recommended work inputs for this service include less clinical time and 
fewer follow-up E/M visits than are currently attributed to the 
performance of this service; however, the AMA RUC-recommended work RVUs 
increased. We disagree with the AMA RUC-recommended work RVUs for this 
service and believe 3.60 work RVUs, the survey low value, reflect a 
more appropriate decrease in work RVU value given the recommended 
decrease in clinical time and follow-up E/M visits. Therefore, we are 
assigning an alternative value of 3.60 work RVUs to CPT code 11044 on 
an interim final basis for CY 2011.
    For CPT code 11047 (Debridement, bone (includes epidermis, dermis, 
subcutaneous tissue, muscle and/or fascia, if performed); each 
additional 20 square centimeters, or part thereof) the AMA RUC 
recommended 2.00 work RVUs, the survey median value. To maintain 
consistency and relativity between this add-on code and its primary 
code (CPT code 11044), for which we are recommending the survey low 
value as discussed above, and given the time and intensity the AMA RUC 
recommended to perform this service, we disagree with the AMA RUC-
recommended value and believe 1.20 RUVs, the survey low value, are more 
appropriate for this service. Therefore, we are assigning 1.20 work 
RVUs to CPT code 11047 on an interim final basis for CY 2011.
    For CY 2011, the services previously reported by CPT codes 11040 
(Debridement; skin, partial thickness) and 11041 (Debridement; skin, 
full thickness) will now be reported with revised CPT codes 97597 
(Debridement (eg, high pressure waterjet with/without suction, sharp 
selective debridement with scissors, scalpel and forceps), open wound, 
(eg, fibrin, devitalized epidermis and/or dermis, exudate, debris, 
biofilm), including topical application(s), wound assessment, use of a 
whirlpool, when performed and instruction(s) for ongoing care, per 
session, total wound(s) surface area; first 20 square centimeters or 
less) and 97598 (Debridement (eg, high pressure waterjet with/without 
suction, sharp selective debridement with scissors, scalpel and 
forceps), open wound, (e.g., fibrin, devitalized epidermis and/or 
dermis, exudate, debris, biofilm), including topical application(s), 
wound assessment, use of a whirlpool, when performed and instruction(s) 
for ongoing care, per session, total wound(s) surface area; each 
additional 20 square centimeters, or part thereof (List separately in 
addition to code for primary procedure)). The HCPAC recommended 0.54 
work RVUs for CPT code 97597, which is a value between the CY 2010 
values for CPT code 11040 (0.50 work RVUs) and CPT code 97597 (0.58 
work RVUs), which we have accepted on an interim final basis in this 
final rule with comment period for CY 2011. However, the work RVUs for 
this CPT code were further subject to a work budget neutrality 
adjustment, as discussed in section V.C.1.b.(iii) of this final rule 
with comment period.
    For CPT code 97598, the HCPAC recommended 0.40 work RVUs, the 
survey 25th percentile. We disagree with the HCPAC-recommended value 
for this service and, given the similarity of code descriptors between 
the 11000 series and the 97000 series CPT codes, we believe a more 
appropriate value would be 0.25 RVUs, the survey low value, as it is 
more consistent with the work RVU value associated with new add-on CPT 
code 11045, discussed above. We also believe the post-service

[[Page 73331]]

time for CPT code 97598 should be reduced to 0 minutes to coincide with 
the CPT codes in the 11000 series, which have 0 or 1 minute of post-
service time. Therefore, we are assigning an alternative value of 0.25 
work RVUs to CPT code 97598 and reducing the post-service time to 0 
minutes on an interim final basis for CY 2011. However, the work RVUs 
for this CPT code were subject to a work budget neutrality adjustment, 
as discussed in section V.C.1.b.(iii) of this final rule with comment 
period.
(B) Arthrodesis Including Discectomy (CPT Code 22551)
    As a result of CPT code 22554 (Arthrodesis, anterior interbody, 
including disc space preparation, discectomy, osteophytectomy and 
decompression of spinal cord and/or nerve roots; cervical, below C2) 
being reviewed by the AMA RUC because of its identification by the 
Five-Year Review Identification Workgroup ``Codes Reported Together'' 
potentially misvalued codes screen in February 2008, CPT code 22551 
((Arthrodesis, anterior interbody, including disc space preparation, 
discectomy, osteophytectomy and decompression of spinal cord and/or 
nerve roots; cervical, below C2)) was created by the CPT Editorial 
Panel in October 2009, to describe fusion and discectomy of the 
anterior cervical spine. The AMA RUC recommended 24.50 work RVUs. The 
specialty society requested 25.00 work RVUs. Upon review of the AMA 
RUC-recommended value and the reference codes used, it was unclear why 
the AMA RUC decided not to accept the specialty society's recommended 
value of 25.00 work RVUs. We disagree with the AMA RUC-recommended 
value of 24.50 and believe work RVUs of 25.00 are appropriate for this 
service. We are also requesting that the specialty society re-review 
with the AMA RUC the pre-service times for codes in this family since 
concerns were noted in the AMA RUC recommendation about the pre-service 
time for this service. Therefore, we are assigning an alternative value 
of 25.00 work RVUs to CPT code 22551 on an interim final basis for CY 
2011.
(C) Strapping Lower Extremity (CPT Codes 29540 and 29550)
    CPT code 29540 (Strapping; ankle and/or foot) was identified by the 
Five-Year Review Identification Workgroup ``Harvard-Valued'' 
potentially misvalued codes screen with utilization over 100,000 screen 
in October 2009. The AMA RUC recommended this whole family of services 
be surveyed.
    For CPT code 29540, the HCPAC recommended 0.39 work RVUs. The HCPAC 
compared the total time required for CPT code 29540 to 29580 
(Strapping; Unna boot), 18 and 27 minutes, respectively, and noted that 
CPT code 29540 requires less time, mental effort/judgment, technical 
skill and psychological stress than CPT code 29580. The HCPAC 
determined that CPT code 29540 was approximately 30 percent less 
intense and complex than CPT code 29580, resulting in work RVUs of 0.39 
for CPT code 29540. We disagree with the HCPAC-recommended value for 
this service and believe work RVUs of 0.32 are appropriate. We believe 
CPT code 11720 (Debridement of nail(s) by any method(s); 1 to 5) (work 
RVUs = 0.32) is a more appropriate crosswalk. Therefore, we are 
assigning an alternative value of 0.32 work RVUs to CPT code 29540 on 
an interim final basis for CY 2011.
    For CPT code 29550 (Strapping; toes), the HCPAC recommended 0.25 
work RVUs. The HCPAC compared this service to CPT code 97762 (Checkout 
for orthotic/prosthetic use, established patient, each 15 minutes) 
(work RVUs = 0.25), which requires the same intensity and complexity to 
perform as CPT code 29550. The HCPAC recommended crosswalking the work 
RVUs for 29550 to reference CPT code 97762. The HCPAC reviewed the 
survey time and determined that 7 minutes pre-service, 5 minutes intra-
service, and 1 minute immediate post-service time were appropriate to 
perform this service. We disagree with the HCPAC-recommended value for 
this service and believe work RVUs of 0.15, the survey low value, are 
appropriate, with 5 minutes of pre- and intra-service time and 1 minute 
of post-service time, as we believe the HCPAC-recommended pre-service 
time of 7 minutes is excessive. Therefore, we are assigning an 
alternative value of 0.15 work RVUs to CPT code 29550 on an interim 
final basis for CY 2011.
(D) Paraesophageal Hernia Procedures (CPT Codes 43333 and 43335)
    In February 2010, the CPT Editorial Panel deleted six existing 
codes and created ten new codes to remove obsolete and duplicative 
codes and add new codes to report current surgical techniques for 
paraesophageal hernia repair. For CPT code 43333 (Repair, 
paraesophageal hiatal hernia (including fundoplication), via 
laparotomy, except neonatal; with implantation of mesh or other 
prosthesis), the AMA RUC recommended 30.00 work RVUs. The AMA RUC 
recommended 33.00 work RVUs for CPT code 43335 (Repair, paraesophageal 
hiatal hernia (including fundoplication), via thoracotomy, except 
neonatal; with implantation of mesh or other prosthesis). While the AMA 
RUC-recommended values are the survey median values, we disagree with 
them. We adjusted the AMA RUC-recommended values for the codes without 
implantation of mesh or other prosthesis upward by 2.50 work RVUs to 
account for the differential between those codes and the parallel codes 
with implantation of mesh or other prosthesis. We note that 2.50 work 
RVUs was the lowest differential that was recommended by the AMA RUC 
between the with/without implantation of mesh or other prosthesis codes 
in this family. That is, for CPT code 43333, the revised work RVUs were 
established by adding 2.50 work RVUs to the AMA RUC-recommended work 
RVUs of 26.60 for CPT code 43332 (Repair, paraesophageal hiatal hernia 
(including fundoplication), via laparotomy, except neonatal; without 
implantation of mesh or other prosthesis), which resulted in work RVUs 
of 29.10. Likewise, for CPT code 43335, the revised work RVUs were 
established by adding 2.50 work RVUs to the AMA RUC-recommended work 
RVUs of 30.00 for CPT code 43334 (Repair, paraesophageal hiatal hernia 
(including fundoplication), via thoracotomy, except neonatal; without 
implantation of mesh or other prosthesis), resulting in work RVUs of 
32.50. Therefore, we are assigning alternative work RVUs of 29.10 to 
CPT code 43333 and 32.50 to CPT code 43335 on an interim final basis 
for CY 2011. However, the work RVUs for this CPT code were subject to a 
work budget neutrality adjustment, as discussed in section 
V.C.1.b.(iii) of this final rule with comment period.
(E) Vaginal Radiation Afterloading Apparatus for Clinical Brachytherapy 
(CPT Codes 57155 and 57156)
    CPT Code 57155 (Insertion of uterine tandems and/or vaginal ovoids 
for clinical brachytherapy) was originally identified through the Five-
Year Review Identification Workgroup ``Site-of-Service Anomalies'' 
potentially misvalued codes screen in September 2007 and was later 
revised by the CPT Editorial Panel to indicate insertion of a single 
tandem rather than tandems.
    For CY 2011, the AMA RUC recommended 5.40 work RVUs for CPT code 
57155 (Insertion of uterine tandems and/or vaginal ovoids for clinical 
brachytherapy). This value was established based on the survey 25th 
percentile and a review of comparable services, specifically CPT codes 
55920 (Placement of needles or catheters into pelvic organs and/or 
genitalia (except

[[Page 73332]]

prostate) for subsequent interstitial radioelement application)(work 
RVUs = 8.31); 50382 (Removal (via snare/capture) and replacement of 
internally dwelling urethral stent via percutaneous approach, including 
radiological supervision and interpretation) (work RVUs = 5.50); and 
52001 (Cystourethroscopy with irrigation and evacuation of multiple 
obstructing clots) (work RVUs = 5.44). We disagree with the AMA RUC-
recommended value for this service because the method used to derive 
the value lacked a defined logic. We believe work RVUs of 3.37 are 
appropriate for this service, which is the same as the value assigned 
to CPT code 58823 (Drainage of pelvic abscess, transvaginal or 
transrectal approach, percutaneous (eg, ovarian, pericolic)), which we 
also believe is a more comparable code. Therefore, we are assigning an 
alternative value of 3.37 work RVUs to CPT code 57155 on an interim 
final basis for CY 2011.
    For CPT code 57156 (Insertion of a vaginal radiation afterloading 
apparatus for clinical brachytherapy), the AMA RUC recommended 2.69 
work RVUs, the survey 25th percentile. Given our decision to revise 
downward the work RVUs for CPT code 57185, a related code, upon review 
of the AMA RUC recommendations for CPT code 57156, we believe that the 
AMA RUC-recommended value of 2.69 is too high. In light of this, we are 
crosswalking the value of CPT code 57156 from CPT code 62319 
(Injection, including catheter placement, continuous infusion or 
intermittent bolus, not including neurolytic substances, with or 
without contrast (for either localization or epidurography), of 
diagnostic or therapeutic substance(s) (including anesthetic, 
antispasmodic, opioid, steroid, other solution), epidural or 
subarachnoid; lumbar, sacral (caudal)) (work RVUs = 1.87), which has 
the same intra-service time (30 minutes) and overall lower total time 
than the comparison services referenced by the AMA RUC. Therefore, we 
are assigning an alternative value of 1.87 work RVUs to CPT code 57156 
on an interim final basis for CY 2011.
(F) Vagus Nerve Stimulator (CPT Codes 61885, 64568, 64569, and 64570)
    CPT code 61885 (Insertion or replacement of cranial neurostimulator 
pulse generator or receiver, direct or inductive coupling; with 
connection to a single electrode array) was identified by the Five-Year 
Review Identification Workgroup by its ``Site-of-Service Anomalies'' 
screen for potentially misvalued codes in September 2007. After 
reviewing the vagal nerve stimulator family of services, the specialty 
societies agreed that the family lacked clarity and the CPT Editorial 
Panel created three new codes to accurately describe revision of a 
vagal nerve stimulator lead, the placement of the pulse generator and 
replacement or revision of the vagus nerve electrode.
    For CY 2011, the AMA RUC recommended 6.44 work RVUs for CPT code 
61885. Upon review of the AMA RUC recommendations, the method used to 
establish the AMA RUC-recommended value for this service lacked a 
defined logic. Although the AMA RUC compared this service to the key 
reference service, CPT code 63685 (Insertion or replacement of spinal 
neurostimulator pulse generator or receiver, direct or inductive 
coupling) (Work RVUs = 6.05) and other relative services and noted the 
similarities in times, an appropriately rigorous methodology was not 
used. The AMA RUC-recommended work RVUs did not adequately account for 
the elimination of two inpatient visits and the reduction in outpatient 
visits for this service. We disagree with the AMA RUC-recommended value 
and believe 6.05 work RVUs, the survey 25th percentile, are appropriate 
for this service. Therefore, we are assigning an alternative value of 
6.05 work RVUs to CPT code 61885 on an interim final basis for CY 2011.
    For CPT code 64568 (Incision for implantation of cranial nerve (eg, 
vagus nerve) neurostimulator electrode array and pulse generator), the 
AMA RUC recommended 11.19 work RVUs. Similar to the rationale provided 
by the AMA RUC for the valuation of CPT code 61885, the method used to 
value this service lacked a defined logic. As with CPT code 61885 
discussed above, to which this code is related, we disagree with the 
AMA RUC-recommended value for this service and believe the survey 25th 
percentile, 9.00 work RVUs, is appropriate. Therefore, we are assigning 
an alternative value of 9.00 work RVUs to CPT code 64568 on an interim 
final basis for CY 2011.
    For CPT code 64569 (Revision or replacement of cranial nerve (eg, 
vagus nerve) neurostimulator electrode array, including connection to 
existing pulse generator), the AMA RUC recommended 15.00 work RVUs, the 
survey median value, and 13.00 work RVUs, the survey median value, for 
CPT code 64570 (Removal of cranial nerve (eg, vagus nerve) 
neurostimulator electrode array and pulse generator). Based on the 
reduction in work RVUs for CPT codes 61885 and 64568 that we are 
adopting on an interim final basis for CY 2011 and to maintain 
relativity for the codes in this family, we believe work RVUs of 11.00, 
the survey 25th percentile, are appropriate for CPT code 64569 and work 
RVUs of 9.10, the survey 25th percentile, are appropriate for CPT code 
64570. Therefore, we are assigning an alternative value of 11.00 work 
RVUs to CPT code 64569 and 9.10 work RVUs to CPT code 64570 on an 
interim final basis for CY 2011.
(G) Ultrasound of Extremity (CPT Codes 76881 and 76882)
    In October 2008, CPT code 76880 (Ultrasound, extremity, 
nonvascular, real time with image documentation) was identified by the 
Five-Year Review Identification Workgroup through its ``CMS Fastest 
Growing'' screen for potentially misvalued codes. In February 2009, the 
CPT Editorial Panel deleted CPT code 76880 and created two new codes, 
CPT codes 76881 (Ultrasound, extremity, nonvascular, real-time with 
image documentation; complete) and 76882 (Ultrasound, extremity, 
nonvascular, real-time with image documentation; limited anatomic 
specific) to distinguish between the comprehensive diagnostic 
ultrasound and the focused anatomic-specific ultrasound.
    For CPT code 76881, the AMA RUC recommended work RVUs of 0.72 and a 
total time of 25 minutes. For CPT code 76882, the AMA RUC recommended 
0.50 work RVUs and a total time of 21 minutes. The predecessor CPT code 
76880 (Ultrasound, extremity, nonvascular, real time with image 
documentation) described a nonvascular ultrasound of the entire 
extremity and was assigned work RVUs of 0.59 and a total time of 18 
minutes. The new CPT codes describe a complete service, CPT code 76881, 
and a limited service, CPT code 76882 (defined as examination of a 
specific anatomic structure, such as a tendon or muscle).
    We disagree with the AMA RUC recommendations for these services. 
For CPT code 76881, we do not believe an increase in work RVUs is 
justified given that this service will be reported for the evaluation 
of the extremity, as was CPT code 76800 which is being deleted for CY 
2011. Therefore, we believe work RVUs of 0.59 are appropriate for this 
service, consistent with the value of the predecessor code. For CPT 
code 76882, we believe a value of 0.41 is more appropriate, 
representing a statistical computation based on maintaining the 
relationship between the AMA RUC-recommended values for CPT codes 76881 
and 76882. Therefore, we are assigning alternative work RVUs of 0.59 to 
CPT code 76881 and 0.41 to CPT code

[[Page 73333]]

76882 on an interim final basis for CY 2011.
(H) Evaluation of Fine Needle Aspirate (CPT Code 88172)
    Due to confusion amongst payers and providers, in February 2010 the 
CPT Editorial Panel revised the descriptor for CPT code 88172 
(Cytopathology, evaluation of fine needle aspirate; immediate 
cytohistologic study to determine adequacy of specimen(s)) and created 
a new code, CPT code 88177 (Cytopathology, evaluation of fine needle 
aspirate; immediate cytohistologic study to determine adequacy for 
diagnosis, each separate additional evaluation episode, same site), to 
report the first evaluation episode and each additional episode of 
cytopathology evaluation of fine needle aspirate. For CPT code 88172, 
the AMA RUC recommended work RVUs of 0.69 based on comparing this code 
to several other services, without the use of an appropriate 
methodology. We disagree with the AMA RUC-recommended value and believe 
the current work RVUs of 0.60 are appropriate and should be maintained 
for this service. Although the code has been revised, no explanation by 
the AMA RUC was provided to demonstrate an increase in work, and we do 
not believe the work has changed. Therefore, we are assigning an 
alternative value of 0.60 work RVUs to CPT code 88172 on an interim 
final basis for CY 2011.
(I) Immunization Administration (CPT Code 90460 and 90461)
    The CPT Editorial Panel revised the reporting of immunization 
administration in the pediatric population in order to better align the 
service with the evolving best practice model of delivering combination 
vaccines. For CY 2011, the AMA RUC recommended 0.20 work RVUs for CPT 
code 90460 (Immunization administration through 18 years of age via any 
route of administration, with counseling by physician or other 
qualified health care profession; first vaccine/toxoid component) and 
0.16 work RVUs for CPT code 90461 (Immunization administration through 
18 years of age via any route of administration, with counseling by 
physician or other qualified health profession; each additional 
vaccine/toxoid component (List separately in addition to code for 
primary procedure)). This is an increase from the current values for 
the predecessor services. The AMA RUC states that the increase in 
recommended work RVUs is due to increased time for patient education. 
In addition, effective January 1, 2011, reporting and payment for these 
services is to be structured on a per toxoid basis rather than a per 
vaccine (combination of toxoids) basis as it was in prior years. We 
disagree with the AMA RUC-recommended values for these services and are 
maintaining the current work RVUs for the related predecessor codes of 
0.17 RVUs for CPT code 90460 and 0.15 work RVUs for CPT code 90461 
since these codes would be billed on a per toxoid basis in CY 2011. 
Therefore, we are assigning alternative values of 0.17 work RVUs to CPT 
code 90460 and 0.15 work RVUs to CPT code 90461 on an interim final 
basis for CY 2011.
(J) Diabetic Retinopathy Imaging (CPT Code 92228)
    In February, 2010 the CPT Editorial Panel established two codes for 
reporting remote imaging for screening retinal disease and management 
of active retinal disease. For CPT code 92228 (Remote imaging for 
monitoring and management of active retinal disease (eg, diabetic 
retinopathy) with physician review, interpretation and report, 
unilateral or bilateral), the AMA RUC recommended 0.44 work RVUs. The 
AMA RUC compared this service to CPT code 92250 (Fundus photography 
with interpretation and report) (Work RVUs = 0.44) due to similar times 
and believes this service is comparable to the service under review. We 
disagree with the reference service used by the AMA RUC and compared 
this code to another diagnostic service, CPT code 92135 (Scanning 
computerized ophthalmic diagnostic imaging, posterior segment, (eg, 
scanning laser) with interpretation and report, unilateral) (Work RVUs 
= 0.35), which we believe is more equivalent but has more pre- and 
intra-service time. Upon further review of CPT code 92228 and the time 
and intensity needed to perform this service, we believe work RVUs of 
0.30, the survey low value, are more appropriate. Therefore, we are 
assigning an alternative value of 0.30 work RVUs to CPT code 92228 on 
an interim final basis for CY 2011.
(K) Speech-Language Pathology Services (CPT Codes 92508 and 92606)
    Section 143 of the MIPPA specifies that speech-language 
pathologists may independently report services they provide to Medicare 
patients. Starting in July 2009, speech-language pathologists were able 
to bill Medicare as independent practitioners. As a result, the 
American Speech-Language-Hearing Association (ASHA) requested that CMS 
ask the AMA RUC to review the speech-language pathology codes to newly 
value the professionals' services in the work and not the practice 
expense. ASHA indicated that it would survey the 12 speech-language 
pathology codes over the course of the CPT 2010 and CPT 2011 cycles. 
Four of these services were reviewed by the HCPAC or the AMA RUC and 
were included in the CY 2010 PFS final rule with comment period (74 FR 
61784 and 62146). For CY 2011, the HCPAC submitted work recommendations 
for the remaining eight codes.
    For CPT code 92508 (Treatment of speech, language, voice, 
communication, and/or auditory processing disorder; group, 2 or more 
individuals), the HCPAC recommended 0.43 work RVUs which was derived by 
dividing the value for CPT code 92507 (Treatment of speech, language, 
voice, communication, and/or auditory processing disorder; individual) 
(work RVUs = 1.30) by 3, as the specialty society stated to the AMA RUC 
that there are typically 3 participants in a group. We disagree with 
the HCPAC-recommended value for this service and believe it is too 
high. We believe work RVUs of 0.33 are more appropriate, which was 
derived by dividing the value for CPT code 92507 by 4 participants, as 
we understand from providers that 4 more accurately represents the 
typical number of participants in a group. Additionally, the work RVUs 
derived from dividing the RVUs for the related individual treatment 
code by 4, 0.33 RVUs, are appropriate for this group treatment service 
relative to the work RVUs of 0.27 for CPT code 97150 (Therapeutic 
procedure(s), group (2 or more individuals)) which is furnished to a 
similar patient population, namely patients who have had a stroke. 
Therefore we are assigning alternative work RVUs of 0.33 to CPT code 
92508 on an interim final basis for CY 2011.
    For CPT code 92606 (Therapeutic service(s) for the use of non-
speech-generating device, including programming and modification), the 
HCPAC recommended 1.40 work RVUs, the survey median value. This service 
is currently bundled under the PFS and we will maintain this status for 
CY 2011. We are publishing the AMA RUC-recommended value in Addendum B 
to this final rule with comment period in accordance with our usual 
practice for bundled services.
(L) Sleep Testing (CPT Codes 95806 and 95807)
    Sleep testing CPT codes were identified by the Five-Year Review 
Identification Workgroup as potentially misvalued codes through the 
``CMS

[[Page 73334]]

Fastest Growing'' potentially misvalued codes screen. The CPT Editorial 
Panel created separate Category I CPT codes to report for unattended 
sleep studies. The AMA RUC recommended concurrent review of the family 
of sleep codes.
    For CPT code 95806 (Sleep study, unattended, simultaneous recording 
of, heart rate, oxygen saturation, respiratory airflow, and respiratory 
effort (eg, thoracoabdominal movement)), the AMA RUC recommended 1.28 
work RVUs. The AMA RUC recommended 1.25 work RVUs for CPT code 95807 
(Sleep study, simultaneous recording of ventilation, respiratory 
effort, ECG or heart rate, and oxygen saturation, attended by a 
technologist). Although the AMA RUC-recommended values for these codes 
reflect the survey 25th percentile, we disagree with the values and 
believe the values should be reversed because of the characteristics of 
the services. CPT code 95807 has 5 minutes more pre-service time but a 
lower AMA RUC-recommended value. Therefore, we have assigned 
alternative values of 1.25 work RVUs to CPT code 95806 and 1.28 work 
RVUs to CPT code 95807 on an interim final basis for CY 2011.
(M) Subsequent Hospital Observation Care
    At the June 2009 CPT Editorial Panel meeting, three new codes were 
approved to report subsequent observation services in a facility 
setting. These codes are CPT code 99224 (Level 1 subsequent observation 
care, per day); CPT code 99225 (Level 2 subsequent observation care, 
per day): and CPT code 99226 (Level 3 subsequent observation care, per 
day).
    The AMA RUC reviewed the survey data for CPT code 99224 and 
accepted the following physician times: 5 minutes of pre-service, 10 
minutes of intra-service, and 5 minutes of post-service time. The AMA 
RUC believed this code was comparable in physician time and intensity 
to CPT code 99231 (Level 1 subsequent hospital care, per day, for the 
evaluation and management of a patient), and recommended work RVUs of 
0.76. Similarly, the AMA RUC reviewed the survey data for CPT code 
99225 and accepted the following physician times: 9 minutes of pre-
service, 20 minutes of intra-service, and 10 minutes of post-service 
time. The AMA RUC believed this code was comparable in physician time 
and intensity to CPT code 99232 (Level 2 subsequent hospital care, per 
day, for the evaluation and management of a patient), and recommended 
work RVUs of 1.39. Finally, the AMA RUC reviewed the survey data for 
CPT code 99226 and accepted the following physician times: 10 minutes 
of pre-service, 30 minutes of intra-service, and 15 minutes of post-
service time. The AMA RUC believed this code was comparable in 
physician time and intensity to CPT code 99233 (Level 3 subsequent 
hospital care, per day, for the evaluation and management of a 
patient), and recommended work RVUs of 2.00.
    Observation services are outpatient services ordered by a patient's 
treating practitioner. Admission of the patient to the hospital as an 
inpatient or the ending of observation services must also be ordered by 
the treating practitioner. CMS has stated that in only rare and 
exceptional cases would reasonable and necessary outpatient observation 
services span more than 48 hours. In the majority of cases, the 
decision whether to discharge a patient from the hospital following 
resolution of the reason for the observation care or to admit the 
patient as an inpatient can be made in less than 48 hours, usually in 
less than 24 hours. Consequently, we believe that the acuity level of 
the typical patient receiving outpatient observation services would 
generally be lower than that of the inpatient level. We believe that if 
the patient's acuity level is determined to be at the level of the 
inpatient, the patient should be admitted to the hospital as an 
inpatient. We note that CMS has publicly stated in a recent letter to 
the AHA that ``it is not in the hospital's or the beneficiary's 
interest to extend observation care rather than either releasing the 
patient from the hospital or admitting the patient as an inpatient * * 
*''
    Consequently, we are not accepting the AMA RUC's recommendation to 
value the subsequent observation care codes at the level of subsequent 
inpatient hospital care services. Instead, to recognize the differences 
in patient acuity between the two settings, we removed the pre- and 
post-services times from the AMA RUC-recommended values for subsequent 
observation care, reducing the values to approximately 75 percent of 
the values for the subsequent hospital care codes. Therefore, we are 
assigning alternative work RVUs of 0.54 to CPT code 99224, 0.96 to CPT 
code 99225, and 1.44 to CPT code 99226 on an interim final basis for CY 
2011.
(2) Comprehensive Codes for a Bundle of Existing Component Services
    A subset of AMA RUC work RVU recommendations addressed valuing new 
CY 2011 CPT codes resulting from the bundling of two or more existing 
component services performed together 95 percent or more of the time. 
We expect this bundling of component services to continue over the next 
several years as the AMA RUC further recognizes the work efficiencies 
for services commonly furnished together. Stakeholders should expect 
that increased bundling of services into fewer codes will result in 
reduced PFS payment for a comprehensive service by explicitly 
considering the efficiencies in work and/or PE that may occur when 
component services are furnished together.
    For CY 2011, the AMA RUC provided CMS with recommendations for 
several categories of new comprehensive services that historically have 
been reported under multiple component codes. In some CY 2011 cases, 
the CPT Editorial Panel undertook relatively minor bundling, such as 
bundling the associated imaging with a procedure in a single new CPT 
code. In other cases, the CPT Editorial Panel bundled significant 
component codes for distinct procedures that were previously separately 
reported. This section focuses on the latter cases, and we note that 
these codes fall into three major clinical categories: Endovascular 
revascularization, computed tomography (CT), and diagnostic cardiac 
catheterization. While we acknowledge that each category of services is 
unique, since bundling of component services is likely to occur more 
often in the coming years we believe a consistent approach is 
especially important when valuing bundled services as part of the 
potentially misvalued codes initiative in order to ensure that we fully 
account for the resulting work efficiencies. Specifically, we recommend 
that the AMA RUC use, whenever possible, the building block approach, 
which is a consistent and transparent methodology based on the 
components of a code.
    The new CY 2011 comprehensive codes in these three clinical 
categories are displayed in Table 51 and our discussion of their work 
values follows.

[[Page 73335]]



 Table 51--New CY 2011 Comprehensive Codes and Work RVUs for Endovascular Revascularization, CT, and Diagnostic
                                        Cardiac Catheterization Services
----------------------------------------------------------------------------------------------------------------
                                                                                     AMA RUC-         CY 2011
        CPT code                             Long descriptor                        recommended    interim final
                                                                                     work RVUs       Work RVUs
----------------------------------------------------------------------------------------------------------------
                                         Endovascular Revascularization
----------------------------------------------------------------------------------------------------------------
37220..................  Revascularization, endovascular, open or percutaneous,             8.15            8.15
                          iliac artery, unilateral, initial vessel; with
                          transluminal angioplasty.
37221..................  Revascularization, endovascular, open or percutaneous,            10.00           10.00
                          iliac artery, unilateral, initial vessel; with
                          transluminal stent placement(s), includes angioplasty
                          within the same vessel, when performed.
37222..................  Revascularization, endovascular, open or percutaneous,             3.73            3.73
                          iliac artery, each additional ipsilateral iliac
                          vessel; with transluminal angioplasty (List separately
                          in addition to code for primary procedure).
37223..................  Revascularization, endovascular, open or percutaneous,             4.25            4.25
                          iliac artery, each additional ipsilateral iliac
                          vessel; with transluminal stent placement(s) (List
                          separately in addition to code for primary procedure),
                          includes angioplasty within the same vessel, when
                          performed.
37224..................  Revascularization, endovascular, open or percutaneous,             9.00            9.00
                          femoral/popliteal artery(s), unilateral; with
                          transluminal angioplasty.
37225..................  Revascularization, endovascular, open or percutaneous,            12.00           12.00
                          femoral/popliteal artery(s), unilateral; with
                          atherectomy, includes angioplasty within the same
                          vessel, when performed.
37226..................  Revascularization, endovascular, open or percutaneous,            10.49           10.49
                          femoral/popliteal artery(s), unilateral; with
                          transluminal stent placement(s), includes angioplasty
                          within the same vessel, when performed.
37227..................  Revascularization, endovascular, open or percutaneous,            14.50           14.50
                          femoral/popliteal artery(s), unilateral; with
                          transluminal stent placement(s) and atherectomy,
                          includes angioplasty within the same vessel, when
                          performed.
37228..................  Revascularization, endovascular, open or percutaneous,            11.00           11.00
                          tibial/peroneal artery, unilateral, initial vessel;
                          with transluminal angioplasty.
37229..................  Revascularization, endovascular, open or percutaneous,            14.05           14.05
                          tibial/peroneal artery, unilateral, initial vessel;
                          with atherectomy, includes angioplasty within the same
                          vessel, when performed.
37230..................  Revascularization, endovascular, open or percutaneous,            13.80           13.80
                          tibial/peroneal artery, unilateral, initial vessel;
                          with transluminal stent placement(s) , includes
                          angioplasty within the same vessel, when performed.
37231..................  Revascularization, endovascular, open or percutaneous,            15.00           15.00
                          tibial/peroneal artery, unilateral, initial vessel;
                          with transluminal stent placement(s) and atherectomy,
                          includes angioplasty within the same vessel, when
                          performed.
37232..................  Revascularization, endovascular, open or percutaneous,             4.00            4.00
                          tibial/peroneal artery, unilateral, each additional
                          vessel; with transluminal angioplasty (List separately
                          in addition to code for primary procedure).
37233..................  Revascularization, endovascular, open or percutaneous,             6.50            6.50
                          tibial/peroneal artery, unilateral, each additional
                          vessel; with atherectomy (List separately in addition
                          to code for primary procedure), includes angioplasty
                          within the same vessel, when performed.
37234..................  Revascularization, endovascular, open or percutaneous,             5.50            5.50
                          tibial/peroneal artery, unilateral, each additional
                          vessel; with transluminal stent placement(s) (List
                          separately in addition to code for primary procedure),
                          includes angioplasty within the same vessel, when
                          performed.
37235..................  Revascularization, endovascular, open or percutaneous,             7.80            7.80
                          tibial/peroneal artery, unilateral, each additional
                          vessel; with transluminal stent placement(s) and
                          atherectomy (List separately in addition to code for
                          primary procedure), includes angioplasty within the
                          same vessel, when performed.
----------------------------------------------------------------------------------------------------------------
                                              CT Abdomen/CT Pelvis
----------------------------------------------------------------------------------------------------------------
74176..................  Computed tomography, abdomen and pelvis; without                   1.74            1.74
                          contrast material.
74177..................  Computed tomography, abdomen and pelvis; with contrast             1.82            1.82
                          material.
74178..................  Computed tomography, abdomen and pelvis; without                   2.01            2.01
                          contrast material in one or both body regions,
                          followed by with contrast material(s) and further
                          sections in one or both body regions.
----------------------------------------------------------------------------------------------------------------
                                       Diagnostic Cardiac Catheterization
----------------------------------------------------------------------------------------------------------------
93451..................  Right heart catheterization including measurement(s) of            3.02            2.72
                          oxygen saturation and cardiac output, when performed.
93452..................  Left heart catheterization including intraprocedural               4.32            4.75
                          injection(s) for left ventriculography, imaging
                          supervision and interpretation, when performed.
93453..................  Combined right and left heart catheterization including            5.98            6.24
                          intraprocedural injection(s) for left
                          ventriculography, imaging supervision and
                          interpretation, when performed.
93454..................  Catheter placement in coronary artery(s) including                 4.95            4.79
                          intraprocedural injection(s) for coronary angiography,
                          imaging supervision and interpretation;.

[[Page 73336]]

 
93455..................    with catheter placement(s) in bypass graft(s)                    6.15            5.54
                         (internal mammary, free arterial, venous grafts)
                         including intraprocedural injection(s) for bypass graft
                         angiography
93456..................    with right heart catheterization                                 6.00            6.15
93457..................    with catheter placement(s) in bypass graft(s)                    7.66            6.89
                         (internal mammary, free arterial, venous grafts)
                         including intraprocedural injection(s) for bypass graft
                         angiography and right heart catheterization
93458..................    with left heart catheterization including                        6.51            5.85
                         intraprocedural injection(s) for left ventriculography,
                         when performed
93459..................    with left heart catheterization including                        7.34            6.60
                         intraprocedural injection(s) for left ventriculography,
                         when performed, catheter placement(s) in bypass
                         graft(s) (internal mammary, free arterial, venous
                         grafts) with bypass graft angiography
93460..................    with right and left heart catheterization including              7.88            7.35
                         intraprocedural injection(s) for left ventriculography,
                         when performed
93461..................    with right and left heart catheterization including              9.00            8.10
                         intraprocedural injection(s) for left ventriculography,
                         when performed, catheter placement(s) in bypass
                         graft(s) (internal mammary, free arterial, venous
                         grafts) with bypass graft angiography
93563..................    Injection procedure during cardiac catheterization               2.00            1.11
                         including image supervision, interpretation, and
                         report; for selective coronary angiography during
                         congenital heart catheterization
93564..................    for selective opacification of aortocoronary venous              2.10            1.13
                         or arterial bypass graft(s) (eg, aortocoronary
                         saphenous vein, free radial artery, or free mammary
                         artery graft) to one or more coronary arteries and in
                         situ arterial conduits (eg, internal mammary), whether
                         native or used for bypass to one or more coronary
                         arteries during congenital heart catheterization, when
                         performed
93565..................    for selective left ventricular or left arterial                  1.90            0.86
                         angiography
93566..................    for selective right ventricular or right atrial                  0.96            0.86
                         angiography
93567..................    for supravalvular aortography                                    1.08            0.97
93568..................    for pulmonary angiography                                        0.98            0.88
----------------------------------------------------------------------------------------------------------------

    The AMA RUC used a variety of methodologies in developing RVUs for 
comprehensive codes in these three categories of bundled services. To 
develop the RVUs for the comprehensive endovascular revascularization 
services, the AMA RUC generally recommended the median work RVUs from 
the physician survey performed by the specialty society. The 
recommended values for the comprehensive services are an average of 27 
percent lower than the summed RVUs of the component services (taking 
into consideration any MPPR that would currently apply) included in the 
bundle. To develop the RVUs for comprehensive CT services, the AMA RUC 
recommended taking the sum of 100 percent of the current work RVUs for 
the code with the highest RVUs and 50 percent for the second code. 
Under this methodology, the recommended work RVUs for the comprehensive 
CT codes are consistently approximately 25 percent lower than the sum 
of the RVUs for the component services. The approach of a uniform 
discount on the second CT service resembles an MPPR and, given the 
public concerns regarding our proposed expansion of current MPPR 
policies under the PFS for CY 2011 as discussed in section II.C.4. of 
this final rule with comment period, we are unsure how the AMA RUC's 
recommended CT methodology actually considered the physician work 
required for the specific component services being bundled. 
Nevertheless, while we believe that the application of a consistent 
approach to valuing comprehensive services is desirable, we agree that 
the decreased work RVUs the AMA RUC recommended for comprehensive 
services in these two categories reflect a reasonable estimation of the 
work efficiencies created by the bundling of the component services. 
Therefore, we are accepting as interim final work RVUs the AMA RUC-
recommended values for endovascular revascularization and CT services 
listed in Table 51 for CY 2011.
    To develop the RVUs for comprehensive diagnostic cardiac 
catheterization services, the AMA RUC generally recommended the lower 
of either the sum of the current RVUs for the component services or the 
physician survey 25th percentile value. In most cases, the AMA RUC's 
recommendation for the comprehensive service was actually the sum of 
the current work RVUs for the component services and we are unsure how 
this approach is resource-based with respect to physician work. We are 
also concerned that the physician survey appears to have overstated the 
work for these well-established procedures so significantly that the 
25th percentile value was usually higher than the sum of the current 
RVUs for the component services. Under this methodology, the AMA RUC-
recommended RVUs for the comprehensive codes for diagnostic cardiac 
catheterization are an average of only one percent lower than the sum 
of the RVUs for the component services (taking into consideration any 
MPPR that would currently apply) included in the bundle.
    We do not find the AMA RUC's methodology or the resulting values in 
this case to be acceptable for a major code refinement exercise of this 
nature. If we were to accept the AMA RUC's recommended values for these 
cardiac catheterization codes, we essentially would be agreeing with 
the presumption that there are negligible work efficiencies gained in 
the bundling of these cardiac catheterization services. On the 
contrary, we believe that the AMA RUC did not fully consider or account 
for the efficiency gains when the component services are furnished 
together, including the significant reduction in service time. Rather, 
the AMA RUC appears to have considered only the summation of the 
component

[[Page 73337]]

services to the comprehensive service. Therefore, we are requesting 
that the AMA RUC reexamine these codes as quickly as possible, given 
the significant PFS utilization and spending for cardiac 
catheterization services, and put forward an alternative approach to 
valuing these services that would produce relative values that are 
resource-based and do not rely predominantly on the current component 
service values in a circular rationale.
    Since we believe that the new comprehensive diagnostic cardiac 
catheterization codes would be overvalued under the AMA RUC's CY 2011 
recommendations, we have employed an interim methodology to determine 
alternative values for these services which we are assigning as the 
interim final work RVUs for CY 2011. To account for efficiencies 
inherent in bundling, we set the work RVUs for all of the CY 2011 
cardiac catheterization codes for which we received AMA RUC 
recommendations to 10 percent less than the sum of the current work 
RVUs for the component codes, taking into consideration any MPPR that 
would apply under current PFS policy. These values are displayed in 
Table 51 and in Addendum B and C to this final rule with comment 
period. We recognize that this interim methodology is not highly 
specific and further acknowledge that the use of another approach by 
the AMA RUC may have differential effects on the values of the new 
comprehensive services compared to the proportionate reduction on the 
sum of the RVUs for the component services that we have adopted as a 
temporary methodology. However, given the complexity of the component 
code combinations that contribute to the comprehensive cardiac 
catheterization codes and the apparent overstatement of physician work 
from the physician survey, we are unable to present a more refined, 
code-specific methodology for the interim final values. Instead, based 
upon a very conservative estimate of the work efficiencies we would 
expect to be present when multiple component services are bundled 
together into a single comprehensive service, we have set interim final 
work values for the cardiac catheterization codes using a 10 percent 
reduction on the current values. As points of comparison, we note that 
the current MPPR policies under the PFS for imaging and surgical 
services reduce payment for the second and subsequent procedures by 50 
percent on the TC and complete service, respectively, and, as discussed 
in detail in section II.C.4. of this final rule with comment period, we 
are adopting a 25 percent MPPR on the PE component of payment for 
therapy services in CY 2011. We further note that the service-specific 
work efficiencies for the other two major categories of new bundled 
codes for CY 2011, specifically endovascular revascularization and CT, 
are generally between 20 and 35 percent.
(3) Work Budget Neutrality for Clinical Categories of CPT Codes
    Work budget neutrality, as a concept, is applied to hold the 
aggregate work RVUs constant within a set of clinically related CPT 
codes, while maintaining the relativity of values for the individual 
codes within that set. In some cases, when the CPT coding framework for 
a clinically related set of CPT codes is revised by the creation of new 
CPT codes or existing CPT codes are revalued, the aggregate work RVUs 
recommended by the AMA RUC within a clinical category of CPT codes may 
change, although the actual physician work for the services has not 
changed. When this occurs, work budget neutrality may be applied to 
adjust the work RVUs of each clinically related CPT code so that the 
sum of the new/revised code work RVUs (weighted by projected 
utilization) for a set of CPT codes would be the same as the sum of the 
current work RVUs (weighted by projected utilization) for that set of 
codes.
    When the AMA RUC recommends work RVUs for new or revised CPT codes, 
we review the work RVUs and adjust or accept the recommended values as 
appropriate, making note of whether any estimated changes in aggregate 
work RVUs would result from true changes (increases or decreases) in 
physician work or from structural coding changes. We then determine 
whether the application of budget neutrality within sets of codes is 
appropriate. That is, if, within a set of clinically related codes, the 
aggregate work RVUs would increase under the RVUs we would be adopting 
for the upcoming year but without a corresponding true increase in 
physician work, we generally view this as an indication that an 
adjustment to ensure work budget neutrality within the set of CPT codes 
is warranted.
    As the AMA RUC and CMS move to bundle and revalue more existing 
codes, creating significant structural coding changes, ensuring work 
budget neutrality is an important principle so that these changes are 
not unjustifiably redistributive among PFS services. This year, we 
found four sets of clinically related CPT codes where we believe the 
application of work budget neutrality is appropriate. That is, in these 
clinical areas, we believe the increases in aggregate work RVUs for the 
related services that would result from the work RVUs we would adopt 
(either the AMA RUC-recommended work RVUs or the alternative work RVUs 
determined by CMS) would not represent a true increase in the physician 
work for these services. These codes are in the areas of paraesophageal 
hernia procedures, obstetrical care, esophageal motility and high 
resolution esophageal pressure topography, and skin excision and 
debridement.
    Table 52 lists the CPT codes that are affected by an application of 
work budget neutrality in CY 2011.

           Table 52--CY 2011 Work Budget Neutrality (BN) for Clinical Categories of New/Revised Codes
----------------------------------------------------------------------------------------------------------------
                                                                                       CMS-
                                                                     AMA RUC-       recommended       CY 2011
          CPT Code                     Short descriptor             recommended   work RVUs pre-   interim final
                                                                     work RVUs          BN           work RVUs
----------------------------------------------------------------------------------------------------------------
                              Paraesophageal Hernia Procedures, BN Factor of 0.7374
----------------------------------------------------------------------------------------------------------------
43283.......................  Lap esoph lengthening.............            4.00            4.00            2.95
43327.......................  Esoph fundoplasty lap.............           18.10           18.10           13.35
43328.......................  Esoph fundoplasty thor............           27.00           27.00           19.91
43332.......................  Transab esoph hiat hern rpr.......           26.60           26.60           19.62
43333.......................  Transab esoph hiat hern rpr.......           30.00           29.10           21.46
43334.......................  Transthor diaphrag hern rpr.......           30.00           30.00           22.12
43335.......................  Transthor diaphrag hern rpr.......           33.00           32.50           23.97
43336.......................  Thorabd diaphr hern repair........           35.00           35.00           25.81

[[Page 73338]]

 
43337.......................  Thorabd diaphr hern repair........           37.50           37.50           27.65
43338.......................  Esoph lengthening.................            3.00            3.00            2.21
----------------------------------------------------------------------------------------------------------------
                                      Obstetrical Care, BN Factor of 0.8922
----------------------------------------------------------------------------------------------------------------
59400.......................  Obstetrical care..................           32.69           32.16           28.69
59409.......................  Obstetrical care..................           14.37           14.37           12.82
59410.......................  Obstetrical care..................           18.54           18.01           16.07
59412.......................  Antepartum manipulation...........            1.71            1.71            1.53
59414.......................  Deliver placenta..................            1.61            1.61            1.44
59425.......................  Antepartum care only..............            6.31            6.31            5.63
59426.......................  Antepartum care only..............           11.16           11.16            9.96
59430.......................  Care after delivery...............            2.47            2.47            2.20
59510.......................  Cesarean delivery.................           36.17           35.64           31.80
59514.......................  Cesarean delivery only............           16.13           16.13           14.39
59515.......................  Cesarean delivery.................           22.00           21.47           19.15
59610.......................  Vbac delivery.....................           34.40           33.87           30.22
59612.......................  Vbac delivery only................           16.09           16.09           14.35
59614.......................  Vbac care after delivery..........           20.26           19.73           17.60
59618.......................  Attempted vbac delivery...........           36.69           36.16           32.26
59620.......................  Attempted vbac delivery only......           16.66           16.66           14.86
59622.......................  Attempted vbac after care.........           22.53           22.00           19.63
----------------------------------------------------------------------------------------------------------------
           Esophageal Motility and High Resolution Esophageal Pressure Topography, BN Factor of 0.8500
----------------------------------------------------------------------------------------------------------------
91010.......................  Esophagus motility study..........            1.50            1.50            1.28
91013.......................  Esophgl motil w/stim/perfus.......            0.21            0.21            0.18
----------------------------------------------------------------------------------------------------------------
                               Skin Excision and Debridement, BN Factor of 0.9422
----------------------------------------------------------------------------------------------------------------
97597.......................  Rmvl devital tis 20 cm/<..........            0.54            0.54            0.51
97598.......................  Rmvl devital tis addl 20 cm<......            0.40            0.25            0.24
----------------------------------------------------------------------------------------------------------------

    For the paraesophageal hernia procedures, the CPT Editorial Panel 
deleted six existing CPT codes and created ten new codes to remove 
obsolete and duplicative codes and add new codes to report current 
surgical techniques for paraesophageal hernia procedures. Since in this 
case there would be more codes that describe the same physician work 
with a greater degree of precision, the aggregate increase in work RVUs 
that would result from our adoption of the CMS-recommended RVUs that 
are largely based on the AMA RUC's work RVU recommendations would not 
represent a true increase in physician work. Therefore, we believe it 
would be appropriate to apply work budget neutrality to this set of 
codes. After reviewing the AMA RUC-recommended work RVUs, we adjusted 
the work RVUs for two codes (CPT codes 43333 and 43335) as described 
previously in section V.C.1.b.(i)(4) of this final rule with comment 
period, and then applied work budget neutrality to the set of 
clinically related CPT codes. The work budget neutrality factor for 
these 12 paraesophageal hernia procedure CPT codes is 0.7374.
    For the obstetrical care codes, the AMA RUC reviewed 17 existing 
obstetrical care codes as part of the potentially misvalued codes 
initiative. It recommended significant increases in the work RVUs for 
some of the comprehensive obstetrical care codes (incorporating more 
than one element of antepartum care, delivery, and/or postpartum care) 
largely to address the management of labor. While we generally agree 
with the resulting AMA RUC-recommended rank order of services in this 
family, the aggregate increase in work RVUs for the obstetrical 
services that would result from our adoption of the CMS-recommended 
work RVUs that are largely based on the AMA RUC work RVU 
recommendations is not indicative of a true increase in physician work 
for the services. Therefore, we believe it would be appropriate to 
apply work budget neutrality to this set of codes. After reviewing the 
AMA RUC-recommended work RVUs, we adjusted the work RVUs for several 
codes as described in the following section V.C.1.c.(6) of this final 
rule with comment period, and then applied work budget neutrality to 
the set of clinically related CPT codes. The work budget neutrality 
factor for the 17 obstetrical care CPT codes is 0.8922.
    For esophageal motility and high resolution esophageal pressure 
topography, two CPT codes were deleted and the services will be 
reported under a revalued existing CPT code and a new add-on code in CY 
2011. We agree with the AMA RUC that there is compelling evidence to 
change the work RVUs for the existing code to account for the inclusion 
of procedures with higher work RVUs that would previously have been 
reported under the deleted codes. We also agree with the AMA RUC-
recommended work RVUs for the add-on code. While we agree with the AMA 
RUC's recommendations for the new work RVUs for both codes, we do not 
believe that this structural coding change should result in an increase 
in aggregate physician work for the same services and, therefore, we 
believe it would be appropriate to apply work budget neutrality to this 
set of codes. The work budget neutrality factor for these 2 codes is 
0.8500.
    In the skin excision and debridement category, two CPT codes were 
deleted and the services that would previously

[[Page 73339]]

have been reported under these codes will be reported under two 
existing codes in CY 2011. However, the two existing wound management 
codes have been restructured from describing two distinct procedures 
reported based on wound surface area to describing a primary procedure 
and an add-on procedure that would additionally be reported in the case 
of a larger wound. Once again, the increase in aggregate work RVUs that 
would result from our adoption of the CMS-recommended work RVUs that 
are largely based on the AMA RUC work RVU recommendations do not 
represent a true increase in physician work for these procedures. 
Therefore, we believe it would be appropriate to apply work budget 
neutrality to this set of codes. After reviewing the AMA RUC-
recommended work RVUs, we adjusted the work RVUs for one code (CPT code 
97598) as described previously in section V.C.1.b.(i)(1) of this final 
rule with comment period, and then applied work budget neutrality to 
the set of clinically related CPT codes. The budget neutrality factor 
for these 2 codes is 0.9422.
c. CY 2011 Interim Final Work RVUs for Potentially Misvalued Codes
    In the following section, we provide a discussion of our rationale 
for not accepting particular AMA RUC-recommended work RVUs for CY 2011 
CPT codes that have been identified as potentially misvalued through 
the AMA RUC's screens and with CMS guidance. Table 53 lists all 291 CPT 
codes for which the AMA RUC has provided CMS with work RVU 
recommendations for CY 2011. Furthermore, the table displays the AMA 
RUC's recommended work value as well as CMS' interim final decisions 
for CY 2011. For CY 2011, the AMA RUC provided work RVU recommendations 
for a total of 82 codes identified as potentially misvalued in 
categories based on the screen that identified the codes, including 
``Harvard-Valued;'' ``CMS Fastest Growing:'' and ``Site-of-Service 
Anomalies.'' For CY 2011, CMS is not accepting 26 of the 82 AMA RUC-
recommended work values for codes identified as potentially misvalued. 
We are instead providing alternative interim final work RVUs as 
discussed in the forthcoming section.
(1) Excision and Debridement (CPT Codes 11043 and 11044)
    CPT codes 11043 (Debridement; skin, subcutaneous tissue, and 
muscle) and 11044 (Debridement; skin, subcutaneous tissue, muscle, and 
bone) were identified by the AMA RUC's Five-Year Review Identification 
Workgroup through the ``Site-of-Service Anomalies'' potentially 
misvalued codes screen in September 2007. The AMA RUC recommended that 
the entire family of services described by CPT codes 11040 through 
11044 and 97597 and 97598 be referred to the CPT Editorial Panel 
because the current descriptors allowed reporting of the codes for a 
bimodal distribution of patients and also to better define the terms 
excision and debridement. For CY 2011, the AMA RUC reviewed this family 
of codes which includes the two potentially misvalued codes, CPT codes 
11043 and 11044, and provided work RVU recommendations to CMS. Since 
the family also included other new and revised codes, we have 
consolidated the discussion of Excision and Debridement codes in 
section V.C.1.b.(i)(1), which discusses new and revised codes. Section 
V.C.1.b.(i)(1) provides the complete discussion of CMS' interim final 
work RVU decisions for this family of codes. However, to summarize the 
CMS decisions in brief, we disagree with the AMA RUC's CY 2011 work RVU 
recommendations and are assigning alternative values for both CPT codes 
11043 and 11044 on an interim final basis for CY 2011.
(2) Strapping Lower Extremity (CPT Code 29540)
    CPT code 29540 (Strapping; ankle and/or foot) was identified as a 
potentially misvalued code through the Five-Year Review Identification 
Workgroup under the ``Harvard Valued'' codes potentially misvalued 
codes screen for services with utilization over 100,000. This code is 
also a member of a family of codes under review for CY 2011 and as 
such, the full discussion for the Strapping Lower Extremity family is 
provided in section V.C.1.b.(i)(3), which discusses new and revised 
codes. However, to summarize the CMS decision in brief, we disagree 
with the AMA RUC's CY 2011 work RVU recommendations and are assigning 
an alternative value of 0.32 RVUs to CPT code 29540 on an interim final 
basis for CY 2011.
(3) Control Nasal Hemorrhage (CPT Code 30901)
    CPT code 30901 (Control nasal hemorrhage, anterior, simple (limited 
cautery and/or packing) any method) was identified as a potentially 
misvalued code through the Five-Year Review Identification Workgroup 
under the ``Harvard Valued'' potentially misvalued codes screen for 
services with utilization over 100,000. The AMA RUC agreed with the 
specialty society, stating that there is no compelling evidence to 
change the current work RVUs of 1.21. To support the current valuation, 
the AMA RUC compared CPT code 30901 to CPT code 36620 (Arterial 
catheterization or cannulation for sampling, monitoring or transfusion 
(separate procedure); percutaneous), and agreed that CPT code 30901 
required slightly more total service time to perform but required 
comparable intensity and complexity. The AMA RUC also compared CPT code 
30901 to the key reference code CPT code 31231 (Nasal endoscopy, 
diagnostic, unilateral or bilateral (separate procedure) and agreed 
that code CPT code 30901 would be relatively more intense/complex. We 
disagree with the AMA RUC's CY 2011 work RVU recommendation to maintain 
the current work RVUs of 1.21 for code CPT code 30901 because the AMA 
RUC-recommended work value does not appropriately account for the 
significant reduction in intra-service time. We believe the more 
appropriate work RVUs are 1.10, based on the survey 25th percentile. 
Therefore, we are assigning an alternative value of 1.10 work RVUs to 
CPT code 29540 on an interim final basis for CY 2011.
(4) Cystourethroscopy (CPT Codes 52281 and 52332)
    CPT codes 52281 (Cystourethroscopy, with calibration and/or 
dilation of urethral stricture or stenosis, with or without meatotomy, 
with or without injection procedure for cystography, male or female) 
and 52332 (Cystourethroscopy, with insertion of indwelling ureteral 
stent (e.g., Gibbons or double-J type) were identified as a potentially 
misvalued code through the Five-Year Review Identification Workgroup 
under the ``Harvard Valued'' potentially misvalued codes screen for 
services with utilization over 100,000.
    The AMA RUC reviewed the survey results and determined that the 
physician time of 16 minutes pre-, 20 minutes intra-, and 10 minutes 
immediate post-service time and maintaining the current work RVUs of 
2.80 appropriately account for the time and work required to perform 
this procedure. We disagree with the CY 2011 AMA RUC work RVU 
recommendation to maintain the current RVUs for this code because the 
physician time to perform this service (a building block of the code) 
has changed since the original ``Harvard values'' were established, as 
indicated by the AMA RUC-recommended reduction in pre-service time. 
Accounting for the reduction in pre-service time, we calculated work 
RVUs that are close to the survey 25th percentile. Therefore,

[[Page 73340]]

we are assigning 2.60 work RVUs to CPT code 52281 on an interim final 
basis for CY 2011.
    Similarly, for CPT code 52332, we disagree with the AMA RUC's CY 
2011 work RVU recommendation to maintain the current value due to the 
same concerns, a significant reduction in pre-service time. Based on 
the same building block rationale we applied to CPT code 52281, the 
other code within this family, we believe 1.47, which is the survey 
25th percentile and maintains rank order, is a more appropriate 
valuation for 52332. Therefore, we are assigning an alternative value 
of 1.47 work RVUs to CPT code 52332 on an interim final basis for CY 
2011.
(5) Vaginal Radiation Afterloading Apparatus for Clinical Brachytherapy 
(CPT Code 51755)
    CPT code 57155 (Insertion of uterine tandems and/or vaginal ovoids 
for clinical brachytherapy) was identified as a potentially misvalued 
code by the Five-Year Review Identification Workgroup through the 
``Site-of-Service Anomalies'' potentially misvalued codes screen. This 
code is a member of a family of codes under review for CY 2011 and as 
such, the full discussion for the family is provided in section 
V.C.1.b.(1)(E), which discusses new and revised codes. However, to 
summarize the CMS decision in brief, we disagree with the AMA RUC's CY 
2011 work RVU recommendations and are assigning an alternative value of 
3.37 RVUs to CPT code 57155 on an interim final basis for CY 2011.
(6) Obstetrical Care Codes (CPT Codes 59440, 59410, 59510, 59515, 
59610, 59614, 59618, and 59622)
    As a result of being identified as potentially misvalued codes by 
the Five-Year Review Identification Workgroup ``High IWPUT'' screen for 
potentially misvalued codes, the AMA RUC reviewed the CPT codes that 
define obstetrical care (CPT codes 59400 through 59622). CPT codes 
59400, 59410, 59510, 59515, 59610, 59614, 59618 and 59622 include 
antepartum care and/or delivery as well as postpartum care for which 
the AMA RUC recommended significantly increased work values. The AMA 
RUC recommended 32.69 work RVUs for CPT code 59400 (Routine obstetric 
care including antepartum care, vaginal delivery (with or without 
episiotomy, and/or forceps) and postpartum care); 18.54 work RVUs for 
CPT code 59410 (Vaginal delivery only (with or without episiotomy and/
or forceps); including postpartum care); 36.17 work RVUs for CPT code 
59510 (Routine obstetric care including antepartum care, cesarean 
delivery, and postpartum care); 22.00 work RVUs for CPT code 59515 
(Cesarean delivery only; including postpartum care), 34.40 work RVUs 
for CPT code 59610 (Routine obstetric care including antepartum care, 
vaginal delivery (with or without episiotomy, and/or forceps) and 
postpartum care, after previous cesarean delivery); 20.26 work RVUs for 
CPT code 59614 (Vaginal delivery only, after previous cesarean delivery 
(with or without episiotomy and/or forceps); including postpartum 
care), 36.69 work RVUs for CPT code 59618 (Routine obstetric care 
including antepartum care, cesarean delivery, and postpartum care, 
following attempted vaginal delivery after previous cesarean delivery); 
and 22.53 work RVUs for CPT code 59622 (Cesarean delivery only, 
following attempted vaginal delivery after previous cesarean delivery; 
including postpartum care). For postpartum care with delivery, which is 
included in all of these codes, the AMA RUC recommended one CPT code 
99214 (Level 4 established patient office or other outpatient visit).
    We disagree with the AMA RUC-recommended work RVUs for these 
services and believe that one CPT code 99213 visit (Level 3 established 
patient office or other outpatient visit) more accurately reflects the 
services furnished for this postpartum care visit. Therefore, for all 
CPT code 99214 blocks for CPT codes that include postpartum care 
following delivery visits, we have converted the CPT code 99214 visit 
to a CPT code 99213 visit and have revised the work RVUs accordingly. 
Therefore, we are adopting alternative work RVUs and are assigning 
32.16 work RVUs to CPT code 59400; 18.01 work RVUs to CPT code 59410; 
35.64 work RVUs to CPT code 59510; 21.47 work RVUs to CPT code 59515; 
33.87 work RVUs to CPT code 59610; 19.73 work RVUs to CPT code 59614; 
36.16 work RVUs to CPT code 59618; and 22.00 work RVUs to CPT code 
59622, prior to the work budget neutrality adjustment as discussed in 
section V.C.1.b.(3) of this final rule with comment period, on interim 
final basis for CY 2011.
(7) Vagus Nerve Stimulator (CPT Code 61885)
    CPT code 61885 (Insertion or replacement of cranial neurostimulator 
pulse generator or receiver, direct or inductive coupling; with 
connection to a single electrode array) was identified as a potentially 
misvalued code by the Five-Year Review Identification Workgroup under 
the ``Site-of-Service Anomalies'' screen for potential misvalued codes. 
We discuss this code in the context of the Vagus Nerve Stimulator 
family, provided in section V.C.1.b.(i)(6), which discusses new and 
revised codes. However, to summarize the CMS decision in brief, we 
disagree with the AMA RUC's CY 2011 work RVU recommendations and are 
assigning an alternative value of 6.05 RVUs to CPT code 61885 on an 
interim final basis for CY 2011.
(8) Transforaminal Epidural Injection (CPT Code 64483)
    CPT code 64483 (Injection(s), anesthetic agent and/or steroid, 
transforaminal epidural, with image guidance (fluoroscopy or CT), 
lumbar or sacral; single level) was identified as a potentially 
misvalued code through the Five-Year Review Identification Workgroup 
under the ``CMS Fastest Growing'' potentially misvalued codes screen. 
The AMA RUC compared components of this code (pre-, intra-, and post-
service times, in addition to intensity) to a number of other codes, 
although the AMA RUC's application of the crosswalk methodology was 
unclear to us. The AMA RUC recommended 1.90 work RVUs; however, we 
disagree with AMA RUC's CY 2011 work RVU recommendation and believe 
1.75 work RVUs, based on the survey 25th percentile, more appropriately 
accounts for the significant reductions in pre-, intra-, and post-
service time. Therefore, we are assigning an alternative value of 1.75 
work RVUs to CPT code 64483 on an interim final basis for CY 2011.
(9) CT Thorax (CPT Code 71250)
    CPT Code 71250 (Computed tomography, thorax; without contrast 
material) was identified as a potentially misvalued code by the Five-
Year Review Identification Workgroup under the ``CMS Fastest Growing'' 
potentially misvalued codes screen. This service had never been 
surveyed by the AMA RUC until this review was conducted for CY 2011. 
The specialty recommended a pre-service time of 5 minutes based on the 
survey results and the AMA RUC concurred. The AMA RUC also agreed that 
the surveyed intra-service of 15 minutes and immediate post-service 
time of 5 minutes were typical for the physician work required for the 
service. While the AMA RUC accepted the survey results for physician 
times based on its comparisons to similar services and other 
considerations, the AMA RUC believed maintaining the code's current 
value of 1.16 work RVUs was more appropriate, noting that this 
recommended value is slightly lower than the survey 25th percentile of 
1.20.

[[Page 73341]]

    We disagree with the AMA RUC's CY 2011 work RVU recommendation to 
maintain the current value for CPT code 71250 and similar codes. As we 
have previously discussed, we are increasingly concerned over the 
validity of accepting work valuations based upon surveys conducted on 
existing codes as we have noticed a pattern of predictable survey 
results. That is, in providing recommendations for existing potentially 
misvalued codes in CY 2011, the AMA RUC often recommended maintaining 
the current work RVUs and supported this valuation by citing the survey 
results. Upon clinical review of a number of these cases, we are 
concerned over the validity of the survey results since the survey 
values often are very close to the current known value for the code. We 
are concerned that this may indicate a bias in the survey results since 
respondents would know the current value for the existing code at the 
time the survey is being conducted. Increasingly, rather than 
recommending the median survey value that has historically been most 
commonly used, the AMA RUC is choosing to recommend the 25th percentile 
value, potentially responding to the same concern we have identified. 
Therefore, based on our concern that CT codes would continue to be 
misvalued if we were to accept the AMA RUC recommendation to maintain 
the current value, we are assigning an alternative value of 1.00 work 
RVUs (the survey low value) to CPT code 71250 on an interim final basis 
for CY 2011.
(10) CT Spine (CPT Code 72125)
    CPT codes 72125 (Computed tomography, cervical spine; without 
contrast material); 72128 (Computed tomography, thoracic spine; without 
contrast material); and 72131 (Computed tomography, lumbar spine; 
without contrast material) were identified as potentially misvalued 
codes by the Five-Year Review Workgroup under the ``CMS Fastest 
Growing'' screen for potentially misvalued codes. For CPT code 72125, 
the AMA RUC concurred with the specialty-recommended pre-service time 
of 5 minutes based on the survey results. The AMA RUC also agreed that 
the surveyed intra-service of 15 minutes and immediate post-service 
time of 5 minutes were typical for the physician work required for the 
service. The AMA RUC compared this service to other comparable services 
and concluded that it was appropriate to maintain the current work RVUs 
of 1.16.
    Similarly, for CPT codes 72128 and 72131, the AMA RUC accepted the 
survey physician times, but also disregarded the survey work RVU 
results. Upon clinical review of these codes in this family, we are 
concerned over the validity of the survey results since the survey 25th 
percentile values are very close to the current value of 1.16 RVUs for 
the code. As we stated previously, we are concerned that this pattern 
may indicate a bias in the survey results. Therefore, based on our 
concern that the CT codes would continue to be misvalued if we were to 
accept the AMA RUC recommendation to maintain the current values, we 
are assigning alternative work RVUs of 1.00 (the survey low value) to 
CPT codes 72125, 72128, and 72131 on an interim final basis for CY 
2011.
(11) CT Upper and CT Lower Extremity (CPT Code 73200 and 73700)
    CPT codes 73200 (Computed tomography, upper extremity; without 
contrast material) and 73700 (Computed tomography, lower extremity; 
without contrast material) were identified as potentially misvalued 
codes by the Five-Year Review Workgroup under the ``CMS Fastest 
Growing'' screen for potentially misvalued codes. Similar to the other 
CT codes previously discussed, the AMA RUC reviewed the survey results 
and accepted the survey physician times, recommending maintaining the 
current work RVUs of 1.09 for these services. Our clinical review of 
the codes, CPT codes 73200 and 73700, as with the other CT codes 
previously discussed, concluded that maintaining the current values 
would result in an overvaluing of this type of service. We remain 
concerned over the validity of the survey results. Therefore, based on 
our concern that CT codes would continue to be misvalued if we were to 
accept the AMA RUC recommendation to maintain the current values, we 
disagree with the AMA RUC's CY 2011 work RVU recommendations. We are 
assigning alternative work RVUs of 1.00 (the survey low RVU value) to 
CPT codes 73200, and 73700 on an interim final basis for CY 2011.
(12) Radiation Treatment Management (CPT Code 77427)
    CPT code 77427 (Radiation treatment management, 5 treatments) was 
identified as a potentially misvalued code by the Five-Year 
Identification Workgroup's ``Site-of-Service Anomalies'' screen for 
potentially misvalued codes in 2007. For CY 2011, the AMA RUC reviewed 
the specialty survey results and agreed that the surveyed physician 
time of 7 minutes pre-service, 70 minutes intra-service, and 10 minutes 
immediate post-service is appropriate. The AMA RUC also used the 
building block approach to value the treatment visits associated with 
CPT code 77427. The AMA RUC averaged the number of weekly E/M visits, 
that is, 4 of CPT code 99214 (Level 4 established patient office or 
other outpatient visit) and 2 of CPT code 99213 (Level 3 established 
patient office or other outpatient visit) over 6 weeks to calculate an 
E/M building block of 1.32 RVUs. Similarly, to value the post-operative 
office visits associated with this code, the AMA RUC calculated a 
building block of 0.57 to account for the average over 6 weeks of ``E/M 
visits after treatment planning.'' The AMA RUC then crosswalked the 
physician times for CPT code 77427 to CPT code 77315 (Teletherapy, 
isodose plan (whether hand or computer calculated); complex (mantle or 
inverted Y, tangential ports, the use of wedges, compensators, complex 
blocking, rotational beam, or special beam considerations)) and used 
the value of CPT code 77315 as the remaining building block for CPT 
code 77427. Accordingly, the AMA RUC calculated total work RVUs of 3.45 
and recommended this value for CPT code 77427.
    Upon clinical review, we modified one of the building blocks that 
the AMA RUC used to calculate the work RVUs associated with the 
treatment E/M office visits. We believe instead of the average based 
upon 4 units of CPT code 99214 and 2 units of CPT code 99213, a more 
appropriate estimation would be an average of 3 units of CPT code 99214 
and 3 units of CPT code 99213. Accordingly, we are assigning an 
alternative value of 2.92 work RVUs to CPT code 77427 on an interim 
final basis for CY 2011.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
2. Establishment of Interim Final Direct PE Inputs for CY 2011
a. Background
    As we previously explained in section V.A. of this final rule with 
comment period, on an annual basis, the AMA RUC provides CMS with 
recommendations regarding direct PE inputs, including clinical labor, 
supplies, and equipment, for new, revised, and potentially misvalued 
codes. These recommendations, therefore, include inputs for all direct 
PE categories excluding supply prices and equipment prices and useful 
life inputs, which are specifically discussed in section II.A.3.e. of 
this final rule with comment period.
    We review the AMA RUC-recommended direct PE inputs on a code-by-
code basis, including the recommended facility PE inputs and/or 
nonfacility PE inputs, as clinically appropriate for the code. We 
determine whether we agree with the AMA RUC's recommended direct PE 
inputs for a service or, if we disagree, we refine the PE inputs to 
represent inputs that better reflect our estimate of the PE resources 
required for the service in the facility and/or nonfacility settings. 
We also confirm that CPT codes should have facility and/or nonfacility 
direct PE inputs and make changes based on our clinical judgment and 
any PFS payment policies that would apply to the code.
    We received direct PE input recommendations from the AMA RUC for 
325 CPT codes for CY 2011, including those CPT codes where the AMA RUC 
recommended no changes to the direct PE inputs of existing codes. We 
note that we have included in this count those recommendations received 
from the AMA RUC that were provided for CY 2011 and addressed in the CY 
2011 PFS proposed rule. These recommendations are discussed in section 
II.A.3.c. of this final rule with comment period. We have accepted for 
CY 2011, as interim final and without refinement, the direct PE inputs 
based on the recommendations submitted by the AMA RUC for the 258 codes 
listed in Table 54.
    For the remainder of the AMA RUC's direct PE recommendations for 67 
codes, we have accepted the PE recommendations submitted by the AMA RUC 
as interim final, but with refinements. These codes and the refinements 
to their direct PE inputs are listed in Table 55.
    Accordingly, while Table 55 details the CY 2011 refinements of the 
AMA RUC's direct PE recommendations at the code-specific level, we 
discuss the general nature of some common refinements and the reasons 
for particular refinements in the following section. We note that the 
final CY 2011 PFS direct PE database reflects the refined direct PE 
inputs that we are adopting on an interim final basis for CY 2011. That 
database is available under downloads for the CY 2011 PFS final rule 
with comment period on the CMS Web site at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
b. CY 2011 Interim Final Direct PE Inputs for New, Revised, and 
Potentially Misvalued Codes
(1) General Equipment Time
    Many of the refinements to the AMA RUC direct PE recommendations 
were made in the interest of promoting a transparent and consistent 
approach to equipment time inputs. In the past, the AMA RUC did not 
always provide us with recommendations regarding equipment time inputs. 
In CY 2010, we requested that the AMA RUC provide equipment times along 
with the other direct PE recommendations. Subsequent to that request, 
we provided the AMA RUC with general guidelines regarding appropriate 
equipment time inputs. We appreciate the AMA RUC's willingness to 
provide us with these additional inputs as part of their direct PE 
recommendations.
    In general, the equipment time inputs correspond to the intra-
service portion of the clinical labor times. We have clarified that 
assumption to consider equipment time as the sum of the times within 
the intra-service period when a clinician is using the piece of 
equipment, plus any additional time the piece of equipment is not 
available for use for another patient due to its use during the 
designated procedure. In addition, when a piece of equipment is 
typically used during additional visits included in a service's global 
period, the equipment time should also reflect that use.
    Certain highly technical pieces of equipment and equipment rooms 
are less likely to be used by a clinician over the full course of a 
procedure and are typically available for other patients during time 
that may still be in the intra-service portion of the service. We 
adjust those equipment times accordingly. For example, CPT code 74178 
(Computed tomography, abdomen and pelvis; without contrast material in 
more than one body region) includes 3 minutes of intra-service clinical 
labor time associated with obtaining the patient's consent for the 
procedure. Since it would be atypical for this activity to occur within 
the CT room, we believe these 3 minutes should not be attributed to the 
CT room.
    We are refining the CY 2011 AMA RUC direct PE recommendations to 
conform to these equipment time policies. These refinements are 
reflected in the final CY 2011 PFS direct PE database and detailed in 
Table 55.
(2) Equipment Time and Clinical Labor for Conscious Sedation
    In services that include conscious sedation recovery, clinical 
labor and equipment time inputs are generally established using a 
distinctive logic. In the case of these services, clinical labor time 
is based on 15 minutes of registered nurse (RN) recovery monitoring for 
each hour monitored following the procedure to account for a typical 
1:4 nurse to patient ratio. Times for equipment used during the 
recovery monitoring period, therefore, are equal to four times the 
number of RN minutes during the recovery monitoring period.
    Equipment time for pieces of equipment used in conscious sedation 
should generally include time to administer the anesthesia, time for 
the procedure, and time to monitor the patient following the 
procedures. Standard equipment and supplies for conscious sedation 
include: EQ011 (ECG, 3-channel (with SpO2, NIBP, temp, resp)); EF019 
(stretcher chair); EQ032 (IV infusion pump); and SA044 (pack, conscious 
sedation).
    We are refining the CY 2011 AMA RUC direct PE recommendations to 
conform to these policies. These refinements are reflected in the final 
CY 2011 PFS direct PE database and detailed in Table 55.
(3) Equipment Time for Add-On Codes
    For add-on codes, only minutes allocated to the procedure itself 
are added to the time for the equipment, since any additional minutes 
would duplicate the equipment time already accounted for in the primary 
procedure that accompanies the add-on code.
    We are refining the CY 2011 AMA RUC PFS direct PE recommendations 
to conform to this policy. These refinements are reflected in the final 
CY 2011 PFS direct PE database and detailed in Table 55.
(4) Changes in Standard Uses of Certain Supplies
    As discussed in section II.A.3.b.(1) of this final rule with 
comment period, we are finalizing our proposal to remove the supply 
item ``biohazard bag'' from the direct PE database because the item is 
considered an indirect practice

[[Page 73351]]

expense. Additionally, as discussed in section II.A.3.b.(6) of this 
final rule with comment period, we are finalizing our CY 2011 proposal 
to remove the pulse oximeter with printer (CMS Equipment Code EQ211) as 
an input for the 118 codes that also contain the ECG, 3-channel (with 
SpO2, NIBP, temp, resp) (CMS Equipment Code EQ011).
    We are refining the CY 2011 AMA RUC PFS direct PE recommendations 
to conform to these policies. These refinements are reflected in the 
final CY 2011 PFS direct PE database and detailed in Table 55.
(5) New Supply and Equipment Items
    When clinically appropriate, the AMA RUC generally recommends the 
use of supply and equipment items that already exist in the direct PE 
database for new, revised, and potentially misvalued codes. Some 
recommendations include supply or equipment items that are not 
currently in the direct PE database. In these cases, the AMA RUC has 
historically recommended a new item be created and has facilitated CMS' 
pricing of that item by working with the specialty societies to provide 
sales invoices to us. We appreciate the contributions of the AMA RUC in 
that process.
    Despite the assistance of the AMA RUC for CY 2011, we did not 
receive adequate information for pricing the following new supply items 
included in the AMA RUC's CY 2011 direct PE recommendations: SC098 
(Catheter, angiographic, Berman); SD251 (Sheath Shuttle (Cook)); SD255 
(Reentry Device (Frontier, Outback, Pioneer)); SD257 (Tunneler); and 
SD258 (Vacuum Bottle). We agree with the AMA RUC that these supply 
items are appropriate direct PE inputs for the associated procedures. 
However, because these items do not resemble current supplies in the PE 
database, we were unable to identify existing supplies with input 
prices to substitute for the AMA RUC-recommended direct PE inputs. We 
were also unable to estimate the prices for these new supply items 
based on analogy to existing supplies in the direct PE database 
because, as stated previously, they are not clinically similar to 
existing items in the direct PE database and we do not have information 
on the pricing of the new supply items. Therefore, our only alternative 
for these supply items for CY 2011 was to accept them as direct PE 
inputs for the associated services based on the AMA RUC 
recommendations, but to price them at $0 for CY 2011. For CY 2012, we 
will consider the prices for these supply items eligible to be updated 
through the process we are finalizing for CY 2011 that is described in 
section II.A.3.e. of this final rule with comment period.
    In the case of certain other direct PE recommendations for CY 2011, 
the AMA RUC has recommended new supply or equipment items that we 
believe to be already described by existing items in the direct PE 
database. Therefore, we are refining the AMA RUC CY 2011 direct PE 
recommendations to utilize existing supply and equipment items in the 
PE database where appropriate. These refinements are reflected in the 
final CY 2011 PFS direct PE database and detailed in Table 55.
(6) Endovascular Revascularization Stents
    In reviewing the supply input recommendations from the AMA RUC for 
CPT codes describing certain endovascular revascularization services, 
we considered the quantity of high-cost stents associated with some of 
the codes. The recommendations included two or three stents for each of 
the following six CPT codes: 37226 (Revascularization, femoral/
popliteal artery(s), unilateral; with transluminal stent placement(s)); 
37227 (Revascularization, femoral/popliteal artery(s), unilateral; with 
transluminal stent placement(s) and atherectomy); 37230 
(Revascularization, tibial/peroneal artery, unilateral, initial vessel; 
with transluminal stent placement(s)); 37231 (Revascularization, 
tibial/peroneal artery, unilateral, initial vessel; with transluminal 
stent placement(s) and atherectomy); 37234 (Revascularization, tibial/
peroneal artery, unilateral, each additional vessel; with transluminal 
stent placement(s) (List separately in addition to code for primary 
procedure)); and 37235 (Revascularization, tibial/peroneal artery, 
unilateral, each additional vessel; with transluminal stent 
placement(s) and atherectomy (List separately in addition to code for 
primary procedure)).
    Given the complex clinical nature of these services, their new 
pricing in the nonfacility setting under the PFS, and the high cost of 
each stent, we were concerned that two or three stents could 
overestimate the number of stents used in the typical office procedure 
that would be reported under one of the CPT code. Therefore, we 
examined CY 2009 hospital OPPS claims data for the combinations of 
predecessor codes that would have historically been reported for each 
case reported in under CY 2011 under a single comprehensive code. 
Because of the OPPS device-to-procedure claims processing edits, all 
prior cases would have included HCPCS C-code for at least one stent on 
the claim for the case. Based on our analysis of these data, we 
determined that for each new CY 2011 comprehensive code, the 
predecessor code combinations would have used only one stent in 65 
percent or more of the cases. We have no reason to believe that when 
these new CPT codes are reported for procedures performed in the 
nonfacility setting, patients would receive more than the one stent 
typically used in the hospital outpatient setting. Therefore, we are 
refining the CY 2011 AMA RUC recommendations to include one stent in 
the direct PE inputs for each of the six endovascular revascularization 
stent insertion codes, including the add-on codes. These refinements 
are reflected in the final CY 2011 PFS direct PE database.
(7) Nasal/Sinus Endoscopy Supply and Equipment Items
    The AMA RUC recommendation for direct PE inputs for CPT code 31295 
(Nasal/sinus endoscopy, surgical; with dilation of maxillary sinus 
ostium (e.g., balloon dilation), transnasal or via canine fossa), 
included irregular supply and equipment inputs. The AMA RUC recommended 
two similar, new supply items, specifically ``kit, sinus surgery, 
balloon (maxillary, frontal, or sphenoid)'' and ``kit, sinus surgery, 
balloon (maxillary)'' as supply inputs with a quantity of one-half for 
each item. We believe that this recommendation was intended to reflect 
an assumption that each of these distinct supplies is used in 
approximately half of the cases when the service is furnished. In 
general, the direct PE inputs should reflect the items used when the 
service is furnished in the typical case. Therefore, the quantity of 
supply items associated with a code should reflect the actual units of 
the item used in the typical case, and not be reflective of any 
estimate of the proportion of cases in which any supply item is used. 
We note, however, that fractional inputs are appropriate when 
fractional quantities of a supply item are typically used, as is 
commonly the case when the unit of a particular supply reflects the 
volume of a liquid supply item instead of quantity. Additionally, in 
the case of certain services with global service periods, fractional 
quantities of supplies may be appropriate when fractional numbers of 
post-service office visits are associated with a code.
    Upon receipt of these recommendations, we requested that the AMA 
RUC clarify the initial recommendation by determining which

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of these supply items would be used in the typical case. The AMA RUC 
recommended that the supply item ``kit, sinus surgery, balloon 
(maxillary, frontal, or sphenoid)'' be included in the inputs for the 
code. We considered that recommendation, but we believe that the item 
``kit, sinus surgery, balloon (maxillary)'' is more clinically 
appropriate based on the description of CPT code 32195.
    The AMA RUC recommendation for equipment inputs for the same code 
(CPT code 31295) included a parallel irregularity by distributing half 
of the equipment minutes to each of two similar pieces of equipment, 
one existing and one new: ``Endoscope, rigid, sinoscopy'' (ES013) and 
``fiberscope, flexible, sinoscopy'' (new). We believe that this 
recommendation was intended to reflect an assumption that each of these 
distinct pieces of equipment is used in approximately half of the cases 
in which the service is furnished. In general, the direct PE inputs 
should reflect the items used when the service is furnished in the 
typical case. Therefore, the equipment time inputs associated with a 
code should reflect the number of minutes an equipment item is used in 
the typical case, and not be distributed among a set of equipment items 
to reflect an estimate of the proportion of cases in which a particular 
equipment item might be used. However, we note that in the case of 
certain services with global service periods, distribution of equipment 
minutes among similar equipment items may be appropriate when 
fractional numbers of post-service office visits are associated with a 
code. Upon review of these items, we believe that the new piece of 
equipment, ``fiberscope, flexible, sinoscopy,'' is more clinically 
appropriate based on the description of CPT code 32195.
    We are refining the CY 2011 AMA RUC direct PE recommendations to 
conform to these determinations. These refinements are reflected in the 
final CY 2011 PFS direct PE database and detailed in Table 55.

 Table 54--CPT Codes With Accepted AMA RUC Direct PE Recommendations for
                              CY 2011 Codes
------------------------------------------------------------------------
          CPT  Code                         Short descriptor
------------------------------------------------------------------------
11010........................  Debride skin at fx site
11011........................  Debride skin musc at fx site
11012........................  Deb skin bone at fx site
11045........................  Deb subq tissue add-on
11046........................  Deb musc/fascia add-on
11047........................  Deb bone add-on
11900........................  Injection into skin lesions
11901........................  Added skin lesions injection
12001........................  Repair superficial wound(s)
12002........................  Repair superficial wound(s)
12004........................  Repair superficial wound(s)
12005........................  Repair superficial wound(s)
12006........................  Repair superficial wound(s)
12007........................  Repair superficial wound(s)
12011........................  Repair superficial wound(s)
12013........................  Repair superficial wound(s)
12014........................  Repair superficial wound(s)
12015........................  Repair superficial wound(s)
12016........................  Repair superficial wound(s)
12017........................  Repair superficial wound(s)
12018........................  Repair superficial wound(s)
15823........................  Revision of upper eyelid
19357........................  Breast reconstruction
20005........................  I&d abscess subfascial
20664........................  Application of halo
20930........................  Sp bone algrft morsel add-on
20931........................  Sp bone algrft struct add-on
22315........................  Treat spine fracture
22552........................  Addl neck spine fusion
22554........................  Neck spine fusion
22585........................  Additional spinal fusion
22851........................  Apply spine prosth device
23430........................  Repair biceps tendon
27065........................  Remove hip bone les super
27066........................  Remove hip bone les deep
27067........................  Remove/graft hip bone lesion
27070........................  Part remove hip bone super
27071........................  Part removal hip bone deep
29540........................  Strapping of ankle and/or ft
29550........................  Strapping of toes
29914........................  Hip arthro w/femoroplasty
29915........................  Hip arthro acetabuloplasty
29916........................  Hip arthro w/labral repair
30901........................  Control of nosebleed
31256........................  Exploration maxillary sinus
31267........................  Endoscopy maxillary sinus
31276........................  Sinus endoscopy surgical
31287........................  Nasal/sinus endoscopy surg
31288........................  Nasal/sinus endoscopy surg
33411........................  Replacement of aortic valve
33620........................  Apply r&l pulm art bands
33621........................  Transthor cath for stent
33622........................  Redo compl cardiac anomaly
33860........................  Ascending aortic graft
33863........................  Ascending aortic graft
33864........................  Ascending aortic graft
34900........................  Endovasc iliac repr w/graft
35471........................  Repair arterial blockage
36410........................  Non-routine bl draw > 3 yrs
37205........................  Transcath iv stent percut
37206........................  Transcath iv stent/perc addl
37207........................  Transcath iv stent open
37208........................  Transcath iv stent/open addl
37222........................  Iliac revasc add-on
37223........................  Iliac revasc w/stent add-on
37232........................  Tib/per revasc add-on
37233........................  Tibper revasc w/ather add-on
37765........................  Stab phleb veins xtr 10-20
37766........................  Phleb veins--extrem 20+
38900........................  Io map of sent lymph node
43283........................  Lap esoph lengthening
43327........................  Esoph fundoplasty lap
43328........................  Esoph fundoplasty thor
43332........................  Transab esoph hiat hern rpr
43333........................  Transab esoph hiat hern rpr
43334........................  Transthor diaphrag hern rpr
43335........................  Transthor diaphrag hern rpr
43336........................  Thorabd diaphr hern repair
43337........................  Thorabd diaphr hern repair
43338........................  Esoph lengthening
43605........................  Biopsy of stomach
43753........................  Tx gastro intub w/asp
47480........................  Incision of gallbladder
47490........................  Incision of gallbladder
49324........................  Lap insert tunnel ip cath
49327........................  Lap ins device for rt
49400........................  Air injection into abdomen
49412........................  Ins device for rt guide open
49419........................  Insert tun ip cath w/port
49421........................  Ins tun ip cath for dial opn
49422........................  Remove tunneled ip cath
50250........................  Cryoablate renal mass open
50542........................  Laparo ablate renal mass
50590........................  Fragmenting of kidney stone
50684........................  Injection for ureter x-ray
*51725.......................  Simple cystometrogram
*51726.......................  Complex cystometrogram
*51727.......................  Cystometrogram w/up
*51728.......................  Cystometrogram w/vp
*51729.......................  Cystometrogram w/vp&up
51736........................  Urine flow measurement
51741........................  Electro-uroflowmetry first
52281........................  Cystoscopy and treatment
52332........................  Cystoscopy and treatment
55866........................  Laparo radical prostatectomy
55876........................  Place rt device/marker pros
59400........................  Obstetrical care
59409........................  Obstetrical care
59410........................  Obstetrical care
59412........................  Antepartum manipulation
59414........................  Deliver placenta
59425........................  Antepartum care only
59426........................  Antepartum care only
59430........................  Care after delivery
59510........................  Cesarean delivery
59514........................  Cesarean delivery only
59515........................  Cesarean delivery
59610........................  Vbac delivery
59612........................  Vbac delivery only
59614........................  Vbac care after delivery
59618........................  Attempted vbac delivery
59620........................  Attempted vbac delivery only
59622........................  Attempted vbac after care
61781........................  Scan proc cranial intra
61782........................  Scan proc cranial extra
61783........................  Scan proc spinal
61885........................  Insrt/redo neurostim 1 array
62268........................  Drain spinal cord cyst
62269........................  Needle biopsy spinal cord
62281........................  Treat spinal cord lesion
62319........................  Inject spine w/cath l/s (cd)
63075........................  Neck spine disk surgery
63076........................  Neck spine disk surgery
63610........................  Stimulation of spinal cord
*64420.......................  Nblock inj intercost sng
*64421.......................  Nblock inj intercost mlt
64480........................  Inj foramen epidural add-on
64484........................  Inj foramen epidural add-on
64508........................  Nblock carotid sinus s/p
64561........................  Implant neuroelectrodes

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64566........................  Neuroeltrd stim post tibial
64568........................  Inc for vagus n elect impl
64569........................  Revise/repl vagus n eltrd
64570........................  Remove vagus n eltrd
64581........................  Implant neuroelectrodes
64611........................  Chemodenerv saliv glands
*64620.......................  Injection treatment of nerve
64708........................  Revise arm/leg nerve
64712........................  Revision of sciatic nerve
64713........................  Revision of arm nerve(s)
64714........................  Revise low back nerve(s)
65778........................  Cover eye w/membrane
65780........................  Ocular reconst transplant
66761........................  Revision of iris
67028........................  Injection eye drug
69802........................  Incise inner ear
70010........................  Contrast x-ray of brain
71250........................  Ct thorax w/o dye
72125........................  Ct neck spine w/o dye
72128........................  Ct chest spine w/o dye
72131........................  Ct lumbar spine w/o dye
73080........................  X-ray exam of elbow
73200........................  Ct upper extremity w/o dye
73510........................  X-ray exam of hip
73610........................  X-ray exam of ankle
73630........................  X-ray exam of foot
73700........................  Ct lower extremity w/o dye
74430........................  Contrast x-ray bladder
*75571.......................  Ct hrt w/o dye w/ca test
*75572.......................  Ct hrt w/3d image
*75573.......................  Ct hrt w/3d image congen
*75574.......................  Ct angio hrt w/3d image
75954........................  Iliac aneurysm endovas rpr
75960........................  Transcath iv stent rs&i
75962........................  Repair arterial blockage
75964........................  Repair artery blockage each
76000........................  Fluoroscope examination
76942........................  Echo guide for biopsy
77003........................  Fluoroguide for spine inject
*77011.......................  Ct scan for localization
77012........................  Ct scan for needle biopsy
*77301.......................  Radiotherapy dose plan imrt
77427........................  Radiation tx management x5
88120........................  Cytp urne 3-5 probes ea spec
88121........................  Cytp urine 3-5 probes cmptr
88172........................  Cytp dx eval fna 1st ea site
88173........................  Cytopath eval fna report
88177........................  Cytp c/v auto thin lyr addl
88300........................  Surgical path gross
88302........................  Tissue exam by pathologist
88304........................  Tissue exam by pathologist
88305........................  Tissue exam by pathologist
88307........................  Tissue exam by pathologist
88309........................  Tissue exam by pathologist
88363........................  Xm archive tissue molec anal
88367........................  Insitu hybridization auto
88368........................  Insitu hybridization manual
90460........................  Imadm any route 1st vac/tox
90461........................  Imadm any route addl vac/tox
90870........................  Electroconvulsive therapy
90935........................  Hemodialysis one evaluation
90937........................  Hemodialysis repeated eval
90945........................  Dialysis one evaluation
90947........................  Dialysis repeated eval
91013........................  Esophgl motil w/stim/perfus
*91038.......................  Esoph imped funct test > 1h
91117........................  Colon motility 6 hr study
*91132.......................  Electrogastrography
*91133.......................  Electrogastrography w/test
92081........................  Visual field examination(s)
92082........................  Visual field examination(s)
92132........................  Cmptr ophth dx img ant segmt
92133........................  Cmptr ophth img optic nerve
92134........................  Cptr ophth dx img post segmt
92504........................  Ear microscopy examination
92507........................  Speech/hearing therapy
92508........................  Speech/hearing therapy
92606........................  Non-speech device service
92607........................  Ex for speech device rx 1hr
92608........................  Ex for speech device rx addl
92609........................  Use of speech device service
93040........................  Rhythm ecg with report
93041........................  Rhythm ecg tracing
93042........................  Rhythm ecg report
93224........................  Ecg monit/reprt up to 48 hrs
93225........................  Ecg monit/reprt up to 48 hrs
93226........................  Ecg monit/reprt up to 48 hrs
93227........................  Ecg monit/reprt up to 48 hrs
93228........................  Remote 30 day ecg rev/report
93270........................  Remote 30 day ecg rev/report
93271........................  Ecg/monitoring and analysis
93272........................  Ecg/review interpret only
93462........................  L hrt cath trnsptl puncture
93463........................  Drug admin & hemodynmic meas
93563........................  Inject congenital card cath
93564........................  Inject hrt congntl art/grft
93565........................  Inject l ventr/atrial angio
93652........................  Ablate heart dysrhythm focus
93922........................  Upr/l xtremity art 2 levels
93923........................  Upr/lxtr art stdy 3+ lvls
93924........................  Lwr xtr vasc stdy bilat
95800........................  Slp stdy unattended
95801........................  Slp stdy unatnd w/anal
95803........................  Actigraphy testing
95805........................  Multiple sleep latency test
95806........................  Sleep study unatt&resp efft
95807........................  Sleep study attended
95808........................  Polysomnography 1-3
95810........................  Polysomnography 4 or more
95811........................  Polysomnography w/cpap
95857........................  Cholinesterase challenge
95950........................  Ambulatory eeg monitoring
95953........................  Eeg monitoring/computer
96105........................  Assessment of aphasia
97598........................  Rmvl devital tis addl 20 cm<
99224........................  Subsequent observation care
99225........................  Subsequent observation care
99226........................  Subsequent observation care
------------------------------------------------------------------------
*CPT codes discussed in more detail in section II.A.3.c. of this final
  rule with comment period.


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3. Establishment of Interim Final Malpractice RVUs for CY 2011
    According to our final policy as discussed in section II.B.2. of 
this CY 2011 final rule with comment period, we have assigned 
malpractice RVUs for CY 2011 new and revised codes by a crosswalk to a 
similar source code. We have reviewed the malpractice source code AMA 
RUC recommendations for 224 CY 2011 new and revised codes and we are 
accepting them all for CY 2011. According to our policy, we have 
adjusted the malpractice RVUs of the CY 2011 new/revised codes for 
differences in work RVUs (or, if greater, the clinical labor portion of 
the fully implemented PE RVUs) between the source code and the new/
revised code to reflect the specific risk-of-service for the new/
revised code. The source code crosswalks for the CY 2011 new/revised 
codes are subject to public comment on this CY 2011 final rule with 
comment period, as well as the CY 2011 malpractice RVUs of the new/
revised codes that are listed in Addendum C to this final rule with 
comment period.
    Table 8 lists the CY 2011 new/revised codes and their respective 
source codes for determining the interim final CY 2011 malpractice 
RVUs. We are also posting the crosswalk on the CMS Web site under the 
downloads for the CY 2011 PFS final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.

VI. Provisions of the Affordable Care Act

    The following section addresses certain provisions of the Patient 
Protection and Affordable Care Act (Pub. L. 111-148), enacted on March 
23, 2010, as amended by the Health Care and Education Reconciliation 
Act of 2010 (Pub. L. 111-152) enacted on March 30, 2010 (collectively 
known as the Affordable Care Act (ACA)).

A. Section 3002: Improvements to the Physician Quality Reporting System

    Section 3002 of the ACA makes a number of changes to the Physician 
Quality Reporting System (previously referred to as the Physician 
Quality Reporting Initiative, or PQRI), including authorizing incentive 
payments through 2014, and requiring a payment adjustment beginning in 
2015, for eligible professionals who do not satisfactorily submit 
quality data. For a more detailed discussion of the provisions of 
section 3002 of the ACA, please refer to section VII.F.1. of this final 
rule with comment period.

B. Section 3003: Improvements to the Physician Feedback Program and 
Section 3007: Value-Based Payment Modifier Under the Physician Fee 
Schedule

1. Background
    As required under section 1848 (n) of the Act, as added by section 
131(c) of MIPPA, we established and implemented by January 1, 2009, the 
Physician Resource Use Measurement & Reporting (RUR) Program (now 
referred to as the Physician Feedback Program) for purposes of 
providing confidential reports to physicians that measure the resources 
involved in furnishing care to Medicare beneficiaries. Section 1848(n) 
of the Act also authorizes us to include information on the quality of 
care furnished to Medicare beneficiaries by a physician or group of 
physicians.
    We are continuing a phased implementation of the Physician Feedback 
Program. Phase I was discussed in the CY 2010 proposed and final rules 
(74 FR 33589, and 74 FR 61844, respectively), and has been completed. 
Phase I consisted of several activities including extensive data 
analysis to inform decisions about topics such as measures, 
attribution, and risk adjustment and formative testing of report design 
with practicing physicians. We concluded Phase I by sending to 
individual practicing physicians in 12 geographic areas \4\ several 
hundred reports that contained per capita and episode-based cost 
information.
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    \4\ The 12 geographic areas are: Boston, MA, Syracuse, NY, 
Northern New Jersey, Greenville, SC, Miami, FL, Little Rock, AR, 
Indianapolis, IN, Cleveland, OH, Lansing, MI, Phoenix, AZ, Seattle, 
WA, and Orange County, CA.
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    Phase I of the Physician Feedback Program focused on providing 
confidential feedback on resource use measures. Section 1848 
(n)(1)(A)(iii) of the Act states that the Secretary may also include 
information on the quality of care furnished to Medicare beneficiaries 
by physicians (or groups of physicians) in the feedback reports. We 
believe that providing physicians with feedback on both quality and 
cost is consistent with the direction of other CMS value-based 
purchasing (VBP) initiatives. As a result, we decided to include 
quality measures in Phase II of the Physician Feedback Program and, in 
particular, we considered measures used in the Physician Quality 
Reporting System (previously referred to as the Physician Quality 
Reporting Initiative (PQRI)) and claims-based measures such as the 
measures used in the Generating Medicare Physician Quality Performance 
Measurement Results (GEM) project (74 FR 61846).
    Section 1848 (n)(1)(A)(ii) of the Act also states that the 
Secretary may provide reports at the physician group level. 
Accordingly, as part of Phase II of the Physician Feedback Program, we 
will also include reporting to group practices, defined as more than 
one physician practicing medicine together (74 FR 61846). In addition, 
we noted that the definition applies to the following types of 
physician groups: (1) Formally established single or multi-specialty 
group practices; (2) physicians practicing in defined geographic 
regions; and (3) physicians practicing within facilities or larger 
systems of care (74 FR 61846). As we continue with Phase II, we plan to 
report to both physician group practices and their affiliated 
practitioners, recognizing that many physicians practice in 
arrangements other than solo practices. We believe that using both 
group and individual level reporting will also allow us to gain 
experience with the sample size issues that arise when individual 
physicians have too few Medicare beneficiaries with specific conditions 
to generate reliable information. (See the CY 2010 final rule with 
comment period (74 FR 61844) for a detailed discussion of plans for 
Phase II.)
2. Effect of the ACA of 2010 on the Program
    The ACA contains two provisions relevant to the Physician Feedback 
Program. Section 3003 of the ACA continues the confidential feedback 
program and requires the Secretary, beginning in 2012, to provide 
reports that compare patterns of resource use of individual physicians 
to other physicians. In addition, section 3007 of the ACA requires the 
Secretary to apply a separate, budget-neutral payment modifier to the 
Fee-For-Service PFS payment formula. The value-based payment modifier, 
which will be phased in beginning January 1, 2015 through January 1, 
2017, will provide for differential payment under the fee schedule to a 
physician or groups of physicians, and later, possibly to other 
eligible professionals, based upon the relative quality and cost of 
care of their Medicare beneficiaries. Accordingly, our goal is to have 
Medicare physicians receive a confidential feedback report prior to 
implementation of the value-based payment modifier. We view these two 
provisions as complementary, as we expect the work done for the 
Physician Feedback Program under section 3003 of the ACA will inform 
our implementation of the value-based

[[Page 73378]]

payment modifier under section 3007 of the ACA. The approach used for 
performance assessment in the confidential feedback reports will serve 
as the foundation for implementing the value-based payment modifier. 
Specifically, throughout future phases of reports under the Physician 
Feedback Program, we will continue to enhance our measures and methods 
and improve the content of the reports based on both our research and 
the feedback of stakeholders before the value-based payment modifier 
begins to affect physician payments in 2015.
    We plan to engage in a large-scale effort to garner widespread 
stakeholder involvement with regard to how we continue to build and 
expand the confidential feedback program and transition to 
implementation of the value-based payment modifier. We recognize that 
such a payment modifier may have an impact on the delivery of care to 
Medicare beneficiaries. Reports that will be produced in the future 
based on changes as a result of section 3003 of the ACA will contain 
both cost and quality data, and work done to improve these reports with 
regard to fair and actionable measures in each of these domains will 
aid our decision making in how to apply the value-based payment 
modifier. We intend to seek stakeholder input on various aspects of 
program design, including cost and quality measures, methodologies for 
compositing measures, and feedback report content and delivery. Such 
feedback may be gathered through rulemaking, open door forums, or other 
mechanisms. Below we summarize the public comments received on the 
changes we proposed to make to Phase II of the Physician Feedback 
Program.
3. Summary of Comments and Phase II Proposed Changes
a. Episode Groupers
    We intend that reports in Phase II of the Physician Feedback 
Program will be distributed in the fall of 2010. However, we proposed 
several changes to the program parameters for Phase II that were 
finalized in prior rules (75 FR 40114). First, we proposed to 
discontinue our use of commercially-available proprietary episode 
grouping software given limitations we noted in proprietary episode 
grouping software we used in previous phases of the program. In 
addition, we noted that section 3003 of the ACA requires that the 
Secretary develop a Medicare-specific episode grouper by January 1, 
2012, and make the details of the episode grouper available to the 
public. It is our intent that the Medicare-specific episode grouper 
will address the limitations we found in the proprietary software.
    We recognize that, because of its disease/condition-specific focus, 
episode-based cost information can be more meaningful and actionable 
for physicians than per capita information. We plan to provide such 
information in feedback reports after public grouper software is 
developed. Prior to that, we may consider other potential interim 
options for episode grouping to provide such information. As we 
indicated, we believe that our use of proprietary episode grouping 
software in the previous phases of the program had certain limitations 
(75 FR 40114). These software products were not intended for use with 
Medicare claims data, and we discovered several problems with the data 
outputs. Specifically, the groupers do not work well to create episodes 
for beneficiaries with multiple chronic conditions, which is a 
significant portion of Medicare beneficiaries.
    For example, when a beneficiary with a chronic disease is 
hospitalized for an acute condition, that beneficiary most likely also 
receives treatments unrelated to the condition for which he or she is 
hospitalized, but related to the chronic disease. The groupers, which 
are proprietary and often referred to as ``black boxes,'' do not enable 
users to understand the coding to determine how to accommodate these 
issues. Therefore, we had to make several decisions about how to pre-
process the claims data so that the groupers could recognize and 
attempt to deal with these issues in the clinical grouping logic. After 
report production in Phase I, we discovered several problems with the 
pre-processing, which resulted in inaccurate episode cost information 
being disseminated.
    Until a Medicare-specific episode grouping software is developed, 
we plan to produce reports for Phase II that contain annualized per 
capita cost information. More specifically, instead of episode-specific 
cost information, we plan to provide all patient per capita cost 
information, as well as per capita cost information for those 
beneficiaries with five common chronic diseases: (1) Diabetes; (2) 
congestive heart failure; (3) coronary artery disease; (4) chronic 
obstructive pulmonary disease; and (5) prostate cancer. This 
information will not be limited to the cost of treating the disease 
itself, but will provide total Part A/B per capita cost information, as 
well as service category breakdowns, for the care received by the 
subset of attributed beneficiaries with that disease.
    Comment: Many commenters were supportive of CMS' decision to 
discontinue using the proprietary episode grouper software in Phase II 
and instead to develop a Medicare-specific grouper available to the 
public. Several of these commenters discussed the specific limitations 
of proprietary groupers and also the importance of developing and 
utilizing a Medicare-specific episode grouper available to the public. 
Many commenters urged CMS to include extensive testing and stakeholder 
input while developing the Medicare-specific grouper. These commenters 
asserted that it was important that the process to develop a Medicare-
specific grouper be available to the public, as well as the methodology 
such a grouper will employ, remain transparent, and open for public 
review and recommendation. A few commenters expressed concern about 
CMS' ability to create a fair and accurate Medicare-specific episode 
grouper in the timeline allotted for its implementation. One commenter 
specifically requested that CMS, to the extent possible, express 
concern about the timeline enacted by Congress. Another commenter 
opposed dropping the episode grouper in Phase II and requested that CMS 
use this time to test and explore different episode grouping 
methodologies.
    Response: We appreciate these comments in support of our proposal 
to discontinue our use of commercially-available proprietary episode 
grouping software due to concerns over their suitability for use with 
Medicare claims and the pending development of a Medicare-specific 
episode grouper. Our research has documented that the currently 
available episode groupers, as they are now configured, present 
significant challenges to their use with our highly complex patient 
population. Therefore, we believe it is appropriate to discontinue use 
of the commercially available episode groupers for the Phase II reports 
and until a Medicare-specific episode grouper is available. We 
acknowledge the suggestion, however, that CMS test and explore 
different episode grouping methodologies. We are bound by statute to 
make the details of the developed Medicare-specific episode grouper 
available to the public and intend to do so. We also intend to involve 
the stakeholder community and to receive their input during the testing 
stage. We acknowledge that there are many challenges involved in 
deciding on the methodologies to utilize in developing the episode 
grouper. We also acknowledge that the statutorily required timeframe 
for development of the grouper is one of those challenges. We believe 
that the episode grouper is

[[Page 73379]]

a useful element in appropriately providing effective and actionable 
cost measures for physician feedback. We intend to research and test 
many different methodologies in order to create a fair and appropriate 
episode grouper for the Medicare population and will incorporate 
episode-based cost measures into the physician feedback reports as 
early as possible.
    After considering all of the public comments received regarding 
this issue and for the reasons we explained above, we are finalizing 
our proposal to discontinue use of the commercially-available 
proprietary episode grouping software for Phase II reports.
b. Quality Measures
    We proposed to exclude data from the Physician Quality Reporting 
System in the Physician Feedback Program reports even though commenters 
have been generally supportive of including Physician Quality Reporting 
System measures in the reports (75 FR 40114).
    The first year of the Physician Quality Reporting System was 2007, 
participation was still quite low, and the first round of Physician 
Quality Reporting feedback reports contained errors that necessitated 
correction. To date, work by CMS' Physician Feedback Program support 
contractor has been based upon claims data from 2007. Because of the 
low number of physicians reporting under the Physician Quality 
Reporting System in 2007, and because providers have the flexibility to 
choose which measures to report under the Physician Quality Reporting 
System, we believe the resulting small numbers of physicians reporting 
an individual measure would greatly limit meaningful peer comparisons, 
and thus the number of providers who would receive a feedback report. 
Therefore for Phase II, we proposed to use the claims-based measures 
developed by CMS in the GEM project (75 FR 40115).\5\ This is a core 
set of 12 process quality measures developed by HEDIS that can be 
calculated using only administrative claims data. Several chronic 
conditions that are prevalent in the Medicare population are captured 
by this set of measures. However, in future phases of the program, we 
intend to explore the possibility of linking the Physician Feedback 
Program to the Electronic Health Record (EHR) incentive program for 
meaningful use of EHR technology (as added by the Health Information 
Technology for Economic and Clinical Health Act (Title IV of Division B 
of the Recovery Act, together with Title XIII of Division A of the 
Recovery Act) (HITECH)), and the group practice reporting option (GPRO) 
in the Physician Quality Reporting System. Both of these programs offer 
measures and measure sets, as well as methods of reporting data which 
would be conducive to meaningful peer comparisons among physicians.
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    \5\ http://www.cms.gov/GEM.
---------------------------------------------------------------------------

    Comment: Several commenters agreed with our proposal to not use 
Physician Quality Reporting System measures during Phase II. These 
commenters argued that the Physician Quality Reporting System measures 
are voluntarily reported, some reports have contained errors, and 
therefore, these data are inadequate for assessing quality for many 
providers. Several commenters voiced concerns and/or disagreement with 
using GEM measures as an alternative to the Physician Quality Reporting 
System measures. These commenters claimed that the GEM measures are too 
focused on primary care and prevention, are limited in scope (for 
example, do not contain any measures for prostate cancer, and breast 
and colorectal cancer measures are only related to screening), and have 
few, if any, measures pertaining to some specialties. Some commenters 
advocated for the future use of Physician Quality Reporting System 
measures claiming that more eligible professionals are participating in 
the program now. Several commenters agreed with CMS' decision to 
explore linking the Physician Feedback Program with the EHR incentive 
program.
    Response: We appreciate these comments and we understand the 
commenters' concern that the 12 core GEM measures may not fully measure 
the broad scope of care delivered to Medicare beneficiaries. However, 
the GEM measures serve as an initial core measure set, upon which a 
larger set can be built for purposes of including in future reports. We 
also believe that the GEM measures will yield sufficient information to 
allow peer group comparisons. In contrast, the Physician Quality 
Reporting System data available to us for the Phase II reports were 
very limited and would not provide sufficient data for the minimum case 
size and number of peers needed to report data for many physicians. We 
plan to take into account the limitations commenters raised as we 
explore our options for choosing and developing measures for subsequent 
phases of the Physician Feedback Program and the development of the 
value-based payment modifier. As part of this process, we fully intend 
to explore the possibility of linking this program to the EHR incentive 
program for meaningful use of electronic health records, and the GPRO 
option in the Physician Quality Reporting System. We recognize the need 
to develop a comprehensive measure set that will fairly measure both 
quality and resource use. We intend to work with the stakeholder 
community to create a fair, reasonable, and actionable set of measures 
that we expect to publish not later than January 1, 2012 for future use 
in determining the value-based payment modifier.
    After considering all of the comments we received and for the 
reasons discussed above, we are finalizing our proposal to not include 
Physician Quality Reporting System data in the Phase II reports.
c. Report Distribution
    We proposed to distribute reports electronically in Phase II, by 
leveraging the infrastructure used to distribute Physician Quality 
Reporting System feedback reports (75 FR 40155). We believe this 
infrastructure will enable groups to utilize an electronic portal to 
download their Phase II reports. Individual practitioners will be able 
to contact their MACs/fiscal intermediaries to receive an e-mailed copy 
of their reports. We have received feedback from physicians that the 
reports distributed in Phase I were too long and cumbersome to manage 
in hard copy. We proposed consolidating the report and disseminating it 
electronically for easier navigation. Below we summarize our responses 
to public comments we received regarding this proposal.
    Comment: Most commenters generally expressed support for our 
proposal to distribute reports electronically in Phase II utilizing the 
existing infrastructure that is used to distribute Physician Quality 
Reporting System feedback reports. One commenter in particular, noted 
that the Physician Quality Reporting System portal was cumbersome and 
that security issues created access problems. Many commenters stressed 
that the reports need to be easy to navigate and need to be easily 
understood.
    Response: We agree that electronic delivery is a desirable means of 
distribution for these reports and are continuing to evaluate and 
develop methods to make future reports easily accessible, user friendly 
and informative. We appreciate all of the feedback from commenters 
regarding this proposal. While we acknowledge that users have expressed 
difficulty in using the Physician Quality Reporting System portal, it 
was the best option for electronic dissemination of the Phase II 
reports. In the future we will consider all of the potential options 
available to

[[Page 73380]]

us and will take these suggestions into account when developing future 
means of report distribution. After taking into consideration the 
comments summarized above, we are finalizing our proposal to distribute 
Phase II reports electronically utilizing the existing infrastructure 
used to distribute Physician Quality Reporting System feedback reports. 
In the future, as we disseminate increasing numbers of reports, we will 
provide information regarding how individuals and groups can access 
their reports through sub-regulatory guidance and other means of 
notification.
4. Implementation of Sections 3003 and 3007 of the ACA
    Sections 3003 and 3007 of the ACA contain several important 
implementation dates. In addition to developing an episode grouper by 
January 1, 2012, we are required by the same date to publish the cost 
and quality measures we intend to use for purposes of the value-based 
payment modifier. The payment modifier will become effective for 
certain physicians and groups of physicians on January 1, 2015, with a 
phased implementation so that all physicians paid under the PFS will be 
subject to the value-based payment modifier by January 1, 2017. On or 
after January 1, 2017, we have the authority to also apply the payment 
modifier to other eligible professionals. Through the rulemaking 
process in 2013, we will begin implementing the program parameters for 
the value-based payment modifier.
    In anticipation of implementing sections 3003 and 3007 of the ACA, 
we intend to perform extensive data analysis and research, and to seek 
stakeholder input on issues related to cost and quality measures so 
that we can be prepared to publish, by January 1, 2012, measures we 
intend to use for purposes of the value-based payment modifier. We 
intend for the work done in establishing cost and quality measures for 
purposes of the payment modifier to inform the continued dissemination 
of confidential feedback reports to both individual physicians and 
physician groups. Specifically, the measures chosen for purposes of the 
value-based payment modifier will be included in future phases of the 
confidential feedback reports.
    As noted previously, Phase I included reports to several hundred 
physicians. In Phase II, during Fall 2010, we anticipate disseminating 
reports to about 40 large physician groups and the approximately 2,000 
physicians affiliated with those groups. We anticipate future phases of 
the reports to include additional dissemination to increasing numbers 
of practitioners and groups such that virtually every applicable 
Medicare practitioner receives a report prior to implementation of the 
value-based payment modifier.
5. Summary of Comments Sought on Specific Statistical Issues Related to 
the ACA Sections 3003 and 3007
    We recognize that there are many important decisions to be made 
when implementing a program that compares physicians to their peers, 
especially when such information can lead to differential payment. 
Since the inception of the Physician Feedback program, all data have 
been price standardized which includes accounting for geographic 
adjustments. We have identified important statistical issues in 
previous rules, and as we have done in previous rules, we sought input 
on several of these topics as they relate to future phases of reports. 
These include, but are not limited to: risk adjustment; attribution; 
benchmarking; peer groups; minimum case sizes; cost and quality 
measures; and compositing methods. Specific parameters of the Physician 
Feedback Program are based on the most current information we have 
available to us. These parameters will continue to evolve and we will 
continue to evaluate them as the state of the art in these areas 
continues to improve. Therefore, in the proposed rule, we solicited 
public comment on the following statistical and methodological issues 
(75 FR 40115).
a. Risk Adjustment
    The cost data used in Phase I were risk adjusted. For the per 
capita costs, we used CMS' Hierarchical Condition Categories (HCC) 
model developed for risk adjustment in Medicare Advantage plans. This 
model takes into account beneficiary characteristics such as age, sex, 
and Medicaid status, and then predicts costs for beneficiaries based on 
their unique mix of health conditions. Several other socioeconomic 
factors, such as the median income per capita in the county where the 
physician practices, were used. For the episode-based costs, we used 
the risk adjustment method built into the proprietary grouper software. 
Regression analyses indicated that these additional socioeconomic 
factors did little to improve the fit of the model.
    The cost data in Phase II are risk adjusted using the HCC model, 
but excluding the additional socioeconomic factors such as the median 
income per capita in the county where the physician practices, that had 
been used in Phase I. And since there are no episode-based costs in 
Phase II--only annual per capita costs--the HCC model will be the only 
method used. Other methods of risk adjustment, such as the CC 
(complications and co-morbidities) and MCC (major complications and co-
morbidities) indicators implemented in the 2008 MS-DRG system, were 
considered but not employed.
    The quality data included in Phase II will not be risk adjusted 
because the GEM measures are all clinical process measures, measure 
specifications provided detailed inclusion/exclusion criteria, and it 
is generally accepted that such measures need not be risk adjusted. 
Beneficiaries should receive the indicated preventive services (for 
example, breast cancer screening) regardless of their demographic 
characteristics or presence or absence of health conditions.
    We solicited comment on the appropriate method for risk adjusting 
cost data, as well as our reasoning for not risk adjusting clinical 
process quality measures (75 FR 40115) and the comments we received are 
summarized below.
    Comment: There were a number of comments regarding the need to risk 
adjust for socioeconomic and cultural differences (including English 
proficiency, literacy, poverty, and family structure) and multiple co-
morbidities in order to avoid creating a disincentive for physicians 
who treat disadvantaged or complex patient populations. If 
socioeconomic factors are not added to the HCC model, commenters 
suggested using an alternative method to account for these factors such 
as a stratified analysis and comparison among similar providers and/or 
similar patient groups. Similarly, some commenters suggested that 
patients with substance abuse and mental health co-morbidities should 
be stratified into a distinct cohort. Other commenters suggested that 
exclusions be allowed for patient non-adherence or for cases of 
terminal illness. While there was general agreement that process 
measures do not require risk adjustment, several of the commenters 
pointed out that socioeconomic factors can also impact process and 
claims-based measures and risk adjustment of these measures should be 
considered on a measure by measure basis. Commenters asserted that 
outcome measures should be risk adjusted and some suggested that CMS 
use publically available risk models developed by specialty societies. 
Some commenters suggested that CMS provide evidence of the utility and 
reliability of using HCC to risk adjust per capita measures.

[[Page 73381]]

Several commenters suggested that CMS test multiple methodologies for 
risk adjustment and perform appropriate statistical analyses to 
determine variability among the different methodologies. Commenters 
emphasized the need to implement a methodology that would be 
transparent to the public and all stakeholders.
    Response: We thank the commenters for their thoughtful input. In 
Phase II reports, we will employ the same method of risk adjustment for 
per capita cost measures as we use in our Medicare Advantage (MA) 
program, that is, the hierarchal condition category (HCC) model. We 
will continue to seek stakeholder input as we consider these comments 
and ways to improve our risk adjustment methodology.
b. Attribution
    Deciding which physician(s) is/are responsible for the care of 
which beneficiaries is an important aspect of measurement. We must 
strike a balance between only attributing cost information to 
physicians for the services they personally delivered, and attributing 
costs to physicians based on a more encompassing view of the services 
provided to each beneficiary so as to encourage better care 
coordination and accountability for patient outcomes.
    There are several methods that are generally used for attributing 
beneficiaries' costs to physicians for the purposes of measuring and 
comparing performance. In Phase I, we used two different attribution 
methodologies. Half of the reports used the multiple-proportional 
attribution, in which a beneficiary's costs were summed, and then 
divided among the physicians who treated that beneficiary in the same 
proportion as their share of evaluation and management (E&M) services 
provided. The other half of the reports used the plurality-minimum 
method, in which a beneficiary's entire cost (either for the episode or 
for the year) was attributed to the physician who performed the 
plurality of the E&M services, subject to a minimum percentage (in that 
case, 10 percent).
    In Phase II reports, we plan to use the plurality-minimum method 
with a minimum percentage threshold of E&M services of 20 percent for 
individual physicians and a minimum percentage threshold of E&M 
services of 30 percent of the E&M services for physician group level 
reports (75 FR 40116). These minimum threshold determinations were 
based on our analysis of the claims data. We recognize that other 
attribution methods exist, which may be either more or less appropriate 
given the aspect of care one is measuring. For example, it may be 
desirable to attribute the entire cost of a surgical episode to the 
performing surgeon. Another method for attributing costs is referred to 
as multiple-even, in which the entire beneficiary's cost is attributed 
to multiple physicians who treated the beneficiary.
    We sought comment on the topic of attribution methodologies, 
including both of those we have already used in the program, as well as 
others. The comments we received are summarized below.
    Comment: Many commenters voiced concern about the plurality minimum 
attribution method that CMS has planned to use in its Phase II feedback 
reports. A number of commenters asked that we ensure that the plurality 
minimum method does not penalize primary care doctors by holding them 
accountable for all the services beneficiaries receive, since they only 
deliver a subset of all of the care a beneficiary receives. Other 
commenters were concerned that if there were too many visits to a 
specialist, the specialist might get penalized. Many commenters were 
opposed to the plurality minimum model, not wanting to be held 
accountable for care they do not influence. Others expressed concern 
that costs could be attributed incorrectly and also that unintended 
changes in referral patterns might result, as physicians might be 
influenced by the cost of care without regard to quality. One commenter 
requested that CMS consider attribution options built on threshold 
concepts or specific agreement between a physician/medical group and 
patient on responsibility for management of a specific condition with 
the goal of focusing measurement and attribution assignment on those 
patients who are truly under the care of the physician or group for the 
condition. Another commenter asked CMS to ensure that the same patient 
is attributed for resource use and quality, and additionally to clarify 
if patients will be attributed to primary care and specialists. 
Generally, specialty physician associations supported the multiple-
proportional attribution method, pointing out that there is shared 
accountability in delivering preventive and many other services. One 
commenter believed that the multiple-even method should be used, and in 
the case of surgical episodes, the entire cost should be attributed to 
the performing surgeon.
    Other commenters believed that the plurality minimum method was 
acceptable, but strongly urged CMS to continually analyze whether this 
methodology results in fair and accurate reports under different 
clinical scenarios, especially those where multiple co-morbidities are 
present. In addition, these commenters urged CMS to statistically 
examine the impact of changing the minimum thresholds. Several 
commenters recommended that CMS test multiple attribution models and 
evaluate the results. Another commenter recommended extensive chart 
reviews in order to ensure that the claims data supports the 
attribution model used. Several commenters pointed out that the choice 
of attribution method will not influence patient behavior and suggested 
incorporating patient accountability, including compliance. There were 
several comments about hospital costs being attributed to physicians 
that suggested alignment with other programs such as Hospital Value-
Based Purchasing. One commenter suggested using multiple models and not 
a single model of attribution. One commenter noted that the problem of 
small numbers may make it difficult to fairly assess the costs at the 
individual level. Overall, commenters pointed out that the method(s) 
used should be accurate, transparent, and not disadvantage small or 
rural practices.
    Response: We appreciate the input from commenters. We will continue 
to consider and evaluate how to apply attribution methods to physician 
feedback reports and seek stakeholder input. In Phase II reports, we 
plan to use the plurality-minimum method with a minimum percentage 
threshold of E&M services of 20 percent for individual physicians and a 
minimum percentage threshold of E&M services of 30 percent of the E&M 
services for physician group level reports.
c. Benchmarking and Peer Groups
    Determining how to most relevantly compare physicians to a standard 
or to their peers is also an important policy aspect of the program. 
CMS' research conducted in Phase I of the program indicated that 
physicians prefer to be compared only to those physicians most like 
them (that is, the narrowest peer group). We recognize the importance 
of fair comparison, but are also faced with the challenge that very 
narrow peer groups, especially among specialist and subspecialists are 
most often not large enough to make statistically significant 
comparisons.
    The individual-level reports in both phases of the program have 
contained, or will contain, two peer group comparisons: (1) Physicians 
in the same specialty in the same geographic area; and (2) physicians 
in the same specialty across all 12 geographic areas. In each

[[Page 73382]]

of these peer groups, a physician is shown where he or she falls on a 
distribution that specifically identified the 10th, 50th, and 90th 
percentiles. These benchmarks were finalized on an interim basis in the 
CY 2010 proposed rule (74 FR 33589).
    In determining differences among providers for episode-based 
measures in Phase I, we used a minimum frequency test. For per capita 
measures in Phase I, a physician had to have a case size of 20 or more 
beneficiaries to be measured and compared. There was no minimum peer 
group size requirement.
    The original MIPPA mandate requires us to make comparisons among 
physicians on cost, and gives the Secretary the authority to include 
comparisons on quality. The use of quality measures in the program was 
finalized in the CY 2010 final rule (74 FR 61846). In Phase II, 
comparisons with appropriate peer groups will be made for both measures 
of cost and quality. Phase II reports will be provided only to those 
physicians that have 30 or more patients for each of the cost measures. 
For the quality measures, we plan to use the measure specifications in 
the GEM project to define minimum case sizes, which are at least 11 
beneficiaries. We also plan to impose a minimum peer group size of 30 
in Phase II for each of the cost and quality measures. A minimum sample 
size of 30 is generally accepted in the research community as the 
minimum sample size to represent a group and make comparisons.
    We solicited comment on the most appropriate and relevant peer 
groups for comparison, including the appropriate minimum case sizes and 
minimum peer group sizes. We were also interested in suggested 
methodologies that could be applied to small case sizes. The comments 
we received are summarized below.
    Comment: Several commenters recommended that CMS establish separate 
benchmark measures for teaching medical facilities. These commenters 
argued that the proposed methodology should take into account the 
multiple missions of academic clinical facilities because their cases 
are often more complex. Other commenters recommended that CMS establish 
benchmarks that compared physicians to other physicians with similar 
practices and/or who perform similar procedures and additionally take 
into account sub-specialties and geography as peer groups will vary. 
These commenters suggested that CMS work with specialty groups and 
communities to develop the best comparisons. Other commenters noted 
that CMS needs to account for issues such as the difference between a 
practicing surgeon and a surgeon who does little surgery but acts more 
as a manager of care. These commenters asserted that this type of 
differentiation can be identified through review of claims history and 
data accessible through specialty organizations. Several commenters 
recommended that hospitalists and hospital groups be benchmarked 
against other hospital-based physicians or groups, preferably in 
similar practice settings, for example, emergency departments. A number 
of commenters suggested that CMS use metrics such as measures of 
statistical precision, multiple metrics including mean, median, 
percentiles in defining parameters for peer groups rather than use 
arbitrary numbers for minimum sample size. One commenter recommended 
that a power analysis be conducted to identify an appropriate sample 
size to be used for benchmarking.
    Response: We appreciate the feedback we received from commenters 
and will take these into consideration for the future. While we will 
continue to explore these issues, in Phase II reports, we will use the 
peer group and minimum case size of 30 as outlined above and in the 
proposed rule.
d. Cost and Quality Measures and Compositing Methods
    As mentioned above, and in previous rules, section 
1848(n)(1)(A)(ii) of the Act gives the Secretary the authority to 
include both cost and quality information in the feedback reports. In 
Phase I, we chose to use only cost information, and used both per 
capita and episode cost measurements. As mentioned above, we previously 
finalized the use of quality measures in Phase II (74 FR 61846), but 
finalized our proposal to discontinue our use of episode cost 
measurements. Accordingly, we have yet to include any composite 
measures of cost or quality in the feedback reports.
    Section 3007 of the ACA requires us to establish a value-based 
payment modifier to pay physicians differentially based both on their 
quality of care and their costs of care using composites of both 
quality and cost measures. Accordingly, we will need to devise a 
methodology in the future for compositing cost measures and quality 
measures, including considering, among other things, possible 
methodologies to develop the value-based payment modifier. In the 
future, episode-based cost measures developed using the Medicare-
specific episode grouper software also may be considered in developing 
a composite of cost measures. Other domains of measures that may be 
considered include patient-level utilization statistics (for example, 
emergency department visits per 1,000 patients) and structural measures 
such as whether a provider has adopted an electronic health record. We 
recognized that measure composites are methodologically and 
operationally complex and, therefore, we sought early comments on this 
topic (75 FR 40116). The comments we received are summarized below.
    Comment: Many commenters stressed the importance of measuring both 
quality and cost of care to ensure useful and meaningful comparisons of 
physician work. Several commenters asserted that focusing on cost 
measures alone was insufficient and urged CMS to include quality 
measures in the comparison to resource utilization feedback reports. 
These commenters asserted that composite measures of cost and quality 
provide the most meaningful context to capture and review resource 
utilization. Several comments focused on the challenge of measuring 
quality at the physician level and the importance that the measures be 
fair, meaningful and actionable, and accurately applied. Incorporation 
of standards and measures endorsed by the National Quality Forum (NQF) 
was also recommended as well as annual measure updates of quality 
measures. A number of commenters stressed the importance of maintaining 
the focus on quality and outcomes measurement. Types of quality 
measures suggested for inclusion in the reports included structure, 
patient safety, clinical processes of care, patient experience, care 
coordination and clinical outcomes, weighted toward clinical outcomes, 
care coordination, and patient experience. Several commenters remarked 
on the limitation of claims-based measures for quality and one 
recommended that outcomes measures be based on clinical rather than 
administrative data. One commenter stated that ICD-10 will enhance 
evaluation of physician performance and suggested evaluation of quality 
be delayed until ICD-10 is implemented. One commenter suggested a 
disease focus on peripheral vascular disease. Several commenters 
suggested that CMS work with specialty societies on using available 
registries of physician level data as a source of physician quality 
performance. Many commenters stated that quality should be weighted 
higher than cost, but agreed both need to be reported. Many commenters 
encouraged CMS to work expeditiously with

[[Page 73383]]

stakeholders to improve quality measures for inclusion in the value-
based payment modifier. Some commenters acknowledged CMS' recognition 
that measure composites are methodologically and operationally complex 
and urged CMS to carefully test and evaluate different composite 
methodologies before implementing the value-based payment modifier. 
These commenters argued that the first step in creating a composite 
measure is to identify the individual components (for example, 
individual measures) that should go into the composite, and therefore 
CMS should ensure that a reliable Medicare-specific episode grouper is 
in place as it would be essential to this initial process. One 
commenter suggested any composite measures developed by CMS should be 
reviewed by the multi-stakeholder consultative partnership defined in 
section 3014 of the ACA prior to any adoption into the physician 
payment program.
    Some commenters mentioned that the National Quality Forum and the 
American Medical Association's Physician Consortium for Performance 
Improvement (PCPI) had developed guidance on creating composite 
measures. These commenters argued that CMS needed to engage in more 
empirical work on creating composite measures before implementing a 
modifier for physician payment. These commenters expressed concern that 
an accurate value-based payment modifier based on resource use would be 
ready for 2015, given the substantial statistical and methodological 
hurdles that must be overcome in creating cost and quality composites 
and a single cost and quality index. They concluded by saying that CMS 
should continue to seek stakeholder comment throughout the composite 
measure development process. One commenter urged CMS to ensure that 
compliance with preventive health service measurements be taken into 
account when developing the composite measures.
    Response: As required under the statute, we plan to identify the 
measures of resource use and quality that will comprise composites of 
cost and quality for the physician feedback reports and for the value-
based payment modifier by January 1, 2012. We thank the commenters for 
their many thoughtful suggestions and recommendations on cost and 
quality measures and compositing methods. As we stated above, we 
solicited public comment to inform potential future policies on these 
issues, and the Physician Feedback Program in general. We thank the 
public for their thoughtful comments and appreciate the feedback 
received from stakeholders. In addition, a number of societies and 
organizations volunteered support and also volunteered to share 
research findings that they believe is applicable to this program.
    We fully expect to draw on the expertise of stakeholders as we 
continue to work on implementing the physician feedback program and 
implementation of the value-based payment modifier. Moreover, we plan 
to engage in open and continuing dialogue with stakeholders on both the 
Physician Feedback Program and value-based payment modifier.
    In addition to the comments we solicited and received on specific 
methodological issues related to production of the feedback reports, we 
also received a number of general comments and suggestions regarding 
the development of reports to ensure access, utility, and relevance.
    Comment: A number of commenters suggested that the reports be: 
Interactive, easy to understand, timely, actionable, inclusive of 
sufficient detail, inclusive of data on cost categories (for example, 
imaging use, prescriptions, hospitalizations, etc.) and impactful. Some 
commenters requested the capability to drill down on data, especially 
if a physician is shown to be a high cost outlier. One commenter 
requested that the physicians have the ability to review the reports 
and correct any data that they believe is inaccurate. Others reiterated 
that all methodologies and algorithms should be in the public domain 
along with clear plans for evaluating the viability and impact of the 
reports and reporting mechanisms. We received more than one suggestion 
for alignment with the HITECH payment incentive program and other 
programs, in order to alleviate reporting burden and variation. Another 
commenter supported the creation of group reports, but suggested CMS 
explore alternative ways to define and determine affiliation with a 
medical practice group rather than relying solely on tax identification 
numbers (TINs). Many strongly encouraged CMS to engage public 
stakeholders intensely and specifically mentioned the importance of 
working with specialists, specialty societies, clinical experts, 
treatment guideline developers, and manufacturers on the issues that 
specifically pertain to their respective interests and expertise in 
creating measures, composite measures, and performance reporting. 
Finally, a commenter requested that the reports include graphical and 
numerical illustrations of data.
    In addition, we received a number of comments on the value-based 
payment modifier although we did not solicit specific comments or make 
proposals. Our summary of these comments follows:
    Comment: A number of commenters supported the idea of a value-based 
payment modifier using the confidential feedback reports as the 
foundation and applauded CMS' intentions for a transparent process 
seeking stakeholder input on the methodology through rulemaking and 
other public forums. However, other commenters expressed caution in 
proceeding given the lack of experience with the quality and resource 
measures which are yet to be published, and the evolutionary nature of 
the methodology to develop quality and resource scores that will 
comprise the value-based payment modifier. Several commenters 
recommended that the value-based payment modifier program be delayed 
until CMS could demonstrate that it has in place reliable and accurate 
methodologies for implementation. Several of these commenters urged CMS 
to thoroughly test out multiple models and methodologies and discuss 
advantages and disadvantages with the multiple stakeholders.
    Response: We appreciate the above input from stakeholders. We will 
continue to seek further stakeholder input and comment through future 
rulemaking and other venues, such as open door forums and listening 
sessions, as we continue to implement the Physician Feedback Program 
and develop the specifications to implement the value-based payment 
modifier.

C. Section 3102: Extension of the Work Geographic Index Floor and 
Revisions to the Practice Expense Geographic Adjustment Under the 
Medicare Physician Fee Schedule, and Protections for Frontier States as 
Amended by Section 10324

    Section 1848(e)(1)(E) of the Act (as amended by section 3102(a) of 
the ACA) extended application of the 1.0 work GPCI floor for services 
furnished through December 31, 2010. In addition, section 1848(e)(1) of 
the Act (as amended by section 3102(b) of the ACA) specified that for 
CY 2010 and CY 2011, the employee wage and rent portions of the PE GPCI 
must reflect only one-half of the relative cost differences for each 
locality compared to the national average and includes a ``hold 
harmless'' provision for any PFS locality that would receive a 
reduction to its PE GPCI resulting from the limited recognition of cost 
differences. Section 1848(e)(1) of the Act (as amended by section 
3102(b) of the ACA) also required an analysis of the current methods 
and data sources

[[Page 73384]]

used to determine the relative cost differences in office rent and 
employee wages compared to the national average and the cost share 
weights assigned to each PE GPCI component: employee wages, office 
rent, and supplies. Finally, section 1848(e)(1) of the Act (as amended 
by section 3102(b) of the ACA) required the Secretary to make 
appropriate adjustments to the PE GPCI by no later than January 1, 
2012. In addition, section 1848(e)(1) of the Act (as amended by section 
10324(c) of the ACA) established a 1.0 PE GPCI floor for services 
furnished in frontier states effective January 1, 2011. The provisions 
of the ACA related to the GPCIs are discussed in detail in section 
II.D. of this final rule with comment period.

D. Section 3103: Extension of Exceptions Process for Medicare Therapy 
Caps

    Section 1833(g)(5) of the Act (as amended by section 3103 of the 
ACA) extended the exceptions process for spending limitations on 
therapy services in certain outpatient settings through December 31, 
2010. Therapy caps are discussed in detail in section III.A. of this 
final rule with comment period.

E. Section 3104: Extension of Payment for Technical Component of 
Certain Physician Pathology Services

    Section 542(c) of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554), as 
amended by section 732 of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173), section 104 of 
division B of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) 
(Pub. L. 109-432), section 104 of the Medicare, Medicaid, and SCHIP 
Extension Act of 2007 (MMSEA) (Pub. L. 110-173), and section 136 of the 
Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) 
(Pub. L. 110-275) was amended by section 3104 of the ACA to continue 
payment to independent laboratories for the TC of physician pathology 
services for fee-for-service Medicare beneficiaries who are inpatients 
or outpatients of a covered hospital through CY 2010. The technical 
component (TC) of physician pathology services refers to the 
preparation of the slide involving tissue or cells that a pathologist 
interprets. The professional component (PC) of physician pathology 
services refers to the pathologist's interpretation of the slide.
    When the hospital pathologist furnishes the PC service for a 
hospital patient, the PC service is separately billable by the 
pathologist. When an independent laboratory's pathologist furnishes the 
PC service, the PC service is usually billed with the TC service as a 
combined service.
    Historically, any independent laboratory could bill the Medicare 
contractor under the PFS for the TC of physician pathology services for 
hospital patients even though the payment for the costs of furnishing 
the pathology service (but not its interpretation) was already included 
in the bundled inpatient stay payment to the hospital. In the CY 2000 
PFS final rule with comment period (64 FR 59408 through 59409), we 
stated that this policy has contributed to the Medicare program paying 
twice for the TC service: (1) To the hospital, through the inpatient 
prospective payment rate, when the patient is an inpatient; and (2) to 
the independent laboratory that bills the Medicare contractor, instead 
of the hospital, for the TC service. While the policy also permits the 
independent laboratory to bill for the TC of physician pathology 
services for hospital outpatients, in this case, there generally would 
not be duplicate payment because we would expect the hospital to not 
also bill for the pathology service, which would be paid separately to 
the hospital only if the hospital were to specifically bill for it. We 
further indicated that we would implement a policy to pay only the 
hospital for the TC of physician pathology services furnished to its 
inpatients.
    Therefore, in the CY 2000 PFS final rule with comment period, we 
revised Sec.  415.130(c) to state that for physician pathology services 
furnished on or after January 1, 2001 by an independent laboratory, 
payment is made only to the hospital for the TC furnished to a hospital 
inpatient. Ordinarily, the provisions in the PFS final rule with 
comment period are implemented in the following year. However, the 
change to Sec.  415.130 was delayed 1 year (until January 1, 2001), at 
the request of the industry, to allow independent laboratories and 
hospitals sufficient time to negotiate arrangements.
    Full implementation of Sec.  415.130 was further delayed by section 
542 of the BIPA and section 732 of the MMA, which directed us to 
continue payment to independent laboratories for the TC of physician 
pathology services for hospital patients for a 2-year period beginning 
on January 1, 2001 and for CYs 2005 and 2006, respectively. In the CY 
2007 MPFS final rule with comment period (71 FR 69624 and 69788), we 
amended Sec.  415.130 to provide that, for services furnished after 
December 31, 2006, an independent laboratory may not bill the carrier 
for the TC of physician pathology services furnished to a hospital 
inpatient or outpatient. However, section 104 of the MIEA-TRHCA 
continued payment to independent laboratories for the TC of physician 
pathology services for hospital patients through CY 2007, and section 
104 of the MMSEA further extended such payment through the first 6 
months of CY 2008.
    Section 136 of the MIPPA extended the payment through CY 2009. Most 
recently, section 3104 of the ACA amended the prior legislation to 
extend the payment through CY 2010.
    Consistent with this legislative change, we proposed to revise 
Sec.  415.130(d) to: (1) Amend the effective date of our payment policy 
to reflect that for services furnished after December 31, 2010, an 
independent laboratory may not bill the Medicare contractor for the TC 
of physician pathology services furnished to a hospital inpatient or 
outpatient; and (2) reformat this subsection into paragraphs.
    Comment: One commenter urged CMS to implement the provision to 
continue to pay independent laboratories for the TC of physician 
pathology services for fee-for-service Medicare beneficiaries who are 
inpatients or outpatients of a covered hospital on a permanent basis 
which would eliminate the potential for complicated billing that occurs 
each time the provision is set to expire and is subsequently extended 
by.
    Response: Payment for the costs of furnishing the pathology service 
(but not its interpretation) is already included in the bundled 
inpatient stay payment to the hospital. We continue to believe that 
this payment provision represents a duplicate payment for the TC 
service: (1) To the hospital, through the inpatient prospective payment 
rate, when the patient is an inpatient; and (2) to the independent 
laboratory that bills the Medicare contractor, instead of the hospital, 
for the TC service.
    After consideration of the public comment we received we are 
finalizing the proposed policy to continue payment to independent 
laboratories for the TC of physician pathology services for fee-for-
service Medicare beneficiaries who are inpatients or outpatients of a 
covered hospital for CY 2010. Absent legislation that extends this 
provision, for services furnished after December 31, 2010, an 
independent laboratory may not bill the Medicare contractor for the TC 
of physician pathology services for fee-for-service Medicare 
beneficiaries who are inpatients or outpatients of a covered

[[Page 73385]]

hospital. Accordingly, we are finalizing the proposed revisions to 
Sec.  415.130(d) to reflect this change.

F. Sections 3105 and 10311: Extension of Ambulance Add-Ons

1. Amendment to Section 1834(l)(13) of the Act
    Section 146(a) of the MIPPA amended section 1834(l)(13)(A) of the 
Act to specify that, effective for ground ambulance services furnished 
on or after July 1, 2008 and before January 1, 2010, the ambulance fee 
schedule amounts for ground ambulance services shall be increased as 
follows:
    <bullet> For covered ground ambulance transports which originate in 
a rural area or in a rural census tract of a metropolitan statistical 
area, the fee schedule amounts shall be increased by 3 percent.
    <bullet> For covered ground ambulance transports which do not 
originate in a rural area or in a rural census tract of a metropolitan 
statistical area, the fee schedule amounts shall be increased by 2 
percent.
    Sections 3105(a) and 10311(a) of the ACA further amend section 
1834(l)(13)(A) of the Act to extend the payment add-ons described above 
for an additional year, such that these add-ons also apply to covered 
ground ambulance transports furnished on or after January 1, 2010 and 
before January 1, 2011. We stated in the CY 2011 PFS proposed rule (75 
FR 40117) that we are revising Sec.  414.610(c)(1)(i) to conform the 
regulations to this statutory requirement. This statutory requirement 
is self-implementing. A plain reading of the statute requires only a 
ministerial application of the mandated rate increase, and does not 
require any substantive exercise of discretion on the part of the 
Secretary. For further information regarding the extension of these 
payment add-ons, please see Transmittal 706 (Change Request 6972) dated 
May 21, 2010.
2. Amendment to Section 146(b)(1) of MIPPA
    Section 146(b)(1) of the MIPPA amended the designation of rural 
areas for payment of air ambulance services. The statute specified that 
any area that was designated as a rural area for purposes of making 
payments under the ambulance fee schedule for air ambulance services 
furnished on December 31, 2006, shall continue to be treated as a rural 
area for purposes of making payments under the ambulance fee schedule 
for air ambulance services furnished during the period July 1, 2008 
through December 31, 2009. Sections 3105(b) and 10311(b) of the ACA 
amend section 146(b)(1) of MIPPA to extend this provision for an 
additional year, through December 31, 2010. Accordingly, for areas that 
were designated as rural on December 31, 2006, and were subsequently 
re-designated as urban, we have re-established the ``rural'' indicator 
on the ZIP Code file for air ambulance services, effective January 1, 
2010 through December 31, 2010. We stated in the CY 2011 PFS proposed 
rule (75 FR 40118) that we are revising Sec.  414.610(h) to conform the 
regulations to this statutory requirement. This statutory requirement 
is self-implementing. A plain reading of the statute requires only a 
ministerial application of a rural indicator, and does not require any 
substantive exercise of discretion on the part of the Secretary. For 
further information regarding the extension of this MIPPA provision, 
please see Transmittal 706 (Change Request 6972) dated May 21, 2010.
3. Amendment to Section 1834(l)(12) of the Act
    Section 414 of the MMA added paragraph (12) to section 1834(l) of 
the Act, which specified that in the case of ground ambulance services 
furnished on or after July 1, 2004, and before January 1, 2010, for 
which transportation originates in a qualified rural area (as described 
in the statute), the Secretary shall provide for a percent increase in 
the base rate of the fee schedule for such transports. The statute 
requires this percent increase to be based on the Secretary's estimate 
of the average cost per trip for such services (not taking into account 
mileage) in the lowest quartile of all rural county populations as 
compared to the average cost per trip for such services (not taking 
into account mileage) in the highest quartile of rural county 
populations. Using the methodology specified in the July 1, 2004 
interim final rule (69 FR 40288), we determined that this percent 
increase was equal to 22.6 percent. As required by the MMA, this 
payment increase was applied to ground ambulance transports that 
originated in a ``qualified rural area;'' that is, to transports that 
originated in a rural area included in those areas comprising the 
lowest 25th percentile of all rural populations arrayed by population 
density. For this purpose, rural areas included Goldsmith areas (a type 
of rural census tract). Sections 3105(c) and 10311(c) of the ACA amend 
section 1834(l)(12)(A) of the Act to extend this rural bonus for an 
additional year through December 31, 2010. Therefore, as directed by 
the ACA, we are continuing to apply the rural bonus described above (in 
the same manner as in previous years), to ground ambulance services 
with dates of service on or after January 1, 2010 and before January 1, 
2011 where transportation originates in a qualified rural area.
    We stated in the CY 2011 PFS proposed rule (75 FR 40118) that we 
are revising Sec.  414.610(c)(5)(ii) to conform the regulations to this 
statutory requirement. This statutory requirement is self-implementing. 
The statute requires a 1-year extension of the rural bonus (which was 
previously established by the Secretary), and does not require any 
substantive exercise of discretion on the part of the Secretary. For 
further information regarding the extension of this rural bonus, please 
see Transmittal 706 (Change Request 6972) dated May 21, 2010.
    A summary of the comments we received and our responses are 
included below.
    Comment: Despite the extension of the ambulance payment add-ons 
under the ACA as discussed above, one commenter stated that ``it has 
become increasingly difficult to continue to operate with the 
reimbursement cuts that went into effect January 1, 2010''. They 
expressed concern that Medicare payment rates for ambulance services 
are not keeping up with inflation in the industry. They were also 
concerned that this is the first time in nearly a decade that the 
ambulance industry will be experiencing negative growth.
    Response: We are not sure what reimbursement cuts the commenter is 
referring to in 2010. As discussed above, pursuant to sections 3105 and 
10311 of the ACA, we are required to extend certain ambulance payment 
add-ons through December 31, 2010. Thus, as discussed above, we are 
revising our regulations to conform the regulations to these statutory 
requirements. To date, Congress has not extended these payment add-ons 
beyond December 31, 2010, and thus we are not authorized to provide 
these add-ons beyond December 31, 2010.
    Comment: One commenter stated that CMS must provide instructions to 
its contractors that direct them to reprocess claims paid at the 
original 2010 rates.
    Response: Several provisions of the ACA require retroactive 
adjustments to Medicare claims, including claims for ambulance 
services, because these provisions have effective dates prior to the 
ACA's enactment or shortly thereafter. We are currently developing the 
best course of action for addressing past claims that were processed 
under pre-ACA rules. The volume of claims that must be adjusted is 
unprecedented

[[Page 73386]]

and a careful process must be deployed to ensure that new claims coming 
into the Medicare program are processed timely and accurately, even as 
we address making retroactive adjustments. Once this process has been 
developed, we will provide instructions to our contractors regarding 
adjusting ambulance claims that were paid under the pre-ACA rules in 
order to apply the payment add-ons required by the ACA.
    In this final rule with comment period, we are finalizing the 
revisions to Sec.  414.610(c)(1)(i), (c)(5)(ii), and (h), as discussed 
above and in the CY 2011 PFS proposed rule, in order to conform the 
regulations to the requirements set forth in sections 3105 and 10311 of 
the ACA. We note that in Sec.  414.610(c)(1), we have made minor 
formatting revisions for clarification purposes. In addition, in Sec.  
414.610(c)(1)(i), we have corrected a typographical error that appeared 
in the CY 2011 PFS proposed rule (75 FR 40258) by changing ``December 
21'' to ``December 31'' to conform with the ACA requirements. As we 
discuss above, sections 3105 and 10311 of the ACA are self-implementing 
and do not require any substantive exercise of discretion by the 
Secretary.

G. Section 3107: Extension of Physician Fee Schedule Mental Health Add-
On

    Section 3107 of the ACA amended section 138(a)(1) of the MIPPA to 
continue the 5 percent increase in Medicare payment for specified 
mental health services through December 31, 2010. This payment increase 
was originally authorized under section 138 of the MIPPA from July 1, 
2008 until December 31, 2009. Accordingly, payment for the 24 
psychiatry CPT codes in Table 56, representing ``specified services,'' 
remains increased by 5 percent through December 31, 2010.

 Table 56--Specified Mental Health Services Subject to the Five Percent
         Increase in Medicare Payment Through December 31, 2010
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                   Office or Other Outpatient Facility
------------------------------------------------------------------------
Insight Oriented, Behavior Modifying and/or Supportive Psychotherapy:
    90804 (Individual psychotherapy, insight oriented, behavior
     modifying and/or supportive, in an office or outpatient facility,
     approximately 20 to 30 minutes face-to-face with the patient;)
    90805 (Individual psychotherapy, insight oriented, behavior
     modifying and/or supportive, in an office or outpatient facility,
     approximately 20 to 30 minutes face-to-face with the patient; with
     medical evaluation and management services)
    90806 (Individual psychotherapy, insight oriented, behavior
     modifying and/or supportive, in an office or outpatient facility,
     approximately 45 to 50 minutes face-to-face with the patient;)
    90807 (Individual psychotherapy, insight oriented, behavior
     modifying and/or supportive, in an office or outpatient facility,
     approximately 45 to 50 minutes face-to-face with the patient; with
     medical evaluation and management services)
    90808 (Individual psychotherapy, insight oriented, behavior
     modifying and/or supportive, in an office or outpatient facility,
     approximately 75 to 80 minutes face-to-face with the patient;)
    90809 (Individual psychotherapy, insight oriented, behavior
     modifying and/or supportive, in an office or outpatient facility,
     approximately 75 to 80 minutes face-to-face with the patient; with
     medical evaluation and management services)
------------------------------------------------------------------------
Interactive Psychotherapy:
    90810 (Individual psychotherapy, interactive, using play equipment,
     physical devices, language interpreter, or other mechanisms of non-
     verbal communication, in an office or outpatient facility,
     approximately 20 to 30 minutes face-to-face with the patient;)
    90811 (Individual psychotherapy, interactive, using play equipment,
     physical devices, language interpreter, or other mechanisms of non-
     verbal communication, in an office or outpatient facility,
     approximately 20 to 30 minutes face-to-face with the patient; with
     medical evaluation and management services)
    90812 (Individual psychotherapy, interactive, using play equipment,
     physical devices, language interpreter, or other mechanisms of non-
     verbal communication, in an office or outpatient facility,
     approximately 45 to 50 minutes face-to-face with the patient;)
    90813 (Individual psychotherapy, interactive, using play equipment,
     physical devices, language interpreter, or other mechanisms of non-
     verbal communication, in an office or outpatient facility,
     approximately 45 to 50 minutes face-to-face with the patient; with
     medical evaluation and management services)
    90814 (Individual psychotherapy, interactive, using play equipment,
     physical devices, language interpreter, or other mechanisms of non-
     verbal communication, in an office or outpatient facility,
     approximately 75 to 80 minutes face-to-face with the patient;)
    90815 (Individual psychotherapy, interactive, using play equipment,
     physical devices, language interpreter, or other mechanisms of non-
     verbal communication, in an office or outpatient facility,
     approximately 75 to 80 minutes face-to-face with the patient; with
     medical evaluation and management services)
------------------------------------------------------------------------
    Inpatient Hospital, Partial Hospital or Residential Care Facility
------------------------------------------------------------------------
Insight Oriented, Behavior Modifying and/or Supportive Psychotherapy:
    90816 (Individual psychotherapy, insight oriented, behavior
     modifying and/or supportive, in an inpatient hospital, partial
     hospital or residential care setting, approximately 20 to 30
     minutes face-to-face with the patient;)
    90817 (Individual psychotherapy, insight oriented, behavior
     modifying and/or supportive, in an inpatient hospital, partial
     hospital or residential care setting, approximately 20 to 30
     minutes face-to-face with the patient; with medical evaluation and
     management services)
    90818 (Individual psychotherapy, insight oriented, behavior
     modifying and/or supportive, in an inpatient hospital, partial
     hospital or residential care setting, approximately 45 to 50
     minutes face-to-face with the patient;)
    90819 (Individual psychotherapy, insight oriented, behavior
     modifying and/or supportive, in an inpatient hospital, partial
     hospital or residential care setting, approximately 45 to 50
     minutes face-to-face with the patient; with medical evaluation and
     management services)
    90821 (Individual psychotherapy, insight oriented, behavior
     modifying and/or supportive, in an inpatient hospital, partial
     hospital or residential care setting, approximately 75 to 80
     minutes face-to-face with the patient;)
    90822 (Individual psychotherapy, insight oriented, behavior
     modifying and/or supportive, in an inpatient hospital, partial
     hospital or residential care setting, approximately 75 to 80
     minutes face-to-face with the patient; with medical evaluation and
     management services)
------------------------------------------------------------------------
Interactive Psychotherapy:
    90823 (Individual psychotherapy, interactive, using play equipment,
     physical devices, language interpreter, or other mechanisms of non-
     verbal communication, in an inpatient hospital, partial hospital or
     residential care setting, approximately 20 to 30 minutes face-to-
     face with the patient;)

[[Page 73387]]

 
    90824 (Individual psychotherapy, interactive, using play equipment,
     physical devices, language interpreter, or other mechanisms of non-
     verbal communication, in an inpatient hospital, partial hospital or
     residential care setting, approximately 20 to 30 minutes face-to-
     face with the patient; with medical evaluation and management
     services)
    90826 (Individual psychotherapy, interactive, using play equipment,
     physical devices, language interpreter, or other mechanisms of non-
     verbal communication, in an inpatient hospital, partial hospital or
     residential care setting, approximately 45 to 50 minutes face-to-
     face with the patient;)
    90827 (Individual psychotherapy, interactive, using play equipment,
     physical devices, language interpreter, or other mechanisms of non-
     verbal communication, in an inpatient hospital, partial hospital or
     residential care setting, approximately 45 to 50 minutes face-to-
     face with the patient; with medical evaluation and management
     services)
    90828 (Individual psychotherapy, interactive, using play equipment,
     physical devices, language interpreter, or other mechanisms of non-
     verbal communication, in an inpatient hospital, partial hospital or
     residential care setting, approximately 75 to 80 minutes face-to-
     face with the patient;)
    90829 (Individual psychotherapy, interactive, using play equipment,
     physical devices, language interpreter, or other mechanisms of non-
     verbal communication, in an inpatient hospital, partial hospital or
     residential care setting, approximately 75 to 80 minutes face-to-
     face with the patient; with medical evaluation and management
     services)
------------------------------------------------------------------------

    Comment: One commenter supported CMS' proposal to continue the 
current 5 percent increase in Medicare payment for specified mental 
health services through December 31, 2010.
    Response: We appreciate the support of our efforts to implement 
this mandated mental health add-on provision that extends the 
expiration of the 5 percent increase in payment for specified 
outpatient mental health services from January 1, 2010 to December 31, 
2010.
    After consideration of the public comment we received, we are 
finalizing the extension of the 5 percent increase in Medicare payment 
under the PFS from January 1, 2010 to December 31, 2010.

H. Section 3108: Permitting Physician Assistants To Order Post-Hospital 
Extended Care Services

    The ACA included a self-implementing provision relating to SNFs. 
Section 3108 of the ACA adds physician assistants (PAs) to the list of 
practitioners (that is, physicians, nurse practitioners (NPs), and 
clinical nurse specialists) that can perform the required initial 
certification and periodic recertification under section 1814(a)(2)(B) 
of the Act with respect to the SNF level of care. Accordingly, we 
proposed to make appropriate revisions to include PAs in Sec.  
424.20(e)(2), in which we refer to NPs, clinical nurse specialists, and 
PAs collectively as ``physician extenders.''
    We received no comments on this proposal and, therefore, are 
finalizing this provision as proposed without further modification.

I. Section 3111: Payment for Bone Density Tests

    Section 1848(b) of the Act (as amended by section 3111 of the ACA) 
changed the payment calculation for dual-energy x-ray absorptiometry 
(DXA) services described by two specified DXA CPT codes for CYs 2010 
and 2011. This provision required payment for these services at 70 
percent of the product of the CY 2006 RVUs for these DXA codes, the CY 
2006 conversion factor (CF), and the geographic adjustment for the 
relevant payment year.
    Effective January 1, 2007, the CPT codes for DXA services were 
revised. The former DXA CPT codes 76075 (Dual energy X-ray 
absorptiometry (DXA), bone density study, one or more sites; axial 
skeleton (eg, hips, pelvis, spine)); 76076 (Dual energy X-ray 
absorptiometry (DXA), bone density study, one or more sites; 
appendicular skeleton (peripheral) (for example, radius, wrist, heel)); 
and 76077 (Dual energy X-ray absorptiometry (DXA), bone density study, 
one or more sites; vertebral fracture assessment) were deleted and 
replaced with new CPT codes 77080, 77081, and 77082 that have the same 
respective code descriptors as the predecessor codes. Section 1848(b) 
of the Act (as amended by section 3111 of the ACA) specifies that the 
revised payment applies to two of the predecessor codes (CPT codes 
76075 and 76077) and ``any succeeding codes,'' which are, in this case, 
CPT codes 77080 and 77082.
    Section 1848(b) (as amended by section 3111 of the ACA) revised the 
payment for CPT codes 77080 and 77082 during CY 2010 and CY 2011. We 
have provided payment in CY 2010 under the PFS for CPT codes 77080 and 
77082 at the specified rates. (Additional information regarding the CY 
2010 payment rates for these services is available in CR 6973, 
published May 10, 2010.)
    Because the statute specifies a payment amount for these services 
as described previously, we proposed to impute RVUs for CY 2011 that 
would provide the specified payment amount for these services when 
multiplied by the CY 2011 CF. Specifically, we divided the payment 
amount based on the statutory requirements by the CY 2011 CF for the 
proposed rule and distributed the imputed total RVUs across the work, 
PE, and malpractice components proportionately to their CY 2006 
distribution. Therefore, these imputed RVUs for CPT codes 77080 and 
77082 were displayed in Addendum B to the CY 2011 proposed rule.
    Comment: Many commenters supported the ACA provision requiring a 
specific payment amount for DXA services. Several commenters requested 
that CMS include in the final rule a sample payment calculation for CPT 
codes 77080 and 77082 to clarify the calculation for these two codes 
and to facilitate proper processing of claims by Medicare contractors. 
In addition, one commenter requested that CMS recalculate any imputed 
RVUs for DXA services based on the final conversion factor reflected in 
the CY 2011 PFS final rule with comment period.
    Response: We appreciate the comments we received on our proposal. 
We note that any changes to the proposed rule calculation that resulted 
from changes between proposed rule values and final rule values have 
been incorporated in the final determination of the RVUs for these 
codes upon which PFS payment is based. That said, we are updating our 
calculation for this final rule with comment period to reflect the 
final CY 2011 conversion factor applicable under current law that is 
discussed in section II.H.1.b. of this final rule with comment period. 
A sample payment calculation for CPT code 77080 is included below.
Sample CY 2011 Calculation of Medicare Payment Rates for CPT Code 77080 
(CY 2006 CPT Code 76075)
    As discussed above, section 1848(b) of the Act (as amended by 
section 3111 of

[[Page 73388]]

the ACA) required us to provide payment for CPT code 77080 at 70 
percent of the product of the CY 2006 RVUs for the specified DXA code, 
the CY 2006 CF, and the geographic adjustment for the relevant payment 
year in which the service is furnished.
    The CY 2006 RVUs for CPT code 76075 (77080) can be found in Table 
57 below.

                                           Table 57--CY 2006 RVUs for CPT Code 77080 (CY 2006 CPT code 76075)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               2006            2006                            2006
            CY 2006 CPT Code                   Mod           CY 2006 Short  descriptor    Physician work    Nonfacility   2006  Facility    Malpractice
                                                                                                RVUs          PE RVUs         PE RVUs          RVUs
--------------------------------------------------------------------------------------------------------------------------------------------------------
76075..................................  26.............  Dxa bone density, axial.......            0.30            0.10            0.10            0.01
76075..................................  TC.............  Dxa bone density, axial.......            0.00            3.10              NA            0.17
76075..................................  ...............  Dxa bone density, axial.......            0.30            3.20              NA            0.18
--------------------------------------------------------------------------------------------------------------------------------------------------------

    First, we multiplied the CY 2006 RVUs listed in Table 57 above by 
the CY 2006 CF, which was $37.8975. These results are shown in Table 58 
below.

                                         Table 58--CY 2006 RVUs for CPT Code 77080 Multiplied by the CY 2006 CF
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   CY 2006            CY 2006       CY 2006  Facility       CY 2006
                     CY 2006 CPT Code                             Mod           Physician work    Nonfacility  PE     PE RVUs*  2006      Malpractice
                                                                                RVUs* 2006 CF      RVUs*  2006 CF           CF           RVUs* 2006 CF
--------------------------------------------------------------------------------------------------------------------------------------------------------
76075....................................................                 26             $11.37              $3.79              $3.79              $0.38
76075....................................................                 TC                 NA             117.48                 NA               6.44
76075....................................................  .................              11.37             121.27                 NA               6.82
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Second, we took 70 percent of the result to arrive at the CY 2011 
national payment amounts for each component of the CPT code. These 
results are shown in Table 59 below.

                          Table 59--CY 2011 National Payment Amounts for CPT Code 77080
----------------------------------------------------------------------------------------------------------------
                                           CY 2011            CY 2011                               CY 2011
       CY 2006 CPT Code         Mod     Physician work     Nonfacility PE    CY 2011 Facility     Malpractice
                                        payment amount     payment amount   PE payment amount    payment amount
----------------------------------------------------------------------------------------------------------------
76075........................  26...              $7.96              $2.65              $2.65              $0.27
76075........................  TC...                 NA              82.24                 NA               4.51
76075........................  .....               7.96              84.89                 NA               4.78
----------------------------------------------------------------------------------------------------------------

    Third, in order to determine the CY 2011 RVUs for CPT code 77080 
(76075) that are displayed in Addendum B to this final rule with 
comment period, we divided the CY 2011 national payment amounts shown 
in Table 59 by the CY 2011 CF (discussed in section II.G.1. of this 
final rule with comment period) of $25.5217. These results are shown in 
Table 60 and in Addendum B to this final rule with comment period.
    We note that RVUs under the PFS are generally resource-based and, 
therefore, are typically unaffected by changes to the CF. However, 
because the statute essentially sets a fixed payment amount for DXA 
services, the CF directly determines the RVUs for CPT code 77080 as we 
must impute RVUs for the DXA services in CY 2011. Therefore, when there 
are changes to the PFS CF, we must make corresponding changes to the 
RVUs for CPT codes 77080 and 77082 for CY 2010 and CY 2011 in order to 
maintain the fixed national payment amount specified in the statute, 
which is then subject to geographic adjustment as indicated below.

                                    Table 60--CY 2011 RVUs for CPT Code 77080
                         (NOTE: Calculated using the current law CY 2011 CF of $25.5217)
----------------------------------------------------------------------------------------------------------------
                                                      CY 2011         CY 2011         CY 2011         CY 2011
          CY 2011 CPT Code               Mod         Physician      Nonfacility    Facility  PE     Malpractice
                                                    work  RVUs        PE RVUs          RVUs            RVUs
----------------------------------------------------------------------------------------------------------------
77080..............................  26.........            0.31            0.10            0.10            0.01
77080..............................  TC.........            0.00            3.22              NA            0.18
77080..............................  ...........            0.31            3.32              NA            0.19
----------------------------------------------------------------------------------------------------------------

    Finally, in order to provide payment for a specific DXA service 
furnished by a practitioner, the RVUs listed in Table 60 would be 
multiplied by the CY 2011 CF and subject to geographic adjustment based 
on the CY 2011 GPCIs that apply

[[Page 73389]]

to the location where the service is furnished.
    In summary, after consideration of the public comments we received, 
we are finalizing our proposed CY 2011 payment methodology for CPT 
codes 77080 and 77082 in accordance with the section 1848(b) of the Act 
(as amended by section 3111 of the ACA). In CY 2011, payment for CPT 
codes 77080 and 77082 will be made at 70 percent of the product of the 
CY 2006 RVUs for the specified DXA codes, the CY 2006 CF, and the CY 
2011 geographic adjustment.

J. Section 3114: Improved Access for Certified Nurse-Midwife Services

    Section 1833(a)(1)(K) of the Act (as amended by section 3114 of the 
ACA) increased the amount of Medicare payment made under the PFS for 
certified nurse-midwife (CNM) services. Currently, section 
1833(a)(1)(K) of the Act specifies that the payment amount for CNM 
services is 80 percent of the lesser of the actual charge or 65 percent 
of the PFS amount for the same service furnished by a physician. Under 
section 1833(a)(1)(K) of the Act (as amended by section 3114 of the 
ACA), effective for services furnished on or after January 1, 2011, 
Medicare payment for CNM services is increased to 100 percent of the 
PFS amount for the same service furnished by a physician (or 80 percent 
of the actual charge if that is less). We proposed to revise our 
regulations at Sec.  414.54 (Payment for certified nurse-midwives' 
services) accordingly to reflect the increased payment for CNM services 
effective for services furnished on or after January 1, 2011.
    Although CNMs are currently paid under Medicare Part B for their 
professional services, there is no mention of CNMs under the regulatory 
provision that lists the providers and suppliers of services to whom 
payment is made under the Medicare Part B program. Accordingly, we 
proposed to make a technical revision to Sec.  410.150 (To whom payment 
is made) to specify that Medicare Part B pays CNMs for professional 
services in all settings, as well as services and supplies furnished 
incident to those services.
    CNMs are authorized under the statute to be paid directly for 
services that they are legally authorized to furnish under State law 
and that are of the type that would otherwise be covered if furnished 
by a physician or incident to a physician's services. Additionally, 
there is no requirement for physician oversight or supervision of CNMs. 
Accordingly, CNMs are authorized to personally furnish diagnostic tests 
that fall under their State scope of practice without regard to the 
levels of physician supervision required under the diagnostic tests 
benefit. Therefore, we proposed to revise Sec.  410.32(b)(2) 
(Exceptions to the levels of physician supervision required for 
diagnostic tests) to include CNMs who furnish diagnostic tests that 
fall within their State scope of practice.
    Comment: Several commenters welcomed the proposed increase in 
Medicare payment for CNM services effective January 1, 2011, stating 
that this policy would provide equitable payment under Medicare to 
CNMs. These commenters claimed that Medicare payment to CNMs at 100 
percent of the Medicare Part B PFS amount that would be paid to a 
physician (or 80 percent of the actual charge if that is less) 
represents policy reform resulting from advocacy over a number of 
years. The commenters believe that the Medicare payment increase will 
enable CNMs across the nation to expand services to women with 
disabilities of childbearing age, as well as to senior women who are 
Medicare patients. The commenters noted that previously the 35 percent 
payment differential between CNMs and other health professionals 
furnishing similar services limited the expansion of CNM services to 
Medicare patients. Additionally, the commenters asserted that CNMs 
serve a critical role as primary care providers for women throughout 
their lifespan and claimed that regulatory changes to unleash the 
potential of this group of providers were critically needed to fill the 
gaps in primary care.
    The commenters also supported CMS' proposed technical revisions to 
Sec.  410.150 and Sec.  410.32. The proposed changes to Sec.  410.150 
would include CNMs as a supplier of services to whom Medicare payment 
can directly be made for their professional services in all settings 
and for services and supplies furnished incident to their professional 
services. Additionally, the commenters believe that the proposed 
changes to Sec.  410.32 would clarify that when CNMs personally perform 
diagnostic tests, these health professionals are not subject to 
physician supervision for payment of diagnostic tests.
    Response: We appreciate the commenters' support for implementing 
the new statutory provision that increases Medicare Part B payment for 
CNM services, effective January 1, 2011, from 80 percent of the lesser 
of the actual charge or 65 percent of the PFS amount that would be paid 
to a physician to 100 percent of the Medicare Part B PFS amount that 
would be paid to a physician or 80 percent of the actual charge if that 
is less.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to increase the Medicare Part B payment 
amount for CNM services under the PFS from 65 percent of the PFS amount 
that would be paid to a physician to 100 percent of the PFS amount that 
would be paid to a physician, or 80 percent of the actual charge if 
that is less. We are also finalizing our proposed modification to Sec.  
414.54 to reflect this statutory change, with clarification to state 
that the amount paid to a CNM may not exceed 100 percent of the PFS 
amount that would be paid to a physician for the same service furnished 
on or after January 1, 2011. In addition, we are finalizing, without 
modification, our proposed revisions to Sec.  410.32 and Sec.  410.150.

K. Section 3122: Extension of Medicare Reasonable Costs Payments for 
Certain Clinical Diagnostic Laboratory Tests Furnished to Hospital 
Patients in Certain Rural Areas

    Section 416 of the MMA established a reasonable cost payment for 
outpatient clinical diagnostic laboratory tests furnished by hospitals 
with fewer than 50 beds that are located in qualified rural areas for 
cost reporting periods beginning during the 2-year period beginning on 
July 1, 2004.
    Section 105 of the Tax Relief and Health Care Act of 2006 (Pub. L. 
109-432) (TRHCA) extended the 2-year period in section 416(b) of the 
MMA for an additional cost-reporting year.
    Section 107 of the Medicare, Medicaid, and SCHIP Extension Act of 
2007 (Pub. L. 110-173) (MMSEA) extended the time period for cost 
reporting periods beginning on July 1, 2004 and ending on June 30, 
2008. For some hospitals with cost reports that began as late as June 
30, 2008, this extension affected services performed as late as June 
29, 2009, because this was the date those cost reports would have 
closed.
    Section 3122 of the ACA reinstitutes reasonable cost payment for 
clinical diagnostic laboratory tests performed by hospitals with fewer 
than 50 beds that are located in qualified rural areas as part of their 
outpatient services for cost reporting periods beginning on or after 
July 1, 2010 through June 30, 2011. For some hospitals with cost 
reports that begin as late as June 30, 2011, this reinstitution of 
reasonable cost payment could affect services performed as late as June 
29, 2012, because this is the date those cost reports will close.
    We received no comments on this proposal and therefore are 
finalizing this provision without modification.

[[Page 73390]]

L. Section 3134: Misvalued Codes Under the Physician Fee Schedule

    Section 1848(c)(2)(K) of the Act (as added by section 3134 of the 
ACA) required the Secretary to periodically review and identify 
potentially misvalued codes and make appropriate adjustments to the 
relative values of those services identified as being potentially 
misvalued. Section 1848(c)(2)(K) of the Act (as added by section 3134 
of the ACA) further specified that the Secretary may use existing 
processes to receive recommendations on the review and appropriate 
adjustment of potentially misvalued services, as well as conduct 
surveys or implement other data collection activities, studies, or 
other analyses as the Secretary determines to be appropriate to 
facilitate the review and appropriate adjustment of the relative values 
of potentially misvalued codes. Finally, section 1848(c)(2)(L) of the 
Act (as added by section 3134 of the ACA) provided that the Secretary 
shall establish a process to validate relative value units under the 
PFS.
    We note that over the past several years, we have been working with 
the AMA RUC to identify approaches to addressing the issue of 
potentially misvalued services. Our CY 2011 approaches to categories of 
potentially misvalued codes are discussed in section II.C. of this 
final rule with comment period.

M. Section 3135: Modification of Equipment Utilization Factor for 
Advanced Imaging Services

1. Adjustment in Practice Expense To Reflect Higher Presumed 
Utilization
    Section 1848(b)(4)(C) of the Act (as added by section 3135(a) of 
the ACA) adjusted the utilization rate beginning in CY 2011 for 
expensive diagnostic imaging equipment to a 75 percent assumption in 
the methodology for establishing the PE of the RVUs of procedures that 
use this equipment.
    In the CY 2010 PFS final rule with comment period (74 FR 61755), we 
finalized a policy to increase the utilization rate to 90 percent for 
expensive diagnostic equipment priced at more than $1 million (CT and 
MRI scanners), providing for a 4-year transition to the 90 percent 
utilization rate from the CY 2009 utilization rate of 50 percent. 
Therefore, in CY 2010 we were transitioning to a 90 percent equipment 
utilization rate assumption, applying a 25/75 blend of the new and old 
PE RVUs, respectively, for the associated procedures. Section 
1848(b)(4)(C) of the Act (as added by section 3135(a) of the ACA) does 
not provide for any further transition and, therefore, we are assigning 
a 75 percent equipment utilization rate assumption to CT and MRI 
scanners, effective January 1, 2011. Under section 1848(b)(4) of the 
Act (as amended by section 3135(a) of the ACA), this change in the 
equipment utilization rate assumption from CY 2010 to CY 2011 is not 
budget neutral under the PFS. The equipment utilization rate assumption 
remains at 50 percent for all other equipment included in the PFS PE 
methodology. Further discussion of our final CY 2011 policies regarding 
the equipment utilization rate assumption can be found in section 
II.A.3.a. of this final rule with comment period.
2. Adjustment in Technical Component ``Discount'' on Single-Session 
Imaging to Consecutive Body Parts
    Section 1848(b)(4)(D) of the Act (as added by section 3135(a) of 
the ACA) increased the established PFS multiple procedure payment 
reduction (MPPR) for the TC of certain single-session imaging services 
to consecutive body areas from 25 to 50 percent, effective July 1, 
2010, and section 1848(c)(2)(B)(v)(VI) of the Act (as added by section 
3135(b) of the ACA) exempted this percent change from the PFS budget 
neutrality provision. This policy is discussed in detail in section 
II.C.4 of this final rule with comment period.
    Effective January 1, 2006, we adopted an MPPR of 25 percent for the 
TC of certain diagnostic imaging procedures, applied to the second and 
subsequent services when more than one service in one of 11 imaging 
families, defined by imaging modality and contiguous body area, is 
furnished in a single session (70 FR 70261 through 70263). The 
established imaging MPPR applies to TC services and to the TC of global 
services. It does not apply to PC services or to the PC of global 
services. Under this policy, full payment was made for the TC of the 
highest priced procedure, while payment was made at 75 percent of the 
TC for each additional procedure. As of July 1, 2010 and continuing in 
CY 2011, payment is made at full payment for the TC of the highest 
paying procedure, while at 50 percent of the TC for each additional 
procedure, consistent with the new statutory provision. Further 
discussion of the MPPR policies affecting nonsurgical PFS services can 
be found in section II.C.4. of this final rule with comment period.

N. Section 3136: Revision for Payment for Power-Driven Wheelchairs

1. Payment Rules for Power Wheelchairs
    Durable medical equipment (DME) is defined at section 1861(n) of 
the Act and includes wheelchairs necessary for use in the patient's 
home. Section 1861(n) of the Act provides that wheelchairs included in 
the definition of DME ``may include a power-operated vehicle that may 
be appropriately used as a wheelchair, but only where the use of such a 
vehicle is determined to be necessary on the basis of the individual's 
medical and physical condition.'' The general Medicare payment rules 
for DME are set forth in section 1834(a) of the Act and 42 CFR part 
414, subpart D of our regulations. Section 1834(a)(1) of the Act and 
Sec.  414.210(a) of our regulations establish that the Medicare payment 
for a DME item is generally equal to 80 percent of either the lower of 
the actual charge or the fee schedule amount for the item less any 
unmet Part B deductible. The beneficiary coinsurance is generally equal 
to 20 percent of either the lower of the actual charge or the fee 
schedule amount for the item once the deductible is met.
    For Medicare payment purposes, power wheelchairs or power-driven 
wheelchairs are classified under various HCPCS codes based on the level 
of performance and functional characteristics of each power wheelchair 
that accommodate the specific needs of patients. Power wheelchairs 
classified under performance Groups 1 through 3 are covered under 
Medicare for use in the patient's home. Power wheelchair groups were 
established in 2006 with the release of the Power Mobility Device 
Coding Guidelines published by the Durable Medical Equipment Regional 
Carriers (DMERCs) currently called the Durable Medical Equipment 
Medicare Administrative Contractors (DME MACs). The DMEPOS quality 
standards define certain power wheelchairs falling as ``complex, 
rehabilitative'' power wheelchairs, and these ``complex, 
rehabilitative'' power wheelchairs are treated as a separate product 
category for the purpose of implementing the DMEPOS Competitive Bidding 
Program (CBP) mandated by section 1847(a) of the Act. In both the 
quality standards and the DMEPOS CBP, complex, rehabilitative power 
wheelchairs are defined or identified as power wheelchairs classified 
as Group 2 power wheelchairs with power options that can accommodate 
rehabilitative features (for example, tilt in space) or Group 3 power 
wheelchairs. Section

[[Page 73391]]

1847(a)(2)(A) of the Act, as amended by section 154(a)(1)(B) of MIPPA, 
excludes complex, rehabilitative power wheelchairs classified within 
Group 3 from the DMEPOS CBP.
    With the exception of power wheelchairs furnished during calendar 
year 1990, power wheelchairs have been paid under the capped rental 
category of DME since January 1, 1989. The payment rules for capped 
rental DME are provided at section 1834(a)(7) of the Act and Sec.  
414.229 of our regulations. Payment for these items is generally on a 
monthly rental basis, with rental payments capped at 13 months. After a 
13-month period of continuous use during which rental payments are 
made, the statute and regulations require that the supplier transfer 
title to the wheelchair to the beneficiary. In addition, effective for 
power wheelchairs furnished on or after January 1, 1991, section 
1834(a)(7) of the Act, as amended by section 4152(c)(2)(D) of the 
Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508), mandates 
that the supplier of the power wheelchair offer the patient the option 
to purchase rather than rent the item. Since 1991, over 95 percent of 
Medicare beneficiaries have exercised this lump-sum purchase option for 
power wheelchairs.
    Consistent with payment for other DMEPOS items, Sec.  414.210(f)(1) 
permits payment for replacement of capped rental DME if the item has 
been in continuous use for the equipment's reasonable useful lifetime 
or is lost, stolen, or irreparably damaged. Section 414.210(f)(1) 
states the reasonable useful lifetime for equipment is determined 
through program instructions. In the absence of CMS program 
instructions, the carrier may determine the reasonable useful lifetime 
for equipment, but in no case can it be less than 5 years. Computation 
is based on when the equipment is delivered to the beneficiary, not the 
age of the equipment. If the beneficiary elects to obtain a new capped 
rental item after the reasonable useful lifetime, a new 13-month rental 
payment period would begin for the new equipment in accordance with the 
requirements of Sec.  414.229.
    Pursuant to section 1834(a)(7)(A)(i)(II) of the Act and Sec.  
414.229(b), the current capped rental fee schedule amounts applicable 
to wheelchairs for months 1 thru 3 of the 13-month capped rental period 
are calculated to pay 10 percent of the purchase price recognized in 
the statute for the item. The rental fee schedule amounts for months 4 
through 13 of the 13-month capped rental period are calculated to pay 
7.5 percent of the purchase price for the item. The purchase price is 
determined consistent with section 1834(a)(8) of the Act and Sec.  
414.229(c) and Sec.  414.220(e) and (f) and is calculated based on 
average allowed payments for the purchase of new items, and is updated 
by the covered item update, as required by section 1834(a)(14) of the 
Act and Sec.  414.229(d). The purchase fee schedule amount for new 
power wheelchairs acquired on a lump sum purchase basis is 100 percent 
of the purchase price calculated for the item, as discussed above.
2. Revision of Payment Amounts for Power Wheelchairs
    Section 3136(a) of the ACA made several changes to section 
1834(a)(7)(A) of the Act. Section 3136(a)(1) of the ACA amends section 
1834(a)(7)(A) of the Act by adding a new subclause (III) to section 
1834(a)(7)(A)(i) of the Act. Subclause (III) revises the capped rental 
fee schedule amounts for all power wheelchairs, modifying the current 
payment structure of 10 percent of the purchase price for months 1 
through 3 and 7.5 percent of that purchase price for months 4 through 
13 that was previously discussed.
    The rental fee schedule amount for months 1 through 3 of the 13-
month capped rental period for power wheelchairs is revised to 15 
percent of the purchase price for the item. The rental fee schedule 
amounts for months 4 through 13 of the 13-month capped rental period 
for power wheelchairs is revised to 6 percent of the purchase price for 
the item. The statutory provision does not change the methodologies 
used to calculate and subsequently update the purchase price of power 
wheelchairs. Therefore, the methodology described previously for 
determining the purchase price amounts will continue to apply.
    Pursuant to section 3136(c) of the ACA, the changes made by section 
3136(a) of the ACA apply to power-driven wheelchairs furnished on or 
after January 1, 2011. Furthermore, as discussed previously, section 
3136(c)(2) of the ACA states that the changes made by section 3136(a) 
of the ACA, including the new payment structure for power wheelchairs, 
do not apply to payment made for items and services furnished pursuant 
to contracts entered into under section 1847 of the Act for the DMEPOS 
CBP prior to January 1, 2011, which applies to the implementation of 
the first round of the DMEPOS CBP. As a result, contract suppliers 
furnishing power wheelchairs in competitive bidding areas (CBA) 
pursuant to contracts entered into prior to January 1, 2011, as part of 
Round 1 of the DMEPOS CBP will continue to be paid based under the 
current regulations using 10 percent of the purchase price for months 1 
through 3 and 7.5 percent for each of the remaining months. We did not 
receive public comment on our proposed changes to Sec.  414.202, Sec.  
414.229, and Sec.  414.408, and therefore we are finalizing our 
proposals without modification.
3. Elimination of Lump Sum Payment for Standard Power Wheelchairs
    Section 3136(a)(2) of the ACA further amends section 
1834(a)(7)(A)(iii) of the Act by inserting the term ``complex, 
rehabilitative'' before the term ``power-driven wheelchairs.'' As a 
result, section 1834(a)(7)(A)(iii) of the Act now extends the lump sum 
purchase option only to complex, rehabilitative power wheelchairs. As 
discussed above, ``complex, rehabilitative'' power wheelchairs are 
power wheelchairs that are classified as: (1) Group 2 power wheelchairs 
with power options that can accommodate rehabilitative features (for 
example, tilt in space), or (2) Group 3 power wheelchairs. We consider 
all other power wheelchairs to be standard power wheelchairs. 
Therefore, we proposed to interpret the language ``complex, 
rehabilitative'' in section 1834(a)(7)(A) of the Act consistent with 
this longstanding classification. As a result, the changes made by 
section 3136 of the ACA to section 1834(a)(7)(A)(iii) of the Act 
eliminate the lump sum purchase option for standard power wheelchairs.
    Pursuant to section 3136(c) of the ACA, the changes made to section 
1834(a)(7)(A)(iii) of the Act apply to power-driven wheelchairs 
furnished on or after January 1, 2011. The lump sum purchase payment 
option will no longer extend to standard power driven wheelchairs 
furnished on or after January 1, 2011.
    Furthermore, section 3136(c)(2) of the ACA states that the changes 
made by section 3136(a) of the ACA, including the limitation of the 
lump sum purchase payment option to complex, rehabilitative power 
wheelchairs, do not apply to payment made for items and services 
furnished pursuant to contracts entered into under section 1847 of the 
Act for the DMEPOS CBP prior to January 1, 2011, pursuant to the 
implementation of the first round of the DMEPOS CBP. As a result, 
contract suppliers furnishing power wheelchairs in CBAs in accordance 
with contracts entered into prior to January 1, 2011 as part of Round 1 
of the DMEPOS CBP must continue to offer beneficiaries the lump sum 
purchase option for all power wheelchairs.

[[Page 73392]]

    We proposed changes to Sec.  414.229 and Sec.  414.408 to reflect 
our interpretation of these statutory requirements.
    Comment: Several commenters stated that the changes regarding the 
lump sum payment option will make it more difficult for many suppliers 
to furnish standard power wheelchairs because suppliers usually 
purchase wheelchairs from manufacturers using the full lump sum 
payments. One commenter stated that some homecare providers will need 
to arrange for loans to obtain sufficient finances to purchase 
wheelchairs that are then paid for by the Medicare program and 
beneficiaries over the longer 1-month payment period and if the recent 
capital markets for loans do not improve, CMS should consider a delay 
in implementing our regulations.
    Response: While we recognize that the regulatory changes require 
adjustments by standard power wheelchair suppliers, we do not believe 
that section 3136(a)(2) of the ACA provides flexibility to delay the 
implementation of this provision. Moreover, these concerns are related 
to the financial relationships developed by manufacturers of standard 
power wheelchairs with the suppliers who furnish patients with 
wheelchairs, which is not within the purview of our regulations. As we 
explained in the proposed rule (75 FR 40121), power wheelchairs have 
been paid under the capped rental category of DME since 1989, and the 
option to purchase in addition to the rental payment method was 
established in 1991. Thus, section 3136(a)(2) of the ACA and the 
regulatory changes implementing that provision are not establishing a 
new rental payment methodology. We expect suppliers will be able to 
adapt expeditiously to furnishing standard power wheelchairs under a 
rental payment structure. Finally, we believe that there may be some 
financial benefit to suppliers as a result of this change. As is the 
case for manual wheelchairs furnished to Medicare beneficiaries, 
suppliers of standard power wheelchairs furnished to Medicare 
beneficiaries on or after January 1, 2011, may be able to rent these 
items to multiple beneficiaries if the beneficiaries use the items for 
fewer than 13 continuous months. In many cases where a power wheelchair 
is rented to multiple beneficiaries, the supplier will receive more 
than 13 monthly payments for the item, including payments based on 15 
percent of the statutory purchase price for the first 3 months that 
each beneficiary rents the item.
    Comment: Several commenters raised a concern that the elimination 
of the lump sum payment method will cause a significant increase in 
monthly rental claims submitted for standard power wheelchairs; 
thereby, increasing administrative claims processing costs. One 
commenter noted that in the event claims processing contractors have 
difficulty processing claims, we did not discuss how to apply interest 
rates for Medicare overpayments or underpayments.
    Response: We appreciate this comment regarding the efficient 
implementation of the provision of section 3136 of the ACA, which 
includes a requirement that payment for all standard power wheelchairs 
be made on a monthly rental basis effective January 1, 2011. We are 
working with our contractors to make the necessary changes to the 
claims processing systems in order to be ready to process additional 
standard power wheelchair rental claims with dates of service on or 
after January 1, 2011. Also, we have coordinated within CMS and our 
partners to update educational materials for our beneficiaries. With 
regard to overpayments or underpayments, these issues will be handled 
in the same manner as overpayments or underpayments are handled for 
capped rental DME in general.
    Comment: Several commenters stressed the need to clarify the 
conditions of payment requirements for power wheelchairs that are 
rented after a break in service or change in patient condition. These 
commenters stated that because the majority of power wheelchairs have 
been paid under the lump sum purchase payment method, physicians and 
suppliers performed the documentation requirements set forth in Sec.  
410.38(c)(2) prior to initial delivery of the standard power 
wheelchairs. These documentation requirements specify the physician or 
treating practitioner must conduct a face-to-face examination of the 
patient to determine that the power wheelchair is medically necessary 
before it is dispensed to the beneficiary. In addition, the supplier 
must perform an on-site evaluation of the patient's home to develop 
supporting documentation for the initial delivery and payment for a 
power wheelchair. As a result of the elimination of the lump sum 
purchase option for standard power wheelchairs, more power wheelchairs 
will be paid under the rental payment method after January 1, 2011. 
Thus, the commenters urged that the regulations should clarify whether 
a new face-to-face examination and home evaluation must be performed 
when a break in service of greater than 60 days occurs.
    Response: This comment is outside the scope of the CY 2011 PFS 
proposed rule. We did not propose any changes to the conditions of 
payment set forth in Sec.  410.28(c)(2). We again note, however, that 
payments on a rental basis for capped rental items, including power 
wheelchairs, have been made since January 1, 1989. The payment and 
coverage requirements identified by the commenters for power mobility 
devices (PMDs), including power-operated vehicles or scooters and 
standard and complex, rehabilitative power wheelchairs, must be met 
before the item is furnished to the beneficiary on either a purchase or 
rental basis. Section 3136 of the ACA, which in part eliminates the 
purchase option for standard power wheelchairs furnished on or after 
January 1, 2011, has no impact on these requirements. They remain in 
effect for all PMDs furnished to Medicare beneficiaries on a purchase 
or rental basis, including rented power wheelchairs. Payment for capped 
rental items is limited to 13 months of continuous use, defined at 
Sec.  414.230. Section 414.230(d) sets forth the criteria for a new 
rental period: during this 13-month capped rental period, a break in 
use of the equipment for more than 60 continuous days, plus the days 
remaining in the rental month in which use ceases, would result in the 
start of a new period of continuous use and a new 13-month capped 
rental period if the supplier submits a new prescription, new medical 
necessity documentation, and documentation that describes the reason 
for the interruption in use and documents that medical necessity in the 
prior rental episode ended. Section 3136 of the ACA has no impact on 
the requirements set forth in Sec.  414.230 regarding continuous use of 
capped rental items.
    Comment: One commenter requested a revision to the billing 
modifiers for Advance Beneficiary Notice of Noncoverage (ABN) to 
utilize when a supplier bills for furnishing a wheelchair that has 
features beyond what is covered by Medicare.
    Response: This comment is outside the scope of the CY 2011 PFS 
proposed rule because we did not propose any changes to the billing 
modifiers for ABNs. Nevertheless, we encourage interested parties to 
follow our HCPCS editorial process and submit coding recommendations by 
following the instructions found at our Web site at http://www.cms.gov/MedHCPCSGenInfo.
    Comment: One commenter requested clarification on whether the 
beneficiary retains ownership of power wheelchair associated 
accessories (for example

[[Page 73393]]

elevated leg rests or adjustable height arms rests) during or after the 
rental period. These associated accessories are not included with the 
rental of the standard power wheelchair base equipment.
    Response: Payment for accessories for power wheelchairs that are 
not included in the basic equipment package for the wheelchair and are 
separately payable items under the inexpensive or routinely purchased 
(IRP) DME category is made on either a rental or lump sum purchase 
basis. If payment is made on a lump sum basis to the supplier for an 
associated accessory, then the beneficiary owns the accessory for use 
with the standard power wheelchair during and after the 13-month 
wheelchair rental period. If payment is made on a rental basis for an 
accessory in the IRP category and it appears that the beneficiary will 
use the wheelchair for the full 13-month capped rental period, the 
beneficiary may elect to purchase the accessory, and the Medicare 
allowed payment for purchase of the accessory would be equal to the 
lowed of the actual charge or the purchase fee schedule amount, less 
cumulative paid rental amounts. Title to an accessory for a power 
wheelchair that is not included in the basic equipment package for the 
wheelchair and is a separately payable item under the capped rental DME 
category is transferred to the beneficiary following the 13-month 
capped rental period.
    Comment: One commenter requested information on how to apply the 
calculation of the reasonable useful lifetime to a standard power 
wheelchair which had been in continuous use for 10 months prior to 
being returned to a supplier and then after appropriate cleaning and 
servicing is placed with a different beneficiary. Also, the commenter 
requested how to apply the calculation of the reasonable useful 
lifetime if the standard power wheelchair is assigned to several 
beneficiaries under similar circumstances and remains in continuous use 
beyond 13 months because of use by multiple beneficiaries prior to 
title being transferred to the last beneficiary.
    Response: The regulations applicable to calculation of the 
reasonable useful lifetime are located at Sec.  414.210(f) and state 
that computation of the reasonable useful lifetime of equipment is 
based on when the equipment is delivered to the beneficiary, not the 
age of the equipment. At the end of 13 months rental use of a DME item, 
the supplier must transfer title to the item, such as a power 
wheelchair, to the beneficiary in accordance with Sec.  414.229(f)(2). 
If, following transfer of title, it is determined that the power 
wheelchair will not last for the entire reasonable useful lifetime, the 
supplier is required by Sec.  414.210(e)(4) to replace the equipment at 
no cost to the beneficiary or the Medicare program.
    Comment: One commenter expressed concern that the proposed changes 
to Sec.  414.408(f)(1) will force suppliers to convert to a rental 
payment model of furnishing standard power wheelchairs prior to the end 
of the 3 year contract period for DMEPOS Round 1 Rebid CBAs although 
their bids included an assumption that the lump sum payment method 
would continue into subsequent years. Another commenter believed 
inequalities occur by continuing the option of a lump sum payment 
method for standard power wheelchairs in Round 1 Rebid CBAs but not in 
other geographic areas.
    Response: Section 3136(c)(2) of the ACA states that the change made 
by section 3136(a) of the ACA, eliminating the lump sum payment method 
for standard power wheelchairs, does not apply to payment made for 
items and services furnished pursuant to contracts entered into under 
section 1847 of the Act for the DMEPOS CBP prior to January 1, 2011 
pursuant to the implementation of the first round of the DMEPOS 
competitive bidding program (CBP). We noted that although these changes 
will not apply to payment made for items and services furnished 
pursuant to the contracts awarded following the Round 1 Rebid, contract 
suppliers must prepare for the elimination of the lump sum payment 
method for standard power wheelchairs that will take effect at the end 
of the 3 year contract period. When the Round 1 contracts are 
recompeted, suppliers will submit bids for furnishing power wheelchairs 
on a rental only basis.
    Comment: One commenter suggested Medicare should consider 
implementing a serial number tracking program for power wheelchairs to 
improve anti-fraud efforts.
    Response: This comment is outside the scope of the CY 2011 PFS 
proposed rule. We appreciate the commenter's suggestion and will 
consider studying the feasibility of a nationwide serial tracking 
program for power wheelchairs for future rulemaking efforts. We were 
informed that nationwide there are more than 106 styles of power 
wheelchairs available from 22 manufacturers. A nationwide serial 
tracking program would require significant program resources and 
stakeholder input which we would need to conduct prior to rulemaking.
    After considering the comments received, we are adopting, without 
modification, our proposed changes to Sec.  414.229 and Sec.  414.408 
that eliminate the lump sum payment option for standard power 
wheelchairs.

O. Section 3139: Payment for Biosimilar Biological Products

    Section 3139 of the ACA amends section 1847A of the Act to provide 
for Medicare payment of biosimilar biological products using the 
average sale price (ASP) methodology.
    Section 1847A(c)(6)(H) of the Act, as added by the ACA, defines a 
biosimilar biological product as a biological product approved under an 
abbreviated application for a license of a biological product that 
relies in part on data or information in an application for another 
biological product licensed under section 351 of the Public Health 
Service Act (PHSA). The reference biological product for a biosimilar 
biological product is defined by the statute as the biological product 
licensed under such section 351 of the PHSA that is referred to in the 
application of the biosimilar biological product.
    The ACA also amends section 1847A(b) of the Act by adding paragraph 
8 to specify that the payment amount for a biosimilar biological 
product will be the sum of the following two amounts: The ASP of all 
NDCs assigned to the biosimilar biological product determined using the 
methodology in section 1847A(b)(6) of the Act, and 6 percent of the 
payment amount determined using the methodology in section 1847A(b)(4) 
of the Act for the corresponding reference biological product. Sections 
7001 to 7003 of the ACA also established a licensing pathway for 
biosimilar biological products, and in accordance with the statute, the 
effective date for Medicare ASP statutory provisions is July 1, 2010. 
We proposed to make conforming regulation text changes at Sec.  414.902 
and Sec.  414.904 and we solicited comments regarding our conforming 
changes.
    We anticipate that as biosimilar biological drug products are 
approved, we will receive ASP sales data through the ASP data 
submission process and publish national payment amounts in a manner 
that is consistent with our current approach to other drugs and 
biologicals that are paid under section 1847A of the Act and set forth 
in 42 CFR part 414 subpart J. Until we have collected sufficient sales 
data as reported by manufacturers, payment limits will be determined in 
accordance with the provisions in section

[[Page 73394]]

1847A(c)(4) of the Act. If no manufacturer data is collected, prices 
will be determined by local contractors using any available pricing 
information, including provider invoices. More information about the 
ASP payment methodology and the data submission process may be found on 
the CMS Web site at http://www.cms.gov/McrPartBDrugAvgSalesPrice/01_overview.asp and in section VII.A.1., ``Carry Over ASP,'' of this final 
rule with comment period.
    Comment: Several commenters supported the proposed regulation text 
changes.
    Response: Based on the comments that we received, we are finalizing 
our proposal and regulation text without additional modification.
    Comment: Several commenters requested that CMS assign biosimilars 
and other brand name drugs and biologicals separate HCPCS codes in 
order to facilitate the tracking of items paid under section 3139 of 
the ACA, as well as branded drugs and biologicals subject to fees under 
section 9008 of the ACA.
    Response: We appreciate the comments; however, our proposal did not 
address procedures for assignment of HCPCS codes, and so these comments 
are outside the scope of this rule. For more information about the 
HCPCS coding process, we refer you to http://www.cms.gov/MedHCPCSGenInfo/.
    In summary, we are finalizing our proposed definitions of 
biosimilar biological, reference biological and our proposed payment 
methodology without additional modification.

P. Section 3401: Revision of Certain Market Basket Updates and 
Incorporation of Productivity Improvements Into Market Basket Updates 
That Do Not Already Incorporate Such Improvements

1. ESRD Market Basket Discussion
    Section 3401(h) of the ACA amended section 1881(b)(14)(F) of the 
Act and directs the Secretary to annually increase payment amounts 
established under the ESRD market basket. Please see section VII.E. of 
this final rule with comment for a detailed description of these 
provisions.
2. Productivity Adjustment Regarding the Ambulatory Surgical Center 
Payment System, and the Ambulance, Clinical Laboratory and DMEPOS Fee 
Schedules
    Section 3401 of the ACA requires that the update factor under 
certain payment systems be annually adjusted by changes in economy-wide 
productivity. The year that the productivity adjustment is effective 
varies by payment system. Specifically, section 3401 of the ACA 
requires that, in CY 2011 (and in subsequent years) update factors 
under the ambulatory surgical center (ASC) payment system, the 
ambulance fee schedule (AFS), the clinical laboratory fee schedule 
(CLFS), and the DMEPOS fee schedules be adjusted by changes in economy-
wide productivity. Section 3401(a) of the ACA amends section 
1886(b)(3)(B) of the Act to add clause (xi)(II) which sets forth the 
definition of this productivity adjustment. The statute defines the 
productivity adjustment to be equal to the 10-year moving average of 
changes in annual economy-wide private nonfarm business multifactor 
productivity (MFP) (as projected by the Secretary for the 10-year 
period ending with the applicable fiscal year, year, cost reporting 
period, or other annual period) (the ``MFP adjustment''). The Bureau of 
Labor Statistics (BLS) is the agency that publishes the official 
measure of private non-farm business MFP. Please see http://www.bls.gov/mfp which is the link to the BLS historical published data 
on the measure of MFP.
    As stated in the PFS proposed rule (75 FR 40123), the projection of 
MFP is currently produced by IHS Global Insight (IGI), an economic 
forecasting firm. As described in the CY 2011 PFS proposed rule, in 
order to generate a forecast of MFP, IGI replicated the MFP measure 
calculated by the BLS using a series of proxy variables derived from 
the IGI US Macro-economic models. These models take into account a very 
broad range of factors that influence the total U.S. economy. IGI 
forecasts the underlying proxy components such as Gross Domestic 
Product (GDP), capital, and labor inputs required to estimate MFP and 
then combines those projections according to the BLS methodology.
    In Table 34 of the proposed rule (75 FR 40123), we identified each 
of the MFP component series employed by the BLS and the corresponding 
concepts estimated by IGI that appeared to be the best measure at the 
time of the proposed rule. IGI found that the historical growth rates 
of the BLS components used to calculate MFP and the IGI components 
identified and listed in the PFS proposed rule (75 FR 40123) were 
consistent across all series and therefore suitable proxies for 
calculating MFP. We proposed a method in which IGI uses the growth 
rates of the forecasted IGI concepts to project BLS' components of MFP. 
The resulting MFP adjustment derived from using this method was 
proposed to be used under section 3401 of the ACA to adjust the updates 
for the ASC payment system, the AFS, the CLFS, and the DMEPOS fee 
schedules.
    Since the proposed rule, BLS issued revised estimates of private 
nonfarm business MFP (released on August 24, 2010). We also received 
public comments on the proposed calculation of the MFP adjustment. We 
summarize these comments and our responses below.
    Comment: Several commenters stated that CMS provided no details in 
the proposed rule on the data and calculations that it used in making 
the MFP estimates, instead referring readers to the BLS, which only 
provides historical data. The commenters stated that this level of 
information is insufficient for public comment. The commenters 
requested that CMS fully disclose the methods and data sources used for 
the MFP estimate for public comment before implementing the multifactor 
productivity adjustment to the ASC payment system and to the other 
payment systems. Another commenter stated that transparency is needed 
concerning the assumptions underlying the projection of MFP and the 
commenter asked that CMS address this in the final rule so a better 
understanding can be gained about how CMS arrived at its MFP 
adjustment.
    Response: The CY 2011 PFS proposed rule included a citation to the 
BLS Web site. This link provided a lengthy detailed description of the 
methodology that is used by the BLS to construct an estimate of MFP for 
the private nonfarm business sector, including a discussion of the 
underlying series used in the MFP calculation. For the forecasted 
estimate of MFP, we then identified in Table 34 in the CY 2011 PFS 
proposed rule (75 FR 40123) the forecasted series that closely align to 
the series used by BLS. The data source for these forecasted series is 
IGI, an economic forecasting firm. Following the methodology as 
described in the BLS documentation that we provided in the CY 2011 PFS 
proposed rule, a forecast of MFP was created using the IGI series. 
Given the information that was presented in the CY 2011 PFS proposed 
rule, we believe that we provided adequate information regarding the 
methods, calculations, and data sources used for the MFP estimate. In 
this final rule with comment period, we have included below a more 
detailed description of this methodology for even greater transparency.
    In response to the public comments we received requesting 
additional information on the assumptions underlying the projection of 
MFP, we note that the projection of MFP is not driven by specific 
assumptions. The

[[Page 73395]]

underlying series forecasted by IGI are derived from a set of complex 
economic forecasting models that project various components of the 
total U.S. economy. These models are intended to capture many drivers 
of economic growth in the U.S. economy. Therefore, the underlying 
series that IGI uses to calculate a forecast of MFP are products of 
this economy-wide macroeconomic model as opposed to being based on a 
specific set of assumptions.
    Comment: Several commenters expressed concern that current economic 
conditions are distorting the factor used for the productivity 
adjustment, potentially leading to unintended consequences. These 
commenters claim that the original intent of the productivity 
adjustment was to hold providers to a standard of productivity 
improvement achieved by the rest of the economy. However, the 
commenters stated that when productivity gains are driven by 
undesirable trends in the economy, this adjustment could lead to 
excessive cuts. The current ``jobless recovery'' is inflating 
productivity as output increases but a key input--employment--continues 
to stagnate. The commenters claim that cutting Medicare payments by 
this inflated figure could hurt hospitals and other health care 
providers and suppliers that have been one of the few sources of 
continued job growth in this economy.
    Response: We are required by law to implement section 3401 of the 
ACA, which requires that in CY 2011 (and in subsequent years) update 
factors under the ASC payment system, the AFS, the CLFS, and the DMEPOS 
fee schedules be adjusted by the 10-year moving average of changes in 
annual economy-wide multi-factor productivity for the private non-farm 
business sector.
    Although we believe that the IGI method of calculating a forecast 
of MFP discussed in the CY 2011 PFS proposed rule (75 FR 40123) is 
appropriate and accurately reflects the 10-year moving average of 
changes in annual economy-wide multi-factor productivity, in response 
to this comment, CMS and IGI reevaluated the series that are used to 
calculate MFP to ensure that the underlying components that are 
ultimately selected are those that will produce a measure of MFP that 
most closely tracks the official measure of MFP as published by BLS. 
While the concepts listed in Table 34 of the CY 2011 PFS proposed rule 
were similar to the underlying concepts used by BLS (as discussed in 
the proposed rule), CMS and IGI subsequently determined that there are 
technically superior IGI series for output and labor that can be used 
to derive a calculation of MFP (still using the method as described in 
the proposed rule), that will ultimately result in a more appropriate 
forecast of MFP. The IGI method is described in more detail below and 
we note that the methodology is the same methodology as was described 
in the CY 2011 PFS proposed rule, which is aligned closely with the 
methodology employed by the BLS. For more information regarding the BLS 
method for estimating productivity we refer the commenter to the 
following link: http://www.bls.gov/mfp/mprtech.pdf.
    Table 61 lists the MFP component series employed by the BLS and the 
corresponding concepts estimated by IGI as specified in Table 34 of the 
CY 2011 PFS proposed rule and in this final rule. Please note that, in 
BLS' revised MFP estimates published on August 24, 2010, the index 
series was rebased from 2000=100 to 2005=100. Thus, Table 61 refers to 
the BLS series in 2005 dollars whereas Table 34 of the CY 2011 PFS 
proposed rule referred to the BLS series in 2000 dollars.

   Table 61--Multifactor Productivity Component Series Employed by the
            Bureau of Labor Statistics and IHS Global Insight
------------------------------------------------------------------------
                              IGI series--proposed    IGI series--final
         BLS series                   rule                  rule
------------------------------------------------------------------------
Real value-added output,      Real gross non-farm   Non-housing non-
 constant 2005 dollars.        value added output,   government non-farm
                               chained 2005 dollar   real GDP, Billions
                               billions.             of chained 2005
                                                     dollars--annual
                                                     rate.
Private non-farm business     Hours of all          Man-hours in private
 sector labor input;           persons--private      nonfarm
 2005=100.00.                  nonfarm business      establishments,
                               sector; 1992=1.0.     Billions of hours--
                                                     annual rate.
Aggregate capital inputs;     Real effective        Real effective
 2005=100.00.                  capital stock used    capital stock used
                               for full employment   for full employment
                               GDP, chained 2005     GDP, Billions of
                               dollar billions.      chained 2005
                                                     dollars.
------------------------------------------------------------------------

    In this final rule with comment period, we are finalizing the same 
IGI method as described in the CY 2011 PFS proposed rule, with minor 
technical improvements to the underlying concepts used to calculate 
MFP. We have also included a more detailed description below of the 
methodology (which was described in the proposed rule and which we are 
finalizing in this final rule with comment period) used to calculate 
MFP in response to the public comments we received.
    To create a forecast of BLS' MFP index, the forecasted annual 
growth rates of the ``non-housing, non-government, non-farm, real 
GDP'', ``man-hours in private nonfarm establishments'', and ``real 
effective capital stock'' series (ranging from 2009 to 2020) are used 
to ``grow'' the levels of the ``real value-added output,'' ``private 
non-farm business sector labor input,'' and ``aggregate capital input'' 
series published by the BLS. Using these three key concepts, MFP is 
derived by subtracting the contribution of labor and capital inputs 
from output growth.
    However, in order to estimate MFP, we need to understand the 
relative contributions of labor and capital to total output growth. 
Therefore, two additional measures are needed to operationalize the 
estimation of the IGI MFP projection: Labor compensation and capital 
income. The sum of labor compensation and capital income represents 
total income. The BLS calculates labor compensation and capital income 
(in current dollar terms) to derive the nominal values of labor and 
capital inputs. IGI uses the ``non-government total compensation'' and 
``flow of capital services from the total private non-residential 
capital stock'' series as proxies for the BLS' income measures. These 
two proxy measures for income are divided by total income to obtain the 
shares of labor compensation and capital income to total income.
    In order to estimate labor's contribution and capital's 
contribution to the growth in total output, the growth rates of the 
proxy variables for labor and capital inputs are multiplied by their 
respective shares of total income. These contributions of labor and 
capital to output growth are subtracted from total output growth to 
calculate the ``change

[[Page 73396]]

in the growth rates of multifactor productivity'':
    MFP = Total output growth--{(labor input growth*labor compensation 
share) + (capital input growth * capital income share){time} 
    The change in the growth rates (also referred to as the compound 
growth rates) of the IGI MFP are multiplied by 100 in order to 
calculate the percent change in growth rates (the percent change in 
growth rates are published by the BLS for its historical MFP measure). 
Finally, the growth rates of the IGI MFP are converted to index levels 
based to 2005 to be consistent with the BLS' methodology.
    For benchmarking purposes, the historical growth rates of IGI's 
proxy variables were used to estimate a historical measure of MFP, 
which was compared to the historical MFP estimate published by the BLS. 
The comparison revealed that the growth rates of the components were 
consistent across all series, and therefore validated the use of the 
proxy variables in generating the IGI MFP projections.
    The resulting MFP index was then interpolated to a quarterly 
frequency using the Bassie method for temporal disaggregation. The 
Bassie technique utilizes an indicator (pattern) series for its 
calculations. IGI uses the index of output per hour (published by the 
BLS) as an indicator when interpolating the MFP index.
    As discussed below, for each of these payment systems, the update 
factor is the percentage increase (or percentage decrease for the CLFS) 
in the consumer price index for all urban consumers (CPI-U) (referred 
to as the ``CPI-U update factor'').
    For all four payment systems, section 3401 of the ACA generally 
states that the Secretary shall reduce the CPI-U adjustment by the MFP 
adjustment. In order to calculate the MFP-adjusted updates to these 
payment systems, we proposed that the MFP percentage adjustment would 
be subtracted from the CPI-U update factor. For example, if the update 
factor (CPI-U) is 4.0 percent, and the projected MFP is 1.3 percent, 
the MFP-Adjusted update factor (or MFP-Adjusted CPI-U for these payment 
systems) would be a 2.7 percent increase.
    We proposed that the end of the 10-year moving average of changes 
in the MFP should coincide with the end of this CPI-U timeframe (75 FR 
40123). Since the CPI-U update factor is reduced by the MFP adjustment 
to determine the annual update for these payment systems, we stated 
that we believe it is appropriate for the numbers associated with both 
parts of the calculation to be projected as of the same end date. In 
this way, changes in market conditions are aligned.
    In this final rule with comment period, we wanted to further 
clarify how for each payment system, the end of the 10-year moving 
average of changes in the MFP will coincide with the period on which 
the CPI-U is calculated. In the case of the ASC payment system, the 
CPI-U projected for the 12-month period ending with the midpoint of the 
year involved, which is CY 2011 for this final rule with comment 
period. Therefore, the end of the 10-year moving average of changes in 
the MFP is projected so that it ends with the midpoint of the year 
involves, which is CY 2011 for this final rule with comment period. In 
the case of the AFS, CLFS, and DMEPOS fee schedules, the CPI-U is 
estimated for the period ending June 30th of the year preceding the 
update year itself, which is CY 2010 for this final rule with comment 
period. Therefore, the end of the 10-year moving average of changes in 
the MFP is estimated so that it ends June 30th of the year preceding 
the update year itself, which is CY 2010 for this final rule with 
comment period.
    We proposed to round the final annual adjustment to the one-tenth 
of one percentage point level up or down as applicable according to 
conventional rounding rules (that is, if the number we are rounding is 
followed by 5, 6, 7, 8, or 9, we will round the number up; if the 
number we are rounding is followed by 0, 1, 2, 3, or 4, we will round 
the number down).
    In the following sections, we provide more information on the 
statutory requirements and proposals for each of the four payment 
systems. The statutory requirements for the ASC payment system were 
also addressed in the CY 2011 OPPS/ASC final rule with comment period. 
We note that, in the CY 2011 PFS proposed rule (75 FR 40123 through 
40125), we described the legislative provision and outlined the 
methodology used to calculate and apply the MFP adjustment to determine 
the annual updates for ASC payment system, the AFS, the CLFS, and the 
DMEPOS fee schedules for CY 2011 and each subsequent year. We stated 
that we would set forth the final MFP adjustment for CY 2011 in this 
final rule with comment period. Also, we stated in the CY 2011 PFS 
proposed rule (75 FR 40123) that once we finalize the methodology for 
determining and applying the MFP adjustment to the CPI-U update factors 
for these payment systems, for subsequent calendar years, as we have 
done in the past, we would notify the general public of the annual 
update to the AFS, CLFS, and DMEPOS fee schedules via CMS instruction 
and on the CMS Web site. These notifications would set forth both the 
CPI-U percentage increase (or, for the CLFS, the percentage decrease) 
and the MFP adjustment for the applicable year. For ASCs, for 
subsequent calendar years, as we have done in the past, we stated that 
we would continue to notify the general public of the annual update to 
the ASC payment amount via the annual OPPS/ASC rulemaking process.
    In summary, as discussed previously, we are finalizing the same IGI 
method as described in the CY 2011 proposed rule to calculate the MFP 
adjustment, with minor technical improvements to the underlying 
concepts used to calculate the MFP adjustment. Furthermore, as 
proposed, the MFP adjustment is calculated so that the end of the 10-
year moving average of changes in the MFP will coincide with the end of 
the CPI-U timeframe for each of the four payment systems (that is, the 
ASC payment system, AFS, CLFS, and DMEPOS fee schedules) so that market 
conditions are aligned. Also, as proposed, we will round the final 
annual adjustment to the one-tenth of one percentage point level up or 
down as applicable according to conventional rounding rules. Using the 
methodology finalized previously, the final MFP adjustment for CY 2011 
is 1.3 percent for the ASC payment system, and 1.2 percent for the AFS, 
CLFS, and DMEPOS fee schedules. We are also finalizing our proposal to 
calculate the MFP-adjusted updates for the ASC payment system, the AFS, 
the CLFS and the DMEPOS fee schedules for CY 2011 and each subsequent 
year by subtracting the MFP adjustment from each payment system's CPI-U 
update factor, as further described in the following sections.
a. Ambulatory Surgical Centers (ASCs)
    Section 1833(i)(2)(C)(i) of the Act requires that, if the Secretary 
has not updated the ASC payment amounts in a calendar year, the payment 
amounts ``shall be increased by the percentage increase in the Consumer 
Price Index for all urban consumers (U.S. city average) as estimated by 
the Secretary for the 12-month period ending with the midpoint of the 
year involved.'' Because the Secretary does update the ASC payment 
amounts annually, we adopted a policy, which we codified at Sec.  
416.171(a)(2)(ii), to update the ASC conversion factor using the CPI-U 
for CY 2010 and subsequent calendar years. Therefore, the annual update 
to the ASC payment system is the CPI-U (referred to as the CPI-U update 
factor). Section 3401(k) of the ACA amends section

[[Page 73397]]

1833(i)(2)(D) of the Act by adding a new clause (v) which requires that 
``any annual update under [the ASC payment] system for the year [after 
application of any reduction in any update for failure to report on 
quality measures, if the Secretary implements a quality reporting 
program for ASCs] shall be reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act'' (which we refer 
to as the MFP adjustment) effective with the calendar year beginning 
January 1, 2011. Section 3401(k) of the ACA states that application of 
the MFP adjustment to the ASC payment system may result in the update 
to the ASC payment system being less than zero for a year and may 
result in payment rates under the ASC payment system for a year being 
less than such payment rates for the preceding year.
    In accordance with section 1833(i)(2)(C)(i) of the Act, before 
applying the MFP adjustment, the Secretary first determines the 
``percentage increase'' in the CPI-U, which we interpret cannot be a 
negative number. Thus, in the instance where the percentage change in 
the CPI-U for a year is negative, we proposed to hold the CPI-U update 
factor for the ASC payment system to zero. Section 1833(i)(2)(D)(v) of 
the Act, as added by section 3401(k) of the ACA, then requires that the 
Secretary reduce the CPI-U update factor (which would be held to zero 
if the CPI-U percentage change is negative) by the MFP adjustment, and 
states that application of the MFP adjustment may reduce this 
percentage change below zero. If the application of the MFP adjustment 
to the CPI-U percentage increase would result in an MFP-adjusted CPI-U 
update factor that is less than zero, then the annual update to the ASC 
payment rates would be negative and payments would decrease relative to 
the prior year.
    Table 62 provides illustrative examples of how we proposed the MFP 
adjustment would be applied to the ASC payment system. These examples 
show the implication of a positive CPI-U update factor with a smaller 
MFP adjustment, a positive CPI-U update factor with a large MFP 
adjustment, and a CPI-U update factor of zero. We discussed the 
application of the MFP adjustment to the CPI-U update factor for the 
ASC payment system under the OPPS/ASC CY 2011 proposed rule (75 FR 
46359). We solicited comment on the specific mathematical calculation 
of the MFP adjustment and noted that comments on the application of the 
MFP adjustment to the CPI-U update factor under the ASC payment system 
should be made to the OPPS/ASC CY 2011 proposed rule (75 FR 46359). As 
discussed previously, we received and responded to comments on the 
calculation of the MFP adjustment and have finalized this methodology 
as described above. In the CY 2011 OPPS/ASC final rule with comment 
period, we respond to any comments received and finalize the 
methodology for applying the MFP adjustment to the CPI-U update factor 
for ASCs.

Table 62--Multifactor Productivity Adjusted Payment Update: Illustrative
                                 Example
------------------------------------------------------------------------
                                                    MFP-Adjusted CPI-U
    CPI-U (percent)          MFP  Adjustment          update  factor
                                (percent)                (percent)
------------------------------------------------------------------------
              4.0                      1.3                      2.7
              4.0                      4.7                     -0.7
              0.0                      0.2                     -0.2
------------------------------------------------------------------------

b. Ambulance Fee Schedule (AFS)
    In accordance with section 1834(l)(3)(B) of the Act, the AFS rates 
are required to be increased each year by the percentage increase in 
the CPI-U (U.S. city average) for the 12-month period ending with June 
of the previous year. We refer to this update as the Ambulance 
Inflation Factor (AIF). Section 3401(j) of the ACA amends section 
1834(l)(3) of the Act to add a new subclause (C) which states that, for 
CY 2011 and each subsequent year, after determining the percentage 
increase under section 1834(l)(3)(B) of the Act (that is, the CPI-U 
percentage increase, or AIF), the Secretary shall reduce such 
percentage increase by the MFP adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act (as discussed previously). Section 
3401(j) of the ACA further amends section 1834(l)(3) of the Act to 
state that the application of subclause (C) (that is, the reduction of 
the CPI-U percentage increase by the MFP adjustment) may result in that 
percentage increase being less than zero for a year, and may result in 
payment rates for a year being less than such payment rates for the 
preceding year.
    In accordance with section 1834(l)(3) of the Act as amended by 
section 3401(j) of the ACA, before applying the MFP adjustment, the 
Secretary first determines the ``percentage increase'' in the CPI-U, 
which we interpret cannot be a negative number. Thus, in the instance 
where the percentage change in the CPI-U for a year is negative, we 
proposed to hold the AIF to zero. The statute then requires that the 
Secretary reduce the CPI-U percentage increase (which would be held to 
zero if the CPI-U percentage change is negative) by the MFP adjustment, 
and states that application of the MFP adjustment may reduce this 
percentage increase below zero. If the application of the MFP 
adjustment to the CPI-U percentage increase would result in an MFP-
adjusted AIF that is less than zero, then the annual update to the AFS 
would be negative and payments would decrease relative to the prior 
year.
    Table 63 provides illustrative examples of how we proposed the MFP 
adjustment would be applied to the AFS. Finally, we proposed to revise 
Sec.  414.610(f) to require that the AIF be reduced by the MFP 
adjustment as required by the statute in determining the annual update 
under the ambulance fee schedule for CY 2011 and each subsequent year, 
and to revise Sec.  414.620 to state that changes in payment rates 
resulting from the incorporation of the AIF and the MFP adjustment will 
be announced by CMS by instruction and on the CMS Web site, as we 
previously discussed.

  Table 63--Examples of the Application of the Multifactor Productivity
                Adjustment to the Ambulance Fee Schedule
                              [In percent]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
A                              B                 C                 D
CPI-U                        AIF      MFP Adjustment           Final
                   .................  ................  update rounded
------------------------------------------------------------------------
          2.0                2.0               1.3               0.7
          0.0                0.0               1.3              -1.3
         -2.0                0.0               1.3              -1.3
          1.0                1.0               1.3              -0.3
------------------------------------------------------------------------

    Comment: A few commenters stated that the payment rates for 
ambulances have consistently fallen further behind the actual cost of 
providing the service. One commenter stated that the annual update as 
adjusted by the MFP adjustment would create a permanent disparity 
between future increases in Medicare's reimbursement for ambulance 
services and the increased costs of providing those services. The 
commenter stated that the two largest operational costs for ambulance 
services are personnel and fuel, neither of which readily lends itself 
to operational efficiencies. In particular, they claim that small and 
rural providers lack the volume of transports needed to obtain any 
meaningful economies of scale. These commenters acknowledge that the 
MFP adjustment is mandated by law, but they state that it will likely 
result in a net decrease in the already insufficient base reimbursement 
rate for air

[[Page 73398]]

ambulances. One commenter urged CMS to take whatever steps are within 
its authority to mitigate the potentially devastating effects of this 
new requirement.
    Response: As discussed previously and in the CY 2011 PFS proposed 
rule (75 FR 40124), we are required by law to implement section 3401(j) 
of the ACA, which requires that for CY 2011 and each subsequent year, 
after determining the percentage increase under section 1834(l)(3)(B) 
of the Act (that is, the CPI-U percentage increase, or AIF), the 
Secretary shall reduce such percentage increase by the MFP adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act. In response to 
the request that we ``mitigate'' any potentially negative effects of 
the MFP adjustment, we reiterate that we are required to apply the MFP 
adjustment to the AIF in the manner specified by the ACA, and we are 
not authorized by statute to implement measures to mitigate the effects 
of this adjustment. We note that certain temporary payment add-ons, 
currently codified at section 1834(l)(12) and (13) of the Act and at 
section 146(b)(1) of the MIPAA, were extended by the ACA through 
December 31, 2010 (see section VI.F(1) and (3). of this final rule). To 
date, Congress has not extended these payment add-ons beyond December 
31, 2010. Therefore, we are finalizing the methodology for applying the 
MFP adjustment to the AIF for the AFS as described in the proposed 
rule. We did not receive any comments regarding the proposed changes to 
Sec.  414.610(f) and Sec.  414.620 as discussed above. Therefore, we 
are revising the regulation text in Sec.  414.610(f) and Sec.  414.620 
as proposed, with the following minor technical change. In Sec.  
414.610(f), for clarification purposes, we have made a technical 
revision to refer to the definition of the productivity adjustment in 
section 1886(b)(3)(B)(xi)(II) of the Act.
c. Clinical Laboratory Fee Schedule
    Section 1833(h)(2)(A)(i) of the Act, as amended by section 3401(l) 
of the ACA, states that the Secretary shall set the CLFS ``for the 12-
month period beginning July 1, 1984, adjusted annually (to become 
effective on January 1 of each year) by, subject to clause (iv) [as 
added by the ACA], a percentage increase or decrease equal to the 
percentage increase or decrease in the Consumer Price Index for All 
Urban Consumers (United States city average) minus, for each of the 
years 2009 through 2010, 0.5 percentage points''. Therefore, the 
adjustment to the fee schedule can be an increase or a decrease.
    Section 3401(l) of the ACA also adds new clause (iv) that applies 
in CY 2011 and each subsequent year. This clause requires the Secretary 
to reduce the adjustment in clause (i): (1) By the MFP adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act for 2011 and each 
subsequent year and (2) by 1.75 percentage points for each year of 2011 
through 2015 (the ``percentage adjustment''). However, section 3401(l) 
of the ACA states that the MFP adjustment will not apply in a year 
where the adjustment to the fee schedule determined under clause (i) is 
zero or a percentage decrease for a year. Further, the application of 
the MFP adjustment shall not result in an adjustment to the fee 
schedule under clause (i) of less than zero for a year.
    Therefore, we proposed to apply the MFP adjustment as follows:
    <bullet> If the CPI-U update factor is positive, it would be 
reduced by the MFP adjustment. However, if application of the MFP 
adjustment would result in a negative update, the update would be held 
to zero.
    <bullet> If the CPI-U update factor is zero or negative, the MFP 
adjustment would not be applied.
    Section 3401(l) of the ACA also states that the application of the 
percentage adjustment may result in an adjustment to the fee schedule 
under clause (i) being less than zero for a year and may result in 
payment rates for a year being less than such payment rates for the 
preceding year. Therefore, we are applying the percentage reduction of 
1.75 percentage points to any adjustment to the fee schedule under the 
CLFS as directed by section 3401(l) of the ACA.
    Table 64 provides illustrative examples of how we proposed these 
adjustments would be applied to fees under the CLFS.

    Table 64--Examples of the Application of the Multifactor Productivity Adjustment to the Clinical Lab Fee
                                                    Schedule
----------------------------------------------------------------------------------------------------------------
        A                  B                      C                        D                        E
 
CPI-U-------------------------MFP--------------Productivity------------------(-1.75%)------Resultant change to--
                       Adjustment           adjusted update          Percentage point                     CLFS
                                                                            reduction
----------------------------------------------------------------------------------------------------------------
                   .................     Greater of 0.0% or     .......................          Col. C-Col. D
                                          (Col. A)-(Col. B)
----------------------------------------------------------------------------------------------------------------
          2.0%               1.3%                      0.7%                    -1.75%                   -1.05%
          0.0%                N/A                      0.0%                    -1.75%                   -1.75%
         -2.0%                N/A                      0.0%                    -1.75%                   -1.75%
----------------------------------------------------------------------------------------------------------------

    We did not receive any public comments on the proposed methodology 
for applying the MFP adjustment and the percentage adjustment to the 
CPI-U update factor for the CLFS. Therefore, we are finalizing the 
methodology for applying the MFP adjustment and the percentage 
adjustment to the CPI-U update factor for the CLFS as described in the 
proposed rule.
d. DMEPOS Fee Schedule
    Sections 1834(a)(14), 1834(h)(4), and 1842(s)(1) of the Act mandate 
annual updates to the fee schedule amounts established in accordance 
with these respective sections for covered items of durable medical 
equipment defined in section 1834(a)(13) of the Act, prosthetic 
devices, orthotics, and prosthetics defined in section 1834(h)(4)(B) 
and (C) of the Act, and parenteral and enteral nutrients, equipment, 
and supplies described in section 1842(s)(2)(D) of the Act. The annual 
updates for 2011 for these sections are based on the percentage 
increase in the CPI-U for the 12-month period ending with June 2010. 
The annual updates for years subsequent to 2011 will be based on the 
percentage increase in the CPI-U for the 12-month period ending with 
June of the previous year (that is, June 2011 for 2012, June 2012 for 
2013, etc.). Since 1990 for durable medical equipment, prosthetic 
devices, orthotics, and prosthetics and since 2003 for

[[Page 73399]]

parenteral and enteral nutrients, equipment, and supplies, we have 
notified the public of these annual fee schedule updates through 
program instructions.
    Section 3401(m) of the ACA amends section 1834(a)(14) of the Act to 
add a new subparagraph (L) which provides that, for CY 2011 and each 
subsequent year, the fee schedule update factor based on the CPI-U for 
the 12-month period ending with June of the previous year is to be 
reduced by the MFP adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act (as discussed previously). Section 
3401(m) of the ACA further amends section 1834(a)(14) of the Act to 
state that the application of subparagraph (L) (that is, the reduction 
of the CPI-U percentage increase by the MFP adjustment) may result in 
that percentage increase being less than zero for a year, and may 
result in payment rates for a year being less than such payment rates 
for the preceding year.
    Section 3401(n) of ACA amends section 1834(h)(4)(A) of the Act to 
add a new clause (xi) which provides that, for CY 2011 and each 
subsequent year, the fee schedule update factor based on the CPI-U for 
the 12-month period ending with June of the previous year is to be 
reduced by the MFP adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act (as discussed previously). Section 
3401(n) of the ACA further amends section 1834(h)(4) of the Act to 
state that the application of subparagraph (A)(xi) (that is, the 
reduction of the CPI-U percentage increase by the MFP adjustment) may 
result in that percentage increase being less than zero for a year, and 
may result in payment rates for a year being less than such payment 
rates for the preceding year.
    Section 3401(o) of ACA amends section 1842(s)(1) of the Act to add 
a new subparagraph (B) and clause (ii) which provides that, for CY 2011 
and each subsequent year, the fee schedule update factor based on the 
CPI-U for the 12-month period ending with June of the previous year is 
to be reduced by the MFP adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act (as discussed above). Section 3401(o) 
of the ACA further amends section 1842(s)(1) of the Act to state that 
the application of subparagraph (B)(ii) (that is, the reduction of the 
CPI-U percentage increase by the MFP adjustment) may result in that 
percentage increase being less than zero for a year, and may result in 
payment rates for a year being less than such payment rates for the 
preceding year.
    The MFP adjustments to the CPI-U percentage increases used in 
calculating the fee schedule adjustment factors for these DMEPOS items 
and services as mandated by sections 3401(m), (n), and (o) of ACA are 
simple mathematical calculations and are ministerial in nature. 
Therefore, we plan to implement these adjustments for 2011 and 
subsequent years as part of the annual program instructions related to 
the DMEPOS fees schedule updates.
    Comment: Several commenters stated that there were flawed 
assumptions underlying the statutory requirements of section 3401 of 
the ACA. Since the MFP measures the contributions to productivity of 
all sectors involved in production, the commenters argued that the 
indiscriminate application of the MFP to DMEPOS items was fundamentally 
flawed.
    Response: As discussed previously, sections 3401(m), (n), and (o) 
of the ACA require us to implement the MFP adjustments to the CPI-U 
percentage increases for DMEPOS items and services. Therefore, we are 
finalizing our proposal to apply the MFP adjustments to the CPI-U 
percentage increases for DMEPOS items and services for calendar year 
2011 and subsequent years.

Q. Section 4103: Medicare Coverage of Annual Wellness Visit Providing a 
Personalized Prevention Plan

1. Background and Statutory Authority
a. Medicare Coverage of Preventive Physical Examinations and Routine 
Checkups
    Section 1862(a)(7) of the Act explicitly prohibits Medicare payment 
for routine physical checkups with certain exceptions. One exception is 
for the Initial Preventive Physical Exam (also referred to as the 
``Welcome to Medicare'' exam) established for new beneficiaries 
effective for services furnished on or after January 1, 2005. Section 
4103 of the ACA has provided another exception to section 1862(a)(7) of 
the Act. Congress expanded Medicare coverage under Part B to include an 
Annual Wellness Visit (AWV) Providing Personalized Prevention Plan 
Services (hereinafter referred to as the annual wellness visit) in 
sections 1861(s)(2)(FF) and 1861(hhh) of the Act. This expanded benefit 
is effective on January 1, 2011.
    Preventive care has become an increasing focus of the Medicare 
program. For instance, section 101 of the MIPPA expanded Medicare's 
authority to establish coverage for additional preventive services that 
meet specified criteria. Among other things, the AWV will encourage 
beneficiaries to obtain the preventive services already covered by 
Medicare, and that are appropriate for each individual beneficiary.
b. Requirements for Coverage of an Annual Wellness Visit
    Section 4103 of the ACA provides for coverage of an AWV, which 
includes and/or takes into account a health risk assessment (HRA), and 
creates a personalized prevention plan for beneficiaries, subject to 
certain eligibility and other limitations. Section 4103 of the ACA also 
requires the identification of elements that must be provided to a 
beneficiary as part of the first visit for personalized prevention plan 
services and requires the establishment of a yearly schedule for 
appropriate provision of such elements thereafter.
    The ACA specifies elements to be included in a personalized 
prevention plan, including establishment of, or update to, the 
individual's medical and family history, a list of the individual's 
current providers and suppliers and medications prescribed for the 
individual; measurement of height, weight, body-mass index (BMI) or 
waist circumference, and blood pressure; detection of any cognitive 
impairment; establishment or update of an appropriate screening 
schedule for the next 5 to 10 years; establishment or update of a list 
of risk factors and conditions (including any mental health conditions) 
for which interventions are recommended or underway; and furnishing of 
personalized health advice and referral, as appropriate, to health 
education or preventive counseling services or programs. The ACA also 
permits the Secretary to add other elements to the AWV determined to be 
appropriate.
2. Regulatory Revisions--Summary of Proposed Rule and Comments
    The following is a summary of the provisions of the proposed rule 
and of the comments received. We received 75 public comments on the 
proposed rule regarding the AWV. Commenters included national and state 
professional associations, medical societies and national medical 
advisory groups, hospital associations and hospitals, physicians, 
registered dietitians, occupational therapists, senior advisory groups, 
health insurance associations, manufacturers, and others. While a 
number of commenters expressed concern that the proposal was either too 
prescriptive, not sufficiently targeted to development of an 
individual's personalized prevention plan, or was

[[Page 73400]]

not broad enough to include additional screening or prevention 
services; a large majority of commenters applauded CMS' efforts in 
developing the rule and generally supported its major elements. Many 
suggested clarification and revision of the rule in a number of 
different areas, including the proposed definitions of ``detection of 
any cognitive impairment,'' and ``health professional,'' and the 
components of the first and subsequent AWVs. One special concern of a 
number of commenters was related to the health risk assessment (HRA). 
Some provisions of section 4103 of the ACA require the HRA be included 
in the new AWV, which is effective January 1, 2011. Other provisions of 
section 4103 of the ACA give the Secretary a longer period of time to 
develop an HRA in consultation with relevant groups and entities.
a. Revisions to Sec.  411.15, Particular Services Excluded From 
Coverage
    To conform the regulations to the statutory requirements of the 
ACA, we proposed to revise Sec.  411.15 by specifying an exception to 
the routine physical checkups exclusion from coverage in Sec.  
411.15(a)(1) and modifying Sec.  411.15(k)(15). We proposed to add a 
provision to permit coverage of AWVs that meet the eligibility 
limitations and the conditions for coverage we are specifying in Sec.  
410.15 (Annual Wellness Visit Providing Personalized Prevention Plan 
Services).
    Coverage of the AWV is furnished under Medicare Part B only. As 
provided in the statute, this new coverage allows payment for an AWV if 
provided on or after January 1, 2011 for an individual who is no longer 
within 12 months after the effective date of his or her first Medicare 
Part B coverage period, and has not received either an IPPE or an AWV 
within the past 12 months.
b. Revisions to Part 410, Subpart B--Medical and Other Health Services
    We proposed to add Sec.  410.15, Annual wellness visits providing 
Personalized Prevention Plan Services: Conditions for and limitations 
on coverage, to codify the coverage of the annual wellness visit 
providing personalized prevention plan services.
    We proposed to define several terms in Sec.  410.15(a), including: 
(1) Detection of any cognitive impairment; (2) Review of the 
individual's functional ability and level of safety; (3) Health 
professional; (4) Establishment of, or update to the individual's 
medical and family history; (5) Eligible beneficiary; (6) First annual 
wellness visit providing personalized prevention plan services; and (7) 
Subsequent annual wellness visit providing personalized prevention plan 
services.
    Further, the ACA allows the addition of any other element 
determined appropriate by the Secretary for inclusion in an AWV. We 
reviewed the relevant medical literature, current clinical practice 
guidelines, and the recommendations of the United States Preventive 
Services Task Force (USPSTF). Pursuant to that review, we proposed to 
add depression screening and functional status screening as elements of 
the first AWV only. In its December 2009 Recommendation Statement, the 
USPSTF recommends screening adults for depression when staff-assisted 
depression care supports are in place to assure accurate diagnosis, 
effective treatment and follow-up (Grade: B recommendation). That is, 
the USPSTF recommends the service; there is high certainty that the net 
benefit is moderate or there is moderate certainty that the net benefit 
is moderate to substantial.
    The USPSTF is currently updating its 1996 recommendation regarding 
screening for hearing impairment in older adults as well as its 
recommendation on falls in the elderly. Until those recommendations can 
be published, functional status screening (including assessment of 
hearing impairment, ability to successfully perform activities of daily 
living, fall risk, and home safety) appears supportable by evidence 
only for the first AWV.
    We also proposed that the definition of the term ``Establishment 
of, or an update to the individual's medical and family history'' 
include more than a list of all of an individual's prescribed 
medications as provided in the statute, but also supplements such as 
vitamins and calcium that an individual may be exposed to or use. 
Supplements such as these are commonly used by many beneficiaries and 
the medical literature supports that their use be closely monitored by 
health professionals because they can interact with prescribed 
medications and may result in unintended medical problems in individual 
cases. The statute expressly permits the Secretary to add other 
elements such as this to the AWVs.
    To facilitate future consideration of coverage of additional 
elements in the definitions of the first and subsequent AWVs in Sec.  
410.15(a), we proposed that the determination of other required 
elements for those purposes will be made through the national coverage 
determination (NCD) process. The NCD process, as described in section 
1862(l) of the Act, is evidence based, transparent, and furnishes the 
opportunity for public comment.
(1) Definitions
    We proposed to add the following definitions to Sec.  410.15(a):
    <bullet> Detection of any cognitive impairment, for purposes of 
this section, means assessment of an individual's cognitive function by 
direct observation, with due consideration of information obtained by 
way of patient report, concerns raised by family members, friends, 
caretakers, or others.
    Comment: A number of commenters strongly supported the mandatory 
inclusion of ``detection of any cognitive impairment'' in the new AWV, 
but several suggested the proposed definition did not go far enough and 
needed to be clarified. One commenter suggested that the definition was 
``too vague and may be interpreted as optional by a provider unless a 
subjective memory complaint is raised by the individual or a concern is 
raised by family members, friends, caretakers, or others'', and that a 
brief cognitive screening test was necessary ``to accurately identify 
the presence of cognitive deficits, and to indicate whether additional 
testing is necessary * * *'' Another commenter expressed concern that 
``physicians cannot accurately assess cognitive function * * * by 
relying on direct observation or by report of the patient or 
knowledgeable informant.'' The commenter cited several recent 
publications and their own experience in support of revising the 
definition to include use of a standardized screening test. A number of 
commenters supporting the importance of the ``detection of cognitive 
impairment'' element, however, agreed with the definition that is used 
in the proposed rule, which does not require a standardized screening 
tool.
    Response: We agree with the commenters that the ``detection of 
cognitive impairment'' is an important element of the AWV. As Boustani 
and colleagues (Ann Internal Medicine 2003;138:927-937) noted: 
``Dementia causes a high burden of suffering for patients, their 
families, and society. For patients, it leads to increased dependency 
and complicates other comorbid conditions. For families, it leads to 
anxiety, depression, and increased time spent caring for a loved one. 
The annual societal cost of dementia is approximately $100 billion 
(health care and related costs as well as lost wages for patients and 
family caregivers).''
    Several commenters suggested revising the proposed definition by 
the

[[Page 73401]]

addition of a standardized screening tool. With the considerable 
variability in the range and causes of cognitive impairment, it is 
difficult to more specifically define this element without limiting it 
to specific diseases such as Alzheimer's since dementia in and of 
itself is broadly defined. The American Psychiatric Association stated: 
``the essential features of a dementia are acquired multiple cognitive 
deficits that usually include memory impairment and at least one of the 
following phenomena in the absence of a delirium that might explain the 
deficit: aphasia, apraxia, agnosia, or a disturbance in executive 
functioning (the ability to think abstractly and to plan, initiate, 
sequence, monitor, and stop complex behavior) (http://www.psychiatryonline.com/content.aspx?aID=152634#152634).'' However, an 
evidence-based, standardized screening tool is not currently available. 
The USPSTF noted: ``most screening tests have been evaluated in studies 
with small sample sizes, and the populations of patients on whom 
screening instruments have been tested have varied greatly, making it 
difficult to determine the overall performance of screening tests for 
dementia'' (http://www.uspreventiveservicestaskforce.org/3rduspstf/dementia/dementrr.pdf). They concluded ``that the evidence is 
insufficient to recommend for or against routine screening for dementia 
in older adults (I grade).'' Since there is no nationally recognized 
screening tool for the detection of cognitive impairments at the 
present time, we are adopting the language in Sec.  410.15(a) as 
proposed.
    We disagree with one of the commenter's assertions that, in 
general, a physician cannot accurately assess cognitive function by 
direct observation or report of the patient or by report of the patient 
knowledgeable informant. We believe that physicians can use their best 
clinical judgment in the detection and diagnosis of cognitive 
impairments, along with determining whether additional resources may 
need to be used in the course of screening and treatment of the 
patient. We will continue to actively monitor advancements in 
screening, collaborate with the USPSTF, and will consider revising this 
element if the evidence is sufficient and a standardized screening test 
becomes available.
    <bullet> Review of the individual's functional ability and level of 
safety, for purposes of this section includes, at a minimum, assessment 
of the following topics:

++ Hearing impairment;
++ Ability to successfully perform activities of daily living;
++ Fall risk;
++ Home safety.

    Comment: One commenter asked CMS to add ``assessment of level of 
support'' to the proposed definition of ``review of the individual's 
functional ability and level of safety'' to recognize that the 
availability of a caregiver is an important indication of a 
beneficiary's ability to function and of their level of safety.
    Response: We agree that family caregivers play an important role in 
the lives of the individuals they care for and support. However, we 
believe that the term as defined in the proposed rule is flexible 
enough to include a discussion of the availability of a caregiver as 
part of the review of functional ability and level of safety, if 
determined appropriate by the health professional furnishing the AWV. 
Therefore, we are not adopting this public comment and are adopting the 
definition as proposed.
    <bullet> Health professional, for purposes of this section means:
    ++ A physician who is a doctor of medicine or osteopathy (as 
defined in section 1861(r)(1) of the Act); or
    ++ A practitioner as described in clause (i) of section 
1842(b)(18)(C) of the Act, that is, a physician assistant, nurse 
practitioner, or clinical nurse specialist (as defined in section 
1861(aa)(5) of the Act); or
    ++ A medical professional (including a health educator, registered 
dietitian, or nutritionist) or a team of medical professionals, who are 
working under the supervision of a physician as defined in this 
definition.
    Comment: A number of commenters requested clarification of specific 
elements of the definition of the term ``Health professional'' and 
offered specific suggestions for revisions that might be made in the 
definition in the final rule. One commenter suggested that section 4103 
of the ACA provided that the AWV could be performed by a health 
professional or a team of health professionals such as a registered 
nurse that works under the supervision of a physician. When registered 
nurses or other medical professionals who are not Medicare-recognized 
providers or practitioners perform the AWV under the supervision of a 
physician, the commenter assumes that the visit ``would be billed by 
the supervising physician who may or may not see the patient during the 
visit.'' The commenter believed that because the AWV has its own 
benefit category then Medicare payments would not fall under the 
``incident to'' benefit (section 1861(s)(2)(B) of the Act and the 
'incident to' criteria would not need to be met.
    Response: We agree with the commenter that the AWV has its own 
benefit category as provided in section 1861(s)(2)(FF) and section 1861 
(hhh) of the Act and, therefore, is not subject to the ``incident to'' 
rules. The commenter is also correct that our intent is that where the 
wellness visit is performed by a ``team of medical professionals 
working under the supervision of a physician'' it is the supervising 
physician who would bill Medicare Part B for the visit. In this final 
rule, we are clarifying that the visit would be furnished under the 
``direct supervision'' (as defined in 42 CFR 410.32(b)(3)(ii)), of a 
physician (as defined in paragraph (i) of this definition). Direct 
supervision in the office setting means that the physician must be 
present in the office suite and immediately available to furnish 
assistance and direction throughout the performance of the procedure. 
It does not mean that the physician must be present in the room when 
the procedure is performed. In response to the public comment, we are 
amending the definition of the term ``health professional'' in the 
final rule to read in paragraph (iii) as follows:
    ``A medical professional (including a health educator, a registered 
dietitian, or nutrition professional, or other licensed practitioner or 
a team of such medical professionals, working under the direct 
supervision (as defined in 42 CFR 410.32(b)(3)(ii)) of a physician as 
defined in paragraph (i) of this definition.''
    Comment: A commenter asserted that the definition of ``health 
professional'' should recognize other potential members of the team 
beyond those listed in the examples in the statute. The commenter 
recommends that CMS ``specify who may or should be a part of the team 
and should define `medical professional' as licensed health 
practitioners whose services are specifically covered and regulated by 
Medicare. Otherwise, in the commenter's view, paraprofessionals, non-
licensed providers or others may be inappropriately used as part of the 
team. The commenter supported the requirement ``that the team should be 
directed by a physician,'' but believes ``CMS should provide some 
standards for the members of the team as a protection for consumers and 
to assure that funding for this visit will be spent on authentic, 
appropriate and regulated services.'' The commenter also suggested that 
occupational therapists be specifically included as a potential 
component of the team.

[[Page 73402]]

    Another commenter asked CMS to clarify ``how the required tasks in 
the visit will be performed and how care coordination will occur among 
the eligible medical professionals and/or team that provides the AWV.''
    Response: While we appreciate the commenters' concerns, we are not 
assigning particular tasks or restrictions for specific members of the 
team in this final rule. We believe it is better for the supervising 
physician to assign specific tasks to qualified team members (as long 
as they are licensed in the State and working within their state scope 
of practice). This approach gives the physicians and the team the 
flexibility needed to address the beneficiary's particular needs on a 
particular day. It also empowers the physician to determine whether 
specific medical professionals (such as occupational therapists) who 
will be working on his or her wellness team are needed on a particular 
day. The physician is able to determine the coordination of various 
team members during the AWV.
    Comment: One commenter urged CMS to revise its proposed definition 
of ``Health professional'' to include the phrase ``practicing in any 
particular patient care setting.'' The commenter believed that this 
clarification is needed to ``encourage retail based practitioners to 
provide these services, thereby making this benefit more appealing for 
patients.'' The commenter suggested that ``retail based health 
practitioners are uniquely positioned to ensure the optimal utilization 
of this new benefit.''
    Response: Although we are interested in encouraging the maximum use 
of the AWV and encourage all of the health professionals listed in 
section 1861(hhh)(3) of the Act that are qualified to furnish this 
service to participate in providing this part B service, we are not 
adopting the commenter's suggestion to include the phrase ``practicing 
an any particular patient care setting.'' This particular phrase is not 
used in section 1861(hhh)(3) of the Act, which instead references 
specific health professionals that may furnish the AWV without regard 
to a particular physical location. Moreover, we note that the phrase 
``any particular patient care setting'' is ambiguous, and may in fact 
unintentionally narrow the availability of the benefit or raise 
unnecessary questions regarding the setting. Therefore, we are not 
adopting the commenter's suggested revision of that definition to 
include language on specific patient care settings.
    Comment: One commenter noted that certified nurse-midwives (CNMs) 
are not specifically mentioned in the ACA as it relates to the AWV, 
though nurse practitioners and clinical nurse specialists are 
enumerated among practitioners eligible to participate. The commenter 
requested that CMS review the education, background and scope of 
practice services under the Medicare program and ensure that CNMs are 
clearly eligible to provide the Medicare AWV.
    Response: Congress defined the term ``health professional'' as 
including certain practitioners ``described in clause (i) of section 
1842(b)(18)(C)'' of the Act. Clause (i) specifically includes physician 
assistants (PAs), nurse practitioners (NPs) and clinical nurse 
specialists. CNMs, in contrast, are identified in clause (iii) of 1842 
(b)(18)(C) of the Act. Given the specificity of the cross-reference to 
only clause (i), we presume that Congress acted intentionally by not 
including a reference to clause (iii). Thus, we believe additional 
legislation would be needed to recognize CNMs as a ``health 
professional'' under this section. However, we note, that it is 
possible that a CNM could be chosen by a physician as a member of the 
team of professionals under the physician's supervision.
    Comment: One commenter requested that CMS clarify the language of 
the proposed rule in the definition of ``medical professional'' in 
Sec.  410.31(a). Section 4103 of the ACA uses the terms ``registered 
dietitian'' or ``nutrition professional'' in its definition of 
``medical professional'' eligible to be involved in the AWV. The 
proposed rule used the term ``nutritionist'' instead of ``nutrition 
professional.'' The commenter asks CMS to replace the term 
``nutritionist'' with ``nutrition professional'' in Sec.  410.15(a).
    Response: We agree with the commenter and we are replacing the term 
``nutritionist'' with the term ``nutrition professional'' in Sec.  
410.15(a) of the final rule, which is consistent with the language used 
in section 4103 of the ACA.
    Comment: One commenter is concerned about the CMS proposal to 
require the term ``physician'' for purposes of the definition of 
``health professional'' to be either a doctor of medicine or a doctor 
of osteopathy as defined in section 1861(r)(1) of the Act. The 
commenter suggests that we use the full definition of a ``physician as 
defined in section 1861(r) of the Act.
    Response: Section 4103 of the ACA does not specifically define what 
type of physician is eligible for performing or supervising the team of 
health professionals who will be performing or supervising the AWV. In 
developing the proposed rule, we considered the various types of 
physicians that are identified in section 1861(r)(2), (r)(3), (r)(4), 
and (r)(5) of the Act. These include doctors of dental surgery, doctors 
of podiatric medicine, doctors of optometry, and chiropractors, whose 
scope of medical practice is generally limited by State law to a 
particular part (or parts) of the human anatomy. Given the State 
licensing restrictions, some individuals who are physicians for certain 
limited purposes under section1861(r) of the Act could exceed their 
scope of practice if they attempted to furnish the AWV. Based on this 
information, we are leaving the definition of a physician unchanged in 
the final rule.
    <bullet> Establishment of, or an update to the individual's medical 
and family history, for purposes of this section, means, at minimum, 
the collection and documentation of the following:
    ++ Past medical and surgical history, including experiences with 
illnesses, hospital stays, operations, allergies, injuries, and 
treatments.
    ++ Use or exposure to medications and supplements, including 
calcium and vitamins.
    ++ Medical events experienced by the beneficiary's parents and any 
siblings and children, including diseases that may be hereditary or 
place the individual at increased risk.
    Comment: A number of commenters requested that additional items be 
included in the definition of the term ``Establishment of, or an update 
to the individual's medical and family history,'' such as tobacco use, 
sexual history, history and results of pelvic exams, and falls history.
    Response: Our proposed definition at Sec.  410.15(a) was not 
intended to establish an exhaustive list of the elements of an 
individual's medical and family history. We included the phrase ``at 
minimum'' to reflect that the listed criteria represent a floor and not 
a ceiling on the items included in the medical and family history. We 
agree that the items of additional information identified by the 
commenters are relevant and could be included in the medical and family 
history that is maintained by the health professional for the Medicare 
beneficiary. However, we believe that the term as defined in the 
proposed rule is flexible enough to encompass the additional items 
requested by the commenters. Therefore, we are not adopting the 
commenters' specific language and are implementing the proposed 
definition in this final rule.
    <bullet> Eligible beneficiary, for purposes of this section, means 
an individual who is no longer within 12 months after the

[[Page 73403]]

effective date of his or her first Medicare Part B coverage period, and 
has not received either an initial preventive physical examination or 
an AWV providing a personalized prevention plan within the past 12 
months.
    Comment: Several commenters suggested that CMS misinterpreted the 
eligibility criteria for the AWV and its relationship to the one-time 
initial preventive physical examination defined in section 1861(ww)(1) 
of the Act, which is only covered during the first 12 months after a 
beneficiary's enrollment in Medicare Part B takes effect.
    In suggesting that CMS' proposed definition was inappropriate, one 
commenter pointed to statutory language that states: ``A beneficiary 
shall only be eligible to receive an initial preventive physical 
examination (as defined under subsection (ww)(1)) at any time during 
the 12-month period after the date that the beneficiary's coverage 
begins under Part B and shall be eligible to receive personalized 
prevention plan services under this subsection provided that the 
beneficiary has not received such services within the preceding 12 
month period.'' The commenter argued that this language intends either 
an initial preventive physical examination or an AWV to be available 
during the 12-month period after an individual's Part B coverage begins 
provided the individual has not received either service within the 
preceding 12-months. To further bolster this argument, the commenter 
points to clause (ii) of paragraph (G) directing the Secretary to 
``establish procedures to make beneficiaries aware of the option to 
select an initial preventive physical examination or personalized 
prevention plan services during the period of 12-months after the date 
that a beneficiary's coverage begins under Part B, which shall include 
information regarding any relevant differences between such services.''
    Response: The statutory text cited by the commenter fails to 
reflect a later Congressional amendment. Specifically, Congress 
replaced the language of paragraph (G) by section 10402(b) of the ACA. 
That amendment replaced the text cited by the commenter so that the 
version of paragraph (G) that was enacted into law reads: ``A 
beneficiary shall be eligible to receive only an initial preventive 
physical examination (as defined under subsection (ww)(1)) during the 
12-month period after the date that the beneficiary's coverage begins 
under Part B and shall be eligible to receive personalized prevention 
plan services under this subsection each year thereafter provided that 
the beneficiary has not received either an initial preventive physical 
examination or personalized prevention plan services within the 
preceding 12-month period.''
    This amendment clarifies that only an initial preventive physical 
examination is covered during the 12-month period after an individual's 
Part B coverage begins, and that coverage of the new AWVs begins during 
the individual's second year of Part B coverage. In other words, they 
were intended to be sequential, not concurrent, benefits. We believe 
the proposed definition of ``eligible beneficiary'' included in the 
proposed rule correctly implements this aspect of sections 4103 and 
10402(b) of the ACA. Therefore, we are finalizing the proposed 
definition without accepting the commenters' suggestion.
(2) Requirements of the First Annual Wellness Visit Providing 
Personalized Prevention Plan Services
    We proposed that the first AWV providing personalized prevention 
plan services for purposes of this benefit include the following:
    <bullet> Establishment of an individual's medical and family 
history.
    <bullet> Establishment of a list of current providers and suppliers 
that are regularly involved in providing medical care to the 
individual.
    <bullet> Measurement of an individual's height, weight, body mass 
index (or waist circumference, if appropriate), blood pressure, and 
other routine measurements as deemed appropriate, based on the 
individual's medical and family history.
    <bullet> Detection of any cognitive impairment that the individual 
may have.
    <bullet> Review of the individual's potential (risk factors) for 
depression, including current or past experiences with depression or 
other mood disorders, based on the use of an appropriate screening 
instrument for persons without a current diagnosis of depression, which 
the health professional as defined in this section may select from 
various available screening questions or standardized questionnaires 
designed for this purpose and recognized by national professional 
medical organizations.
    <bullet> Review of the individual's functional ability and level of 
safety, based on direct observation or the use of appropriate screening 
questions or a screening questionnaire, which the health professional 
as defined in this section may select from various available screening 
questions or standardized questionnaires designed for this purpose and 
recognized by national professional medical organizations.
    <bullet> Establishment of the following:
    ++ A written screening schedule, such as a checklist, for the next 
5 to 10 years as appropriate, based on recommendations of the USPSTF 
and the Advisory Committee on Immunization Practices, and the 
individual's health status, screening history, and age-appropriate 
preventive services covered by Medicare.
    ++ A list of risk factors and conditions for which primary, 
secondary or tertiary interventions are recommended or are underway, 
including any mental health conditions or any such risk factors or 
conditions that have been identified through an initial preventive 
physical examination (as described under Sec.  410.16), and a list of 
treatment options and their associated risks and benefits.
    <bullet> Furnishing of personalized health advice to the individual 
and a referral, as appropriate, to health education or preventive 
counseling services or programs aimed at reducing identified risk 
factors and improving self management, or community-based lifestyle 
interventions to reduce health risks and promote self-management and 
wellness, including weight loss, physical activity, smoking cessation, 
fall prevention, and nutrition.
    <bullet> Any other element determined appropriate through the 
National Coverage Determination process.
    Comment: A number of commenters were supportive of the proposal to 
use the national coverage determination process and rely on the USPSTF 
recommendations in developing the definitions of the first and 
subsequent AWV definitions, along with the addition of any other 
elements in the future, since the services need to be based on 
evidence. One commenter suggested that CMS publish a notice in the 
Federal Register about consideration of other preventive services via 
the NCD process. The commenter expressed concern that many groups and 
members of the public were more familiar with the regulatory 
notification process than the NCD process.
    Response: We appreciate the commenter's concerns regarding 
receiving timely information about topics that CMS is considering for 
coverage of preventive services via the NCD process. As discussed in 
the preamble, the NCD process is an evidence-based, transparent process 
and furnishes the opportunity for public comment, and is described in 
section 1862(l) of the Act. The CMS Web site at http://www.cms.gov/mcd/index_list.asp?list_type=nca contains a

[[Page 73404]]

list of all national coverage analyses that are currently under 
consideration. Those interested in receiving information via e-mail 
regarding national coverage analyses under consideration can sign up to 
receive e-mail notifications via the CMS coverage listserv at http://www.cms.gov/InfoExchange/03_listserv.asp#TopOfPage. Given the 
relatively fast timeline described in section 1862(l) of the Act, we do 
not believe it is feasible to add a requirement for publication of a 
notice in the Federal Register whenever an NCD is opened. Therefore, we 
are not adopting the public comment. Please note that we do publish a 
listing in the Federal Register of all NCDs that are issued. This 
information is included in the quarterly notice issued pursuant to 
section1871(c) of the Act.
    Comment: Several commenters noted that we did not include the 
health risk assessment (HRA) in our proposal that section 4103 of the 
ACA ultimately requires to be part of the AWV. Several of these 
commenters strongly supported the CMS approach of not immediately 
implementing the HRA requirement on January 1, 2011. Some commenters 
noted that a separate ACA provision also concerns the establishment of 
an HRA, but used later deadlines. Specifically, section 1861(hhh)(4)(A) 
of the Act requires consultation to develop publically available 
guidelines for HRAs by March 23, 2011. One commenter noted that ``the 
relative recent enactment of the Affordable Care Act provided CMS 
little time to establish standard processes related to a health risk 
assessment (HRA).'' Another commenter stressed the need for a 
standardized HRA model or models that is/are recognized and accepted 
nationally. Another commenter urged us to act as expeditiously as 
possible in a consultative way by directly engaging the major medical 
organizations and stakeholders who represent physicians and other 
clinicians who see Medicare beneficiaries. One commenter recommended 
that the ``HRA program should also be pilot-tested before widely 
imposed to determine such critical factors as the effectiveness of the 
guidelines and the administrative burden imposed on the physicians.''
    However, other commenters expressed the view that the HRA is such a 
fundamental element of the new AWV that it should be added to the final 
rule and required beginning January 1, 2011. One commenter indicated 
that the absence of an HRA ``will delay the opportunity to improve 
beneficiaries' health and to control costs as a result. We believe that 
the HRA is the lynchpin that makes the wellness visit more than another 
office visit and should be included as a required element beginning 
January 1, 2011.'' Several of these commenters suggested that CMS 
should rely on the National Committee for Quality Assurance (NCQA) 
certification process, the Utilization Review Accreditation Committee 
(URAC) accreditation process, or another certification process that 
already exists effective January 1, 2011, at least as an interim 
measure.
    Response: We agree with commenters that the HRA is an important 
part of the AWV and we are working to fully implement this relevant 
provision of the ACA. However, because the statute has specified a time 
frame and procedures that require consultation with relevant groups and 
entities prior to publication of the required HRA guidelines, it is not 
possible to complete those procedures by January 1, 2011. Moreover, we 
do not believe it would be prudent to mandate an interim HRA without 
completing the consultation process that Congress has specifically 
required. The point of the consultation is to achieve a greater 
national consensus on the HRA to be used. As one of the large physician 
specialty groups has noted during the public comment period, a 
standardized HRA is needed to ``ensure use of appropriate and robust 
HRA from a marketplace where considerable variation exists today.'' We 
agree with this commenter that what is needed is an HRA ``that has been 
standardized by the Department of Health and Human Services.'' The 
development of an evidence-based, standardized model, nonetheless 
requires extensive work and input from a number of public agencies, 
professional societies and private organizations. It is important to 
carefully complete that process so that the evidence-based standard 
will have a sound scientific foundation and broad acceptance.
    Consistent with the statutory deadlines, and one commenter's 
suggestion ``that the Secretary of HHS expedite the development of a 
standardized HRA,'' CMS is collaborating with the Centers for Disease 
Control and Prevention (CDC) which is directed by section 4004(f) of 
the ACA to develop a personalized prevention plan tool and has an in-
depth knowledge of HRAs. We understand that CDC is planning to convene 
an open scientific meeting in Atlanta at the beginning of 2011 to 
facilitate that development. This meeting should allow broad public 
input into the development of an evidence-based standardized HRA, as 
recommended by the American Medical Association (AMA) which urged ``CMS 
to continue to develop the HRA guidelines, in consultation with the AMA 
and other relevant stakeholders representing physicians,'' and the 
American College of Physicians (ACP) which recommended ``that the 
agency engage directly with the most relevant stakeholders * * * to 
ensure that the HRA fulfills the vital role of promoting optimal 
preventive care and related interventions envisioned by the ACA.'' CMS 
has also commissioned a technology assessment from the Agency for 
Healthcare Research and Quality (AHRQ) to be completed by the end of 
2010 that will help in the development of the HRA guidelines and model.
    While commenters have suggested that we require the use of one or 
more currently available assessment tools until an evidence-based 
standardized model is available, we believe it would be premature and 
inefficient to make such a recommendation at this time without adequate 
scientific review and broader stakeholder input. As noted in the 
proposed rule, HRA guidelines and standards are being developed by the 
CDC and when a model HRA instrument is available and determined by the 
Secretary to be appropriate for the use of Medicare beneficiaries, we 
will revise these regulations to include the HRA as an element in the 
definition of the AWV.
    Comment: Several comments expressed concern that there were too 
many required elements in the definition of the ``First annual wellness 
visit'' and that the definition should be modified so that some of the 
elements are discretionary based on an individual's medical history or 
the results of an HRA and one suggested that CMS should ``clarify the 
role that the HRA care plan plays in addressing these elements as a 
prelude to the office visit.'' This commenter noted that the proposed 
CMS definition ``assumes that the physician does not already know the 
patient's medical and family history or other providers and suppliers 
involved in the patient's care'' which may not always be the case.
    One commenter stated that the AWV ``is supposed to deliver a 
service tailored to the specific needs of the patient based on some 
combination of the HRA results, medical history, and practitioner 
expertise. Some elements could be required for every patient because 
the level of appropriateness does not vary much from patient to patient 
based on age, gender, and other factors. However, there are some 
elements the need for which varies greatly from patient to patient and 
even over time.'' This commenter

[[Page 73405]]

recommended ``that CMS add general language stating that certain 
elements can be addressed, at least to some degree, as part of the 
HRA.''
    Response: We agree that a physician's or other health 
professional's need to include certain elements of the AWV may vary 
with the professional's knowledge of the individual's medical and 
family history and, in particular, with the results of an HRA, if 
available. However, until HRA guidelines have been developed and a 
standardized HRA model or models has/have been recognized and accepted 
nationally by the Secretary for use by Medicare beneficiaries, we do 
not believe it is appropriate to include more flexibility or 
alternatives to the proposed elements of the first wellness visit. 
Therefore, we are leaving the proposed elements (i) through (viii) of 
the definition of the first AWV unchanged in this final rule.
(3) Requirements of Subsequent Annual Wellness Visits Providing 
Personalized Prevention Plan Services
    We proposed that subsequent AWVs providing personalized prevention 
plan services for purposes of this benefit include the following:
    <bullet> An update of the individual's medical and family history.
    <bullet> An update of the list of current providers and suppliers 
that are regularly involved in providing medical care to the 
individual, as that list was developed for the first AWV providing 
personalized prevention plan services.
    <bullet> Measurement of an individual's weight (or waist 
circumference), blood pressure, and other routine measurements as 
deemed appropriate, based on the individual's medical and family 
history.
    <bullet> Detection of any cognitive impairment, as that term is 
defined in this section, that the individual may have.
    <bullet> An update to both of the following:
    ++ The written screening schedule for the individual as that 
schedule was developed at the first AWV providing personalized 
prevention plan services.
    ++ The list of risk factors and conditions for which primary, 
secondary or tertiary interventions are recommended or are under way 
for the individual as that list was developed at the first AWV 
providing personalized prevention plan services.
    <bullet> Furnishing of personalized health advice to the individual 
and a referral, as appropriate, to health education or preventive 
counseling services or programs as that advice and related services are 
defined in paragraph (a) of this section.
    <bullet> Any other element determined through the NCD process.
    We proposed that body-mass index (BMI) should be calculated at the 
first AWV and may be recalculated at subsequent AWVs, if indicated. 
Given the general stability of adult height, we would not expect the 
BMI to meaningfully change in the absence of significant weight change. 
In the proposed rule, we did not require measurement of the 
individual's height in the subsequent annual visit.
    We proposed to add two distinct elements to the definition of the 
first AWV only: Depression screening and functional status and level of 
safety assessment. Our review of the medical literature and the USPSTF 
recommendations indicates that the optimum frequency for those services 
is unknown. In the proposed rule, we stated we believe it would be 
premature and beyond the current evidence to require depression 
screening and functional status assessment included in the definition 
of subsequent visits, but they may be performed at these visits, if 
indicated.
    Comment: A number of commenters expressed concern that the proposed 
definition of the term ``Subsequent annual wellness visit * * *'' did 
not include the depression screening and the functional ability and 
level of safety screening, elements (v) and (vi), respectively, that 
were included in the proposed definition of the term ``First annual 
wellness visit.'' One commenter noted that ``while the USPSTF states 
that the optimal interval for screening is unknown, it does recognize 
that recurrent screening may be needed for certain patients.'' At a 
minimum, the commenter suggested that ``the regulations should require 
additional screening for depression after new chronic conditions are 
diagnosed and when reduction in functioning is noted.'' The commenter 
also indicated that yearly screening for functional ability and level 
of safety ``is important to determine changes in functional impairments 
identified in previous screening as well as any new limitations. Such 
screening will assist in determining care plans, further assessments, 
and other services to allow a beneficiary to remain in the community as 
long as possible.''
    Response: We agree that depression screening in older adults is 
important. We have reviewed the USPSTF guidelines (http://www.uspreventiveservicestaskforce.org/uspstf09/adultdepression/addeprrs.htm) and have decided not to include it as a required element 
for subsequent AWVs largely since the USPSTF states that ``the optimum 
interval for screening for depression is unknown.'' In addition, the 
USPSTF only recommends depression screening ``when staff-assisted 
depression care supports are in place to assure accurate diagnosis, 
effective treatment, and follow-up.'' It is unclear if these supports 
are universally available in physician offices to allow adequate 
routine screening at the AWV. The USPSTF further notes: ``recurrent 
screening may be most productive in patients with a history of 
depression, unexplained somatic symptoms, comorbid psychological 
conditions (for example, panic disorder or generalized anxiety), 
substance abuse, or chronic pain.'' If an individual is determined to 
be in this category from prior screening, such as at the IPPE or 
through an HRA, then it would appear appropriate on an individual basis 
to continue screening and to tailor the AWV based on risk.
    Regarding functional ability and safety, we agree that for certain 
individuals, functional status and safety assessments (for example, 
fall prevention) may be important to consider on a more routine basis. 
For the general Medicare population, there are no A or B 
recommendations by the USPSTF in these areas and thus we have decided 
not to add functional status and safety assessments as universally 
required elements for the subsequent AWV. The AWV does allow for an 
individualized approach with a personalized prevention plan. For 
certain individuals where these areas are determined to be priorities, 
specific evaluations may be voluntary parts of subsequent visits. Since 
we closely monitor the USPSTF recommendations for updates or changes, 
if specific new or revised recommendations come out in the future, we 
may consider modifications at that time.
    Comment: Several commenters requested that we add additional 
screening elements to the first and subsequent AWVs regarding: (1) 
Alcohol use status; (2) Tobacco use or other substance use status; (3) 
Sexual health and incontinence; (4) Physical activity level; (5) Risk 
of falls; (6) Nutrition status including under nutrition and/or 
malnutrition; (7) Vision and eye health; (8) an assessment for 
osteoarthritis; and (9) assessment of gait and balance.
    Response: We appreciate the suggestions provided. The intent of the 
proposed definition for ``establishment of, or an update to the 
individual's medical and family history'' means at a minimum the 
collection and documentation of the information outlined in the 
proposed definition of this term. Additional items like those

[[Page 73406]]

suggested by the commenters can be identified and discussed as part of 
the establishment of, or an update to the individual's medical and 
family history. We do not believe that it is necessary to outline an 
exhaustive list of various items that may be included in the 
definition. We believe that physical activity level and risk of falls 
are adequately addressed in the definition of ``review of the 
individual's functional ability and level of safety''.
    We recognize that the health professional (or supervising physician 
in the case of a team of medical professionals) furnishing the AWV is 
qualified and would be able to determine the specific additional 
information that needs to be discussed in order to establish a 
comprehensive medical and family history and provide the best care 
possible for the individual.
    In the future, as the medical science continues to evolve, CMS may 
consider adding other elements to the first and subsequent AWVs through 
use of the national coverage determination process, if considered 
appropriate.
    Comment: One commenter requested that the first and subsequent AWVs 
include a detailed current medications and supplements list as part of 
the individual's medical and family history.
    Response: We agree that medications and supplements such as 
vitamins and calcium are an important part of an individual's medical 
and family history. We included in the proposed definition of the 
``Establishment of, or an update to the individual's medical and family 
history'' provisions for the collection and documentation of use or 
exposure to medications and supplements, including calcium and 
vitamins. We believe the information included in the definition 
addresses the commenter's concerns and, therefore, we are implementing 
element (i) of the first AWV and element (i) of the subsequent AWV, as 
proposed, in this final rule.
    Comment: One commenter suggested that measurement of BMI be viewed 
as a vital sign that should be included in both the first and 
subsequent AWVs.
    Response: We explained in the preamble to the proposed rule that 
``body mass index (BMI) should be calculated at the first AWV and may 
be recalculated at subsequent visits if indicated. Given the general 
stability of adult height, we would not expect the BMI to meaningfully 
change in the absence of significant weight change, and therefore we 
are not requiring measurement of the individual's height during 
subsequent AWVs. Accordingly, in this final rule, we are not adding the 
BMI requirement to the subsequent AWV.
    Comment: Several commenters suggested CMS should specify in the 
final rule that an individual's family history of various diseases, 
obesity, or risk factors for a disease such as diabetes should be 
included in the list of risk factors and conditions for which primary, 
secondary or tertiary interventions are recommended for an individual 
as described in element (vii)(B) of the first AWV and element (v)(B) of 
the subsequent AWV.
    Response: We agree that the risk factors and conditions identified 
by the commenters should be reflected in the list of risk factors 
referenced in element (vii)(B) of the first AWV and element (V)(B) of 
the subsequent AWV for possible referral if the individual's health 
professional determines that it is appropriate to do so, based on the 
information obtained during the first and/or subsequent AWV. Therefore, 
we believe no additional changes to the description of ``individual's 
medical and family history'' as part of the elements of the first and 
subsequent AWVs are in order.
    Comment: We received a number of comments from physicians, health 
care providers, and others urging us to add voluntary advance care 
planning as an element to the definitions of both the ``first annual 
wellness visit'' and the ``subsequent annual wellness visit.'' They 
base their recommendation upon a number of recent research studies, and 
the inclusion by statute of a similar element in the existing initial 
preventive physical examination (IPPE) benefit. One commenter noted 
that ``the new wellness visit was wisely designed to build on the 
initial preventive physical exam, providing an ongoing, systematic 
focus on wellness and prevention by harmonizing Medicare services into 
a coordinated benefit.'' Another commenter stated that ``the AWV 
provides an appropriate setting for providers to initiate voluntary 
conversations about future care wishes, as they counsel beneficiaries 
on other aspects of their health and achieving their personal health 
goals.'' The commenter added that the ``care plans discussed in the 
'Welcome to Medicare visit' should not be frozen in time, but revisited 
as an important component of patient wellness.''
    Response: We agree that voluntary advance care planning should be 
added as an element of the definitions of both the ``first annual 
wellness visit'' and the ``subsequent annual wellness visit'' based on 
the evidence described below, and the inclusion of a similar element in 
the IPPE benefit (also referred to as the Welcome to Medicare visit), 
since January 1, 2009. We believe that this will help the physician to 
better align the personal prevention plan services with the patient's 
personal priorities and goals.
    Recently, Detering and colleagues (British Medical Journal 2010; 
340:c1345) reported that ``advance care planning improves end of life 
care and patient and family satisfaction and reduces stress, anxiety, 
and depression in surviving relatives.'' Silveira and colleagues (New 
England Journal of Medicine 2010; 362:1211-8) reported that ``data 
suggest that most elderly patients would welcome these discussions.'' 
Lastly, a study by Fischer and colleagues (Journal of the American 
Geriatric Society 2010; 58:400-401) found ``no evidence that these 
(advance directive) discussions or completing an advance directive lead 
to harm.''
    Based on the available evidence and other relevant information, we 
are adding to the final regulation a definition of the term ``voluntary 
advance care planning'' to read as follows:
    ``Voluntary advance care planning'' means, for purposes of this 
section, verbal or written information regarding the following areas:
    (1) An individual's ability to prepare an advance directive in the 
case where an injury or illness causes the individual to be unable to 
make health care decisions.
    (2) Whether or not the physician is willing to follow the 
individual's wishes as expressed in an advance directive.
    This definition is based on the definition of ``end-of-life 
planning'', which is included as an element of the IPPE as described in 
section 1861(ww)(3) of the Act. Thus, the addition of ``voluntary 
advance care planning'' to the AWVs extends to those visits a similar 
element to the one already in the one-time IPPE.
    We are also revising the definitions of the terms ``First annual 
wellness visit'' and ``Subsequent annual wellness visit'' by inserting 
a new element (ix) to the definition of the term ``first annual 
wellness visit'' and a new element (vii) to the definition of the term 
``subsequent annual wellness visit'' in Sec.  410.15 (a) of the final 
regulation text that would read as follows: ``Voluntary advance care 
planning as that term is defined in this section upon agreement with 
the individual.''
    Comment: Commenters requested that we specifically require that 
certain referrals for various services be included as part of the 
personalized prevention plan including: (1) Community-based and other 
lifestyle management services; (2) kidney disease education services; 
(3) urogynecologist visits to discuss

[[Page 73407]]

incontinence issues; and (4) tobacco use cessation counseling and 
related services.
    Response: In the proposed rule, the definition for the first AWV 
included provisions for the furnishing of personalized health advice 
and a referral, as appropriate, to health education or preventive 
counseling services or programs aimed at reducing identified risk 
factors and improving self-management, including weight loss, physical 
activity, smoking cessation, fall prevention, and nutrition. Under the 
definition of the subsequent AWV, we included provisions for furnishing 
of personalized health advice to the individual and a referral as 
appropriate, to health education or preventive counseling services.
    We believe that the health professionals who are furnishing the 
AWVs whether they be first or subsequent visits are the most qualified 
to determine an appropriate list of referrals for education services 
and preventive counseling services for each individual. We believe that 
the proposed definitions for the first and subsequent AWVs address 
commenters' concerns regarding community-based and lifestyle management 
services, kidney disease education services, referrals to further 
discuss treatment for incontinence issues, and tobacco use cessation 
counseling services.
    Comment: One commenter suggested that CMS require the 
identification of a family caregiver that provides care for and 
supports a beneficiary with chronic conditions. The commenter states 
that ``it is vitally important for medical professionals to know 
whether the beneficiary has a family caregiver or has a family member/
friend who will fill that role.''
    Response: We appreciate the role that family caregivers provide in 
the lives of individuals with chronic conditions. We expect that the 
identification of a family care giver will be addressed when the health 
professional furnishing the AWV discusses the patient's ability to 
successfully perform activities of daily living. However, we do not 
believe the identification of a caregiver should be required of 
beneficiaries who wish to take advantage of AWVs so we are not 
requiring such identification in the final rule.
    Comment: Several commenters suggested that CMS use its authority 
under section 4105 of the ACA to expand Medicare coverage of certain 
preventive services that are already available under Part B such as 
screening for abdominal aortic aneurysms, HIV screening, colorectal 
cancer screening, breast cancer screening (mammography), and 
counseling/intensive behavioral (nutrition) counseling in accordance 
with the USPSTF recommendations for these services. Other commenters 
suggested using this authority to expand Medicare Part B coverage for 
preventive immunizations to include vaccinations such as herpes zoster 
and tetanus shots, which are currently covered under Part D in 
accordance with the recommendations of the Advisory Committee on 
Immunizations Practices (ACIP) for adults age 65 and older.
    Response: We appreciate the commenters' support for expanded 
coverage of preventive services under the Part B program. Section 4105 
of the ACA grants the Secretary the authority to modify or eliminate 
coverage of certain preventive services that are already available to 
certain beneficiaries to the extent that such modification or 
elimination of coverage is consistent with the recommendations of the 
USPSTF. Many of the items requested (including coverage of ultrasound 
screening for abdominal aortic aneurysms, medical nutrition therapy, 
certain colorectal cancer screening tests, and mammography) are already 
recognized as ``preventive services'' in section 1861(ww)(2) of the 
Act. Because those items are already covered by Medicare, we will need 
to further evaluate whether coverage for those items or services should 
be modified in light of the specific grades of the USPSTF as permitted 
under section 4105 of the ACA. Due to the complexities of considering 
whether to modify or eliminate coverage of certain preventive services 
under Medicare Part B, we decided not to address this subject in the 
proposed rule, which focuses instead on implementation of section 4103 
and 4104 of the ACA.
    We note that we may consider other expansions in Medicare coverage 
for ``additional preventive services'' in the future through section 
1861(ddd)(1) of the Act. Under the ``additional preventive service'' 
statute, however, the recommendations of the Advisory Committee on 
Immunizations Practices (ACIP) alone do not provide a basis for 
expanded coverage. Additional information regarding Medicare coverage 
for additional preventive services can be found in the Federal Register 
(November 19, 2008, (73 FR 69869 through 69870 and 69933)) and Sec.  
410.64. We will continue to monitor the USPSTF recommendations for 
updates or changes, and when appropriate, consider possible coverage 
through the NCD process. We also note that individuals can request a 
NCD using the procedures set forth in our Guidance Document: ``Factors 
CMS Considers in Opening a National Coverage Determination,'' available 
at http://www.cms.gov/mcd/ncpc_view_document.asp?id=6. We also note 
that the Secretary has exercised the authority granted by section 
1861(ddd)(1) of the Act to add coverage under Part B of ``additional 
preventive services'' such as HIV screening for individuals at high 
risk consistent with the USPSTF recommendations. Since many of the 
items that the commenters requested are already covered as ``preventive 
services'' or ``additional preventive services,'' we are not making any 
changes based on these comments at the present time. We will continue 
to monitor access to these preventive services and may exercise the 
authority granted by section 4105 of the ACA in the future.
    Comment: A commenter requested CMS to ``consider whether there are 
opportunities to leverage its `coverage with evidence development' 
process to help build the evidence base for new preventive services.'' 
The commenter further suggested CMS ``review those preventive services 
with a USPSTF grade of `I' (`insufficient evidence to recommend for or 
against') and consider the development of a `coverage with evidence 
development' initiative to help generate the data needed to fully 
assess certain preventive services'' via partnerships with other 
federal agencies.
    Response: We are interested in increasing the evidence base 
concerning new preventive services. We will need to further consider 
whether the CED process could be used for items or services that 
currently are rated with an ``I.'' We note that under Sec.  410.64 of 
these regulations, an ``additional preventive service'' must have a 
grade of A or B recommendation by the USPSTF. Because this suggestion 
will require further study, we are not making any changes to our final 
rule at this time.
    Comment: Several commenters provided suggestions for continuing 
education and outreach regarding issues related to the new AWV. One 
commenter asked that we educate providers about evidence based 
recommendations for colorectal cancer screening and monitor adherence 
to guidelines via performance measures. Another commenter requested 
education and outreach materials regarding the AWV and materials that 
also explain the differences between the initial preventive physical 
examination and the new AWV. An additional commenter requested that we 
inform patients of the importance of preventive services including 
colorectal cancer

[[Page 73408]]

screening options (colonoscopy, sigmoidoscopy, and fecal occult blood 
tests).
    Response: We agree that it is important to raise awareness 
concerning the expanded Medicare coverage provided under the ACA. We 
will issue appropriate manual instructions and other educational 
information to the Medicare providers and beneficiaries, including an 
MLN Matters article (Medicare Learning Network) and information in the 
2011 Medicare and You Handbook regarding implementation of the new AWV 
benefit.
    Comment: One commenter recommended that we eliminate the initial 
preventive physical examination since it is similar to the provisions 
of the new AWV.
    Response: We appreciate the attention being drawn to the similarity 
between the initial preventive physical examination and the new AWV. 
While we did model some of the elements of the new AWV after elements 
in the initial preventive physical exam, we note that these statutory 
provisions are separate and distinct benefits and that Medicare 
beneficiaries will be eligible to receive both of these benefits in 
sequence if the appropriate regulatory requirements are met.
    In summary, as a result of the comments received, we are making the 
following changes in this final rule:
    <bullet> We are amending the definition of the term ``health 
professionals'' to read in paragraph (iii) as follows: ``A medical 
professional (including a health educator, a registered dietitian, or 
nutrition professional, or other licensed practitioner or a team of 
such medical professionals, working under the direct supervision (as 
defined in Sec.  410.32(b)(3)(ii)) of a physician as defined in 
paragraph (i) of this definition.''
    <bullet> We are adding to the final regulation the definition of 
the term ``voluntary advance care planning'' to read as follows:

``Voluntary Advance care planning'' means, for purposes of this 
section, verbal or written information regarding the following areas:
    (1) An individual's ability to prepare an advance directive in the 
case where an injury or illness causes the individual to be unable to 
make health care decisions.
    (2) Whether or not the physician is willing to follow the 
individual's wishes as expressed in an advance directive.
    <bullet> We are also revising the definitions of the terms ``First 
AWV'' and ``Subsequent AWV'' by inserting a new element (ix) to the 
definition of the term ``first AWV'' and a new element (vii) to the 
definition of the term ``subsequent AWV'' in Sec.  410.15(a) of the 
final regulation text that would read as follows: ``Voluntary advance 
care planning as that term is defined in this section upon agreement 
with the individual.''
3. Payment for the Annual Wellness Visit Providing Personalized 
Prevention Plan Services (PPPS)
    Section 4103 of the ACA created a new benefit for an ``annual 
wellness visit'' (AWV) with personalized prevention plan services. The 
ACA amended section 1861(s)(2) of the Act by adding a new subparagraph 
(FF) to provide for coverage of the AWV beginning January 1, 2011. 
Section 4103 of the ACA also added new subsection (hhh) to section 1861 
of the Act to define ``personalized prevention plan services'' and to 
specify who may furnish these services. Finally, section 4103 of the 
ACA amended section 1848(j)(3) of the Act and provided for payment of 
AWVs under the PFS, and specifically excluded the AWV from the hospital 
OPPS. Therefore, a single payment under the PFS would be made when an 
AWV is furnished by a physician, physician assistant, nurse 
practitioner, or clinical nurse specialist, or by a medical 
professional or team of medical professionals, as determined 
appropriate by the Secretary, under the supervision of a physician.
    To allow for Medicare reporting and payment of the AWV, we proposed 
to create two new HCPCS G-codes for reporting the first wellness visit 
and creation of a personalized prevention plan and the subsequent 
visits available to the beneficiary every 12 months. Specifically, we 
proposed to establish the following two new HCPCS codes for CY 2011: 
GXXXA (AWV; includes a personalized prevention plan of service (PPPS), 
first visit) and GXXXB (AWV; includes a personalized prevention plan of 
service (PPPS), subsequent visit). A beneficiary's first AWV to any 
practitioner would be reported to Medicare under HCPCS code GXXXA, even 
if the beneficiary had previously received an initial preventive 
physical examination (IPPE) that was covered by Medicare. 
Beneficiaries, in their first 12 months of Part B coverage, would 
continue to be eligible only for an IPPE. After the first 12 months of 
Part B coverage, on or after January 1, 2011, beneficiaries would be 
eligible for an AWV described by HCPCS code GXXXA or GXXXB, provided 
that the beneficiary has not received an IPPE or AWV within the 
preceding 12-month period.
    Comment: Several commenters noted that the IPPE and the first AWV 
are very similar services with significant overlap. These commenters 
urged CMS not to develop a separate coding structure for the first AWV 
as it would be a burden for practitioners to review and determine the 
specific preventive service the beneficiary is eligible for on a given 
date. In addition, the commenters noted that a delay in information 
being available through the Common Working File (CWF) may cause 
practitioners to inaccurately determine a beneficiary's eligibility for 
a particular service, be it the IPPE, the first AWV, or a subsequent 
AWV. One commenter requested that CMS clarify that a beneficiary may 
choose either an IPPE or a first AWV during the beneficiary's first 12 
months of Part B coverage.
    Response: The set of services described by the IPPE is very 
specific and while the services contained in the IPPE may be similar to 
the services included in the AWV, these are two separate benefits under 
Medicare. Just as there are component services specified for the IPPE, 
there are component services specified for the AWV. Moreover, according 
to section 1861(hhh)(4)(G) of the Act (as added by section 4103(b) of 
the ACA), a beneficiary is eligible only for the IPPE during the 12-
month period after the date the beneficiary's coverage begins under 
Part B and is only eligible for the AWV each year thereafter. 
Therefore, in order to be able to identify the particular benefit and 
services furnished to a beneficiary and ensure coverage of the 
services, we believe that we must distinguish between the IPPE and the 
AWV through the use of distinct HCPCS codes. We understand that there 
may be instances where practitioners may experience a delay in the 
information available through the CWF, but we expect the situations 
where this would affect the services furnished (and subsequently 
billed) by a practitioner would be uncommon. The CWF will reflect the 
beneficiary's eligibility for the IPPE or first or subsequent AWV based 
on all claims submitted to date to the Medicare contractors. Only under 
the limited circumstances where a practitioner previously furnished an 
IPPE or AWV to the beneficiary but had not yet submitted the claim to 
Medicare would a practitioner inaccurately determine a beneficiary's 
eligibility for the IPPE or first or subsequent AWV.
    Comment: Several commenters urged CMS to recognize the CPT codes in 
the Preventive Medicine Services series, ranging from 99381 (Initial 
comprehensive preventive medicine

[[Page 73409]]

evaluation and management of an individual including an age and gender 
appropriate history, examination, counseling/anticipatory guidance/risk 
factor reduction interventions, and the ordering of laboratory/
diagnostic procedures, new patient; infant (age younger than 1 year)) 
through 99397 (Periodic comprehensive preventive medicine reevaluation 
and management of an individual including an age and gender appropriate 
history, examination, counseling/anticipatory guidance/risk factor 
reduction interventions, and the ordering of laboratory/diagnostic 
procedures, established patient; 65 years and older), for reporting and 
payment of the AWV, rather than creating the two new HPCPCS G-codes as 
proposed. The commenters noted that the practitioner could report the 
appropriate CPT code based on the beneficiary's age and new or 
established patient status, allowing specific reporting of the AWV with 
a CPT code that would result in appropriate payment for the service 
provided to the beneficiary. In addition, the commenters urged CMS to 
use the existing CPT Editorial Panel and the AMA RUCs process to modify 
these existing codes so they would be applicable for AWV services.
    Response: Prior to the establishment of the IPPE benefit, 
Preventive Medicine Services CPT codes in the range from 99381 through 
99397 were excluded from Medicare coverage because preventive medicine 
evaluation and management services were noncovered by Medicare. When 
the IPPE benefit was implemented, we created HCPCS code G0402 (Initial 
preventive physical examination; face-to-face visit, services limited 
to new beneficiary during the first 12 months of Medicare enrollment) 
as we have specifically defined through the regulatory process the 
elements that are required for this service to be billed and paid by 
Medicare. We refer readers to the Medicare Claims Processing Manual, 
Pub. 100-04, chapter 18, section 80 for additional information 
regarding the components of the IPPE. When implementing the IPPE, we 
recognized that CPT codes describing preventive services were 
available, but we did not believe it was appropriate to use these 
existing CPT codes for the IPPE, given the general nature of the 
services they describe in contrast to the specific nature of the IPPE 
service.
    Similarly, in section VI.Q.2. of this final rule with comment 
period, we have adopted the final specific components of the AWV for CY 
2011, consistent with the statutory requirements for the service. While 
we acknowledge that the elements of the preventive medicine evaluation 
and management (E/M) services reported by the CPT codes could 
significantly overlap with the components of the AWV, we believe that 
it is important to utilize specific HCPCS codes to identify the AWV as 
there are coverage periodicity requirements that apply to the AWV, as 
well as specific requirements regarding the elements of the AWV. While 
we understand the commenters' request to use the established set of CPT 
codes for the AWV, we do not believe that the existing CPT code 
descriptors should be subject to adjustment and limitation based on 
this new benefit as these CPT codes are currently used by many 
practitioners to report noncovered preventive medicine E/M services 
furnished to Medicare beneficiaries. In addition, coverage for the AWV 
begins on January 1, 2011, and we believe that our authority to create 
and maintain Level II HCPCS codes allows us a mechanism to implement 
these codes quickly and effectively. While we would not necessarily be 
opposed to the use of CPT codes to report the AWV in the future if CPT 
codes existed that met our specific purposes, time does not allow for 
the establishment of new CPT codes or the revision of existing codes 
for the AWVs that are covered as of January 1, 2011.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to adopt two new HCPCS G-codes for 
reporting the AWV in CY 2011. While we proposed these codes as GXXXA 
and GXXXB for the first and subsequent AWVs, respectively, the final 
codes and their descriptors are G0438 (Annual wellness visit; includes 
a personalized prevention plan of service (PPPS), first visit) and 
G0439 (Annual wellness visit; includes a personalized prevention plan 
of service (PPPS), subsequent visit). We note that practitioners 
furnishing a preventive medicine E/M service that does not meet the 
requirements for the IPPE or the AWV would continue to report one of 
the preventive medicine E[sol]M services CPT codes in the range of 
99381 through 99397 as appropriate to the patient's circumstances, and 
these codes continue to be noncovered by Medicare.
    A beneficiary would be eligible for one first AWV covered by 
Medicare that must include all of the required elements that we have 
adopted in our final policy for CY 2011, as discussed in section 
VI.Q.2. of this final rule with comment period. All subsequent AWVs 
would include the required elements for those visits as also described 
in section VI.Q.2. of this final rule with comment period. All AWVs 
other than the beneficiary's first AWV would be reported as subsequent 
visits, even if a different practitioner furnished the subsequent AWV. 
We expect there to be continuity and communication among the 
practitioners caring for beneficiaries over time with respect to AWVs, 
and this would include the case where a different practitioner 
furnishing a subsequent AWV would update the information in the 
patient's medical record based on the patient's interval history since 
the previous AWV.
    As we stated in the CY 2011 PFS proposed rule (75 FR 40128), the 
first AWV described by HCPCS code GXXXA (G0438) is similar to the IPPE 
that is currently reported with HCPCS code G0402 (Initial preventive 
physical examination; face-to-face visit, services limited to new 
beneficiary during the first 12 months of Medicare enrollment). We 
believe that the physician work and nonfacility PE of the IPPE and the 
first AWV are very similar, given that both represent an initial 
beneficiary visit focused on prevention. In the CY 2010 PFS final rule 
with comment period discussion of payment for the IPPE (74 FR 61767), 
we noted that in the context of physician work and intensity, HCPCS 
code G0402 was most equivalent to CPT code 99204 (Level 4 new patient 
office or other outpatient visit). Therefore, for CY 2011, we proposed 
to crosswalk the same physician work RVUs of 2.43 from CPT code 99204 
to HCPCS codes G0402 and GXXXA (G0438). Similarly, we believe the 
direct PE inputs for all of these services are similar and, therefore, 
we proposed to assign the same direct PE inputs to HCPCS codes G0402 
and GXXXA (G0438) as are included for CPT code 99204. We noted that 
currently, the direct PE inputs for HCPCS code G0402 also include 
preventive assessment forms, and we proposed to add this supply to the 
PE for HCPCS code GXXXA (G0438) as well because we believe it would be 
used in the first AWV. The proposed CY 2011 PE and malpractice RVUs for 
HCPCS code GXXXA (G0438) were displayed in Addendum B to the proposed 
rule (75 FR 40640). We also noted that we proposed no facility PE RVUs 
for HCPCS code GXXXA (G0438) because only a single payment would be 
made under the PFS when this service is furnished. There is no separate 
facility payment for GXXXA (G0438) when a practitioner furnishes this 
service in the facility setting.
    Moreover, in the CY 2011 PFS proposed rule (75 FR 40128), we also 
indicated that we believe that a subsequent AWV described by HCPCS code 
GXXXB (G0439) is most similar,

[[Page 73410]]

from the perspectives of physician work and PE, to CPT code 99214 
(Level 4 established patient office or other outpatient visit). The 
subsequent AWV is a patient visit for PPPS that includes certain 
required elements, such as updating information regarding the patient's 
history, risk factors, and regular medical care providers and suppliers 
since the prior AWV, and obtaining routine measurements. We believe the 
physician work and direct PE of a subsequent AWV are similar, in terms 
of E/M visit level, to the first AWV, which we proposed to value like a 
level 4 new patient office or other outpatient visit, as we had 
previously valued the IPPE. However, the subsequent AWV would typically 
be for an established patient and, as described earlier in this 
section, we proposed that only certain AWV elements must be furnished 
in the first AWV. As a result, in the CY 2011 PFS proposed rule (75 FR 
40129), we stated that we believe it would be most appropriate to value 
the subsequent AWV based upon an E/M visit for an established patient. 
Therefore, for CY 2011 we proposed to crosswalk the same physician work 
RVUs of 1.50 from CPT code 99214 to HCPCS code GXXXB (G0439). 
Furthermore, we believe the direct PE inputs for these two services are 
also similar and, therefore, we proposed to assign the same direct PE 
inputs to HCPCS code GXXXB (G0439) as were assigned to CPT code 99214. 
We note that we also proposed to add the same preventive assessment 
forms to the PE for HCPCS code GXXXB (G0439) as we proposed to add for 
HCPCS code GXXXA (G0438) because we believe this supply would be used 
in both the first and subsequent AWVs. The proposed CY 2011 PE and 
malpractice RVUs for HCPCS code GXXXB were displayed in Addendum B to 
the CY 2011 PFS proposed rule (75 FR 40640). Similar to our treatment 
of HCPCS code GXXXA (G0438) for the first AWV, we proposed no facility 
PE RVUs for HCPCS code GXXXB (G0439) as only a single payment would be 
made under the PFS when this service is furnished. There is no separate 
facility payment for GXXXB (G0439) when a practitioner furnishes this 
service in the facility setting.
    Comment: A number of commenters supported the proposed payment for 
the first and subsequent AWVs based on a crosswalk to level 4 new and 
established patient office and other outpatient visits. Several 
commenters recommended that CMS vary the payment for the AWV based on 
the visit's complexity, arguing that beneficiaries with multiple health 
risk factors would require additional practitioner time and intensity 
for the AWV. One commenter recommended that CMS value the first and 
subsequent AWVs based on the values applicable to level 5 new and 
established patient office and other outpatient visits, arguing that 
the typical Medicare beneficiary would have multiple health risk 
factors that would need to be addressed in the AWV through a complex 
plan specific to that beneficiary's situation. Other commenters argued 
that CMS should recognize the preventive medicine E/M services CPT 
codes from 99381 through 99387, whose values vary based on age and new 
or established patient status, to ensure appropriate payment for the 
first and subsequent AWVs. Furthermore, one commenter also pointed out 
that the existing preventive medicine E/M services CPT codes are 
currently being revalued by the AMA RUC as part of the Fourth 5-Year 
Review of Work to ensure that the values for the services are 
commensurate with the level of practitioner work involved in furnishing 
the medical service.
    A few commenters noted that they currently bill preventive medicine 
services E/M CPT codes 99381 through 99397 which are noncovered in 
Medicare, and indicated as such with status ``N'' (Noncovered service), 
in conjunction with Medicare-covered E/M visits. The commenters 
requested that CMS clarify whether practitioners would continue to be 
able to bill additional preventive services in the CPT code range of 
99381 through 99397 in conjunction with the AWV.
    Response: As discussed earlier in this section, we are adopting the 
final HCPCS codes G0438 and G0439 for reporting the first and 
subsequent AWVs, rather than recognizing the CPT codes for preventive 
medicine E/M services as covered only for purposes of the AWVs. With 
respect to the values for those preventive medicine E/M services CPT 
codes that some commenters believe would be appropriate for payment of 
the first and subsequent AWVs, we have not adopted the values for 
Medicare because the codes are noncovered by Medicare. Nevertheless, we 
publish the AMA RUC-recommended work values and the PE RVUs that result 
from application of our standard PE methodology to the AMA RUC-
recommended PE inputs in Addendum B for the CPT codes. We compared the 
values we proposed for HCPCS codes G0438 and G0439 with the preventive 
medicine E/M services CPT codes because of the commenters' reasoning 
that these AMA RUC-recommended values would result in appropriate 
payment for AWVs. The values we proposed for HCPCS codes G0438 based on 
the work value and direct PE inputs for a level 4 new patient office or 
other outpatient visit are actually slightly higher (2.43 work RVUs; 
2.14 fully implemented nonfacilty PE RVUs) than the new patient, 65 
years and older CPT preventive medicine E/M services code (2.06 work 
RVUs; 1.87 nonfacility PE RVUs). In contrast, the values we proposed 
for HCPCS code G0439 based on the work value and direct PE inputs for a 
level 4 established patient office or other outpatient visit are 
slightly lower (1.50 work RVUs; 1.59 nonfacilty PE RVUs) than the 
establish patient, 65 years and old CPT preventive services code (1.71 
work RVUs; 1.62 nonfacility RVUs). We note that if the AMA RUC provides 
revised recommendations to us for these preventive medicine E/M 
services CPT codes for a future year, we may conduct this analysis 
again based on that new information.
    As discussed above, we note that additional preventive medicine 
services E/M CPT codes 99381 through 99397, noncovered by Medicare and 
indicated with status ``N,'' may be furnished in conjunction with 
Medicare-covered E/M visits, including the AWV. However, we believe 
that it would be difficult to distinguish an AWV from another 
preventive medicine E/M service furnished in the same encounter that 
would be reported under a preventive medicine services E/M CPT code as 
there is substantial overlap in the components of CPT codes 99381 
through 99397 and HCPCS codes G0438 and G0439 reported for the AWV.
    Based on the final elements of the first and subsequent AWVs as 
adopted in section VI.Q.2. of this final rule, we do not believe that 
the first and subsequent AWVs would usually require the 60 or 40 
minutes of physician face-to-face time that is typically associated 
with the level 5 new or established patient office or other patient 
visit, respectively. We continue to believe, as we proposed, that the 
typical physician time would be 45 or 25 minutes of face-to-face time, 
like that of the level 4 new or established patient office or other 
outpatient visit, respectively. We also believe the direct PE inputs 
for the AWV may be appropriately crosswalked to the direct PE inputs 
for the level 4 new or established patient office or other outpatient 
visit, with the addition of preventive assessment forms to both HCPCS 
codes G0438 and G0439, as we also proposed.
    Comment: One commenter suggested that the upcoming definition of a 
health risk assessment (HRA) may add more

[[Page 73411]]

work to the AWV. The commenter recommended that once the HRA has been 
established, CMS should incorporate the RVUs from CPT code 99420 
(Administration and interpretation of health risk assessment instrument 
(eg, health hazard appraisal) into the RVUs associated with the AWV to 
ensure that the costs of the HRA are recognized as part of the AWV 
service.
    Response: As discussed previously in this section, the HRA 
guidelines and the model HRA tool are not yet available. As is our 
standard process, when more information becomes available on the nature 
of a particular service or the elements of the services change, we 
reevaluate the valuation of the services. Therefore, when the HRA is 
incorporated into the AWV, we will reevaluate the values for HCPCS 
codes G0438 and G0439.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to crosswalk the physician work RVUs of 
2.43 from CPT code 99204 (level 4 new patient office or other 
outpatient visit) to HCPCS codes G0402 (IPPE) and G0438 (first AWV) and 
the physician work RVUs of 1.50 from CPT code 99214 (level 4 
established patient office or outpatient visit) to HCPCS code G0439 
(subsequent AWV). Similarly, we believe the direct PE inputs for all of 
these services are similar and, therefore, we are assigning the same 
direct PE inputs to HCPCS codes G0402 and G0438 as are included for CPT 
code 99204 and the same direct PE inputs to HCPCS code G0439 as are 
assigned to CPT code 99214. Preventive assessment forms have been added 
as supplies to both HCPCS codes G0438 and G0439. The final direct PE 
inputs for these codes are included in the final CY 2011 direct PE 
database available under downloads for the CY 2011 PFS final rule with 
comment period on the CMS web site at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage. The final work, PE, and 
malpractice RVUs for HCPCS codes G0438 and G0439 are displayed in 
Addendum B to this final rule with comment period. There is no separate 
facility payment for HCPCS code G0438 or G0439 when a practitioner 
furnishes either service in the facility setting.
    In the CY 2011 PFS proposed rule (75 FR 40129), we noted that while 
we believe there could be overlap in the direct PE, malpractice 
expense, and physician work in both history taking and examination of 
the patient in the context of the initial or subsequent AWV and another 
E/M service, we did not propose to limit the level of a medically 
necessary E/M visit when furnished and billed with an AWV. As we stated 
in the CY 2005 PFS final rule with comment period with respect to the 
IPPE (69 FR 66289 through 66290), we do not want to prohibit the 
reporting of an appropriate level of service when it is necessary to 
evaluate and treat the beneficiary for acute and chronic conditions. 
However, at the same time, we believe the practitioner is better able 
to discuss health promotion, disease prevention, and the educational 
opportunities available with beneficiaries when their health status has 
been stabilized and the beneficiary is physically receptive. Therefore, 
depending on the clinical circumstances, a CPT code for a medically 
necessary E/M visit may be reported and appended with CPT modifier-25 
(Significant, separately identifiable evaluation and management service 
by the same physician on the same day of the procedure or other 
service) to designate the E/M visit as a separately identifiable 
service from the initial or subsequent AWV. However, in the CY 2011 PFS 
proposed rule (75 FR 40129) we explained that we believe this scenario 
would be uncommon, and that we expect that no components of an 
encounter attributable to the AWV would be used in determining the 
level of a separate E/M visit that would also be reported.
    Comment: A few commenters disagreed with CMS' assertion that 
reporting a significant, separately identifiable E/M visit for the same 
encounter as an AWV would be unusual. The commenters believe that 
reporting an E/M visit with an AWV would be typical, as the age and 
health conditions of the typical Medicare beneficiary would likely 
result in problem-oriented E/M services being furnished in association 
with the AWV in order to fully address the medical problems that were 
identified in the encounter. The commenters explained that providing 
this care during the same encounter as the AWV would be both clinically 
appropriate and convenient for the beneficiary.
    Response: While we continue to believe that a practitioner is 
better able to discuss health promotion, disease prevention, and health 
education opportunities with beneficiaries when their health status has 
been stabilized and the beneficiary is physically receptive to 
prevention, the goal of the AWV, we acknowledge that the AWV encounter 
may provide an annually recurring opportunity for a beneficiary to 
receive medical care for his or her health problems. However, we 
continue to believe that a beneficiary who has an acute medical problem 
or condition would not receive optimal benefit from the AWV, which 
focuses on health promotion in the longer term. We encourage 
practitioners to be thoughtful regarding the best timing of the AWV to 
maximize its impact on beneficiary health since the AWV is covered by 
Medicare no more frequently than once every 12 months. Therefore, as we 
proposed, depending on the clinical circumstances, a CPT code for a 
medically necessary E/M visit may be reported and appended with CPT 
modifier -25 (Significant, separately identifiable evaluation and 
management service by the same physician on the same day of the 
procedure or other service) to designate the E/M visit as a separately 
identifiable service from the initial or subsequent AWV.
    With respect to beneficiary cost-sharing, section 4103(c)(1) of the 
ACA amended section 1833(a)(1) of the Act and added subparagraph (X), 
referring to the PPPS to state that the amount paid shall be 100 
percent of the lesser of the actual charge for the services or the 
amount determined under the payment basis determined under section 1848 
of the Act, thereby eliminating coinsurance for the AWV. Finally, 
section 4103(c)(4) of the ACA amended section 1833(b) of the Act to 
specify that the Part B deductible will not apply to the AWV.
    Comment: Many commenters expressed support for CMS' proposal to 
waive the beneficiary deductible and coinsurance for the AWV. The 
commenters noted that this waiver would likely encourage more 
beneficiaries to receive an AWV.
    Response: We appreciate the commenters' support for our proposal to 
eliminate the beneficiary cost-sharing for the AWV as the statute 
requires. We refer readers to section VI.R. of this final rule with 
comment period for further discussion of the waiver of the deductible 
and coinsurance for preventive services beginning in CY 2011.
    In summary, for CY 2011 we are adopting the following new HCPCS G-
codes for reporting the AWV: G0438 (Annual wellness visit; includes a 
personalized prevention plan of service (PPPS), first visit); and G0439 
(Annual wellness visit; includes a personalized prevention plan of 
service (PPPS), subsequent visit). These codes are valued for payment 
under the PFS using a crosswalk methodology for the work RVUs and 
direct PE inputs from the level 4 new and established patient office or 
other outpatient visit CPT codes. The final work, PE, and malpractice 
RVUs for HCPCS codes G0438 and G0439 are displayed in

[[Page 73412]]

Addendum B to this final rule with comment period. The deductible and 
coinsurance for the AWV is waived when coverage begins in CY 2011. 
Finally, the CPT code for a medically necessary E/M visit may be 
reported and appended with CPT modifier -25 (Significant, separately 
identifiable evaluation and management service by the same physician on 
the same day of the procedure or other service) to designate the E/M 
visit as a separately identifiable service from the initial or 
subsequent AWV when both are provided in the same encounter.

R. Section 4104: Removal of Barriers to Preventive Services in Medicare

1. Definition of ``Preventive Services''
    Section 4104 of the ACA revised section 1861(ddd) of the Act and 
added paragraph (3), which defined the term ``preventive services'' as 
follows:
    <bullet> The specific services currently listed in section 
1861(ww)(2) of the Act with the explicit exclusion of 
electrocardiograms (as specified in section 1861(ww)(2)(M) of the Act);
    <bullet> The initial preventive physical examination (IPPE) 
established by section 611 of the MMA and defined in section 
1861(ww)(1) of the Act; and
    <bullet> The annual wellness visit including personalized 
preventive plan services, as specified by section 1861(hhh) of the Act 
as added by section 4103 of the ACA. We refer readers to section VI.Q. 
of this final rule with comment period for the CY 2011 provisions 
related to the coverage of and payment for the annual wellness visit. 
The regulations regarding coverage of the IPPE are specified in Sec.  
410.16 and remain unchanged by the ACA.
    The specific preventive services included in the definition of 
``preventive services'' in section 1861(ddd)(3)(A) of the Act as cross-
referenced to section 1861(ww)(2) of the Act, excluding 
electrocardiograms, include the following:
    <bullet> Pneumococcal, influenza, and hepatitis B vaccine and 
administration.
    <bullet> Screening mammography.
    <bullet> Screening pap smear and screening pelvic exam.
    <bullet> Prostate cancer screening tests.
    <bullet> Colorectal cancer screening tests.
    <bullet> Outpatient diabetes self-management training (DSMT).
    <bullet> Bone mass measurement.
    <bullet> Screening for glaucoma.
    <bullet> Medical nutrition therapy (MNT) services.
    <bullet> Cardiovascular screening blood tests.
    <bullet> Diabetes screening tests.
    <bullet> Ultrasound screening for abdominal aortic aneurysm (AAA).
    <bullet> Additional preventive services identified for coverage 
through the national coverage determination (NCD) process.
    In the CY 2011 PFS proposed rule (75 FR 41029), we indicated that 
at that time the only additional preventive service identified for 
coverage through the NCD process was HIV testing. A proposed NCD for 
smoking cessation services for asymptomatic patients was released in 
May 2010 on the CMS Web site at: http://www.cms.gov/mcd/index_list.asp?list_type=nca. We stated that we would address the 
applicability of section 1861(ddd)(3)(A) of the Act (as added by 
section 4104 of the ACA) to these services if an NCD establishing them 
as additional preventive services was finalized. As of August 25, 2010, 
CMS finalized an NCD for ``Counseling to Prevent Tobacco Use'' and 
established smoking cessation services for asymptomatic patients, thus 
qualifying them as ``additional preventive services'' as defined at 
section 1861(ddd)(3)(A) of the Act, as cross-referenced to section 
1861(ww)(2) of the Act.
    We proposed to add the definition of ``preventive services'' in 
Sec.  410.2 to implement the provisions of section 1861(ddd)(3) of the 
Act (as added by section 4104 of the ACA).
    Comment: Many commenters supported CMS' definition of ``preventive 
services,'' observing that the definition was fully aligned with 
section 1861(ddd)(3) of the Act (as added by section 4104 of the ACA).
    Response: We appreciate the support of the commenters and are 
adopting this definition of ``preventive services'' in this final rule 
with comment period.
    Comment: Several commenters expressed confusion about Medicare's 
definition of ``preventive services'' and its relationship to those 
services with a United States Preventive Services Task Force (USPSTF) 
recommendation grade of A [An ``A'' rating means the USPSTF recommends 
the service. There is high certainty that the net benefit is 
substantial.] or B [A ``B'' rating means the USPSTF recommends the 
service. There is high certainty that the net benefit is moderate or 
there is moderate certainty that the net benefit is moderate to 
substantial.].
    Response: It appears that some of the commenters' confusion may be 
due to the use of two similar terms in the Medicare Act. In section 
1861(ddd) of the Act, Congress defined two terms of art. The term, 
``preventive services,'' is described in section 1861(ddd)(3) of the 
Act and in this final rule with comment period in Sec.  410.2. Congress 
also defined the term ``additional preventive services'' and that term 
was previously defined in Sec.  410.64 of our regulations. Under 
section 1861(ddd)(1) of the Act, in order for the Secretary to add an 
``additional preventive service,'' the Secretary is required to use the 
national coverage determination process. Moreover, in addition to other 
standards, the item or service must be recommended with a grade of A or 
B by the USPSTF.
    In section 1861(ddd)(3) of the Act (as added by section 4104 of the 
ACA), Congress expanded Medicare coverage under Part B to encourage the 
use of ``preventive services.'' Among other things, Congress removed 
some of the Part B cost-sharing obligations to encourage patients to 
obtain certain of these services. We note that ``additional preventive 
services'' are one of the categories of specific services that are 
covered under section 1861(ww)(2) of the Act and, therefore, also fall 
within the term ``preventive services'' based on the cross-reference in 
section 1861(ddd)(3)(A) of the Act. Other specific services that are 
listed in section 1861(ww)(2) of the Act and that are included in the 
definition of ``preventive services'' are not required to have a grade 
A or B recommendation from the USPSTF. As we stated in the CY 2011 PFS 
proposed rule (75 FR 40130), ``[n]ot all preventive services described 
in subparagraph (A) of section 1861(ddd)(3) of the Act are recommended 
by the USPSTF with a grade of A or B, and, therefore, some of the 
preventive services do not meet the criteria in sections 1833(a)(1) and 
(b)(1) of the Act for the waiver of the deductibles and coinsurance.'' 
We hope that this technical explanation helps to eliminate any 
confusion concerning the two separate terms of art.
    Comment: Several commenters observed that some services, such as 
intensive behavioral (nutrition) counseling, have been given a grade A 
or B recommendation by the USPSTF but are not listed as ``additional 
preventive services'' in the CY 2011 PFS proposed rule. Another 
commenter requested that CMS identify all USPSTF-recommended services 
as ``additional preventive services'' and, therefore, recognize them as 
having a benefit category under Medicare, even if their coinsurance and 
deductible are not waived because their USPSTF recommendation is not a 
grade A or B.
    Response: Under section 1861(ddd)(1) of the Act and our regulations 
in Sec.  410.64, an item or service must meet other standards in 
addition to having received a grade of A or B recommendation by the 
USPSTF in order for the Secretary to determine that an item is an 
``additional preventive

[[Page 73413]]

service.'' As we previously noted, ``additional preventive services'' 
must also be established by using the NCD process. While some of the 
services recommended by the commenters for addition to Medicare's list 
of ``additional preventive services'' have a grade A or B 
recommendation by the USPSTF, this recommendation alone is not 
sufficient for those services to be included as ``additional preventive 
services'' that are covered by Medicare Part B. For instance, some of 
the USPSTF recommendations may be directed to a particular patient 
population (for example, pediatric services) that may not include 
Medicare beneficiaries.
    However, we acknowledge the potential value to Medicare 
beneficiaries of those preventive services recommended by the USPSTF 
for populations covered by Medicare based on the medical evidence that 
led to the grade A or B recommendation. While certain preventive 
services with such a recommendation may not yet be covered by Medicare, 
these services have the potential to improve the health of 
beneficiaries. Therefore, we plan to proactively pursue Medicare 
coverage of ``additional preventive services'' with a grade A or B 
USPSTF recommendation through our current processes on our own 
initiative in light of our commitment to the health and wellness of 
Medicare beneficiaries.
    Comment: A few commenters suggested the inclusion of additional 
services in the definition of ``preventive services,'' including items 
or services that have not been reviewed by the USPSTF or where there is 
no NCD. In addition, several commenters urged CMS to recognize 
recommendations from organizations other than the USPSTF when 
considering services for inclusion as ``additional preventive 
services.''
    Response: Because the term ``preventive services,'' is specifically 
defined by statute in section 1861(ddd)(3) of the Act, we do not have 
unlimited authority to simply add items or services to this definition. 
As we have noted, however, the Secretary may add items or services as 
``additional preventive services'' if the item or service meets the 
existing criteria in Sec.  410.64. Among other things, the statute 
specifically requires that a new ``additional preventive service'' must 
have a grade A or B recommendation by the USPSTF.
    We do not have the authority under section 1861(ddd)(1)(B) of the 
Act to add ``additional preventive services'' based on the 
recommendations of other groups or organizations. We recognize that in 
other sections of the ACA, Congress specifically recognized the 
expertise of other organizations with respect to coverage of preventive 
health services. For instance, in section 1001 of the ACA, Congress 
amended section 2713 of the Public Health Service Act so that certain 
group health plans and health insurance issuers must provide coverage 
of preventive health services that were recommended by several other 
organizations. The Medicare statute, however, does not permit 
recommendations from other advisory bodies to substitute for 
recommendations from the USPSTF regarding Medicare coverage of 
``additional preventive services.''
    Comment: A number of commenters supported CMS' inclusion of certain 
vaccines in the definition of ``preventive services.'' Other commenters 
were concerned that the USPSTF does not currently review or provide 
recommendations regarding vaccine or vaccine administration and instead 
urged CMS to consider recommendations from the CDC's Advisory Committee 
on Immunization Practices (ACIP). Several commenters requested that 
vaccines such as diphtheria, pertussis, herpes zoster, tetanus, 
hepatitis A vaccine, meningococcal vaccine, measles-mumps-rubella, and 
varicella be considered ``additional preventive services'' as they are 
recommended by the ACIP. The commenters requested that CMS provide 
coverage for all vaccines recommended by the ACIP under Part B, noting 
that currently some vaccines are covered under Part B while others are 
covered under Part D.
    Response: Medicare has covered certain vaccines and their 
administration under Part B, including influenza, pneumococcal, and 
hepatitis B, as a result of a specific statute, section 1861(s)(10) of 
the Act. Those services are specifically cross-referenced in section 
1861(ww)(2)(A) of the Act, and are included in the definition of 
``preventive services'' by section 1861(ddd)(3)(A) of the Act. While we 
acknowledge that the ACIP currently makes recommendations concerning 
immunizations, section 1861(ddd)(1) of the Act does not permit us to 
use recommendations from the ACIP as the basis for coverage of vaccines 
as ``additional preventive services.'' As the commenters observed, 
vaccines that are not covered by Medicare Part B may be covered by Part 
D.
    Comment: Several commenters requested that CMS not wait for an NCD 
for smoking cessation services but, instead, proactively identify 
smoking cessation services as preventive services effective for CY 
2011.
    Response: The Medicare statute requires the Secretary to use the 
national NCD process when considering adding services as an 
``additional preventive service.'' Consistent with the public process 
and timeframes required by section 1862(l) of the Act, our NCD 
expanding coverage for counseling to prevent tobacco use for 
asymptomatic patients was effective on August 25, 2010. Thus, the 
``additional preventive services'' covered by Medicare Part B currently 
include services described by HCPCS codes G0436 (Smoking and tobacco 
cessation counseling visit for the asymptomatic patient; intermediate, 
greater than 3 minutes, up to 10 minutes) and G0437 (Smoking and 
tobacco cessation counseling visit for the asymptomatic patient; 
intensive, greater than 10 minutes).
    Comment: Several commenters requested coverage of routine HIV 
testing for all individuals, including persons at low risk for HIV 
infection, regardless of risk, based on more recent data, or based upon 
the C rating of the USPSTF.
    Response: We are not able to accept the public comment to extend 
coverage for HIV screening for all individuals under the Medicare 
program because the USPSTF grade A or B recommendation was limited to 
specific populations and the USPSTF specifically made a grade C 
recommendation about HIV screening for ``adolescents and adults who are 
not at increased risk for HIV infection.'' Our statute and regulations 
only permit coverage of ``additional preventive services'' which have 
been recommended with a grade of A or B by the USPSTF and do not permit 
coverage as ``additional preventive services'' of services with grade C 
recommendations.
    As a result of the NCD, Medicare covers screening of at risk 
individuals for HIV described by three HCPCS codes, specifically G0432 
(Infectious agent antigen detection by enzyme immunoassay (EIA) 
technique, qualitative or semi-qualitative, multiple-step method, HIV-1 
or HIV-2, screening); G0433 (Infectious agent antigen detection by 
enzyme-linked immunosorbent assay (ELISA) technique, antibody, HIV-1 or 
HIV-2, screening); and G0435 (Infectious agent antigen detection by 
rapid antibody test or oral mucosa transudate, HIV-1 or HIV-2, 
screening)). These HCPCS codes are all listed in Table 65 of the 
following section because their beneficiary cost-sharing will be waived 
in CY 2011.
    Comment: Several commenters encouraged CMS to develop transparency 
in its interactions with the USPSTF and CMS coverage

[[Page 73414]]

determinations. The commenters urged CMS to support increased 
opportunities for stakeholders to participate in the USPSTF process.
    Response: As required by section 1862(l) of the Act, the NCD 
process includes an opportunity for public comment on a proposed 
decision. With respect to any proposed NCD for an ``additional 
preventive service,'' we include a summary of the USPSTF 
recommendations in our proposed decision memorandum. The Secretary is 
required to respond to the public comments when issuing a final 
determination. We believe that this process is open and transparent and 
that the public comments have improved the quality of our final 
decisions.
    While some commenters have requested greater opportunities for 
public participation prior to the USPSTF recommendations, the process 
that the USPSTF utilizes in making its expert recommendations is beyond 
the scope of this rulemaking. The USPSTF, first convened by the U.S. 
Public Health Service in 1984, and since 1998 sponsored by the AHRQ, is 
an independent panel of private-sector experts in prevention and 
primary care that makes recommendations that are independent of the 
U.S. government. The USPSTF conducts impartial assessments of the 
scientific evidence for the effectiveness of a broad range of clinical 
preventive services, including screening, counseling, and preventive 
medications. The mission of the USPSTF is to evaluate the benefits of 
individual services based on age, gender, and risk factors for disease; 
make recommendations about which preventive services should be 
incorporated routinely into primary medical care and for which 
populations; and identify a research agenda for clinical preventive 
care. The USPSTF has partners from the fields of primary care, public 
health, health promotion, policy, and quality improvement. Liaisons 
from these groups and from Federal health agencies, including CMS, 
contribute their expertise in the peer review of draft USPSTF documents 
and help disseminate the work of the USPSTF to their members.
    After consideration of the public comments we received, we are 
finalizing our proposed definition of preventive services. 
Specifically, preventive services include the IPPE; the AWV; 
pneumococcal, influenza, and hepatitis B vaccine and administration; 
screening mammography; screening pap smear and screening pelvic exam; 
prostate cancer screening tests; colorectal cancer screening tests; 
outpatient diabetes self-management training (DSMT); bone mass 
measurement; screening for glaucoma; medical nutrition therapy (MNT) 
services; cardiovascular screening blood tests; diabetes screening 
tests; ultrasound screening for abdominal aortic aneurysm (AAA); and 
additional preventive services identified for coverage through the NCD 
process. To date, two items or services have been added as ``additional 
preventive services'' by NCDs. These services are HIV screening for at 
risk individuals and smoking and tobacco cessation counseling for 
asymptomatic individuals.
    We are adopting the proposed definition of ``preventive services'' 
in Sec.  410.2 to implement the provisions of section 1861(ddd)(3) of 
the Act (as added by section 4104 of the ACA), with modification of 
Sec.  410.2(3) to read ``Annual Wellness Visit (AWV), providing 
Personalized Prevention Plan Services (PPPS) (as specified by section 
1861(hhh)(1) of the Act)'' to utilize wording that is consistent with 
final Sec.  410.15, Annual Wellness Visits Providing Personalized 
Prevention Plan Services: Conditions for and Limitations on Coverage.
    Furthermore, in this final rule with comment period, we are making 
a technical revision to Sec.  410.64 (Additional Preventive Services) 
to conform with section 1861(ddd)(1) of the Act, as amended by section 
4104 of the ACA. We are revising Sec.  410.64(a) by removing the words 
``not otherwise described in this subpart'' and adding the words ``not 
described in subparagraphs (1) or (3) of Sec.  410.2 of this subpart'' 
in their place. This change reflects section 1861(ddd)(1) of the Act 
(as amended by section 4104(a)(2) of the ACA).
2. Deductible and Coinsurance for Preventive Services
    Section 4104(b)(4) of the ACA amended section 1833(a)(1) of the Act 
by requiring 100 percent Medicare payment for the IPPE and for those 
Medicare-covered preventive services recommended by the United States 
Preventive Services Task Force (USPSTF) with a grade of A or B for any 
indication or population and that are appropriate for the individual. 
In other words, this provision waived any coinsurance that would 
otherwise be applicable under section 1833(a)(1) of the Act for the 
IPPE and for those items and services listed in section 1861(ww)(2) of 
the Act (excluding electrocardiograms) to which the USPSTF has given a 
grade of A or B recommendation. In addition, section 4103(c)(1) of the 
ACA amended section 1833(a)(1) of the Act to waive the coinsurance for 
the AWV. The coinsurance represents the beneficiary's share of the 
payment to the provider or supplier for furnished services. Coinsurance 
generally refers to a percentage (for example, 20 percent) of the 
Medicare payment rate for which the beneficiary is liable and is 
applicable under the PFS, while copayment generally refers to an 
established amount that the beneficiary must pay that is not 
necessarily related to a particular percentage of the Medicare payment, 
and is applicable under the OPPS. We refer readers to the CY 2011 OPPS/
ASC final rule with comment period for provisions related to payment 
for preventive services, including waiver of the deductible and 
copayment, under the OPPS.
    Section 4104(c) of the ACA amended section 1833(b)(1) of the Act to 
waive the Part B deductible for preventive services described in 
subparagraph (A) of section 1861(ddd)(3) of the Act that have a grade 
of A or B recommendation from the USPSTF for any indication or 
population and are appropriate for the individual. In addition, section 
1833(b)(1) of the Act (as amended by section 4103(c)(4) of the ACA) 
waived the Part B deductible for the AWV including personalized 
prevention plan services. These provisions are effective for services 
furnished on or after January 1, 2011. Section 101(b)(2) of the MIPPA 
previously amended section 1833(b) of the Act to waive the deductible 
for the IPPE effective January 1, 2009.
    Not all preventive services described in subparagraph (A) of 
section 1861(ddd)(3) of the Act are recommended by the USPSTF with a 
grade of A or B and, therefore, some of the preventive services do not 
meet the criteria in sections 1833(a)(1) and (b)(1) of the Act for the 
waiver of the deductible and coinsurance. However, with certain 
exceptions noted below, the changes made by section 4104 of the ACA do 
not affect most of the preexisting provisions in sections 1833(a) and 
1833(b) of the Act (codified in regulations in Sec.  410.160(b) and 
Sec.  410.152) that waive the deductible and coinsurance for specific 
services. For example, section 1833(a)(1)(D) of the Act already waives 
the coinsurance and section 1833(b)(3) of the Act already waives the 
deductible for clinical laboratory tests (including tests furnished for 
screening purposes). Section 4104 of the ACA does not change these 
provisions and, therefore, the waiver of both the deductible and 
coinsurance remain in place for all clinical laboratory tests, 
regardless of

[[Page 73415]]

whether the particular clinical laboratory test meets the USPSTF 
grading criteria specified in sections 1833(a)(1) and 1833(b)(1) of the 
Act (as amended by section 4104 of the ACA) for waiver of the 
deductible and coinsurance as a preventive service. Similarly, both the 
deductible and coinsurance were already waived, prior to the ACA, for 
influenza and pneumococcal vaccines and their administration, and the 
deductible (but not the coinsurance) was already waived for screening 
mammography, screening pelvic exams, colorectal cancer screening 
procedures, ultrasound screening for abdominal aortic aneurysms, and 
the IPPE.
    As discussed in the CY 2011 PFS proposed rule (75 FR 40130), the 
following preventive services listed in section 1833(ddd)(3)(A) of the 
Act (as added by section 4104 of the ACA) are not recommended by the 
USPSTF with a grade of A or B for any indication or population: digital 
rectal examination furnished as a prostate cancer screening service; 
glaucoma screening; DSMT services; and barium enema furnished as a 
colorectal cancer screening service.
    Specifically, HCPCS code G0102 (Prostate cancer screening; digital 
rectal exam), which does not have a grade of A or B from the USPSTF for 
any indication or population, will continue to be subject to the 
deductible and coinsurance as there is no statutory provision to the 
contrary. However, the deductible and coinsurance for HCPCS code G0103 
(Prostate cancer screening; prostate specific antigen test (PSA)) will 
continue to be waived in accordance with sections 1833(a)(1)(D) and 
1833(b)(3) of the Act (applying to clinical laboratory tests), even 
though this service also does not have a grade of A or B from the 
USPSTF.
    Glaucoma screening services, described by HCPCS codes G0117 
(Glaucoma screening for high risk patients furnished by an optometrist 
or ophthalmologist) and G0118 (Glaucoma screening for high risk patient 
furnished under the direct supervision of an optometrist or 
ophthalmologist), will continue to be subject to the deductible and 
coinsurance because these services are not recommended with a grade of 
A or B by the USPSTF for any indication or population and there is no 
other statutory provision to exempt them. Similarly, DSMT services are 
currently not rated by the USPSTF, and there is no other statutory 
provision to except them from applicability of the deductible and 
coinsurance. Therefore the deductible and coinsurance requirements will 
continue to apply.
    Barium enemas furnished as colorectal cancer screening tests, 
described by HCPCS codes G0106 (Colorectal cancer screening; 
alternative to G0104, screening sigmoidoscopy, barium enema) and G0120 
(Colorectal cancer screening; alternative to G0105, screening 
colonoscopy, barium enema), do not have a grade of A or B from the 
USPSTF for any indication or population. However, the deductible does 
not apply to barium enemas furnished as colorectal cancer screening 
tests, because colorectal cancer screening tests are explicitly 
excluded from the deductible in section 1833(b)(8) of the Act. However, 
there is no specific exclusion of barium enemas from the coinsurance 
requirement in section 1833(b)(1) of the Act and, therefore, this 
requirement, as applicable, continues to apply to barium enemas. We 
note that the USPSTF has given a grade A recommendation to screening 
colonoscopy, screening flexible sigmoidoscopy, and fecal occult blood 
screening tests, and that, as a result, both the deductible and 
coinsurance are waived for these colorectal cancer screening tests 
under section 4104 of the ACA.
    In developing recommendations regarding preventive services for the 
CY 2011 PFS proposed rule, we recognized that the USPSTF may make 
recommendations that are specific to a clinical indication or 
population, at times including characteristics such as gender and age 
in its recommendations. In accordance with section 4014 of the ACA, we 
proposed to waive the deductible and coinsurance for a Medicare-covered 
preventive service, with no limits on the indication or population, as 
long as that service is recommended by the USPSTF with a grade of A or 
B for at least one indication and/or population. However, we noted that 
all existing Medicare coverage policies for such services, including 
any limitations based on indication or population would continue to 
apply. In some cases, national coverage policies may currently limit 
Medicare coverage based on the indication or population, consistent 
with the USPSTF recommendations with a grade of A or B for the 
indication or population. In other cases where Medicare does not 
explicitly noncover preventive services for a specific population or 
indication, we stated that we would expect that, particularly in those 
cases where the USPSTF recommendation grade is a D (that is, the USPSTF 
recommends against the service because there is moderate or high 
certainty that the service has no net benefit or that the harms 
outweigh the benefits), practitioners would only order those preventive 
services that are clinically appropriate for the beneficiary. We noted 
that if we had concerns in the future about the appropriateness of 
preventive services for an indication or population in light of the 
USPSTF's recommendations, we may consider using our authority under 
section 1834(n)(1) of the Act (as added by section 4105 of the ACA) to 
modify Medicare coverage of any preventive service to be consistent 
with the recommendations of the USPSTF.
    We note also that the USPSTF ceased to make recommendations with 
regard to vaccines and vaccine administration after CY 1996, so as not 
to conflict with the recommendations of the CDC's ACIP. However, the 
USPSTF's most recent vaccine recommendations gave a grade of B to 
influenza and pneumococcal vaccines and their administration and a 
grade of A to hepatitis B vaccine and its administration. While 
sections 1833(a)(1) and 1833(b)(1) of the Act (as amended by section 
4104 of the ACA) require that a preventive service receive a grade A or 
B recommendation from the USPSTF for the coinsurance and deductible to 
be waived, the statute does not specify that the recommended grade must 
be furnished by the USPSTF within any given timeframe. The USPSTF 
grades from 1996 for these vaccination services are the most current 
USPSTF grades and have never been withdrawn. Therefore, we believe that 
these preventive services meet the requirements of the statute for the 
waiver of the deductible and coinsurance. We also noted that the CDC's 
ACIP currently recommends influenza, pneumococcal, and hepatitis B 
vaccines.
    We proposed to update Sec.  410.160(b), which lists the services 
for which expenses incurred are not subject to the Part B annual 
deductible and do not count toward meeting that deductible. 
Specifically, we proposed to revise Sec.  410.160(b)(2) to include 
influenza and hepatitis B vaccines and their administration, in 
addition to pneumococcal vaccine and its administration. In addition, 
in Sec.  410.160(b), we also proposed to add exceptions for bone mass 
measurement, MNT services, and the AWV.
    In Sec.  410.152, we proposed to revise paragraph (l) to establish 
the amount of payment under the applicable payment system for providers 
and suppliers of the services listed in paragraph (1). Table 38 of the 
CY 2011 PFS proposed rule (75 FR 40131 through 40135) identified the 
HCPCS codes that we

[[Page 73416]]

proposed to identify as ``preventive services,'' in addition to the 
IPPE and the AWV, as well as the most recent USPSTF grade, if any, that 
was the basis for our policy with regard to waiver of the deductible 
and coinsurance. Table 38 also identified the Medicare payment system 
under which the HCPCS code would be paid when furnished outside of the 
facility setting.
    Comment: Many commenters supported CMS' proposal to waive the 
deductible and coinsurance for those Medicare-covered preventive 
services with a grade A or B USPSTF recommendation for any indication 
or population, as well as for the IPPE and the AWV. The commenters 
acknowledged that CMS did not propose to modify current Medicare policy 
that may cover a preventive service only under specific circumstances. 
The commenters supported CMS' proposal to rely on practitioners' 
clinical judgment to order preventive services that are clinically 
appropriate for specific beneficiaries. Many commenters noted that CMS' 
``quick implementation'' of this provision underscores the agency's 
commitment to removing barriers to preventive health care.
    A few commenters expressed concern regarding how CMS may 
incorporate USPSTF recommendations into the Medicare benefit structure 
in the future and cautioned CMS not to adopt policies that would result 
in Medicare not covering important preventive services for an older 
population. For example, the USPSTF recommendations for mammography in 
women do not apply to individuals age 75 or older, and the commenters 
were concerned that future changes to CMS policies could result in 
Medicare not covering important preventive services for an older 
population.
    Response: We appreciate the commenters' support for our proposal to 
waive the beneficiary deductible and coinsurance for most preventive 
services beginning in CY 2011. We continue to believe that is 
appropriate to waive the beneficiary deductible and coinsurance for 
preventive services with a grade A or B recommendation by the USPSTF 
for any indication or population, if Medicare covers the particular 
service under Part B. However, we reiterate that if we develop concerns 
in the future about the appropriateness of preventive services for an 
indication or population in light of the USPSTF's recommendations, we 
may consider using our authority under section 1834(n)(1) of the Act 
(as added by section 4105 of the ACA) to modify Medicare coverage of 
any preventive service to be consistent with the recommendations of the 
USPSTF.
    Comment: Several commenters expressed concern over the USPSTF 
rating of I for glaucoma screening [An ``I'' rating means that the 
USPSTF concludes that the current evidence is insufficient to assess 
the balance of benefits and harms of the service. Evidence is lacking, 
of poor quality, or conflicting, and the balance of benefits and harms 
cannot be determined]. Others were concerned about the rating of D for 
prostate cancer screening [A ``D'' rating means that the USPSTF 
recommends against the service. There is moderate or high certainly 
that the service has no net benefit or that the harms outweigh the 
benefits]. Other commenters noted the lack of a specific USPSTF rating 
for DSMT services. The commenters argued that because these services 
were covered by Medicare as preventive services, the beneficiary cost-
sharing should be waived to ensure access to these services.
    Response: Glaucoma screening, digital prostrate screening, and DSMT 
services are covered by Medicare under Part B and are specific 
categories of ``preventive services'' included in section 
1861(ddd)(3)(A) of the Act (as added by section 4014 of the ACA). 
However, as these services do not have a USPSTF grade A or B 
recommendation, the deductible and coinsurance cannot be waived. Thus, 
the coinsurance and deductible will continue to apply to these services 
when they are furnished to a Medicare beneficiary.
    Comment: Some commenters were concerned that ultrasound screening 
for abdominal aortic aneurysm (AAA), while a preventive service covered 
by Medicare and with a grade B recommendation from the USPSTF, would 
continue to require a physician referral in order for the preventive 
service to be furnished and for the waiver of cost-sharing to apply. 
Furthermore, the commenters objected to the current requirement that 
coverage of ultrasound screening for AAA relies upon a referral as a 
result of the IPPE because the IPPE is only available to beneficiaries 
during their first 12 months of Part B enrollment.
    Response: Ultrasound screening for AAA is a preventive service 
covered by Medicare, with certain restrictions set forth in Sec.  
410.19 of our regulations. Because this service has a grade B 
recommendation from the USPSTF, the deductible and coinsurance will be 
waived beginning in CY 2011 for covered services. While we appreciate 
the commenters' concerns regarding the existing requirements for 
ultrasound screening for AAA, the current requirement for a referral as 
a result of the IPPE is required by section 1861(s)(2)(AA) of the Act 
and continues to apply.
    Comment: In the context of many commenters' recommendations to add 
new preventive services for coverage under Part B as ``additional 
preventive services,'' most commenters also recommended that the 
beneficiary cost-sharing for these services be waived. The services 
addressed by the commenters included services with current grade A or B 
USPSTF recommendations, those with other grade USPSTF recommendations, 
those that have never been reviewed by the USPSTF, those with 
recommendations from other advisory organizations but the USPSTF, and 
other vaccines for which the USPSTF no longer makes recommendations.
    Response: As discussed earlier in this section, the statute permits 
us to add ``additional preventive services'' to Medicare coverage only 
if those services have a grade A or B recommendation from the USPSTF. 
Other grade USPSTF recommendations or recommendations from other 
advisory groups, including the ACIP, cannot substitute for the grade A 
or B USPSTF recommendation. In the event that we add ``additional 
preventive services'' in the future, as we have HIV screening for at 
risk individuals and smoking and tobacco cessation counseling for 
asymptomatic individuals in CY 2010, the Medicare deductible and 
coinsurance will be waived for those services.
    Comment: One commenter expressed concern that CMS was limiting the 
waiver of beneficiary cost-sharing to only those vaccines covered under 
Medicare Part B. The commenter contended that the ACIP recommends 
vaccines that are covered under Medicare Part D, and not Part B, and 
therefore not subject to the waiver.
    Response: We recognize that many preventive vaccines such as herpes 
zoster and hepatitis A are covered for beneficiaries under Medicare 
Part D and the commenter is correct that Medicare Part D is not 
included in section 1861(ddd) of the Act (as amended by section 4104 of 
the ACA). Section 1861(ddd)(1)(C) of the Act limits ``additional 
preventive services'' to those appropriate for individuals entitled to 
benefits under Medicare Part A or enrolled under Medicare Part B only. 
In addition, the statute only permits expansions if the item or 
services based on a grade of A or B recommendation by the USPSTF.
    Comment: Several commenters appreciated the clarity of Table 38 in 
the

[[Page 73417]]

CY 2011PFS proposed rule (75 FR 40131 through 40135), and requested 
that a table such as this be made available on the CMS Web site that 
reflects CMS' final policies regarding preventive services and 
beneficiary cost-sharing on a HCPCS code-specific basis. Other 
commenters requested additional provider and beneficiary educational 
materials to clarify preventive services benefits under Medicare, to 
identify which preventive services would continue to be subject to 
beneficiary cost-sharing, and to specify which preventive services 
would meet the requirements for the waiver of deductible and 
coinsurance where Medicare would make 100 percent payment.
    Response: We are in the process of developing educational materials 
that will reflect and communicate to beneficiaries and providers the CY 
2011 changes to beneficiary cost-sharing for preventive services under 
Medicare. We agree with the commenters that it is critical to 
effectively educate beneficiaries and providers about the preventive 
services covered by Medicare and specifically those services that will 
be paid at 100 percent by Medicare beginning in CY 2011 to help expand 
access to these important services. MLN Matters articles, quick 
reference guides, and the Medicare and You Handbook will all be 
developed and/or updated to reflect the provisions of the ACA and are 
examples of some the provider and beneficiary educational materials 
that will be available. We appreciate the recommendations of the 
commenters regarding the format for specific information that we could 
make available on the CMS web site, and we will keep these suggestions 
in mind as we further refine our educational strategy.
    After consideration of the public comments we received, we are 
finalizing our proposal to waive the deductible and coinsurance for 
most preventive services, and for the IPPE and the AWV, beginning in CY 
2011.
    Table 65 displays the HCPCS codes that we are finalizing as 
``preventive services'' under section 1861(ddd)(3)(A) of the Act (as 
added by section 4014 of the ACA) and identifies the HCPCS codes for 
the IPPE and the AWV. Table 65 also indicates the most recent USPSTF 
grade, if any, that is the basis for our policy with regard to waiver 
of the deductible and coinsurance, as applicable, and the Medicare 
payment system under which the HCPCS code would be paid when furnished 
outside of the facility setting.
    Since the publication of the CY 2011 PFS proposed rule, final Level 
II HCPCS codes have been assigned for the AWV, as well as the 
``additional preventive services'' for HIV screening for at risk 
individuals and smoking and tobacco cessation counseling for 
asymptomatic individuals. Therefore, these services and their 
associated Level II HCPCS codes are all displayed in Table 65. In 
addition, beginning in CY 2011, Medicare will no longer recognize CPT 
code 90658 (Influenza virus vaccine, split virus, when administered to 
individuals 3 years of age and older, for intramuscular use) but, 
instead will use 5 new HCPCS Q codes to report influenza vaccines that 
would otherwise have been reported under CPT code 90658. Therefore, 
these HCPCS Q-codes are included in Table 65, and they will be 
recognized as of January 1, 2011. CPT code 90658 is no longer displayed 
in the table. Finally, it has come to our attention since publication 
of the CY 2011 PFS proposed rule that CPT code 86689 (HTLV or HIV 
antibody, confirmatory test (e.g., Western Blot)) describes a 
diagnostic test, not specifically an HIV screening test that would be 
reported for a screening service that is covered by Medicare, and, 
therefore, this CPT is not included in Table 65.
    We are adopting proposed Sec.  410.152 to specify the amounts of 
payment, with modification of (13) to read ``Annual Wellness Visit 
(AWV), providing Personalized Prevention Plan Services (PPPS)'' and 
proposed Sec.  410.160 to specify exclusion from the Part B annual 
deductible, with modification of (12) to read ``Annual Wellness Visit 
(AWV), providing Personalized Prevention Plan Services (PPPS).'' These 
modifications utilize wording that is consistent with final Sec.  
410.15, Annual Wellness Visits Providing Personalized Prevention Plan 
Services: Conditions for and Limitations on Coverage.
    Section 10501(i)(2) of the ACA amended the definition of Federally 
Qualified Health Center (FQHC) services as defined in section 
1861(aa)(3)(A) of the Act by replacing the specific references to 
services provided under section 1861(qq) and (vv) of the Act (diabetes 
outpatient self-management training services and medical nutrition 
therapy services, respectively) with preventive services as defined in 
section 1861(ddd)(3) of the Act, as established by section 4014(a)(3) 
of the ACA. These changes are effective for services provided on or 
after January 1, 2011. Accordingly, we are proposing to conform the 
regulations to the new statutory requirement by adding a new section 
Sec.  405.2449 which would add the new preventive services definition 
to the definition of FQHC services effective for services provided on 
or after January 1, 2011.
    Section 1861(ddd)(3) of the Act defines ``preventive services'' as 
consisting of the following three components:
    <bullet> Screening and preventive services described in section 
1861(ww)(2) of the Act (other than electrocardiograms described in 
subparagraph (M) of that subsection).
    <bullet> An initial preventive physical examination, as defined in 
section 1861(ww) of the Act.
    <bullet> Personalized prevention plan services as defined in 
section 1861(hhh)(1) of the Act.
    We proposed to add each of these three components into the new 
Medicare FQHC preventive services definition in a new Sec.  405.2449.
    Section 4104(b) of the ACA, as amended by section 10406 of the ACA, 
waives coinsurance for preventive services by adding section 
1833(a)(1)(Y) to the Act to require waiver of coinsurance for 
preventive services that are recommended with a grade of A or B by the 
USPSTF for any indication or population. This provision is specifically 
designed to remove barriers to affording and obtaining such preventive 
services under Medicare.
    In addition, section 10501(i)(3)(B)(ii) of the ACA added section 
1833(a)(1)(Z) to the Act to require a 20 percent coinsurance on all 
FQHC services after implementation of the FQHC prospective payment 
system. We believe we can give both section 1833(a)(1)(Y) and (Z) of 
the Act, and the definition of FQHC services (revised to include the 
broader scope of preventive services) their best effect by providing 
Medicare payment at 100 percent for preventive services as defined at 
section 1861 (ddd)(3) of the Act, effective January 1, 2011.
    Section 1833(b)(4) of the Act stipulates that the Medicare Part B 
deductible shall not apply to FQHC services. The ACA makes no change to 
this provision; therefore Medicare will continue to waive the Part B 
deductible for all FQHC services, including preventive services added 
by the ACA.
    We received a number of public comments on the addition of 
preventive services to the Medicare FQHC benefit. These comments 
included questions regarding how these benefits are paid and 
clarification on the waiver of coinsurance on these benefits in the 
Medicare FQHC setting. The comments are addressed individually below.
    Comment: One commenter indicated that prior to enactment of the 
ACA, many health centers provided added preventive services as part of 
the

[[Page 73418]]

primary and preventive care offered at the center. Yet when provided to 
Medicare beneficiaries, they received no additional reimbursement. The 
commenter noted that since the inception of the Medicare FQHC benefit 
in 1992, Medicare added thirteen new services to its coverage, yet 
those services have not been included as FQHC services, except for 
diabetes self management training and medical nutrition therapy which 
were added by the Deficit Reduction Act.
    Response: We recognize that prior to enactment of the ACA, many 
FQHCs may have provided some or all of the same preventive services 
since added to the Medicare FQHC benefit package by the ACA. We also 
agree that many new preventive services have been added to Medicare 
since 1992, and except for diabetes self management training and 
medical nutrition therapy, which were added by the Deficit Reduction 
Act of 2005, these services had not been specifically added to the 
Medicare FQHC benefit package under the law. We believe the addition of 
these preventive services to the Medicare FQHC benefit through 
provisions in the ACA, along with the waiver of beneficiary cost 
sharing for these services in the Medicare FQHC setting, eliminates 
both prior statutory restrictions from Medicare coverage in the FQHC 
setting as well as potential financial barriers beneficiaries might 
otherwise face in obtaining these services.
    Comment: One commenter requested further clarification in both this 
preamble and the final regulation text at Sec.  405.2449 on the 
application of the waiver of coinsurance in the FQHC setting and CMS' 
statement that it will allow 100 percent reimbursement for these 
preventive services. The commenter stated that health centers are 
reimbursed 100 percent of their costs for the provision of influenza, 
pneumococcal, and Hepatitis B vaccinations, in accordance with Section 
1861(s)(10)(A) of the Act. The commenter further noted that this 
reimbursement is done separately and outside the Medicare FQHC upper 
payment limit. The commenter asserted that the payment limit negatively 
impacts an overwhelming majority of health centers, and therefore 
encouraged CMS to use a similar method to determine the reimbursement 
for these new FQHC preventive services. The commenter further asserted 
that using a similar method to determine reimbursement would allow for 
health centers to provide more comprehensive preventive care to their 
patients, alleviate the financial restrictions faced by health centers 
in providing these critical services, and would be in the best 
interests of CMS, health centers, and their patients. Finally, the 
commenter noted that because the list of new preventive services 
includes the provision of influenza, pneumococcal and hepatitis B 
vaccinations, CMS must ensure that health centers do not lose their 
current reimbursement structure for these services.
    Response: No coinsurance will be imposed upon ACA-added preventive 
services in Medicare FQHCs. Accordingly, final settlement with FQHCs 
will reflect the policy that no coinsurance amounts will be subtracted 
from the reasonable cost of ACA-added preventive benefits. Final 
settlement is determined on the basis of the Medicare cost report, the 
CMS-222-92. We made no proposal to exempt ACA-added preventive services 
from tests of reasonableness such as the Medicare FQHC upper payment 
limits. Further, we do not agree that CMS should use the same 
methodology presently employed to pay FQHCs for influenza and 
pneumococcal vaccinations (see discussion of Hepatitis B vaccinations 
below) to pay for new Medicare FQHC preventive services added by the 
ACA. We believe the average cost per-visit payment methodology, which 
is the general payment methodology employed by Medicare to pay for 
Medicare FQHC services, was implicit in the proposal as we proposed no 
changes to Medicare FQHC payment regulations to implement this new 
preventive services addition. In addition, we believe the general 
payment methodology for Medicare FQHCs, which is based on an all-
inclusive-cost-per-visit, is better suited and most appropriate for 
payment of new preventive services such as the annual wellness visit. 
It is our belief that the Medicare FQHC per-visit upper payment limits 
($126.10 urban and $109.14 rural in CY 2011) remain reasonable and 
adequate not only for existing Medicare FQHC services but also for new 
preventive services as well. Accordingly, we cannot accept the comment 
to exclude new preventive services from the Medicare FQHC upper payment 
limits. The Medicare FQHC upper payment limits and the general per-
visit payment methodology employed to pay for Medicare FQHC services 
will apply to new Medicare FQHC preventive services.
    While we clarify the waiver of coinsurance and application of 
Medicare FQHC payment methodology and upper payment limits to new 
preventive services in this preamble, we cannot accept the comment to 
provide further clarification within the final regulation text at Sec.  
405.2449. Section 405.2449 is placed within Medicare FQHC regulations 
which pertain to the description of Medicare FQHC services and not 
payment. We made no proposal to change payment and accordingly make no 
changes to Medicare FQHC payment regulations.
    Finally, we note that we did not propose, nor are we making any 
changes to, how influenza, pneumococcal and hepatitis B vaccinations 
are paid in Medicare FQHCs. Accordingly, health centers will not lose 
their current reimbursement structure for these services. We agree that 
health centers are reimbursed 100 percent of their costs for the 
provision of influenza and pneumococcal vaccinations. We further agree 
that payment for influenza and pneumococcal vaccinations in Medicare 
FQHCs is done separately and outside the Medicare FQHC upper payment 
limit. However, we note for clarification purposes that prior to the 
effective date of the ACA provisions adding new preventive services to 
the Medicare FQHC benefit, the waiver of Part B coinsurance did not 
extend to Hepatitis B vaccinations. Hepatitis B vaccinations were 
covered in Medicare FQHCs in accordance with Section 1861(aa)(3)(A) of 
the Act which through reference to section 1861(aa)(1)(A) of the Act 
included all section 1861(s)(10) of the Act services including section 
1861(s)(10)(B) of the Act, Hepatitis B vaccinations. The waiver of the 
20 percent Medicare Part B coinsurance in Section 1833(a)(3)(A) of the 
Act extended only to Section 1861(s)(10)(A) of the Act services and not 
to section 1861(s)(10)(B) of the Act Hepatitis B vaccinations. To 
summarize this clarification, prior to the effective date of the ACA 
provisions adding new preventive services to the Medicare FQHC benefit, 
the waiver of Medicare Part B coinsurance did not extend to Section 
1861(s)(10)(B) of the Act Hepatitis B vaccinations, hence these 
services were subject to Medicare Part B coinsurance and paid at 80 
percent (not 100 percent) of reasonable costs in accordance with the 
provisions in section 1833(a)(3) of the Act. Effective with 
implementation of ACA provisions on January 1, 2011, Part B coinsurance 
on Hepatitis B vaccinations is waived as they are now included in the 
definition of ``preventive services'' in section 1861(ddd)(3)(A) of the 
Act as cross-referenced to section 1861(ww)(2) of the Act.
    Consistent with our response to public comment above, and in 
conformance with the preventive services definition in section

[[Page 73419]]

1861(ddd)(3) of the Act, we are finalizing this new Medicare FQHC 
preventive services provision without modification. We will conform the 
regulations to the new statutory requirements by adding a new section 
Sec.  405.2449, adding the new preventive services definition to the 
definition of FQHC services effective for services provided on or after 
January 1, 2011.
BILLING CODE 4120-01-P

[[Page 73420]]

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BILLING CODE 412-01-C
3. Extension of Waiver of Deductible to Services Furnished in 
Connection With or in Relation to a Colorectal Cancer Screening Test 
That Becomes Diagnostic or Therapeutic
    Section 4104(c) of the ACA amended section 1833(b) of the Act to 
waive the Part B deductible for colorectal cancer screening tests that 
become diagnostic. Specifically, section 1833(b)(1) of the Act (as 
amended by section 4104(c)(2) of the ACA) waived the deductible with 
respect to a colorectal cancer screening test regardless of the code 
that is billed for the establishment of a diagnosis as a result of the 
test, or for the removal of tissue or other matter or other procedure 
that is furnished in connection with, as a result of, and in the same 
clinical encounter as a screening test. We proposed that all surgical 
services furnished on the same date as a planned screening colonoscopy, 
planned flexible sigmoidoscopy, or barium enema be considered to be 
furnished in connection with, as a result of, and in the same clinical 
encounter as the screening test. In the event of a legislative change 
to this policy (for example, a statutory change that would waive the 
coinsurance for these related services in addition to the deductible), 
we would reassess the appropriateness of this proposed definition of 
services that are furnished in connection with, as a result of, and in 
the same clinical encounter as the colorectal cancer screening test 
that becomes diagnostic. We also noted that the beneficiary's annual 
deductible would likely be met when any surgical procedure (related or 
not) is furnished on the same day as the scheduled screening test.
    We proposed to implement this provision by creating a HCPCS 
modifier that providers and practitioners would append to the 
diagnostic procedure code that is reported instead of the screening 
colonoscopy or screening flexible sigmoidoscopy HCPCS code or as a 
result of the barium enema when the screening test becomes a diagnostic 
service. The claims processing system would respond to the modifier by 
waiving the deductible for all surgical services on the same date as 
the diagnostic test. We proposed that coinsurance would continue to 
apply to the diagnostic test and to other services furnished in 
connection with, as a result of, and in the same clinical encounter as 
the screening test.
    Comment: Many commenters expressed support for CMS' proposal to 
waive the deductible in cases where a screening colonoscopy for 
colorectal cancer becomes diagnostic. The commenters believe that the 
proposal to waive the Medicare deductible for any surgical service 
performed on the same day and in the same clinical encounter as a 
screening colonoscopy if the service is appended with a modifier is a 
sound approach to implementing the policy.
    However, a few commenters requested that CMS also waive the 
coinsurance for a procedure that was a planned colorectal cancer 
screening test, regardless of the code that is billed for the 
establishment of a diagnosis as a result of the test, or for the 
removal of tissue or other matter or other procedure that is furnished 
in connection with, or as a result of, and in the same clinical 
encounter as a screening test. The commenters were concerned that 
beneficiaries may refrain from undergoing a covered colorectal cancer 
screening test if coinsurance could apply to a resulting diagnostic 
test and other services furnished in the same encounter as the planned 
colorectal cancer screening test. As an alternative, several commenters 
recommend that CMS not apply a coinsurance requirement to the part of 
the procedure that is screening in nature.
    Response: We appreciate the commenters' support for our proposal, 
including the proposed administrative requirements for practitioners 
and providers to identify the circumstances under which the waiver of 
the deducible would apply. As stated above, section 1833(b)(1) of the 
Act (as amended by section 4104(c)(2) of the ACA) waived the Part B 
deductible for colorectal cancer screening tests that become 
diagnostic. The statute does not currently permit waiver of coinsurance 
for these circumstances as the 20 percent coinsurance applies to all 
service furnished under the PFS unless there is a specific statutory 
exception. We believe that a statutory change would be necessary in 
order to waive the coinsurance for these related services, in addition 
to the waiver of the deductible.
    In response to those commenters who suggested, as an alternative, 
that we identify the screening portion of the diagnostic test in order 
to waive the coinsurance for only that portion, we are unable to 
identify a portion of a diagnostic test that is ``screening'' because a 
HCPCS code for a diagnostic test would be reported and, therefore, we 
would consider the whole test to be diagnostic in nature.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to waive the deductible for colorectal 
cancer screening tests that become diagnostic. Providers and 
practitioners would append new HCPCS modifier -PT (Colorectal cancer 
screening test, converted to diagnostic test or other procedure) to the 
diagnostic procedure code that is reported instead of the screening 
colonoscopy or screening flexible sigmoidoscopy HCPCS code or as a 
result of the barium enema when the screening test becomes a diagnostic 
service. The claims processing system would respond to the modifier by 
waiving the deductible for all surgical services on the same date as 
the diagnostic test. Coinsurance would continue to apply to the 
diagnostic test and to other services furnished in connection with, as 
a result of, and in the same clinical encounter as the screening test.

S. Section 5501: Expanding Access to Primary Care Services and General 
Surgery Services

1. Section 5501(a): Incentive Payment Program for Primary Care Services
a. Background
    Section 5501(a) of the ACA revised section 1833 of the Act by 
adding a new paragraph (x), ``Incentive Payments for Primary Care 
Services.'' Section 1833(x) of the Act states that in the case of 
primary care services, furnished on or after January 1, 2011 and before 
January 1, 2016 by a primary care practitioner, there shall also be 
paid on a monthly or quarterly basis an amount equal to 10 percent of 
the payment amount for such services under Part B.
    Section 1833(x)(2)(A) of the Act (as added by section 5501(a) of 
the ACA) defines a primary care practitioner as: (1) A physician, as 
described in section 1861(r)(1) of the Act, who has a primary specialty 
designation of family medicine, internal medicine, geriatric medicine, 
or pediatric medicine; or (2) a nurse practitioner, clinical nurse 
specialist, or physician assistant as defined in section 1861(aa)(5) of 
the Act, and in all cases, for whom primary care services accounted for 
at least 60 percent of the allowed charges under Part B for the 
practitioner in a prior period as determined appropriate by the 
Secretary.
    Section 1833(x)(2)(B) of the Act (as added by section 5501(a)(2)(B) 
of the ACA) defines primary care services as those services identified 
by the following HCPCS codes as of January 1, 2009 (and as subsequently 
modified by the Secretary, as applicable):
    <bullet> 99201 through 99215 for new and established patient office 
or other outpatient E/M visits;
    <bullet> 99304 through 99340 for initial, subsequent, discharge, 
and other nursing facility E/M services; new and

[[Page 73432]]

established patient domiciliary, rest home (eg, boarding home), or 
custodial care E/M services; and domiciliary, rest home (eg, assisted 
living facility), or home care plan oversight services; and
    <bullet> 99341 through 99350 for new and established patient home 
E/M visits. These codes are displayed in Table 66. All of these codes 
remain active in CY 2011 and there are no other codes used to describe 
these services.

             Table 66--Primary Care Services Eligible for Primary Care Incentive Payments in CY 2011
----------------------------------------------------------------------------------------------------------------
           CPT Code                                               Description
----------------------------------------------------------------------------------------------------------------
99201........................  Level 1 new patient office or other outpatient visit.
99202........................  Level 2 new patient office or other outpatient visit.
99203........................  Level 3 new patient office or other outpatient visit.
99204........................  Level 4 new patient office or other outpatient visit.
99205........................  Level 5 new patient office or other outpatient visit.
99211........................  Level 1 established patient office or other outpatient visit.
99212........................  Level 2 established patient office or other outpatient visit.
99213........................  Level 3 established patient office or other outpatient visit.
99214........................  Level 4 established patient office or other outpatient visit.
99215........................  Level 5 established patient office or other outpatient visit.
99304........................  Level 1 initial nursing facility care.
99305........................  Level 2 initial nursing facility care.
99306........................  Level 3 initial nursing facility care.
99307........................  Level 1 subsequent nursing facility care.
99308........................  Level 2 subsequent nursing facility care.
99309........................  Level 3 subsequent nursing facility care.
99310........................  Level 4 subsequent nursing facility care.
99315........................  Nursing facility discharge day management; 30 minutes.
99316........................  Nursing facility discharge day management; more than 30 minutes.
99318........................  Other nursing facility services; evaluation and management of a patient involving
                                an annual nursing facility assessment.
99324........................  Level 1 new patient domiciliary, rest home, or custodial care visit.
99325........................  Level 2 new patient domiciliary, rest home, or custodial care visit.
99326........................  Level 3 new patient domiciliary, rest home, or custodial care visit.
99327........................  Level 4 new patient domiciliary, rest home, or custodial care visit.
99328........................  Level 5 new patient domiciliary, rest home, or custodial care visit.
99334........................  Level 1 established patient domiciliary, rest home, or custodial care visit.
99335........................  Level 2 established patient domiciliary, rest home, or custodial care visit.
99336........................  Level 3 established patient domiciliary, rest home, or custodial care visit.
99337........................  Level 4 established patient domiciliary, rest home, or custodial care visit.
99339........................  Individual physician supervision of a patient in home, domiciliary or rest home
                                recurring complex and multidisciplinary care modalities; 30 minutes.
99340........................  Individual physician supervision of a patient in home, domiciliary or rest home
                                recurring complex and multidisciplinary care modalities; 30 minutes or more.
99341........................  Level 1 new patient home visit.
99342........................  Level 2 new patient home visit.
99343........................  Level 3 new patient home visit.
99344........................  Level 4 new patient home visit.
99345........................  Level 5 new patient home visit.
99347........................  Level 1 established patient home visit.
99348........................  Level 2 established patient home visit.
99349........................  Level 3 established patient home visit.
99350........................  Level 4 established patient home visit.
----------------------------------------------------------------------------------------------------------------

b. Primary Care Incentive Payment Program (PCIP)
(1) Primary Specialty Designation
    For primary care services furnished on or after January 1, 2011 and 
before January 1, 2016, we proposed to provide a 10 percent incentive 
payment to primary care practitioners, identified as the following: (1) 
In the case of physicians, enrolled in Medicare with a primary 
specialty designation of 08-family practice, 11-internal medicine, 37-
pediatrics, or 38-geriatrics; or (2) in the case of nonphysician 
practitioners (NPPs), enrolled in Medicare with a primary care 
specialty designation of 50-nurse practitioner, 89-certified clinical 
nurse specialist, or 97-physician assistant; and (3) for whom the 
primary care services displayed in Table 66 accounted for at least 60 
percent of the allowed charges under Part B for such practitioner 
during the time period that is specified by the Secretary, and proposed 
in this section. Hereinafter, we refer to practitioners with these 
primary Medicare specialty designations as potential primary care 
practitioners and the potential primary care practitioner's ratio of 
primary care allowed charges to allowed charges under Part B 
(multiplied by 100) as the primary care percentage.
    Comment: Many commenters expressed support for the PCIP and general 
appreciation for the increased payment for primary care services. Some 
commenters approved of the

[[Page 73433]]

proposed inclusion of nonphysician practitioners (NPPs) in the program, 
but asked for clarification on the practice settings where these 
practitioners may furnish PCIP-eligible services. However, several 
commenters disagreed with the proposed specialty limitations for the 
PCIP. The commenters recommended that several additional specialties be 
eligible for the PCIP including, but not limited to, neurology, 
chiropractics, infectious disease, endocrinology, and certified nurse-
midwives. The commenters contended that many practitioners in these 
other specialties provide primary care services and have the requisite 
education and training, similar to the potential primary care 
practitioners in the designated specialties to which payment under the 
PCIP was proposed.
    Response: We appreciate the commenters' support of the PCIP. We 
recognize that a variety of specialties may provide primary care 
services as defined broadly under the statute by the E/M codes 
displayed in Table 66 and, in some cases, these specialist 
practitioners may truly function as ``primary care practitioners'' in 
the common use of the term (providing first contact, coordinated, 
continuous care for certain patients under their care). However, 
section 1833(x) of the Act (as added by section 5501(a) of the ACA) 
specifies in the definition of primary care practitioner the physician 
specialties that are considered as primary care for purposes of the 
PCIP. Under section 1833(x)(2)(A)(i)(I) of the Act, only physicians 
with a primary specialty designation of family medicine, internal 
medicine, geriatric medicine, or pediatric medicine are considered 
potential primary care physicians. The provision does not authorize us 
to add other Medicare specialty designations to the definition of a 
primary care practitioner for purposes of the PCIP. Therefore, as 
proposed, we will identify physicians that have a primary specialty 
designation of family medicine, internal medicine, geriatric medicine, 
or pediatric medicine (along with nurse practitioners, clinical nurse 
specialists, and physician assistants) for further evaluation as 
potential primary care practitioners for purposes of the PCIP.
    We note that the PCIP does not place limitations on the setting of 
the primary care services for which a primary care practitioner may be 
paid an incentive payment. However, as a practical matter, the 
statutorily defined primary care services to which the PCIP applies may 
limit the setting of the services on which a PCIP payment is based. For 
example, there are no inpatient hospital care E/M services on the list 
of primary care services for purposes of the PCIP. The PCIP payment is 
an amount equal to 10 percent of the payment for primary care services 
furnished by the primary care practitioner.
    Comment: Several commenters commended CMS for proposing that the 
PCIP payment would be in addition to payments under other incentive 
programs under Medicare, arguing that this policy is particularly 
important to encourage the delivery of primary care services to 
underserved Medicare populations. However, some commenters recommended 
that CMS increase the amount of PCIP payments because the commenters 
believe that 10 percent is an insufficient financial incentive to 
encourage primary care practice over specialty practice as a career 
path for medical and other health professional students.
    Response: We appreciate the commenters' suggestions that primary 
care should continue to be a Medicare priority and acknowledge that 
payment incentives are one of many factors that may influence health 
professional student career choice. While we recognize the importance 
of encouraging primary care practice and ensuring the accessibility of 
primary care services, section 1833(x) of the Act (as added by section 
5501(a) of the ACA) explicitly states the incentive payment amount, and 
does not grant authority to the Secretary to adjust the payment amount. 
According to this provision, primary care practitioners (those who meet 
the specialty designation and primary care percentage criteria) qualify 
for an incentive payment equaling 10 percent of the payment amount 
under Part B for the primary care services they furnish. Therefore, we 
are maintaining the PCIP incentive payment amount at 10 percent, as we 
proposed. The statute also specifies that the PCIP payment is to be 
determined without regard to any payment for the primary care service 
under section 1833(m) of the statute (currently, the HPSA physician 
bonus payment program). Therefore, we are also adopting as final our 
proposal to make any PCIP payment in addition to, but determined 
without regard to, any HPSA physician bonus payment.
(2) Primary Care Percentage Calculation
    In the CY 2011 PFS proposed rule (74 FR 10137), we proposed to use 
the most current full year of claims data to identify primary care 
practitioners eligible for the PCIP for a CY based on the 
practitioner's primary specialty (as identified on claims) and the 
practitioner's primary care percentage calculated based on the primary 
care services displayed in Table 66. We commonly use the most recent 
full year of claims data for purposes of establishing annual payment 
amounts under a number of Medicare's fee-for-service programs. A 
potential primary care practitioner would be eligible for the PCIP in a 
CY if the practitioner's primary care percentage, calculated as the 
practitioner's allowed charges for primary care services (identified in 
Table 66) (the numerator) divided by his or total allowed charges under 
Part B (the denominator) and multiplied by 100, meets or exceeds the 60 
percent threshold. We note that the practitioner's specialty is applied 
to the claim by the claims processing system and reflects the 
practitioner's primary specialty designation for purposes of Medicare 
enrollment on the date the claim is processed, which would usually be 
close to the date on which the service was actually furnished to the 
beneficiary. We would identify primary care practitioners eligible for 
the PCIP for a year by the individual physician/practitioner national 
provider identifier (NPI) number using the most current full year of 
claims data available.
    Comment: Many commenters described problems potential primary care 
practitioners would likely encounter in meeting the 60 percent 
eligibility threshold requirement for the PCIP. The commenters pointed 
to a few reasons why a potential primary care practitioner's primary 
care percentage may not meet the 60 percent threshold. Most commenters 
believe that the denominator in the primary care percentage 
calculation, or ``allowed charges under Part B'' as CMS proposed, was 
too broad, and would limit the number of potential primary care 
practitioners who would qualify for the PCIP. For example, the 
commenters speculated that under the proposed threshold calculation, 
more than one-third of family practitioners and more than 60 percent of 
general internists would not qualify for the PCIP. Generally, the 
commenters requested that CMS interpret the phrase ``allowed charges 
under this part'' in section 1833(x) of the Act (as added by section 
5501(a)(2)(A)(ii) of the ACA) more narrowly to decrease the denominator 
in the primary care percentage calculation and thereby increase the 
number of potential primary care practitioners who would qualify for 
the PCIP.
    Several commenters, including MedPAC, recommended that CMS use only 
the total allowed charges under the PFS, rather than all charges under 
Part B, as the denominator in the potential primary care practitioner's 
primary care percentage calculation. The commenters

[[Page 73434]]

argued that a potential primary care practitioner's billings under his 
or her NPI for Part B services not paid under the PFS (including 
laboratory services, drugs, and durable medical equipment (DME)) would 
depend upon the organizational structure of the potential primary care 
practitioner's practice and, therefore, would be unrelated to whether 
the practitioner was serving as a ``true primary care practitioner'' 
for Medicare beneficiaries under his or her care. The commenters 
asserted that under other sections of the Act, ``allowed charges under 
this part'' has been interpreted by CMS to mean ``allowed charges under 
the PFS.'' The commenters did not believe that potential primary care 
practitioners serving as ``true primary care practitioners'' should be 
penalized with respect to PCIP eligibility because they furnish non-PFS 
Part B services to their patients.
    In addition, other commenters argued that ``true primary care 
practitioners'' caring for their patients across all settings in 
accordance with a traditional primary care model commonly furnish other 
types of services to their patients that are paid under the PFS but 
that are not defined as primary care services under the PCIP, such as 
inpatient hospital care and emergency department visits. The commenters 
were concerned that providing hospital care to their patients 
consistent with the goal of improved continuity of care would 
disadvantage ``true primary care practitioners'' with respect to the 
primary care percentage calculation and, ultimately, eligibility for 
the PCIP. Several commenters emphasized that potential primary care 
practitioners in rural areas would be more likely to provide a wider 
variety of services to their patients due to the lack of other more 
specialized providers in their area, which could make them less likely 
to qualify for the PCIP. Many commenters contended that the amount of 
these specific non-primary care PFS allowed charges would be 
sufficiently large to prevent ``true primary care practitioners'' from 
meeting the 60 percent primary care percentage threshold. MedPAC and 
several other commenters recommended that CMS remove hospital E/M 
visits from the denominator of the primary care percentage calculation, 
explaining that this approach would neither penalize nor reward 
potential primary care practitioners who provide hospital care to their 
patients with respect to eligibility for the PCIP.
    Response: We understand commenters' concerns regarding the criteria 
for the PCIP eligibility determination, and in particular the total 
amount of allowed charges used in the denominator for calculation of 
the potential primary care practitioner's primary care percentage. We 
also believe that it is important that the eligibility determination be 
based on a fair representation of potential primary practitioners' 
services so that ``true primary care practitioners'' may meet or exceed 
the qualifying primary care percentage threshold for the PCIP, 
regardless of how they may have chosen to organize their medical 
practice.
    We agree with some commenters who suggested that section 
1833(x)(2)(A)(ii) of the Act (as added by section 5501(a) of the ACA) 
allows some flexibility in implementing the PCIP primary care 
percentage calculation, based on the phrase in the 60 percent threshold 
specification that states, ``at least 60 percent of the allowed charges 
under this part for such physician or practitioner in a prior period as 
determined appropriate by the Secretary.''
    We considered several refinements to determine a potential primary 
care practitioner's allowed charges consistent with the goal of 
eliminating potential biases that could affect ``true primary care 
practitioners'' who practice under certain conditions and structural 
constraints. We reviewed recent Medicare claims data by specialty 
designation to determine which Part B services accounted for the 
highest allowed charges for primary care practitioners, focusing on 
those services that are not defined as primary care services and, 
therefore, contribute to increasing the magnitude of the denominator in 
the primary care percentage. We found that many potential primary care 
practitioners had significant allowed charges for hospital inpatient 
care and emergency department visits, which are not considered primary 
care services for purposes of the PCIP, consistent with the 
observations of some commenters. Due to the high allowed charges for 
these hospital visits compared to other primary care services, ``true 
primary care practitioners'' providing hospital inpatient and emergency 
department care for their patients would be less likely to qualify for 
the PCIP. We also found that rural practitioners, specifically family 
physicians, may be disproportionately unlikely to qualify for the PCIP 
because they typically provide a wider variety of services, including 
hospital inpatient care and emergency department visits, than their 
urban counterparts. This difference in the profile of potential primary 
care practitioners' services was even greater for family physicians in 
frontier states.
    Our review of non-PFS Part B services furnished by potential 
primary care practitioners, including laboratory services, drugs, and 
DME, showed that allowed charges for these services were typically only 
a small percentage of the total amount of a potential primary care 
practitioner's allowed charges under Part B. However, while less 
influential than the inclusion of hospital visits in the denominator of 
the primary care percentage for purposes of determining whether a 
potential primary care practitioner meets the PCIP eligibility 
threshold, we believe that the inclusion of the non-PFS services in the 
denominator could also lead to bias against ``true primary care 
practitioners'' who provide a full spectrum of care to their patients.
    Therefore, in an effort to eliminate potential bias against 
potential primary care practitioners who are ``true primary care 
practitioners'' with certain primary care practice patterns, we are 
modifying our proposal and will remove certain services from the total 
allowed charges that is the denominator of the primary care percentage 
calculation. In the CY 2011 PFS proposed rule (74 FR 40136), we 
proposed to use all allowed charges under Part B as the denominator in 
the calculation to determine whether a potential primary care 
practitioner meets the 60 percent eligibility threshold requirement. 
Following our analysis of Medicare claims data, we will remove all non-
PFS allowed charges and allowed charges for evaluation and management 
(E/M) services furnished to hospital inpatients and outpatients by 
potential primary care practitioners from the total allowed charges 
under Part B. The specific E/M services that we are removing from the 
denominator for purposes of the primary care percentage calculation are 
displayed in Table 67. We note that we are not removing hospital 
inpatient consultation E/M services from the denominator, either face-
to-face or via telehealth, because we believe these E/M services do not 
reflect the types of services that would be furnished by ``true primary 
care practitioners'' serving a primary care function for their patients 
as reflected in their primary care practice patterns.
    In other words, PFS charges excluding allowed charges for hospital 
E/M services will be the denominator in the final primary care 
percentage calculation for PCIP eligibility determination: [primary 
care services/(PFS charges--hospital E/M charges)] multiplied by 100. 
The potential primary care practitioner primary care percentage 
calculation is subject to traditional rounding rules with respect

[[Page 73435]]

to the 60 percent eligibility threshold, meaning 59.5 percent and above 
will be rounded to 60 percent.
    These refinements remove the largest categories of non-primary care 
allowed charges furnished by ``true primary care practitioners'' from 
the primary care percentage calculation used for determination of PCIP 
eligibility, typically decreasing the magnitude of the denominator and 
resulting in a higher proportion of primary care to non-primary care 
services for a given potential primary care practitioner. Limiting the 
allowed charges to the PFS also removes drugs, laboratory services, and 
DME from the denominator calculation. While these non-PFS allowed 
charges are not a large percentage of most potential primary care 
practitioners' allowed charges under Part B, we acknowledge the 
commenters' assertions that many potential primary care practitioners 
who are ``true primary care practitioners'' furnish these services to 
their patients under certain primary care practice models. Therefore, 
we also believe it is appropriate to remove the non-PFS allowed charges 
from the denominator of the primary care percentage calculation. In 
effect, removing allowed charges for hospital E/M and non-PFS services 
from the total allowed charges in the denominator of the primary care 
percentage calculation allows significantly more potential primary care 
practitioners to qualify for the PCIP, while still limiting the payment 
incentive to ``true primary care practitioners'' who predominantly 
serve a primary care function for their patients. With use of this 
revised denominator in the primary care percentage calculation, we 
estimate that over 80 percent of physicians who currently are enrolled 
in Medicare with a primary specialty designation of family medicine and 
almost 60 percent of physicians with a designation of internal medicine 
would qualify for the PCIP based on CY 2009 claims data. This revised 
calculation removes bias with respect to eligibility of ``true primary 
care practitioners'' for the PCIP based on the specific primary care 
practice characteristics and model they utilize in caring for their 
patients.

  Table 67--Excluded Hospital Evaluation and Management Services From the Denominator for the PCIP Primary Care
                                             Percentage Calculation
----------------------------------------------------------------------------------------------------------------
               CPT Code                                                Description
----------------------------------------------------------------------------------------------------------------
99217.................................  Observation care discharge day management.
99218.................................  Level 1 initial observation care, per day.
99219.................................  Level 2 initial observation care, per day.
99220.................................  Level 3 initial observation care, per day.
99221.................................  Level 1 initial hospital care, per day.
99222.................................  Level 2 initial hospital care, per day.
99223.................................  Level 3 initial hospital care, per day.
99231.................................  Level 1 subsequent hospital care, per day.
99232.................................  Level 2 subsequent hospital care, per day.
99233.................................  Level 3 subsequent hospital care.
99234.................................  Level 1 observation or inpatient hospital care.
99235.................................  Level 2 observation or inpatient hospital care.
99236.................................  Level 3 observation or inpatient hospital care.
99238.................................  Hospital discharge day management; 30 minutes or less.
99239.................................  Hospital discharge day management; more than 30 minutes.
99281.................................  Level 1 emergency department visit.
99282.................................  Level 2 emergency department visit.
99283.................................  Level 3 emergency department visit.
99284.................................  Level 4 emergency department visit.
99285.................................  Level 5 emergency department visit.
----------------------------------------------------------------------------------------------------------------

    Comment: A number of commenters recommended that CMS add additional 
services commonly furnished by ``true primary care practitioners'' to 
the list of primary care services for purposes of calculation of the 
primary care percentage and payment of the incentive payments 
themselves, which are made at 10 percent of the Medicare payment for 
primary care services. Among the numerous services recommended as 
additions by the commenters are hospital E/M visits, preventive 
services such as immunizations, certain diagnostic tests, and services 
related to home health. The commenters argued that, by increasing the 
numerator of the primary care percentage calculation used for 
determining PCIP eligibility, more potential primary care practitioners 
would qualify for the PCIP. Moreover, several commenters argued that, 
when furnished by ``true primary care practitioners,'' these additional 
services are, in fact, primary care services and therefore should be 
subject to the incentive payment. The commenters suggested the phrase, 
``and as subsequently modified by the Secretary'' in section 
1833(x)(2)(B) of the Act (as added by section 5501(a) of the ACA) 
following the HCPCS codes defined as primary care services, could be 
read to provide CMS authority to add services to the list of primary 
care services. However, some commenters expressed concern that adding 
services, such as hospital E/M visits, to the list primary care 
services would qualify many hospitalists for the PCIP with the result 
that the PCIP would be applied inappropriately to practitioners 
predominantly furnishing hospital services. If CMS were to contemplate 
adding hospital E/M services to the list of primary care services, the 
commenters argued that CMS should exclude clinicians with hospitalists' 
claim patterns, even when those practitioners have a potential primary 
care specialty designation.
    Response: While we appreciate commenters' interest in increasing 
the number of practitioners qualifying for the PCIP, we do not believe 
that section 1833(x)(2)(B) of the Act (as added by section 5501(a) of 
the ACA) authorizes us to add services to the list of primary care 
services specified in the Act. Section 1833(x)(2)(B) of the Act (as

[[Page 73436]]

added by section 5501(a) of the ACA) clearly specifies the HCPCS codes 
that are considered primary care services for purposes of the PCIP, 
stating ``The term `primary care services' means services identified, 
as of January 1, 2009, by the following HCPCS codes (and as 
subsequently modified by the Secretary) * * *.'' This phrase appears in 
other sections of the Act, and we have consistently interpreted it to 
refer to the same services that may be reported under different HCPCS 
codes when those codes change over time. We do not believe the phrase 
``and as subsequently modified by the Secretary'' authorizes us to add 
codes (additional services) to the definition of primary care services.
    Comment: Several commenters expressed concern regarding the reduced 
likelihood that ``true primary care practitioners'' in rural areas 
would qualify for the PCIP because primary care practitioners in remote 
areas commonly furnish a greater variety of services than those on the 
list of specific primary care services. The commenters recommended that 
rural practitioners be qualified for the PCIP based on another primary 
care percentage threshold that better suits the practice patterns of 
rural practitioners, including accounting for hospital E/M visits 
without penalizing the practitioners. Some commenters asserted that the 
PCIP would only benefit those practitioners furnishing services in 
health professional shortage areas (HPSAs) based on their belief that 
the PCIP was limited to primary care practitioners furnishing primary 
care services in HPSAs or that primary care practitioners would benefit 
at the cost of other specialty practitioners because of considerations 
of budget neutrality under the PFS.
    Response: We appreciate the concerns of the commenters regarding 
rural practitioners and their special practice patterns. As discussed 
earlier in this section, we have modified our primary care percentage 
calculation for purposes of comparison with the 60 percent PCIP 
eligibility threshold so that all potential primary care practitioners, 
including potential primary care practitioners in rural areas, will not 
miss the PCIP eligibility threshold as a result of furnishing hospital 
visits to their patients. With regard to applying special criteria for 
the primary care percentage calculation for rural practitioners, we 
note that section 1833(x) of the Act does not include any provision 
that would make the location of the primary care services or the 
primary care practitioner a factor for PCIP eligibility; the same 
eligibility determination is applicable to all potential primary care 
practitioners.
    In contrast to the HPSA physician bonus payment program and the 
HPSA Surgical Incentive Program (HSIP), the PCIP does not consider 
geographic location in determining practitioner eligibility or the 
primary care services for which the incentive payments will be made. 
Although practitioners in rural areas will benefit from the PCIP in the 
same way as practitioners in other regions, as we note above, PCIP 
payments will be made in addition to the regular Part B payments for 
primary care services furnished by eligible primary care practitioners 
and, if applicable, the HPSA physician bonus payment will also be made. 
Finally, we note that primary care incentive payments are not subject 
to the budget neutrality adjustment under the PFS, so PCIP payments 
will not affect payment for other services for which payment is made 
under the PFS.
    After consideration of the public comments we received, we are 
finalizing our policy for calculation of the primary care percentage, 
with certain modifications from the proposed policy. The numerator of 
the primary care percentage for each NPI is the sum of the allowed 
charges for the primary care services listed in Table 66, as we 
proposed. However, the denominator is the allowed charges under the PFS 
minus the allowed charges for the hospital E/M services listed in Table 
67, which is a change from our proposal. We will calculate the primary 
care percentage for each NPI of a potential primary care practitioner 
and, if the calculation rounds to 60 percent or greater, the potential 
primary care practitioner with that NPI will qualify to receive PCIP 
payments for the applicable year.
(3) Period of Claims Data for Primary Care Percentage Calculation
    As we discussed in the CY 2011 PFS proposed rule (74 FR 40137), we 
proposed to use CY 2009 PFS claims data, processed through June 30, 
2010, for determining PCIP practitioner eligibility for CY 2011. This 
would ensure analysis of about 99 percent of CY 2009 claims to 
determine practitioner eligibility for PCIP payment beginning January 
2011. We note that the MMA changed the requirements for critical access 
hospital (CAH) billing for practitioners' professional services and, 
therefore, modifications were made to the Medicare claims processing 
system to require CAHs to identify the practitioner furnishing a 
service on the CAH claim for that professional service. However, 
because the rendering practitioner has only been identified on CAH 
claims since July 1, 2009, for the first year of the PCIP we are 
proposing to identify eligible practitioners using only 6 months of CAH 
data for those CAHs paid under the optional method. Thereafter, we 
would update the list of practitioners eligible for the PCIP annually 
based on the most recent available full year of PFS and CAH claims 
data.
    To the extent practitioners were paid under the PFS during the 
historical claims data year for some primary services, and CAHs were 
paid under the optional method for those same practitioners' other 
professional services, we would aggregate the historical claims data 
from all settings by the practitioner's NPI in order to determine 
whether the practitioner is eligible for PCIP payments. We proposed 
that for all potentially eligible primary care practitioners (both 
practitioners paid under the PFS and practitioners for whose 
professional services CAHs are paid under the optional method), the 
period of claims data used for the annual determination of the 
practitioner's primary care percentage would lag the PCIP payment year 
by 2 years (for example, CY 2010 claims data would be used for the CY 
2012 PCIP). This 2-year lag is consistent with other areas of the 
Medicare program where we rely on information from claims data to 
inform payment in a future year, such as the use of CY 2009 PFS 
utilization data in the establishment of certain aspects of CY 2011 PFS 
payment rates.
    Under the proposed PCIP eligibility determination method, it would 
be necessary to revise the list of PCIP-eligible primary care 
practitioners based on updated claims data regarding primary specialty 
designation and primary care percentage each year. The revised list of 
primary care practitioners developed prior to the beginning of the next 
CY would establish a practitioner's eligibility for PCIP payments for 
the full next CY. That is, once eligible for the PCIP for a given CY, 
the practitioner would receive PCIP payments for primary care services 
furnished throughout that full CY. We would then reassess the 
practitioner's PCIP eligibility for the next year's payments. As a 
result, under our proposal, a practitioner newly enrolling in Medicare 
during a CY would not be eligible for the PCIP until Medicare claims 
data reflecting the practitioner's primary care specialty and primary 
care percentage that equals or exceeds the 60 percent threshold were 
available to establish the practitioner's eligibility for the next PCIP 
year. Similarly, an enrolled practitioner's change in primary specialty 
designation (either to

[[Page 73437]]

or from a primary care specialty) would not affect that practitioner's 
eligibility for the PCIP until the practitioner's claims reflecting the 
change were available for analysis in preparation for the next 
applicable CY PCIP. In the CY 2011 PFS proposed rule (74 FR 40138), we 
indicated that, given the statutory requirement for PCIP eligibility 
that a potential primary care practitioner's primary care services 
account for at least 60 percent of the allowed charges under Part B for 
the practitioner in a prior period as determined by the Secretary, we 
saw no clear alternative methodologies that would allow PCIP payments 
to be made to those practitioners newly enrolling in Medicare without 
the 2-year lag in eligibility determination that was described 
previously. However, given our general interest in supporting primary 
care practitioners and entry into primary care practice by new 
physicians and nonphysician practitioners in order to ensure that 
Medicare beneficiaries have access to these important services, we 
asked for public comments on alternative approaches for establishing 
PCIP eligibility for newly enrolled practitioners that would be 
consistent with the statutory requirement.
    Comment: Several commenters opposed the proposed 2-year lag in the 
data used for PCIP eligibility determination (for example, CY 2009 
claims data for CY 2011 PCIP payment). The commenters contended that 
the 2-year lag would not accurately represent changes in practice or 
changes in specialty designation, and requested that CMS exercise 
flexibility in determining the prior period in order to more closely 
align the eligibility and payment periods. Some commenters recommended 
that CMS decrease the timeframe of claims data used for eligibility 
determination to less than a year in order to use claims data from the 
year immediately prior to the incentive payment year. Other commenters 
suggested that CMS repeat the eligibility determination for potential 
primary care practitioners more frequently than annually, allowing 
multiple opportunities for potential primary care practitioners to meet 
the primary care percentage threshold because the commenters believe 
that practitioners may experience seasonal variations in their practice 
patterns.
    The commenters were especially concerned about the eligibility 
determination for practitioners who newly enroll in Medicare because 
there would be no Medicare claims data for these practitioners from the 
2 years prior to the PCIP payment year. The commenters were concerned 
that all newly enrolled potential primary care practitioners would, 
therefore, be ineligible for the PCIP for up to 2 years during their 
initial period of practice. The commenters contended that the 2-year 
interval would discourage, or at a minimum not encourage, primary care 
practice as a career choice. A few commenters also raised concerns 
about the corresponding 2-year lag time in PCIP eligibility for 
practitioners who change their Medicare-enrolled specialty to one that 
would make them potential primary care practitioners.
    The commenters recommended a variety of approaches for CMS to 
consider in addressing PCIP eligibility for newly enrolled potential 
primary care practitioners. The commenters' recommendations included 
using claims data for a 6-month prior period in order to limit the lag 
time; making a lump sum PCIP payment after the conclusion of the PCIP 
payment year once eligibility could be confirmed; placing PCIP payments 
into escrow accounts to be paid after the potential primary care 
practitioner's first year of practice if the primary care percentage 
threshold was met; or presuming the eligibility of all practitioners 
with the designated enrolled specialties until claims data demonstrated 
that they did not qualify for the PCIP.
    Response: We appreciate the commenters' interest in closely 
aligning the period of claims data used to determine PCIP eligibility 
with the time period where the primary care services subject to the 
incentive payment would be furnished in order to identify those primary 
care practitioners with the most current primary care practice patterns 
for the PCIP. For practitioners who were enrolled in Medicare 2 years 
prior to the PCIP payment year, as we proposed, we believe it is 
important to consider a full year of claims data rather than a shorter 
period, in order to account for seasonal variations in care patterns 
and more accurately represent the totality of PFS services provided by 
the potential primary care practitioner. Medical practices often 
experience fluctuations in the services that they provide over a year. 
A longer data period helps to smooth the variation and, therefore, 
better represents the totality of the potential primary care 
practitioner's practice. Due to the time necessary to receive and 
process claims data, using the claims data from the full year prior to 
the PCIP payment year for calculating the primary care percentage would 
delay incentive payments until after the third quarter of the PCIP 
payment year for all eligible primary care practitioners, a delay which 
we believe is not desirable because the statute indicates that we 
should make quarterly or monthly PCIP payments. Therefore, we believe 
that the 2-year lag method, as described in the CY 2011 PFS proposed 
rule (74 FR 40137), is the most appropriate approach to determining 
eligibility for most potential primary care practitioners because it 
allows for a review of a full year of claims data without delaying 
incentive payments for most eligible primary care practitioners.
    However, we recognize the special circumstances of newly enrolled 
potential primary care practitioners, in that they do not have the 
claims history from 2 years prior to the PCIP payment year to determine 
their eligibility. We believe it is important to give potential primary 
care practitioners newly enrolling in Medicare in the year immediately 
preceding the PCIP payment year the opportunity to qualify for the PCIP 
with minimal delay. Therefore, for these practitioners, we will 
determine PCIP eligibility based on a different prior period than for 
those practitioners who are already enrolled in Medicare and who have 
Medicare claims data from 2 years prior to the PCIP payment year 
available for analysis. Section 1833(x) of the Act (as added by Section 
5501(a) of the ACA) gives the Secretary the authority to establish the 
period of allowed charges used to assess the potential primary care 
practitioner's primary care percentage with regard to the minimum 60 
percent threshold required for PCIP eligibility. For newly enrolled 
potential primary care practitioners only, we will use the available 
claims data from the year immediately preceding the PCIP payment year 
(for example, CY 2010 claims data for CY 2011 PCIP payment) to 
determine PCIP eligibility. We will use all claims data available for 
the newly enrolled potential primary care practitioner from that prior 
year to determine PCIP eligibility, with no minimum time period that 
the potential primary care practitioner must have been enrolled in 
Medicare in that prior year. Therefore, a newly enrolled potential 
primary care practitioner would need to wait no more than one year and 
potentially significantly less than one year following enrollment and 
first billing in order for the primary care services furnished by that 
eligible primary care practitioner to be subject to the PCIP in the 
year following the practitioner's initial enrollment.
    Due to the processing lag for claims data from the previous CY, 
PCIP payments for newly enrolled primary care practitioners will be 
delayed until after the end of the third quarter of the PCIP payment 
year, although the PCIP

[[Page 73438]]

payments will ultimately be made for all primary care services the 
eligible practitioners furnished throughout the full PCIP payment year. 
Following that first PCIP eligibility determination in the year 
immediately following the potential primary care practitioner's 
enrollment in Medicare, PCIP eligibility will be determined as 
specified previously for a practitioner who was enrolled in Medicare 2 
years prior to the PCIP payment year.
    For example, if a practitioner newly enrolled in Medicare any time 
during CY 2010 with a primary specialty designation of family medicine 
and furnished services that were billed to Medicare, in CY 2011 we will 
evaluate the family physician's CY 2010 claims data to determine 
whether the physician meets the 60 percent primary care percentage 
eligibility threshold for CY 2011 payment under the PCIP. We would not 
be able to make this assessment until the CY 2010 claims data are 
substantially complete and, therefore, would anticipate making a 
determination regarding the physician's eligibility some time after the 
midpoint of CY 2011. If the family physician is eligible for the PCIP, 
we would make a lump sum payment for those primary care services 
furnished earlier in CY 2011 prior to the determination of eligibility 
and then we would begin making quarterly PCIP payments following the 
third quarter of CY 2011. For the same physician for the CY 2012 PCIP 
payment year, we would again refer to CY 2010 claims data to assess 
whether the physician is eligible for the PCIP and, if applicable 
(eligibility could potentially change with more complete CY 2010 data 
than were available for the CY 2011 determination), make quarterly PCIP 
payments to that physician in CY 2012.
    The use of a different prior period in the case of newly enrolled 
potential primary care practitioners will allow us more quickly to 
assess whether the practitioner qualifies for the PCIP and make any 
applicable PCIP payment, while allowing PCIP payments for established 
primary care practitioners to be made timely for each quarter of the 
PCIP payment year based on the use of a different prior period to 
determine the eligibility of previously enrolled potential primary care 
practitioners. The use of the more recent prior period for PCIP 
eligibility determination will not apply to practitioners who are 
already enrolled in Medicare 2 years prior to the PCIP payment year, 
but switch their specialty designation to a potential primary care 
specialty in the year immediately preceding the PCIP payment year. As 
we explained in the CY 2011 PFS proposed rule (74 FR 40138) and discuss 
further below, we do not want to encourage practitioners to change 
their specialty designation merely for the purpose of garnering PCIP 
payments. Moreover, if we were to make an accommodation for 
practitioners enrolled in Medicare who change their specialty to a 
potential primary care practitioner specialty after the data year used 
for PCIP eligibility determination, we would also need to devise a 
process to remove practitioners from PCIP eligibility if they changed 
to a non-primary care specialty during that same period. We believe the 
incentives and the practice challenges experienced by newly enrolling 
practitioners are not the same as those for established practitioners 
and, on balance, we continue to believe it is appropriate to establish 
PCIP eligibility based upon claims data for a full CY. This policy will 
also ensure greater predictability of payment, which is an important 
objective of the PCIP and Medicare payment policy in general.
    We do not agree with commenters who recommended that we make PCIP 
payments to newly enrolled potential primary care practitioners based 
on a self-certification process or presumptions about eligibility. 
Making incentive payments prior to review of a practitioner's 
eligibility based on claims data would inevitably result in 
inappropriate PCIP payments to potential primary care practitioners. 
Any such payments would constitute overpayments subject to recoupment, 
which would place a burden on our claims processing systems and on the 
practitioners themselves.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 proposal to use Medicare claims data for the 
year 2 years prior to the PCIP payment year to determine PCIP 
eligibility for those potential primary care practitioners who were 
enrolled in Medicare in that year. However, we are modifying the 
proposed policy to use claims data from the year immediately preceding 
the PCIP payment year in order to determine PCIP eligibility for 
potential primary care practitioners who newly enroll in Medicare in 
the year immediately preceding the PCIP payment year. The PCIP payments 
to newly enrolled potential primary care practitioners, if applicable, 
will be made as a lump sum for those primary care services furnished 
earlier in the PCIP payment year by the eligible primary care 
practitioner as a soon as an eligibility determination can be made in 
the PCIP payment year. Quarterly PCIP payments for these eligible 
primary care practitioners will begin following the third quarter of 
the PCIP payment year.
    In the CY 2011 PFS proposed rule (74 FR 40138), we stated that we 
plan to monitor changes in the primary specialty designations of 
enrolled practitioners over time and would expect not to see 
significant changes in the specialties of currently enrolled 
practitioners as a result of the PCIP payments. We would expect that 
physicians changing their primary specialty to one of the primary care 
specialties of family medicine, internal medicine, geriatric medicine, 
or pediatric medicine and who would be newly eligible for the PCIP are 
furnishing primary care services to the patients in their practices. 
Consistent with our past policies, we would expect that physicians 
changing their primary specialty designation under Medicare would make 
such changes only so that their primary specialty designation is fully 
consistent with the specific or unique type of medicine they practice. 
If we find that physicians are changing their specialty designations 
(for example, cardiologists who designate their primary specialty as 
internal medicine, although they practice cardiology) in order to take 
advantage of the PCIP payments, we would considering making future 
revisions to eliminate such an outcome.
    Comment: Several commenters agreed that CMS should review the 
specialty designations of physicians and nonphysician practitioners to 
ensure there is no gaming of the system in order for practitioners to 
qualify for the PCIP.
    Response: We appreciate the commenters' support and plan to follow 
closely the changes in the Medicare primary specialty designations of 
physicians and nonphysician practitioners. As we stated previously, if 
we find that practitioners are changing their specialty designations in 
order to become eligible for PCIP payments rather than to reflect their 
actual practice, we may consider making future revisions to address 
this problem.
(4) PCIP Payment
    We proposed in the CY 2011 PFS proposed rule (74 FR 40138) that 
PCIP payments would be calculated by the Medicare contractors and made 
quarterly on behalf of the eligible primary care practitioner for the 
primary care services furnished by the practitioner in that quarter, 
consistent with the established Medicare HPSA physician bonus program 
(Medicare Claims Processing Manual, Pub. 100-04, Chapter 12, Section 
90.4.4) and the proposed HSIP described in section

[[Page 73439]]

III.S.2. of this final rule with comment period. The primary care 
practitioners' professional services may be paid under the PFS based on 
a claim for professional services or, where the practitioner has 
reassigned his or her benefits to a CAH paid under the optional method, 
to the CAH based on an institutional claim.
    Comment: Several commenters supported CMS' proposal to make 
incentive payments quarterly. These commenters agreed that quarterly 
payments would mitigate the administrative burden and better account 
for the practice patterns of the various types of primary care 
practitioners submitting claims for primary care services.
    Response: We appreciate the commenters' support of the quarterly 
PCIP payments. We agree that the quarterly payments would work well 
with the billing cycles of many practitioners and would be consistent 
with Medicare payment policies for other incentive programs.
    As discussed in CY 2011 PFS proposed rule (74 FR 40138), eligible 
primary care practitioners would be identified on a claim based on the 
NPI of the rendering practitioner. If the claim is submitted by a 
practitioner's group practice or a CAH, the rendering practitioner's 
NPI must be included on the line-item for the primary care service 
(identified in Table 66) in order for a determination to be made 
regarding whether or not the service is eligible for payment of the 
PCIP. We note that, in order to be eligible for the PCIP, physician 
assistants, clinical nurse specialists, and nurse practitioners must be 
billing for their services under their own NPI and not furnishing 
services incident to physicians' services. Regardless of the specialty 
area in which they may be practicing, these specific NPPs would be 
eligible for the PCIP based on their enrolled potential primary care 
practitioner specialty if their historical primary care percentage 
equals or exceeds the 60 percent threshold.
    In the CY 2011 PFS proposed rule (75 FR 41038), we indicated that 
section 1833(x)(4) of the Act (as added by section 5501(a) of the ACA) 
specifies that ``there shall be no administrative or judicial review 
under section 1869, or section 1878, or otherwise, respecting the 
identification of primary care practitioners.'' We believe that the 
inclusion of this language is intended to provide a means for the 
practical implementation of this provision. We explained that we must 
develop a process and identify primary care practitioners before we can 
make payments under the PCIP to the eligible primary care 
practitioners. The statute gives CMS the authority to make final 
determinations of eligible primary care practitioners that are not 
subject to appeal through the various channels normally available to 
practitioners, in order for the timely payments under the PCIP to 
occur. In contrast, if the eligibility determinations that we must make 
under this provision were subject to appeal, the timely implementation 
of this program could be jeopardized and payments under the PCIP could 
be significantly delayed. However, we stated that we did not believe 
that the ``no administrative or judicial review'' clause precludes CMS 
from correcting errors resulting from clerical or mathematical 
mistakes. Therefore, we indicated that practitioners would have the 
opportunity to notify CMS of clerical or mathematical errors that may 
have occurred during the process of identifying eligible primary care 
practitioners for PCIP payment and that may have resulted in a mistaken 
eligibility determination for the PCIP.
    Comment: Several commenters supported the review of the PCIP 
eligibility determinations for clerical or mathematical mistakes. The 
commenters agreed that a review of the data calculations may be 
necessary when errors are suspected. Some commenters further asked for 
clarification and transparency regarding the formula and data that are 
used for eligibility determinations. Finally, several commenters 
requested that CMS provide notification to individual qualifying 
primary care practitioners even if the PCIP payment is made to the 
group practice under a reassignment arrangement.
    Response: We appreciate the support of the commenters for a review 
when suspected clerical or mathematical mistakes are identified. As 
described earlier in this section, the formula used to determine the 
primary care percentage for a potential primary care practitioner is 
the practitioner's allowed charges from the applicable data year (the 
prior period) for primary care services (listed in Table 66) divided by 
the total allowed charges under the PFS, excluding hospital E/M visits 
(listed in Table 67), and multiplied by 100. The specialty designation 
and allowed charges used to identify a potential primary care 
practitioner and calculate the primary care percentage are based on the 
claims data that are submitted by the practitioner during the 
applicable prior year for eligibility determination for the PCIP 
payment year, which depends on whether the potential primary care 
practitioner was newly enrolled in Medicare in the year immediately 
prior to the PCIP payment year or previously enrolled in Medicare. 
Those data will be reviewed when we are assessing a suspected mistake.
    We note that Medicare contractors will post a list of individual 
primary care practitioners eligible for the PCIP for a year, along with 
their NPIs, on their web sites. We do not anticipate providing 
individual notices to PCIP-eligible primary care practitioners for each 
year. Rather, primary care practitioners, including those who have 
reassigned their benefits, can confirm their eligibility for the PCIP 
for a year without direct individual notification.
    In the CY 2011 PFS proposed rule (75 FR 41038), we further noted 
that section 1833(x)(3) of the Act (as added by section 5501(a) of the 
ACA) authorizes payment under the PCIP as an additional payment amount 
for specified primary care services without regard to any additional 
payment for the service under section 1833(m) of the Act. Therefore, an 
eligible primary care physician furnishing a primary care service in a 
HPSA may receive both a HPSA physician bonus payment under the 
established program and a PCIP payment under the new program beginning 
in CY 2011, but the PCIP payment is made without regard to the HPSA 
physician bonus payment amount. In addition, payments for outpatient 
CAH services under section 1834(g)(2)(B) of the Act (as amended by 
section 5501(a) of the ACA) would not be affected by the PCIP payment 
amounts made to the CAH on behalf of the primary care practitioner.
(5) Summary of Final PCIP Policies
    In summary, after consideration of the public comments we received, 
we are finalizing our CY 2011 proposals for the PCIP, with 
modification. Practitioners with a designated primary Medicare-enrolled 
specialty of family medicine, internal medicine, geriatric medicine, 
pediatric medicine, nurse practitioner, clinical nurse specialist, or 
physician assistant and whose primary care percentage, calculated as 
primary care allowed charges divided by PFS allowed charges excluding 
hospital E/M visits, and then multiplied by 100, exceeds 60 percent 
will be eligible for the PCIP. The primary care percentage will be 
calculated based on claims data from 2 years prior to the PCIP payment 
year for practitioners enrolled in Medicare in that year, and from the 
year immediately prior to the PCIP payment year for practitioners newly 
enrolling in that year. Beginning immediately following the first 
quarter of CY 2011, incentive payments for primary care

[[Page 73440]]

services furnished by eligible practitioners will be paid quarterly 
after the conclusion of the calendar quarter, in addition to payments 
by Medicare for the primary care services and other incentive program 
payments. The list of eligible primary care practitioners will be 
updated annually based upon our analysis of claims data from the 
subsequent reference period.
    Accordingly, we are finalizing our regulation at new Sec.  414.80 
to specify the requirements of the PCIP. While we are finalizing our 
proposed definition of primary care services in Sec.  414.80(a), we are 
revising our proposed definition of eligible primary care practitioners 
in Sec.  414.80(a)(i)(B) and (ii)(B) to specify that at least 60 
percent of the physician's or practitioner's allowed charges under the 
PFS (excluding hospital evaluation and management visits) during a 
reference period specified by the Secretary are for primary care 
services. We are finalizing Sec.  414.80(b) as proposed to provide 
eligible primary care practitioners a 10 percent incentive payment for 
primary care services, in addition to the amount that would otherwise 
be paid for their professional services under Part B. Quarterly PCIP 
payments will be made to eligible practitioners or to CAHs paid under 
the optional method that are billing on behalf of practitioners for 
their professional services for identified primary care services.
2. Section 5501(b): Incentive Payment Program for Major Surgical 
Procedures Furnished in Health Professional Shortage Areas
a. Background
    Section 1833(m) of the Act provides for an additional 10 percent 
incentive payment when physicians' services are furnished to a covered 
individual in an area designated as a geographic Health Professional 
Shortage Area (HPSA) as identified by the Secretary prior to the 
beginning of such year. Section 5501(b) of the ACA revises section 1833 
of the Act by adding new subparagraph (y), ``Incentive Payments for 
Major Surgical Procedures Furnished in Health Professional Shortage 
Areas.''
    In the case of major surgical procedures furnished by a general 
surgeon on or after January 1, 2011 and before January 1, 2016, in an 
area designated under section 332(a)(1)(A) of the Act as a geographic 
HPSA, they would be paid on a monthly or quarterly basis an amount 
equal to 10 percent of the payment amount for eligible services under 
Part B. Section 1833(y)(2)(A) of the Act (as added by section 5501(b) 
of the ACA) defines a general surgeon as a physician who is described 
in section 1861(r)(1) of the Act and who has designated a CMS specialty 
code of 02-general surgery as his or her primary specialty code in the 
physician's enrollment in Medicare under section 1866(j) of the Act.
    Section 1833(y)(2)(B) of the Act (as added by section 5501(b) of 
the ACA) defines major surgical procedures as surgical procedures for 
which a 10-day or 90-day global period is used for payment under the 
PFS under section 1848(b) of the Act. In Addendum B to the CY 2010 PFS 
final rule with comment period (74 FR 62017 through 62143), as 
corrected in the correction notice (74 FR 65455 through 65457), we 
identified 489 10-day global procedure codes and 3,796 90-day global 
procedure codes for a total of 4,285 surgical procedure codes that 
would have met the surgical procedure criteria for the incentive 
payment if it were applicable in CY 2010.
b. HPSA Surgical Incentive Payment Program (HSIP)
    For services furnished on or after January 1, 2011 and before 
January 1, 2016, in the CY 2011 PFS proposed rule (75 FR 40139) we 
proposed to provide a 10 percent incentive payment to general surgeons, 
identified by their enrollment in Medicare with a primary specialty 
code of 02-general surgery, in addition to the amount they would 
otherwise be paid for their professional services under Part B, when 
they furnish a major surgical procedure in a location defined by the 
Secretary as of December 31 of the prior year as a geographic HPSA. As 
with the PCIP described above, we stated in the CY 2011 PFS proposed 
rule (75 FR 40139) that we did not believe surgeons would change their 
Medicare specialty designation in order to take advantage of the HSIP 
payments. However, we described our plan to monitor the specialty 
designations of enrolled physicians, and if we were to find that 
surgeons were changing their primary specialty designation to general 
surgery in order to take advantage of the HSIP payments, we would 
consider making future revisions to eliminate such an outcome.
    Consistent with the established Medicare HPSA physician bonus 
program, we proposed that HSIP payments be calculated by Medicare 
contractors based on the criteria for payment discussed earlier in this 
section, and payments would be made quarterly on behalf of the 
qualifying general surgeon for the qualifying major surgical 
procedures. The surgeons' professional services would be paid under the 
PFS based on a claim for professional services or, when a physician has 
reassigned his or her benefits to a CAH paid under the optional method, 
to the CAH based on an institutional claim.
    Qualifying general surgeons would be identified on a claim for a 
major surgical procedure based on the primary specialty of the 
rendering physician, identified by his or her NPI, of 02-general 
surgery. If the claim is submitted by a physician's group practice or a 
CAH, the rendering physician's NPI must be included on the line-item 
for the major surgical procedure in order for a determination to be 
made regarding whether or not the procedure is eligible for payment 
under the HSIP.
    For HSIP payment to be applicable, the major surgical procedure 
must be furnished in an area designated by the Secretary as of December 
31 of the prior year as a geographic HPSA. We stated that we would 
provide HSIP payments for major surgical procedures furnished by 
general surgeons in the same HPSAs as we currently recognize for 
purposes of payment of all physicians under the established Medicare 
HPSA physician bonus program under section 1833(m) of the Act.
    Each year, we publish a list of zip codes eligible for automatic 
payment of the HPSA physician bonus payment at: http://www.cms.gov/hpsapsaphysicianbonuses/01_overview.asp. We proposed to use the same 
list of zip codes for automatic payment of the incentive payment for 
qualifying surgical procedures furnished by general surgeons. We also 
proposed to create a new HCPCS code modifier to identify circumstances 
when general surgeons furnish qualifying surgical procedures in areas 
that are designated as HPSAs as of December 31 of the prior year, but 
that are not on the list of zip codes eligible for automatic payment. 
The new modifier would be appended to the major surgical procedure on 
claims submitted for payment, similar to the current process for 
payment of the Medicare HPSA physician bonus when the geographic HPSA 
is not a HPSA identified for automatic payment.
    Consistent with the statutory requirement, we would define major 
surgical procedures as those for which a 10-day or 90-day global period 
is used for payment under the PFS. For CY 2011, approximately 4,300 10-
day and 90-day global surgical procedures codes were identified in 
Addendum B to the CY 2011 PFS rule (75 FR 40262 through 40641) under 
the far right column labeled ``Global'' and designated with ``010'' or 
``090,'' respectively.

[[Page 73441]]

    We further noted that section 1833(y)(3) of the Act (as added by 
section 5501(b)(1) of the ACA) authorizes payment under the HSIP as an 
additional payment amount for specified surgical services without 
regard to any additional payment for the service under section 1833(m) 
of the Act. Therefore, a general surgeon may receive both a HPSA 
physician bonus payment under the established Medicare HPSA physician 
bonus program and a HSIP payment under the new program beginning in CY 
2011, but the HSIP payment would be made without regard to the HPSA 
physician bonus payment amount. In addition, payments for outpatient 
CAH services under section 1834(g)(2)(B) of the Act (as amended by 
section 5501(b) of the ACA) would not be affected by the HSIP payment 
amounts made to the CAH on behalf of the general surgeon.
    Accordingly, for CY 2011, we proposed to revise Sec.  414.2 and add 
the definitions of ``HPSA'' and ``major surgical procedure.'' We also 
proposed to revise Sec.  414.67 to move the existing provisions to 
paragraph (a) to be grouped as the ``Health Professional Shortage Area 
(HPSA) physician bonus program'' and adding a new paragraph (b) for the 
``HPSA surgical incentive payment program'' provisions. Section 
414.67(b) would state that general surgeons who furnish identified 10-
day and 90-day global period surgical procedures in an area designated 
by the Secretary as of December 31 of the prior year as a geographic 
HPSA that is recognized by Medicare for the HPSA physician bonus 
program as specified under renumbered Sec.  414.67(a)(1) would receive 
a 10 percent incentive payment in addition to the amount that would 
otherwise be paid for their professional services under Part B. 
Physicians furnishing services in areas that are designated as 
geographic HPSAs prior to the beginning of the year but not included on 
the published list of zip codes for which automated HPSA surgical 
incentive payments are made would report a specified HCPCS code 
modifier to receive the HSIP payment. Quarterly incentive payments 
would be made to physicians or to CAHs paid under the optional method 
when billing on behalf of physicians for their professional services.
    Comment: A number of commenters supported CMS' proposal to 
implement the HSIP. A few commenters recommended expanding the 
geographic eligibility criteria for the HSIP to increase the number of 
qualifying procedures furnished by general surgeons for which the 
incentive payment would be made. These commenters suggested that CMS 
introduce three modifications to the proposed criteria in order to 
provide the incentive payment for major surgical procedures furnished 
by general surgeons to Medicare beneficiaries who have limited access 
to general surgical care. Specifically, the commenters recommended that 
CMS additionally provide the incentive payment for: (1) Qualifying 
surgical procedures performed by a general surgeon in a hospital 
adjacent to a recognized HPSA; (2) qualifying surgical procedures 
performed by a general surgeon who resides in a recognized HPSA; and 
(3) qualifying surgical procedures performed by a general surgeon who 
has an office in a recognized HPSA. The commenters argued that the 
proposed policy would narrowly limit the availability of the general 
surgery incentive payments by linking payments only to surgical 
procedures furnished in established HPSAs. The commenters concluded 
that the proposed policy would result in relatively fewer general 
surgeons receiving the incentive payments and would not capture 
surgical procedures furnished in all of the nation's geographic areas 
in which there is a shortage of general surgeons.
    Response: We appreciate the commenters' support for our proposal. 
Regarding commenters' requests for expansion of the locations for 
surgery when we would provide the incentive payment for major surgical 
procedures furnished by general surgeons, we do not believe that we 
have the authority to expand the care settings beyond the statutorily 
prescribed location, that is, ``major surgical procedures * * * by a 
general surgeon in an area that is designated (under section 
332(a)(1)(A) of the Public Health Service Act) as a health professional 
shortage area.'' Section 1833(y) of the Act (as added by section 
5501(b) of the ACA) relies solely on section 332(a)(1)(A) of the Public 
Health Service Act to identify qualifying HPSAs and expressly notes 
that the HPSA must be identified by the Secretary prior to the 
beginning of the HSIP payment year.
    Comment: One commenter requested that CMS extend HSIP payment to 
physician assistants who are trained as first assistants at surgery. 
The commenter encouraged CMS to provide the 10 percent incentive 
payment to physician assistants, trained in surgical specialties, who 
ensure both that beneficiaries in rural areas have access to 
appropriate surgical care and that general surgeons furnishing surgical 
procedures in these locations are appropriately supported by physician 
assistants trained in surgical specialties.
    Response: Section 1833(y)(2) of the Act (as added by section 
5501(b) of the ACA) specifically limits HSIP eligibility to those 
physicians (a doctor of medicine or osteopathy legally authorized to 
practice medicine and surgery by the State in which he performs such 
function or action according to the definition in section 1861(r)(1)) 
of the Act who have designated 02-general surgery as their primary 
specialty code in Medicare's physician enrollment. On the other hand, 
physician assistants are not doctors of medicine or osteopathy and 
these practitioners are identified in Medicare enrollment with the 
specialty code 97-physician assistant. Therefore, we do not believe we 
have the statutory authority to extend HSIP payment to physician 
assistants who provide surgical support for major surgeries furnished 
by general surgeons in recognized HPSAs.
    After consideration of the public comments we received, we are 
finalizing our CY 2011 HSIP proposal, with modification regarding the 
proposal to create a new HCPCS code modifier to identify circumstances 
when general surgeons furnish services in areas that are designated as 
HPSAs as of December 31 of the prior year, but that are not on the list 
of zip codes eligible for automatic payment. Under our final policy, 
under these circumstances practitioners would report the existing 
modifier-AQ (Physician providing a service in a HPSA) that is used for 
the established Medicare HPSA physician bonus program because we would 
make incentive payments under the HSIP for surgical procedures 
furnished by general surgeons in the same HPSAs that are recognized for 
the Medicare HPSA physician bonus program.
    In summary, the HSIP provides a 10 percent incentive payment 
quarterly to qualifying physicians enrolled as general surgeons in 
Medicare (or to the CAHs to which they have reassigned their benefits) 
for qualifying 10-day and 90-day global surgical procedures furnished 
on or after January 1, 2011 and before January 1, 2016 by those general 
surgeons in recognized geographic HPSAs. CMS will make automatic 
payments when the zip code for the location of service is found in the 
applicable file for the payment year on the CMS web site for the HPSA 
physician bonus program at: http://www.cms.gov/hpsapsaphysicianbonuses/01_overview.asp. Existing HCPCS modifier-AQ should be appended to the 
major surgical procedure on claims submitted for payment to identify 
circumstances when general surgeons

[[Page 73442]]

furnish services in areas that are designated as HPSAs as of December 
31 of the prior year, but that are not on the list of zip codes 
eligible for automatic payment.
    We are also finalizing our proposed revisions to the Code of 
Federal regulations related to the HSIP, with minor modification. We 
are revising Sec.  414.2 as we proposed to add the definitions of 
``HPSA'' and ``major surgical procedure.'' We also are revising Sec.  
414.67 as we proposed to move the existing provisions to paragraph (a) 
to be grouped as the ``Health Professional Shortage Area (HPSA) 
physician bonus program'' and adding new paragraph (b) for the ``HPSA 
surgical incentive payment program'' provisions. We are finalizing our 
proposal for Sec.  414.67(b) to state that general surgeons who furnish 
identified 10-day and 90-day global period surgical procedures in an 
area designated by the Secretary as of December 31 of the prior year as 
a geographic HPSA that is recognized by Medicare for the HPSA physician 
bonus program as specified under renumbered Sec.  414.67(a)(1) would 
receive a 10 percent incentive payment in addition to the amount that 
would otherwise be paid for their professional services under Part B. 
We are modifying the proposal to specify in Sec.  414.67(b)(3) that 
physicians furnishing services in areas that are designated as 
geographic HPSAs prior to the beginning of the year but not included on 
the published list of zip codes for which automated HPSA surgical 
incentive payments are made would report HCPCS modifier-AQ to receive 
the HSIP payment and to change the term ``bonus'' to ``incentive'' when 
referring to the HSIP. Quarterly incentive payments will be made to 
physicians or to CAHs paid under the optional method when billing on 
behalf of physicians for their professional services.
3. Sections 5501(a) and (b) of the ACA and Payment for Critical Access 
Hospital Professional Services Under the Optional Method
    Section 1834(g) of the Act established the payment rules for 
outpatient services furnished by a CAH. In 1999, section 403(d) of the 
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113) (BBRA) amended 
section 1834(g) of the Act to provide for two methods of payment for 
outpatient services furnished by a CAH. Specifically, section 
1834(g)(1) of the Act, as amended by the BBRA, specifies that the 
amount of payment for outpatient services furnished by a CAH is equal 
to the reasonable costs of the CAH in furnishing such services. (The 
physician or other practitioner furnishing the professional service 
receives payment under the PFS.) In the alternative, the CAH may make 
an election, under section 1834(g)(2) of the Act, to receive amounts 
that are equal to ``the reasonable costs'' of the CAH for facility 
services plus, with respect to the professional services, the amount 
otherwise paid for professional services under Medicare, less the 
applicable Medicare deductible and coinsurance amount. The election 
made under section 1834(g)(2) of the Act is sometimes referred to as 
``method II'' or ``the optional method.'' Throughout this section we 
refer to this election as ``the optional method.''
    In 2000, section 202 of the Medicare, Medicaid and SCHIP Benefits 
Improvement and Protection Act of 2000 (Pub. L. 106-554) (BIPA) amended 
section 1834(g)(2)(B) of the Act to increase the payment for 
professional services under the optional method to 115 percent of the 
amount otherwise paid for professional services under Medicare. In 
addition, in 2003 section 405(a)(1) of the MMA amended section 
1834(g)(1) of the Act by inserting the phrase ``equal to 101 percent 
of'' before the phrase ``the reasonable costs.'' However, section 405 
of the MMA did not make a corresponding change to section 1834(g)(2)(A) 
of the Act regarding the amount of payment for facility services under 
the optional method. In 2010, section 3128 of the ACA amended section 
1834(g)(2)(A) of the Act by inserting the phrase ``101 percent of'' 
before ``the reasonable costs.''
    Section 5501(a) of the ACA amends section 1833 of the Act by adding 
a new paragraph (x), ``Incentive Payments for Primary Care Services,'' 
that authorizes additional Part B payments to primary care 
practitioners for primary care services. Section 5501(b) of the ACA 
further amends section 1833 of the Act by adding new paragraph (y), 
``Incentive Payments for Major Surgical Procedures Furnished in Health 
Professional Shortage Areas,'' that authorizes additional Part B 
payments for major surgical procedures furnished by general surgeons in 
HPSAs. Sections 5501(a)(3) and 5501(b)(3) of the ACA make conforming 
amendments to section 1834(g)(2)(B) of the Act, which refers to payment 
to the CAH for professional services under the optional method, by 
adding at the end of section 1834(g)(2)(B) of the Act the following 
phrase, ``Subsections (x) and (y) of 1833 of the Act shall not be taken 
into account in determining the amounts that would otherwise be paid 
pursuant to the preceding sentence.'' As such, section 1834(g)(2)(B) of 
the Act (as amended by sections 5501(a)(2) and 5501(b)(2) of the ACA) 
requires that under the optional method, the 115 percent adjustment 
payment to the CAH for professional services is calculated without 
considering the incentive payments for primary care services furnished 
by primary care practitioners and major surgical procedures furnished 
by general surgeons in HPSAs as these terms are defined under sections 
1833(x) and (y) of the Act.
    The regulations implementing section 1834(g)(2)(B) of the Act, 
payment to the CAH for professional services under the optional method, 
are in Sec.  413.70(b)(3)(ii)(B). In order to implement the amendments 
to section 1834(g)(2)(B) of the Act as specified by sections 5501(a)(2) 
and 5501(b)(2) of the ACA, we are proposing to amend the regulations in 
Sec.  413.70(b)(3)(ii)(B) to state that, effective for primary care 
services furnished by primary care practitioners and major surgical 
procedures furnished by general surgeons in HPSAs on or after January 
1, 2011 and before January 1, 2016, the additional incentive payment 
amounts as specified in Sec.  414.67 and Sec.  414.80 are not included 
in the determination of the payment for professional services made to 
the CAH under the optional method. Accordingly, we are proposing that 
payment for professional services to the CAH at 115 percent of the PFS 
amount under the optional method would not take into account the 
additional Part B incentive payments for primary services furnished by 
primary care practitioners and major surgical procedures furnished by 
general surgeons in HPSAs as provided in Sec.  414.67 and Sec.  414.80.
    Comment: Several commenters supported CMS' proposal to make HSIP 
and PCIP payments to CAHs paid under the optional method for qualifying 
services furnished by eligible practitioners who have reassigned their 
billing rights to the CAHs. No commenters addressed CMS' proposal to 
calculate the 115 percent adjustment payment to the CAH for 
professional services without considering the incentive payments for 
primary care services furnished by primary care practitioners and major 
surgical procedures furnished by general surgeons in HPSAs.
    Response: We appreciate the commenters' support for our proposal to 
include qualifying professional services billed by CAHs paid under the 
optional method furnished by eligible practitioners in the PCIP and 
HSIP.
    After considering the public comments we received, we are 
finalizing our CY 2011 proposal to

[[Page 73443]]

include CAHs paid under the optional method in the PCIP and HSIP. 
Payment to a CAH paid under the optional method, will be made 
quarterly, for eligible professional services furnished by qualifying 
physicians and nonphysician practitioners who have reassigned their 
billing rights to the CAH. Furthermore, we are finalizing our CY 2011 
proposal to specify that payment for professional services to the CAH 
at 115 percent of the PFS amount under the optional method would not 
take into account the additional Part B incentive payments for primary 
services furnished by primary care practitioners and major surgical 
procedures furnished by general surgeons in HPSAs. We are amending 
Sec.  413.70(b)(3)(ii)(B) as we proposed to reflect this final policy.

T. Section 6003: Disclosure Requirements for In-Office Ancillary 
Services Exception to the Prohibition on Physician Self-Referral for 
Certain Imaging Services

1. Background
    Section 1877 of the Act (also known as the physician self-referral 
law): (1) Prohibits a physician from making referrals for certain 
``designated health services'' (DHS) payable by Medicare to an entity 
with which he or she (or an immediate family member) has a financial 
relationship (ownership or compensation), unless an exception applies; 
and (2) prohibits the entity from submitting claims to Medicare (or 
billing another individual, entity, or third party payer) for those DHS 
rendered as a result of a prohibited referral. The statute establishes 
a number of exceptions and grants the Secretary the authority to create 
regulatory exceptions that pose no risk of program or patient abuse.
    Section 1877(b)(2) of the Act, entitled ``In-office Ancillary 
Services'' sets forth the exception that permits a physician in a solo 
or group practice to order and provide designated health services 
(DHS), other than most durable medical equipment and parenteral and 
enteral nutrients, in the office of the physician or group practice, 
provided that certain criteria are met. The requirements of the in-
office ancillary services exception are described at Sec.  411.355(b).
    Section 6003 of the ACA amended section 1877(b)(2) of the Act by 
creating a new disclosure requirement for the in-office ancillary 
services exception to the prohibition on physician self-referral. 
Specifically, section 6003 of the ACA provided that, with respect to 
referrals for magnetic resonance imaging (MRI), computed tomography 
(CT), positron emission tomography (PET), and any other DHS specified 
under section 1877(h)(6)(D) of the Act that the Secretary determines 
appropriate, the referring physician inform a patient in writing at the 
time of the referral that the patient may obtain the service from a 
person other than the referring physician or someone in the physician's 
group practice and provide the patient with a list of suppliers who 
furnish the service in the area in which the patient resides.
    In the CY 2011 PFS proposed rule, we proposed regulations related 
to section 6003 of the ACA. We are finalizing that proposal with 
modification. We received approximately 45 comments related to this 
section. Most commenters offered support for the proposed rule and some 
stated that it was consistent with the intent of the legislation, which 
was to provide choice for patients, as well as a degree of protection 
against conflicts of interest. Others stated that disclosure might be a 
first step towards ending abuses in self referral, but questioned the 
overall effectiveness of the disclosure requirement in reducing 
overutilization. These commenters were nonetheless supportive of the 
reasonable mechanisms used to implement the requirement.
    We are finalizing some elements of the proposal without 
modification. Elements that remain unchanged from the proposed rule 
include: application of the disclosure requirement to advanced imaging 
services only; the general disclosure requirements that the notice 
should be written in a manner sufficient to be reasonably understood by 
all patients and be given to the patient at the time of the referral; 
the list must include the requisite number of suppliers; the 
information about these suppliers must include name, address, and phone 
number; these suppliers are to be located within a 25-mile radius of 
the physician's office location at the time of the referral; and the 
effective date of January 1, 2011.
    Elements that we are finalizing with changes include: reducing the 
number of suppliers that must be included from 10 to 5; removing the 
requirement that the supplier's distance from the physician's office be 
listed on the disclosure; clarifying that as long as the requisite 
number of suppliers are included in the alternate list, the physician 
may also list providers on the notice; and removing the requirement 
that the physician obtain the patient's signature on the notice and 
retain a copy of the disclosure in the patient's medical record.
2. Disclosure Requirement
    Based upon the comments received, we have finalized Sec.  
411.355(b)(7) in a manner that addresses concerns of the industry while 
also maintaining the intended purpose of the provision. The comments 
received during the public comment period are discussed more fully 
below.
a. Services That Trigger the Disclosure Requirement
    We proposed that the disclosure requirement should apply to only 
the advanced imaging services listed in section 6003 of the ACA (MRI, 
CT, and PET). We solicited comments regarding whether other radiology 
or imaging services under section 1877(h)(6)(D) of the Act should be 
included in the requirement. We are finalizing this element as 
proposed.
    Comment: Most commenters were supportive of our proposal to apply 
the disclosure requirement only to those advanced imaging services 
listed in section 6003 of the ACA. A commenter stated that expanding 
application of the provision beyond the named services would add to 
confusion and increase negative effects on physician practices. The 
commenter noted that creating lists of alternate suppliers for the 
named services will be less burdensome than adding any other radiology 
services. Multiple commenters who were opposed to expanding the 
disclosure requirement stated that a disclosure requirement for 
diagnostic services such as x-rays or ultrasound services would place 
significant burden on physician groups and could interrupt continuity 
of care for patients, as these tests are often performed in the office 
immediately after the physician has ordered the test.
    Only one commenter urged CMS to fully exercise the authority 
granted by the Affordable Care Act and apply the disclosure requirement 
to all radiology services covered by section 1877(h)(6)(D) of the Act. 
The commenter stated that the disclosure requirement benefits Medicare 
beneficiaries through greater transparency regarding their freedom to 
choose a supplier of medical services and that there is no reason to 
draw a distinction between MRI, CT, and PET referrals and referrals for 
other radiology services. This commenter also did not believe that the 
burden on the referring physicians would be materially different if the 
list of affected imaging services is expanded to cover all radiology 
services, as it would only entail expanding the list that will serve as 
the notice to patients.
    Response: We are finalizing this requirement as proposed and 
applying

[[Page 73444]]

the disclosure requirement to only the advanced imaging services 
specified in section 6003 of the ACA, which are MRI, CT, and PET 
services. We decline to expand the disclosure requirement to any of the 
other radiology or imaging services that fall under section 
1877(h)(6)(D) of the Act. X-ray and ultrasound services in particular 
are much more likely to be performed on the same day as the original 
visit compared to many advanced imaging services. Therefore, 
disclosures related to these additional services would not be as useful 
to the patient. We do not find that the benefit of expanding this 
disclosure requirement to other radiology services would outweigh the 
additional burden that would be placed on physicians.
    Comment: One commenter requested that CMS clarify that any CT 
imaging service that is furnished integral to a procedure defined as a 
radiation therapy service for purposes of the physician self-referral 
law is exempt from this disclosure requirement. The commenter provided 
the example of CT guidance used to localize tumors and focus the beam 
during the delivery of external beam radiation therapy treatments. Such 
imaging, although involving CT, is integral to the performance of 
radiation therapy treatments that are included in the DHS category of 
radiation therapy services and supplies.
    Response: The disclosure requirement applies to all in-office 
referrals for CT imaging services that are categorized as ``radiology 
and certain other imaging services'' by the list of CPT/HCPCS Codes (as 
defined in Sec.  411.351). We note, however, that the request by a 
radiation oncologist for radiation therapy or ancillary services 
necessary for, and integral to, the provision of radiation therapy does 
not constitute a ``referral,'' as defined in Sec.  411.351, if certain 
criteria are satisfied. The disclosure requirement would not apply to 
any request that is not a ``referral'' as defined in Sec.  411.351.
    Comment: A commenter requested that CMS remove CPT code 77014 
(computed tomography guidance for placement of radiation therapy 
fields) from the DHS category of ``radiology and certain other imaging 
services,'' and add it to the category of ``radiation therapy services 
and supplies,'' as such categories are set forth in the list of CPT/
HCPCS Codes. The commenter asserts that this would be appropriate 
because while the code is for a service that involves imaging, the 
service is distinct from the other radiology codes and integral to the 
delivery of radiation therapy. The commenter noted that when a 
radiation oncologist performs radiation therapy services, it is not 
considered a referral under the law. However, if CPT code 77014 is 
included in the list of radiology services, it could be considered a 
referral and therefore radiation oncologists could be required to 
fulfill the disclosure requirements for this service if it remains on 
the list of radiology services codes subject to the new disclosure 
requirements. According to the commenter, because CPT code 77014 is so 
integral to the delivery of certain radiation therapy treatments, it 
would be completely impractical, if not impossible, for a radiation 
oncologist to fulfill the disclosure requirements for this service.
    Response: As noted in section X.B.3 of this preamble, we are 
removing CPT code 77014 from the list of CPT/HCPCS Codes because the 
service is always integral to, and performed during, a nonradiological 
medical procedure. Therefore, under Sec.  411.351, this service is 
excluded from the definition of ``radiology and certain other imaging 
services'' and is not subject to the disclosure requirement. We are not 
adding this code to the radiation therapy services category on the list 
of CPT/HCPCS Codes because it does not satisfy the definition of 
``radiation therapy services and supplies'' as set forth in Sec.  
411.351. As a practical matter, in many cases the service would not 
constitute a ``referral'' (as defined in Sec.  411.351) if requested by 
a radiation oncologist pursuant to a consultation.
    Comment: A commenter requested that CMS stipulate that CPT code 
77011, currently defined as ``computed tomography guidance for 
stereotactic localization,'' is not subject to this disclosure 
requirement whenever it is furnished as part of a therapeutic or 
palliative radiation therapy service. This commenter stated that this 
clarification is essential since CPT code 77011 is not listed in 
Addendum I to the 2010 PFS final rule with comment period either as a 
radiology service or as a radiation therapy service.
    Response: This code is for a service that is integral to the 
performance of a nonradiological medical procedure and is performed 
either during the nonradiological procedure or immediately after the 
procedure to confirm placement of an item. Therefore, the service is 
excluded from the DHS category of ``radiology and certain other imaging 
services'' and is not subject to the disclosure requirement. The 
disclosure requirement applies only to MRI, CT, and PET services 
identified as ``radiology and certain other imaging services'' on the 
list of CPT/HCPCS Codes; MRI, CT, and PET services not identified as 
such on that list are not subject to the disclosure requirement.
    Comment: Other commenters urged CMS to expand the disclosure 
requirement to other DHS that they perceive to be subject to abuse 
under the in-office ancillary services exception. These DHS included: 
physical therapy, anatomic pathology and radiation therapy services.
    Response: Section 6003 of the ACA does not grant the Secretary the 
authority to expand application of this disclosure requirement to DHS 
other than those in section 1877(h)(6)(D) of the Act. We did not 
propose expansion beyond these services and did not solicit comments 
regarding other DHS categories that should have this requirement. The 
requested expansion to other DHS is beyond the Secretary's authority 
under this provision and cannot be accomplished in this rulemaking.
    Comment: One commenter suggested that CMS expand the disclosure 
requirement to radiology practices and IDTFs so that they are also 
required to provide a list of alternate suppliers when self-referring 
for imaging studies in order to offer a more level playing field. Two 
commenters suggested that we require the same disclosure for hospitals 
to avoid the perception of conflict of interest in all settings.
    Response: The first comment appears to incorrectly assume that 
section 6003 of the ACA would never apply to radiology practices and 
IDTFs. Section 6003 of the ACA applies to physicians who make a 
``referral'' (as defined in section 1877(h)(5) of the Act and Sec.  
411.351 of our regulations) for certain advanced imaging services and 
rely on the in-office ancillary services exception to ensure their 
compliance with the physician self-referral prohibition. While many 
requests by radiologists for diagnostic imaging services will not 
constitute a ``referral'' as defined in the statute and our 
regulations, some requests by radiologists for advanced imaging 
services could implicate the self-referral prohibition, and such 
referrals would be subject to the disclosure requirement if the 
referring physician relies on the in-office ancillary services 
exception to ensure compliance with the physician self-referral 
prohibition. Similarly, the disclosure requirement would also apply 
when a physician relies on the in-office ancillary services exception 
to protect referrals for advanced imaging services furnished and billed 
by an IDTF that is wholly owned by the physician or his or her group 
practice.
    We have no statutory authority to make the disclosure requirement 
apply

[[Page 73445]]

to requests for advanced imaging services that are not ``referrals.'' 
Mandating a similar disclosure requirement for hospitals would have to 
be accomplished under separate rulemaking and authority.
b. General Disclosure Requirements
    We proposed that the disclosure notice should be written in a 
manner sufficient to be reasonably understood by all patients and must, 
as the ACA requires, be given to the patient at the time of the 
referral. The notice must indicate to the patient that the services may 
be obtained from a person other than the referring physician or his or 
her group practice and include a list of other suppliers who provide 
the service being referred (MRI, CT, or PET). We are finalizing this 
proposal without modification.
    Comment: One commenter requested CMS to clarify how often the 
disclosure notice needs to be provided. The commenter asked if a 
physician can meet the requirement by giving patients the list of 
suppliers upon initiation of the physician-patient relationship and 
annually thereafter to ensure updated information is given, or if the 
information must be disclosed each time a patient is referred for MRI, 
CT or PET. Another commenter expressed concern regarding informing a 
patient in person at the time of the referral. This commenter described 
the situation where diagnostic tests are ordered after the patient has 
a previous abnormal diagnostic test; often they communicate this to the 
patient via phone call and do not want to require the patient to come 
into the office to receive the disclosure. The commenter asked if the 
disclosure could be mailed to the patient after the verbal notification 
via phone call.
    Response: The statute requires the disclosure to be made ``in 
writing at the time of the referral.'' In order to satisfy this element 
of the statute, we believe the disclosure must be presented to the 
patient each time one of the listed advanced imaging services is 
referred. Patients should receive the disclosure each time these 
services are needed, not just for the initial service. The patient 
should be made aware that he or she may obtain the services from 
another supplier any time advanced imaging is ordered. For subsequent 
referrals made via phone call, the written disclosure must still be 
provided to the patient and adequately documented as further described 
in the Documentation of Disclosure subsection below. Mailing or e-
mailing the disclosure to the patient would be acceptable if verbal 
notification has also occurred.
    Comment: Some commenters requested that CMS post a draft disclosure 
document that physicians can use as a model to ensure that all notices 
are drafted in a neutral, comprehensive, and consistent manner.
    Response: We do not plan to post standard disclosure language to be 
used for this requirement. Each physician office will be responsible 
for drafting the language employed in the notice. Because we are not 
setting out specific language that must be included in the disclosure, 
physicians will have more flexibility in drafting the notice.
    Comment: Several commenters requested that CMS allow physicians to 
make it clear on the disclosure that there is no intended endorsement 
or recommendation of the facilities named on the list furnished by the 
referring physician.
    Response: If the physician chooses to include language informing 
patients that inclusion of other suppliers is not intended as an 
endorsement or recommendation of those suppliers, there is nothing in 
section 6003 of the ACA or this final rule with comment that would 
preclude him or her from doing so.
c. List of Alternate Suppliers
    We proposed that the notice list 10 alternate suppliers (as defined 
in section 1861(d) of the Act) located within a 25-mile radius of the 
physician's office at the time of the referral, unless there are fewer 
than 10 suppliers in the 25-mile radius, in which case the physician 
must list all suppliers up to ten in that area. In the proposed rule, 
we required the notice to include the name, address, phone number, and 
distance from the physician's office at the time of the referral. In 
this final rule with comment, we are decreasing the number of suppliers 
that must be listed to 5; and removing the distance from the 
physician's office from the information about the suppliers that must 
be listed in the disclosure notice. The final rule does not expand the 
list of alternate suppliers to include providers as part of the 5 
required suppliers but is discussed further below. We are finalizing 
our proposal that the suppliers be located within a 25-mile radius of 
the physician's location at the time of the referral.
    We solicited comments related to whether there are procedures or 
circumstances in which it may be difficult or impractical to provide 
the written disclosure prior to the provision of advanced imaging 
services. We are finalizing this rule without creating such an 
exception.
    We also solicited comments regarding an alternative notice that 
includes a ``reasonable'' list of other suppliers with general 
requirements for the disclosure to patients, while providing that if 
the physician meets the more specific requirements set forth in the 
proposed rule he or she will be deemed to have a ``reasonable'' 
disclosure. We are not finalizing this in the final rule as we did not 
receive comments in support of this alternative.
    Comment: A number of commenters asked that the list of alternate 
suppliers include hospitals. Two commenters stated CMS has taken an 
overly literal interpretation of ``suppliers'' and has incorrectly 
excluded hospitals from the list of alternate sites. The commenters 
also noted that in many areas, especially rural, the community hospital 
is the largest or only remaining independent provider of imaging 
services. Another pair of commenters stated that providing a partial 
list of options is inconsistent with transparency, inconsistent with 
collaborative alignment between providers and suppliers, and that 
including both providers and suppliers would be more consistent with 
``informing a patient's decision-making regarding his or her own 
care.''
    Several commenters urged CMS to allow, and even to require, that 
physicians include hospitals and CAHs in the written list of alternate 
suppliers who provide imaging services. The commenters stated that 
hospitals are often the only provider of this service within the 25-
mile radius of the physician's office and allowing physicians to 
include hospitals and CAHs would provide patients with more options.
    Finally, one commenter pointed out that including hospitals in the 
list of alternate suppliers would be consistent with the integrated and 
coordinated care models that are of interest to the Federal government, 
health plans, members of Congress and healthcare delivery reformers. 
The commenter also believes that this would increase convenience for 
its patients while preserving their ability to make decisions about 
their care.
    One commenter supported CMS' proposal to limit the required 
disclosure list to suppliers of services. The commenter stated that 
this would protect the Medicare program from the higher imaging costs 
and Part B co-pays for beneficiaries associated with imaging services 
provided by hospital outpatient departments. The commenter encouraged 
CMS to finalize the proposed supplier only list.

[[Page 73446]]

    Response: Section 6003 of the ACA requires physicians to provide 
patients with a written list of alternate ``suppliers'' (as defined in 
section 1861(d) of the Act). The ACA does not afford the flexibility 
requested by commenters to allow physicians to satisfy the disclosure 
requirement by furnishing a list that includes hospitals and other 
providers. However, physicians are not precluded from listing hospitals 
in the disclosure notice as long as the required number of suppliers is 
also included. For example, in rural areas where no other suppliers 
exist in the 25-mile radius, we encourage physicians to list a hospital 
on the disclosure notice as an alternate location for the patient to 
receive the referred imaging service if the hospital is the closest 
option.
    Comment: Many of the commenters supported our proposal that the 
disclosure notice include suppliers located within a 25-mile radius of 
the physician's location at the time of the referral, rather than in 
the area in which the patient resides.
    Two commenters suggested that CMS set different radii requirements 
for rural versus urban areas. One of the two commenters stated that in 
an urban setting, there could be many more than 10 suppliers within a 
25-mile setting placing making it difficult for the referring physician 
to make a decision regarding which providers to include in the written 
notification. The commenter noted that in a rural setting with fewer 
than 10 suppliers, the burden of identifying and providing all of the 
suppliers in the 25-mile radius is excessive for the physician.
    Finally, a commenter objected to our concern in the proposed rule 
preamble that ``physicians located in large metropolitan areas will 
draft a list that includes suppliers located mostly at the edges of the 
25-mile radius, thereby increasing the chances that the patient will 
choose to receive imaging services from the referring physician's 
practice.'' The commenter asserted that physicians will strive to 
create lists that include the highest quality suppliers in the area.
    Response: We are finalizing this requirement as proposed. We 
believe a list of suppliers located within a 25-mile radius of the 
physician's office is reasonable and large enough to generate a list 
that will be useful for patients. This same distance has also been used 
in other physician self-referral exceptions including the intra-family 
rural referrals exception (Sec.  411.355(j)) and the physician 
recruitment exception (Sec.  411.357(e)). In addition, we are reducing 
the number of required suppliers on the disclosure notice and believe 
this will help address the issue in some rural area settings where 
there may only be a few suppliers within a 25-mile radius.
    Comment: One commenter indicated that requiring a list of 10 
suppliers was excessive. Several commenters requested that we decrease 
the required number of alternate suppliers from 10 to 5 and one 
commenter suggested we reduce it to 3 in order to meet patient choice 
and reduce the compliance burden for medical groups and smaller 
practices. The commenters stated that listing 10 suppliers would be too 
burdensome on physicians and might be confusing for beneficiaries if 
too many choices are presented.
    Response: We agree with the commenters and are decreasing the 
required number of alternate suppliers from 10 to 5. We believe a list 
of 5 suppliers is reasonable, not burdensome, and supports patient 
choice.
    Comment: A commenter supported the inclusion of the proposed 
information of the disclosure notice because it is easily understood 
and contains useful information. One commenter recommended that the 
referring physician provide the name and telephone number for the 
alternate suppliers and that other information, such as the address and 
distance, should be included at the referring physician's discretion. A 
different commenter stated that the distance from the referring 
physician's office location at the time of the referral should not be 
included in the notice because it can be measured in a variety of ways 
and may vary greatly depending on the route taken between the listed 
supplier and the physician's offices. The commenter believes patients 
may get upset if the distance noted on the supplier list is different 
from what they actually encountered and recommends that the list simply 
state that all of the suppliers are within a 25-mile radius of the 
referring physician's office.
    Response: We are modifying the proposal in the final rule to remove 
the requirement that the distance from the referring physician's office 
at the time of the referral be included on the list provided to the 
patient. All alternate suppliers listed must be located within the 25-
mile radius of the physician's office location at the time of the 
referral. Any reasonable method for measuring distance will be 
acceptable.
    We are finalizing the other information required in the notice as 
proposed so that it must include the name, address and phone number of 
each supplier. This provides patients with the most useful information 
in making a decision about receiving the service from the referring 
physician or from another supplier.
    Comment: Two commenters requested that CMS provide an exception to 
providing the disclosure notice to the patient at the time of referral, 
especially for services furnished on an emergency or time-sensitive 
basis as the commenters believe it is impractical to think that the 
list will be given and signed by the patient in an emergency or other 
time-sensitive case.
    Response: We do not believe it is necessary to grant an exception 
to the disclosure requirement in cases of an emergency or time-
sensitive nature. In those situations, physicians should make a 
reasonable attempt to provide the notice to the patient and document 
that the attempt was made. We believe the occurrence of emergencies in 
physician offices that require a referral for advanced imaging under 
the in-office ancillary services exception is rare enough that it does 
not warrant granting an exception. We believe having the physician make 
a reasonable attempt would not prevent or impede beneficiaries from 
receiving the necessary services. In most emergencies that arise in a 
physician's office, patients will be transferred to the emergency 
department of the nearest hospital rather than referred for imaging at 
the physician's office.
    Comment: A commenter asked about compilation of the list of 
alternate suppliers and how physicians should go about this task. The 
commenter asked if a search of the internet or a telephone directory 
would be adequate. Also the commenter asked if Medicare contractors 
will have a list of entities providing such services. Another commenter 
recommended that CMS create a publicly available database of providers 
of the specified services and maintain this information online and in 
the Medicare provider directory that is published annually because, 
according to the commenter, it should be less work for CMS to create 
this list than it is for practices, since much of this information can 
be gleaned from information already furnished by practitioners to 
Medicare.
    Response: We are not prescribing any one method for physicians to 
craft the list of alternate suppliers. A physician is able to use any 
reasonable means that he or she chooses in order to compile the list of 
five alternate suppliers. We do not plan to create a standard form or a 
publicly available database for this disclosure requirement nor will we 
require Medicare contractors to furnish lists of all entities providing 
such services. Some physicians may choose

[[Page 73447]]

to compile the list of suppliers from an internet search, others may 
know suppliers in the 25-mile radius who provide quality imaging and 
list these. We are not limiting a physician's methods of creating the 
list so long as the other requirements of this disclosure requirement 
are satisfied.
    Comment: A commenter requested that CMS emphasize that the list of 
alternate suppliers must provide the same service for which the patient 
has been referred, for example a 64-slice CT as opposed to a 16-slice 
CT.
    Response: The disclosure is meant to inform patients that they 
``may obtain the services for which the individual is being referred'' 
from another supplier who furnishes such services in the area. The 
referring physician should list suppliers that are able to perform the 
services for which the patient is being referred. Listing suppliers 
that are unable to perform the needed test does not provide the patient 
with meaningful choices about his or her care.
    Comment: Several commenters suggested that the quality of alternate 
suppliers should be indicated on the information provided to patients. 
Other commenters recommended that only credentialed facilities are 
listed on the notice, or that credentialed facilities be given special 
designation on the disclosure notice.
    Response: We are not requiring any quality indication on the list 
of alternate suppliers at this time. Because the referring physician 
will most likely be reviewing the results of the advanced imaging 
service that the patient receives, it is reasonable to think that the 
physician will include quality suppliers on the list. We are not 
convinced to limit the list of suppliers to those who receive 
accreditation. Nothing in the statute or this final rule with comment 
prevents physicians from furnishing a list that designates a supplier's 
credentialing status.
    Comment: Two commenters requested that CMS provide clarification on 
the frequency with which the physician must review and update the list 
of suppliers. For example, commenters asked if the notice should be 
reviewed for accuracy if a supplier relocates or any contact 
information changes. In addition, one of the commenters asked about the 
obligation of the referring physician to ensure that the suppliers 
listed are accepting new Medicare patients.
    Response: We suggest that the list of suppliers should be reviewed 
annually for accuracy and updated at that time, if necessary. We do not 
believe an annual update would be overly burdensome for physicians. We 
believe an inaccurate list of alternate facilities would lead to 
beneficiary confusion and that annually reviewing and modifying the 
notice as needed would ensure that patients receive complete and 
accurate information in accordance with this disclosure requirement.
    In addition, referring physicians are not obligated to list only 
suppliers that are accepting new Medicare patients; however, as the 
disclosure notice is intended to allow patients to make informed 
choices, referring physicians should make a reasonable effort to ensure 
that the suppliers listed in the disclosure are viable options for all 
of their patients for the services being referred.
d. Documentation of Disclosure
    We proposed that, in order to document that this disclosure notice 
was satisfied, a record of the patient's signature on the disclosure 
notification must be maintained as an element of the patient's medical 
record. We are modifying this proposal in this final rule with comment 
to remove the patient signature requirement.
    Comment: Many commenters stated that the burden of obtaining and 
retaining the patient's signature in the medical record is burdensome. 
Other commenters noted that, as suppliers move toward maintaining 
electronic health records, an additional paperwork requirement seems 
counter to these goals and recommended that CMS include an electronic 
alternative to the maintenance of a signed copy of the disclosure 
notice in patients' medical records. Another commenter noted that 
because the notification of alternate suppliers is not a clinical 
document, it might not belong in a patient's medical record. A 
commenter asked if the disclosure document must be maintained in the 
patient's main medical record or if it could be maintained instead with 
the patient's radiological documentation, which can be maintained 
electronically in a PACS system with the physician's orders for the 
study.
    A commenter recommended that CMS accept as sufficient 
documentation, a note in the patient's chart that a member of the staff 
provided the letter and explained it to the patient. Another suggestion 
from a commenter was that physicians maintain a dated notification log 
at the front desk that patients will sign once they have received and 
reviewed their disclosure lists. These logs will then be retained and 
filed by the office for potential review by regulators or accreditors.
    One commenter supported the requirement to maintain a copy of the 
disclosure in the patient's medical record.
    Response: We acknowledge that obtaining the patient's signature and 
maintaining a copy of such in the medical record may be burdensome. In 
this final rule with comment we are removing the requirement to obtain 
the patient's signature on the disclosure and to maintain this 
documentation in the medical record. Nevertheless, as a matter of 
prudent business practices, physicians should be able to document or 
otherwise establish that they have complied with the disclosure 
requirement. For example, the physician could document in the patient's 
chart that the notice was given to the patient.
e. Effective Date
    We proposed that the new disclosure requirement shall apply only to 
services furnished on or after the effective date of these final 
regulations, January 1, 2011. We did not receive any comments 
suggesting any alternate effective date. We are finalizing the 
effective date as proposed.
f. Other Comments
    Comment: Some commenters submitted comments addressing topics 
beyond the scope of this proposal. These comments included detailed 
discussions of the in-office ancillary services exception, services 
that should be excluded from that exception, MedPAC's analysis on the 
issue, as well as questions about the anti-markup payment limitation 
(Sec.  414.50) and a request that we respond to comments we requested 
regarding incentive payment or shared savings arrangements.
    Response: These comments are beyond the scope of this rulemaking 
and are not addressed in this final rule with comment. If these issues 
are addressed in the future, we will publish a notice of proposed 
rulemaking that will be open to public comment at that time.

U. Section 6404: Maximum Period for Submission of Medicare Claims 
Reduced to Not More Than 12 Months

1. Background
    Sections 1814(a)(1), 1835(a), and 1842(b)(3)(B) of the Act 
establish time limits for filing Medicare Part A and B claims. Prior to 
the enactment of the ACA, under sections 1814(a)(1) and 1835(a) of the 
Act, providers could file for Part A and Part B claims, respectively, 
``* * * no later than the close of the period of 3 calendar years 
following the year in which such services are furnished (deeming any 
services furnished in the last 3 calendar

[[Page 73448]]

months of any calendar year to have been furnished in the succeeding 
calendar year) except that, where the Secretary deems that efficient 
administration so requires, such period may be reduced to not less than 
1 calendar year* * *''. Prior to the enactment of the ACA, CMS was 
authorized to establish a minimum time limit for provider-submitted 
Part A and Part B claims of at least 1 calendar year from the date of 
service, and a maximum time limit not to exceed 4 years and 3 months 
after the date of service.
    Additionally, prior to the enactment of the ACA, under section 
1842(b)(3)(B) of the Act, Part B claims for physician and other 
supplier services could be filed with Medicare ``* * * no later than 
the close of the calendar year following the year in which such service 
is furnished (deeming any service furnished in the last 3 months of any 
calendar year to have been furnished in the succeeding calendar year) * 
* *''. Therefore, prior to the enactment of the ACA, we were authorized 
to establish a minimum time limit for filing Part B claims of 15 months 
and a potential maximum of 27 months after the service was furnished, 
depending on what month of the year the service was furnished.
    Section 424.44 of the regulations implements sections 1814(a)(1), 
1835(a), and 1842(b)(3)(B) of the Act. In order to effectively 
administer the Medicare Program, we, through regulations, modified the 
potential minimum and maximum time periods for filing Part A claims. At 
Sec.  424.44(a), we adopted the minimum time limit of 15 months and 
potential maximum of 27 months after the service was furnished that was 
permitted under section 1842(b)(3)(B) of the Act for Part B claims and 
uniformly applied that 15 to 27 month time limit to both Part A and B 
claims. Also, under Sec.  424.44(b), we allowed providers and suppliers 
the opportunity to file claims after the 15 to 27 month deadline for 
filing claims expired when the failure to file `` * * * was caused by 
error or misrepresentation of an employee, intermediary, carrier, or 
agent of the Department that was performing Medicare functions and 
acting within the scope of its authority.''
2. Provisions of the ACA
    Section 6404 of the ACA amended sections 1814(a)(1), 1835(a), and 
1842(b)(3)(B) of the Act regarding Medicare fee-for-service (FFS) 
claims for services furnished on or after January 1, 2010. Under 
section 6404(b)(1) of the ACA, all claims for services furnished on or 
after January 1, 2010 must be filed within 1 calendar year after the 
date of service. Section 6404 of the ACA did not amend sections 
1814(a)(1), 1835(a), and 1842(b)(3)(B) of the Act for services 
furnished before January 1, 2010. However, section 6404(b)(2) of the 
ACA created a new requirement that claims for services furnished before 
January 1, 2010 must be filed on or before December 31, 2010. Thus, the 
statutory provisions prior to the enactment of the ACA remain in effect 
for pre-2010 services, subject to this new requirement. The practical 
effect of this change is that any claims for services furnished before 
October 1, 2009 will follow the existing regulations. But for services 
furnished during the last 3 months of 2009, providers and suppliers 
must file claims no later than December 31, 2010. For services 
furnished between October 1, 2009 and December 31, 2009, providers and 
suppliers will only have 12 to 15 months to file a claim, whereas 
before the ACA amendments, they would have had an additional year to 
file their claims, or 24 to 27 months.
    The majority of the comments that we received for the proposed rule 
were supportive of our proposed exceptions at Sec.  424.44(b)(2) and 
(3) concerning retroactive entitlement situations and dual-eligible 
beneficiary situations. However, some commenters encouraged us to 
either expand those proposed exceptions or suggested other new 
exceptions.
    Comment: One commenter stated that CMS should instruct Medicare 
Intermediaries to process claims where provider representatives are 
submitting retroactive claims within 6 months from the Social Security 
Administration's (SSA) notification date due to SSA's delay in 
processing beneficiaries' retroactive Medicare entitlement. Moreover, 
the commenter cited to an OIG evaluation report dated January 2006 (A-
13-05-15028), which stated that the average number of years where 
beneficiaries are awarded retroactive Medicare benefits is about 8 
years. Therefore, the commenter asserted that when SSA corrects the 
error and sends a notification letter to beneficiaries, providers 
should be allowed to submit claims to Medicare Intermediaries as long 
as the claims are submitted within 6 months from the notification 
letter from SSA and as long as supporting documentation is attached to 
the claims.
    Response: As stated in the CY 2011 PFS proposed rule, if CMS or one 
of its contractors determines that one of the exceptions to the time 
limits for filing claims applies, then the time to file a claim will be 
extended. We will update its internet only manual instructions to its 
contractors so that Medicare's contractors are aware of the new timely 
filing requirements, the exceptions to those requirements, and process 
claims in accordance with these new requirements.
    Comment: Two commenters disagreed that services furnished between 
October 1, 2009 through December 31, 2009 must be billed by December 
31, 2010 and asserted that our proposed language at Sec.  424.44(a) is 
in contravention of explicit statutory language.
    Response: We disagree with the commenter because section 6404(b)(2) 
of the ACA clearly states that--``In the case of services furnished 
before January 1, 2010, a bill or request for payment under section 
1814(a)(1), 1842(b)(3)(B), or 1835(a) of the Act shall be filed not 
later than December 31, 2010''. Therefore, because the statute 
specifically addresses this issue, we must require that services 
furnished between October 1, 2009 through December 31, 2009 be filed by 
December 31, 2010.
    Comment: Two commenters suggested that CMS create an additional 
exception to the timely filing rules to permit providers to submit 
claims for services at the request of a Medicaid State Agency or its 
agent under the terms of the regulation prior to these current 
revisions; that is, by the end of the calendar year following the year 
in which the services were delivered (with services delivered in the 
last quarter of a calendar year being treated as though they were 
delivered in the next calendar year). The commenters believe that this 
type of additional exception would permit Medicaid State Agencies to 
assure proper billing of services to Medicare, as an appropriate third 
party payer, without overtaxing providers or Medicare contractors by 
requiring them to submit multiple claims at varying times. 
Additionally, a third commenter stated that the third condition of the 
exception at Sec.  424.44(b)(3) could be interpreted to mean that the 
Medicaid agency must recover their payment from a provider or supplier 
prior to the provider or supplier billing Medicare. The commenter 
believes that it would be a better practice to notify providers of the 
Medicaid agency's intention to recover prior to performing the actual 
recovery.
    Response: We were not persuaded to modify the rule in order to 
create an additional exception to permit providers and suppliers to 
submit claims for services at the request of a Medicaid State Agency 
prior to the State Medicaid Agency actually recovering the payment. 
Providers and suppliers do not necessarily have to wait for

[[Page 73449]]

Medicaid to recover its payment (see Sec.  424.44(b)(3)) in order to 
utilize an exception to the timely filing rules in retroactive 
entitlement situations because the proposed exception at Sec.  
424.44(b)(2) may be used by providers and suppliers in order to file 
claims prior to a State Medicaid Agency recovering its payments. As we 
stated in Sec.  424.44(b)(2), if CMS or one of its contractors 
determines that at the time the service was furnished the beneficiary 
was not entitled to Medicare and the beneficiary subsequently received 
notification of Medicare entitlement effective retroactively to the 
date of the furnished service, then the time limit to file a claim may 
be extended.
    Comment: Three commenters suggested that an exception to the timely 
filing rules should be created for Medicare beneficiaries who are 
retroactively disenrolled from a Medicare Advantage plan so that all 
claims for services provided to the beneficiary while enrolled in the 
Medicare Advantage plan (upon retroactive disenrollment) can be 
submitted for coverage and payment to original Medicare. The commenters 
stated that a beneficiary may be retroactively disenrolled from that 
plan under a variety of circumstances. Moreover the commenters asserted 
that if a retroactively disenrolled beneficiary is unable to have 
claims for services submitted to original Medicare because some of 
those services were delivered more than a year prior to the date of 
actual disenrollment, then the beneficiary will be unable to be made 
whole and the ability to disenroll from a Medicare Advantage plan will 
be rendered pyrrhic at best.
    Response: We modified the final rule based on these comments and 
created an additional exception for retroactive disenrollment from 
Medicare Advantage plans at Sec.  424.44(b)(4). Although we did not 
receive a comment requesting an exception for retroactive disenrollment 
from Program of All-inclusive Care for the Elderly (PACE) provider 
organizations, we included retroactive disenrollment from PACE in the 
exception at Sec.  424.44(b)(4) because beneficiaries, providers, and 
suppliers could also be disadvantaged in retroactive disenrollment PACE 
situations.
    Comment: Two commenters suggested that an exception to the timely 
filing rules should be created when a private payer recovers its 
payment from the provider 11 months or more after the date of service. 
The commenters stated that hospitals routinely experience payment 
retractions from private payers that are outside the hospitals' control 
and that may prevent a Medicare claim from being filed within one year 
of the date of service.
    Response: We were not persuaded to modify the rule by these 
comments because providers are already required ``to maintain a system 
that, during the admission process, identifies any primary payers other 
than Medicare, so that incorrect billing and Medicare overpayments can 
be prevented''. See Sec.  489.20(f). Also, section 1862(b)(6) of the 
Act states--``* * * no payment may be made for any item or service 
furnished under part B unless the entity furnishing such item or 
service completes (to the best of its knowledge and on the basis of 
information obtained from the individual to whom the item or service is 
furnished) the portion of the claim form relating to the availability 
of other health benefit plans''. Therefore, we are not modifying the 
rule based on this comment because creating an exception to the timely 
filing limitations for these situations would allow providers and 
suppliers to circumvent the statutory and regulatory requirements 
stated above.
    Comment: Two commenters suggested that CMS create an exception to 
the timely filing rules for Medicare Secondary Payer (MSP) claims when 
the initial payment determination by the primary payer is not received 
by the hospital in sufficient time to permit timely filing of the MSP 
claim. A third commenter recommended that in cases where Medicare is 
not the primary payer, the filing deadline be extended to 12 months 
from the date the payment is made for the products or services by the 
payer immediately primary to Medicare (that is, the primary payer when 
Medicare is the secondary payer, and the secondary payer when Medicare 
is tertiary).
    Response: We were not persuaded to modify the rule by these 
comments because Medicare may make conditional payments for services 
when a payer that is primary to Medicare does not pay promptly. 
``Prompt'' or ``promptly'', when used in connection with primary 
payments, except as provided in Sec.  411.50, for payments by liability 
insurers, means payment within 120 days after receipt of the claim. See 
42 CFR part 411 subparts B through H and 411.21 and 411.24 for the 
definitions of conditional payment and promptly. Moreover, because 
providers are already required ``to maintain a system that, during the 
admission process, identifies any primary payers other than Medicare, 
so that incorrect billing and Medicare overpayments can be prevented'' 
(See Sec.  489.20(f)) we do not believe a provider's ability to meet 
the new 1 calendar year timely filing requirement will be compromised 
by the commenter's concerns.
    Comment: Three commenters suggested that CMS create an exception to 
the timely filing rules so that hospitals are permitted to file 
inpatient Part B only claims for any inpatient cases that are 
retrospectively reviewed by a Medicare Recovery Audit Contractor (RAC) 
or other review entity and determined not to be medically necessary in 
an inpatient setting. The commenters pointed out that with the 
reduction of the timely filing period to one year from the date of 
service, legitimate rebilling opportunities are limited since Medicare 
RAC's may audit Medicare claims that were paid up to 3 years ago.
    Response: We were not persuaded to modify the rule by these 
comments because Medicare's billing guidelines instruct providers 
regarding what types of inpatient services may be billed to Part A and 
to Part B. Therefore, it is the responsibility of a provider to 
correctly submit claims to Medicare by coding the services 
appropriately.
    Comment: In the CY 2011 PFS proposed rule, CMS solicited comments 
regarding whether CMS should provide a regulatory definition of ``date 
of service'' and, if so, how should it define this term. One commenter 
suggests that the ``date of service'' be defined through administrative 
instructions as the ``through date'' on the Medicare claim (UB-04 form 
locator 6, statement covers period). A second commenter stated that CMS 
should adopt as a final rule the guidance on ``Date of Service'' 
provided in MLN Matters Number 7080 and Transmittal 734, Change Request 
7080. CMS Manual System, Pub 100-20 One-Time Notification, July 30, 
2010. This guidance provides that for institutional claims that include 
span dates, the ``Through'' date on the claim will be used to determine 
the date of service for claims filing timeliness; for professional 
claims (CMS-1500 Form and 837P) submitted by physicians and other 
suppliers that include span dates of service, the guidance states that 
the line item ``From'' date will be used to determine the date of 
service and filing.
    Response: We decided not to define ``date of service'' in the final 
rule because, as we stated in the CY 2011 PFS proposed rule, we 
recognize that for many Part A and B services it is difficult to craft 
a uniform rule that will apply a consistent date of service standard. 
Therefore, we decided to address the ``date of service'' issue via sub-
regulatory guidance. We issued sub regulatory guidance on what 
constitutes the ``date

[[Page 73450]]

of service'' for some items and services on May 7, 2010 via Change 
Request 6960 and on July 30, 2010 via Change Request 7080 to our 
Medicare contractors and it is our intention to provide additional sub-
regulatory guidance as the need arises for different Part A and B 
services.
    Comment: One commenter believed an exception should be created for 
claims for consumers who retroactively enroll in original Medicare Part 
B, such as consumers who successfully apply for equitable relief. For 
example, a person may choose to take Part A (because it is premium 
free) but may mistakenly choose not to enroll in Medicare Part B due to 
cost or because they believe that other insurance for which they 
already pay a premium, such as retiree coverage or coverage through a 
group health plan provided by a small employer, will pay medical costs. 
As a result, insurance that is supposed to pay secondary to Medicare 
incorrectly pays primary. The commenter goes on to assert that if the 
insurance plan discovers that a person was eligible for Medicare Part B 
but did not enroll and therefore the plan was supposed to pay 
secondary, the insurer can recoup payments made back to the date the 
enrollee became Medicare Part B eligible. In some instances, a person 
may obtain a retroactive Medicare Part B start date back to the 
original date of Medicare eligibility. This retroactive start date can 
be a few months to a few years and is not limited by statute. As a 
result, providers from which secondary insurer's recouped payment would 
need the ability to submit claims to Medicare for services provided 
over one year in the past. In these cases, because the consumer is 
already enrolled in Medicare Part A and not Part B, the commenter is 
concerned that claims would not fall under the language of Sec.  
424.44(2)(ii) as the consumer is already entitled to Medicare.
    Response: Although this comment was unclear, we believe the 
commenter wants CMS to create an exception to the time limits for 
filing claims specifically for Part B services. We were not persuaded 
to modify the rule by these comments because if a beneficiary is 
granted equitable relief under section 1837(h) of Act, the beneficiary 
may still be able to use the exception at Sec.  424.44(b)(2). Of 
course, all of the conditions for Sec.  424.44(b)(2) will need to be 
satisfied in order for an exception to be granted in a particular case. 
It is important to note that all of the exceptions in Sec.  424.44(b) 
(including the exception for Sec.  424.44(b)(2)) are not limited to 
just Part A services; the exceptions may also be granted for Part B 
services when applicable.
    Comment: One commenter asked whether the 4 years from date of 
service limitation specified in Sec.  424.44(b)(1) applies when the SSA 
makes an administrative error in determining a beneficiary's 
retroactive entitlement decision since the SSA is not considered an 
agent or contractor to CMS. Or, would this be covered under Sec.  
424.44(b)(2) or Sec.  424.44(b)(3) without the 4 year limitation? The 
commenter recommended that CMS clarify in the final rule that the 4 
year limitation does not apply when the result of a retroactive 
Medicare decision was due to SSA's administrative error in incorrectly 
and untimely processing of beneficiaries eligibility determinations.
    Response: Section 424.44(b)(1) only applies to errors or 
misrepresentations that are made by an employee, Medicare contractor 
(including Medicare Administrative Contractor, intermediary, or 
carrier), or agent of the Department that was performing Medicare 
functions and acting within the scope of its authority. It does not 
apply to errors or misrepresentations made by the SSA; therefore, the 4 
year restriction for Sec.  424.44(b)(1) would not apply because Sec.  
424.44(b)(2) and (3) could be used in situations where the SSA makes an 
error. However, it is important to note that errors or 
misrepresentations by the SSA are not one of the conditions that must 
be met in order for an extension of time to be granted under Sec.  
424.44(b)(2) and (3).
    Comment: Two commenters recommended that if the SSA cannot locate a 
copy of the original retroactive notification letter that was sent to 
the beneficiary, then CMS should allow providers or beneficiaries to 
submit the notification letter that they received from SSA that clearly 
indicates the beneficiary's retroactive entitlement date and the date 
in which the notification of SSA's retroactive decision was made. 
Therefore, the regulations and guidelines should address alternate 
proof of coverage in the event a copy of the actual Notice of Award is 
unavailable.
    Response: We were not persuaded to modify the rule by these 
comments because we believe these types of documentation or proof of 
retroactive entitlement issues should be addressed via sub-regulatory 
guidance. Therefore, we will consider these comments when we update our 
internet only manual instructions to our contractors.
    Comment: One commenter suggested that there should be an exception 
to account for claims filed for beneficiaries granted Medicare 
entitlement retroactively because of the 30+ years of systemic errors 
of SSA's Special Disability Workload (SDW). The commenter stated that 
this issue is currently in bill form before both houses of Congress and 
that failing a legislative solution this proposed rule would bar States 
from perfecting rightful claims for services provided over the years 
under Medicaid that should have been provided by Medicare. The 
commenter goes on to state that States will have great difficulty in 
reaching out to providers over 30 years of services to recoup third 
party liability from Medicare. Despite such difficulty, States should 
retain the right to file claims and they should not be barred by this 
proposed rule. The proposed rule states that ``we believe that limiting 
this exception to 4 years after the dates of service strikes an 
appropriate balance between fairness and equity for providers, 
suppliers, and beneficiaries and administrative finality for the 
Medicare program''. The commenter asserts that the proposed rule does 
not show any consideration of States' interests in pursuing third party 
liability against Medicare based on systemic failures by SSA, the 
agency responsible for determining Medicare eligibility.
    Response: The commenter's statement that States should retain the 
right to file claims is outside the scope of this rule; therefore, we 
will not address that particular comment. We were not persuaded to 
modify the rule by the other comments because Sec.  424.44(b)(1) only 
applies to errors or misrepresentations that are made by an employee, 
Medicare contractor (including Medicare Administrative Contractor, 
intermediary, or carrier), or agent of the Department that was 
performing Medicare functions and acting within the scope of its 
authority. It does not apply to errors or misrepresentations made by 
the SSA; therefore, the 4 year restriction for Sec.  424.44(b)(1) would 
not apply in the situation described by the commenter, but Sec.  
424.44(b)(2) and (3) could be used in situations where the SSA makes an 
error. However, it is important to note that errors or 
misrepresentations by the SSA are not one of the conditions that must 
be met in order for an extension of time to be granted under Sec.  
424.44(b)(2) and (3).
    Comment: One commenter suggested that CMS consider allowing the 
exception for dually-eligible beneficiaries at Sec.  424.44(b)(3) to 
apply if any one of the three conditions are met as opposed to all of 
the conditions.
    Response: We were not persuaded to modify the rule by this comment 
because it would make the dual-eligible

[[Page 73451]]

exception meaningless. The first condition of Sec.  424.44(b)(3) 
states--``At the time the service was furnished the beneficiary was not 
entitled to Medicare''. That first condition could apply to every 
service a person has ever received during his or her lifetime prior to 
becoming a Medicare beneficiary. Therefore, under the commenter's 
suggestion the exception would be meaningless.
    Comment: One commenter suggested that the first condition of the 
exception at Sec.  424.44(b)(3) include cases in which Medicare 
coverage is unknown to the Medicaid agency at the time of service 
instead of using the condition that at the time the service was 
furnished the beneficiary was not entitled to Medicare.
    Response: We were not persuaded to modify the rule by this comment 
because if the beneficiary was already entitled to Medicare at the time 
the service was furnished, then the provider or supplier could have 
taken the necessary actions to find out that the individual was a 
Medicare beneficiary. For example, the provider could have asked the 
beneficiary prior to admission, checked with CMS, etc.
    Comment: One commenter stated that the second condition of the 
exception at Sec.  424.44(b)(3) assumes that because the beneficiary is 
notified about retroactive Medicare coverage that the provider of 
service and the State Medicaid Agency is concurrently notified, which 
may not always be the case. Because this is a direct communication 
between the Medicare program and its beneficiary, CMS should address 
how providers and the Medicaid agency will evidence dual eligibility to 
Medicare's contractors in an effort to meet this condition.
    Response: We were not persuaded to modify the rule by these 
comments even though we agree that it is possible that providers, 
suppliers, and State Medicaid Agencies may not be notified concurrently 
about a beneficiary's retroactive Medicare entitlement. However, the 
exception at Sec.  424.44(b)(3) does not prevent providers and 
suppliers from requesting an exception to the time limits for filing a 
claim because the provider or supplier will always be notified about a 
beneficiary's retroactive entitlement whenever a State Medicaid Agency 
recovers its payment.
    Pursuant to Sec.  424.44(b)(5)(iii), the date when the State 
Medicaid Agency actually recovers its payment from the provider or 
supplier is when the extension of time to file the claim through the 
last day of the 6th calendar month is triggered. In other words, 
assuming that all three of the conditions for Sec.  424.44(b)(3) are 
met, providers and suppliers will possess the ability to file a claim 
through the last day of the 6th calendar month after the date the State 
Medicaid Agency recovers its payment. Unlike the 4 year restriction 
(Sec.  424.44(b)(5)(i)) placed on the exception at Sec.  424.44(b)(1), 
which is commonly referred to as the exception for ``administrative 
error,'' there is no similar time restriction regarding when a provider 
or supplier may request an exception under Sec.  424.44(b)(3). 
Therefore, providers and suppliers should note that once the State 
Medicaid Agency recovers its payment for the services, providers and 
suppliers will only have through the last day of the 6th calendar month 
after that recovery date to file a claim (assuming that all three of 
the conditions for Sec.  424.44(b)(3) are met).
    Comment: One commenter recommends that CMS define ``retroactive 
Medicare'' for the purpose of these proposed exceptions. The commenter 
stated that they understand retroactive Medicare to be the extension of 
benefits to a date in the past but believe that confirmation or 
clarification of this definition should be issued by CMS.
    Response: Although this comment was unclear, we believe the 
commenter wants CMS to clarify what Medicare entitlement effective 
retroactively to or before the date of the furnished service means. We 
were not persuaded to modify the rule by this comment because we did 
not use the term ``retroactive Medicare'' in the regulation text. 
Instead, the regulation text used the following language--``the 
beneficiary subsequently received notification of Medicare entitlement 
effective retroactively to or before the date of the furnished 
service''-- which we believe makes it clear that a beneficiary is 
receiving his or her Medicare entitlement beginning at some date in the 
past.
    Comment: One commenter recommends that in States which have a 
contract with the SSA to determine eligibility for Medicaid at the same 
time a determination is made for receipt of Social Security Income 
(SSI) benefits (see section 1634(a) of the Act), that CMS should 
clarify if Medicare retroactivity will include requests for prior month 
premium payments.
    Response: Although this comment was unclear, we believe the 
commenter wants to know whether the exceptions to the time limits for 
filing claims is limited to just Part A services. Because the commenter 
refers to requests for prior month premium payments, we believe that 
the commenter is concerned about what happens when State Medicaid 
Agencies pay Part B premiums on behalf of dual-eligible beneficiaries. 
If a beneficiary receives notification of Medicare entitlement (Part A) 
effective retroactively to or before the date of a furnished service 
and a State Medicaid Agency (or the beneficiary or anyone else) pays 
for that beneficiary's Part B monthly premium retroactively to or 
before the date of a Part B furnished service, then those ``old'' Part 
B services for that beneficiary may be granted an extension to the time 
limits for filing as long as the other conditions for that particular 
exception are also met. In other words, the exceptions for Sec.  
424.44(b)(2) and (3) are not limited to just Part A services; the 
exceptions may also be granted for Part B services when applicable.
    Comment: One commenter stated that the ACA provision essentially 
provides providers with a 12 month period in which to file claims for 
services for which they have reason to believe Medicare may be 
responsible. However, in the exceptions proposed by CMS, a provider 
only has 6 months to file a claim. Consistency with the ACA would 
suggest that the time to file a claim under each exception should be 
extended through the last day of the 12th month following the month in 
which the exception applies. The commenter also stated that with regard 
to the proposed exceptions, the time limit should be based on the month 
in which the error or misrepresentation is corrected and the provider 
is notified of that fact. There may be some time between when the error 
or misrepresentation is corrected and when the provider is notified of 
that fact and the extended time limit should begin when the provider 
becomes aware of the correction. A second commenter stated that the 
timeframe for filing claims applicable to services provided to 
beneficiaries who become retroactively entitled to Medicare (regardless 
of whether they are dual-eligible beneficiaries) should be extended to 
the later of: (1) The date that is 12 months after the date that the 
beneficiary is notified of retroactive Medicare entitlement, or (2) the 
date that is 12 months after the provider or supplier becomes aware of 
retroactive Medicare entitlement.
    Response: We are modifying Sec.  424.44(b)(5)(ii) based on these 
comments because we agree that in retroactive entitlement situations 
there could be situations where a provider or supplier may not be 
notified of a beneficiary's retroactive entitlement in order to utilize 
the exception at Sec.  424.44(b)(2). Therefore, we are modifying Sec.  
424.44(b)(5)(ii) so that

[[Page 73452]]

notification to either party (that is, the beneficiary or the provider/
supplier) for the first time about a beneficiary's retroactive 
entitlement will trigger when the extension of time to file the claim 
through the last day of the 6th calendar month begins. We understand 
that this rule may result in two extension of time triggers if the 
beneficiary and the provider/supplier are not notified on the same day 
(one for when the beneficiary is first notified and one for when the 
provider or supplier is first notified); however, we agree with the 
commenter that it would be unfair to providers and suppliers to limit 
the exception based only on when the beneficiary receives notification.
    We are also modifying Sec.  424.44(b)(5)(i) based on these comments 
because we agree that there may be situations where a provider or 
supplier may be able to utilize the exception under Sec.  424.44(b)(1) 
commonly referred to as the ``administrative error'' exception, but the 
provider or supplier is not notified about the correction until it is 
too late to utilize the exception. Therefore, we are modifying Sec.  
424.44(b)(5)(i) so that notification to either party (that is, the 
beneficiary or the provider/supplier) for the first time about the 
administrative error correction will trigger when the extension of time 
to file the claim through the last day of the 6th calendar month 
begins. We understand that this rule may result in two extension of 
time triggers if the beneficiary and the provider/supplier are not 
notified on the same day (one for when the beneficiary is first 
notified and one for when the provider or supplier is first notified); 
however, we agree with the commenter that it would be unfair to 
providers and suppliers to limit the exception based only on when the 
``administrative error'' is actually corrected.
    However, we were not persuaded to modify the rule for dual-eligible 
situations (see Sec.  424.44(b)(3)) because the extension of time to 
file a claim through the last day of the 6th calendar month is 
triggered in dual-eligible situations when the State Medicaid Agency 
recovers its payment from the provider or supplier. Therefore, 
providers and suppliers will always receive sufficient notification in 
dual-eligible situations because the date that the State Medicaid 
Agency recovers its payment will be the provider's or supplier's notice 
that they have through the last day of the 6th calendar month in order 
to file a claim (assuming of course that CMS or its contractors 
determines that all the conditions in Sec.  424.44(b)(3) are met and 
grants an extension).
    Also, we were not persuaded to modify the rule based on the comment 
that the time to file a claim under each exception should be extended 
through the last day of the 12th month following the month in which the 
exception applies. Because the triggering events for the exceptions at 
Sec.  424.44(b)(1), (2), and (3) cannot occur without the provider or 
supplier actually being notified, we believe that an extension of time 
to file a claim through the last day of the 6th calendar month after 
those triggering events gives providers and suppliers sufficient time 
to submit their claims.
    Comment: Two commenters requested that CMS create an additional 
exception for those instances where the issuance of new Medicare 
provider numbers are delayed due to no fault of the provider. The 
commenter stated that numerous Medicare contractors are taking 60 to 
120 days or longer to process and finalize CMS enrollment applications. 
Additionally, and more importantly, many State survey agencies are 
extremely behind on initial Medicare State surveys. In some cases, it 
is taking 2 years for the State to conduct the required survey for the 
providers. These delays significantly restrict a provider's ability to 
submit claims for services furnished prior to the effective date of the 
Medicare billing privileges and the commenter hopes that CMS would work 
with the provider community to process claims under these 
circumstances. Another commenter recommended that CMS should provide an 
exception for provider enrollment delays caused by the MAC or CMS 
Regional Office that are outside the control of the provider. The 
commenter recommended that CMS should extend the time to file a claim 
through the last day of the 6th calendar month following the month in 
which provider enrollment was completed with an additional 30 days 
allowed for each full or partial month between the effective date of 
the provider enrollment and the approval date of the provider 
enrollment. This additional time is necessary to accommodate Medicare's 
sequential billing requirement.
    Response: We were not persuaded to modify the rule based on these 
comments because regulations at Sec.  424.520, Sec.  424.521, and Sec.  
489.13 already establish an effective billing date for providers and 
suppliers and those regulations have already established limitations on 
retroactive billing for providers and suppliers.
    Comment: Two commenters stated that the Medicare Secondary Payer 
rules do allow a provider to file with Medicare if the otherwise 
primary payer is going to take awhile to pay. Notwithstanding, there 
have been situations which would warrant enumeration in an exceptions 
regulation. Providers have experienced situations where an insurance 
company has executed a retroactive denial of a previously paid claim 
after a year. When this happens, the timely filing clock should start 
with the denial date. Thus, the commenter recommends that:
    <bullet> CMS should continue to allow for payment when a primary 
payer may take a substantial amount of time to pay;
    <bullet> CMS should allow for a claim to be considered timely if it 
is filed within 1 year from the date that the primary payer has made 
its payment determination; and
    <bullet> CMS should allow for a claim to be considered timely if it 
is filed within 1 year from the date that the primary payer 
retroactively denied a prior previously paid claim.
    Response: We were not persuaded to modify the rule by these 
comments because Medicare may make conditional payments for services 
when a payer that is primary to Medicare does not pay promptly. 
``Prompt'' or ``promptly'', when used in connection with primary 
payments, except as provided in Sec.  411.50, for payments by liability 
insurers, means payment within 120 days after receipt of the claim. See 
42 CFR part 411 subparts B through H and 411.21 for the definitions of 
conditional payment and promptly.
    Also, section 1862(b)(6) of the Act states--``* * * no payment may 
be made for any item or service furnished under part B unless the 
entity furnishing such item or service completes (to the best of its 
knowledge and on the basis of information obtained from the individual 
to whom the item or service is furnished) the portion of the claim form 
relating to the availability of other health benefit plans''. Moreover, 
because providers are already required ``to maintain a system that, 
during the admission process, identifies any primary payers other than 
Medicare, so that incorrect billing and Medicare overpayments can be 
prevented'' (See 489.20(f)) we do not believe a provider's ability to 
meet the new 1 calendar year timely filing requirement will be 
compromised by the commenter's concerns.
    Comment: One commenter stated that providers have reported that 
they are experiencing a need to cancel previously processed Part B 
claims in order to submit benefits exhaust claims. Depending on the 
time frame for this, providers may be unable to resubmit the Part B 
charges. Providers need either a mechanism for submitting benefits 
exhaust claims for older dates of service

[[Page 73453]]

that does not require the cancelling of previously processed claims or 
they need an exception granted for resubmitting claims that had been 
processed timely but needed to be cancelled to submit benefits exhaust 
claims. The commenter recommends that CMS should provide a mechanism 
for submitting benefits exhaust claims for older dates of service that 
does not require the cancelling of previously processed claim.
    Response: We are not aware of the specific scenario described by 
the commenter; however, we will monitor this issue and determine 
whether any additional sub-regulatory guidance is needed in this area.
    Comment: One commenter stated that there have been cases in which a 
facility has been under a payment ban and the lifting of the remedy was 
not communicated to the facility in a timely manner, thus prohibiting 
the timely filing of claims. The commenter recommended that CMS should 
start the timely filing clock with the date that the lifting of a 
payment ban is communicated to the provider.
    Response: We were not persuaded to modify the rule by this comment 
because if the failure to file a claim timely was the result of an 
error or misrepresentation that was made by an employee, Medicare 
contractor (including Medicare Administrative Contractor, intermediary, 
or carrier), or agent of the Department that was performing Medicare 
functions and acting within the scope of its authority, then the 
provider may be able to utilize the exception under Sec.  424.44(b)(1) 
commonly referred to as the ``administrative error'' exception in order 
to file a claim.
    Comment: One commenter stated that when a provider is trying to 
adjust a claim for the purpose of returning money to the Medicare 
program, timely filing should not apply. Conversely, when a provider 
finds an error that had caused an underpayment, the provider should be 
allowed to file an amended claim and receive the increased 
compensation. Therefore, the commenter recommends that CMS should 
provide that timely filing under amended Sec.  424.44 not apply when a 
provider is trying to adjust a claim for the purpose of returning money 
to the Medicare program, or, conversely, when a provider finds an error 
that had caused an underpayment.
    Response: We were not persuaded to modify the rule by these 
comments because the timely filing provision of section 6404 of the ACA 
and subsequent final rule amending Sec.  424.44 is not intended to 
address requests for re-determinations of initial determinations by 
Medicare contractors such as those described by the commenter. The 
regulations for such requests are detailed in 42 CFR part 405, subparts 
G, H, and I.
    Comment: One commenter stated that they regularly file claims 
within 1 calendar year after the date of service that are either 
rejected or denied and that are subsequently approved after being re-
filed. In certain instances, the date of re-filing, because of the time 
period before the rejection or denial, is more than one year after the 
date of service. The commenter recommends that the timely filing rule 
should be and is satisfied when an original claim is timely filed 
within 1 calendar year after the date of service, regardless of the 
date of any resubmission.
    Response: We were not persuaded to modify the rule by this comment 
because, for example, if a provider or supplier fails to include a 
particular item or service on its initial claim, fails to include all 
the necessary information in order for an initial determination to be 
made on that claim or fails to file the claim on a form prescribed by 
us, then a provider or supplier cannot attempt to re-file that claim 
more than 1 calendar year after the date that the service was 
furnished. An incomplete or rejected claim cannot act as a placeholder 
for a claim that has yet to be filed because that would clearly be a 
way for providers and suppliers to avoid the 1 calendar year 
requirement stated in section 6404 of the ACA. Moreover, it would 
create a multitude of problems for CMS to deal with operationally or 
administratively because CMS would need to have the ability to track 
all rejected claims or all claims that failed to receive an initial 
determination and be able to match those rejected or incomplete claims 
up with all of the complete or valid claims that would eventually be 
filed months or years later so that an initial determination could be 
made.
    Comment: One commenter stated that it is unnecessary to impose an 
additional restriction to the exception for claims filed for services 
provided to dual-eligible individuals. The third condition for the 
exception at Sec.  424.44(b)(3) that a State Medicaid Agency recovers 
the Medicaid payment for the furnished service from a provider or 
supplier 11 months or more after the date of service is too restrictive 
and CMS should have used a different time period.
    Response: We agreed with the commenter that the 11 months or more 
after the date of service requirement in Sec.  424.44(b)(3)(iii) was 
too restrictive and therefore we modified the final rule based on these 
comments by changing the time period from 11 months to 6 months or more 
after the service was furnished.
    Comment: One commenter suggests that CMS amend the third condition 
of Sec.  424.44(b)(3) to read as follows-- ``A State Medicaid agency or 
Provider recovered the Medicaid payment for the furnished service from 
the provider or supplier 11 months or more after the date of service.'' 
The commenter stated that occasionally providers identify retroactive 
Medicare coverage after Medicaid has paid without receiving 
notification from the State Medicaid agency. The provider needs to have 
the ability to correct the payer order when necessary before their 
existing payment is recouped.
    Response: We were not persuaded to modify the rule by these 
comments because when a provider refunds a payment that is made to it 
by a State Medicaid Agency, the provider is not recovering a State 
Medicaid payment. Instead, when the State Medicaid Agency accepts that 
refunded payment from the provider, we consider the State Medicaid 
Agency to actually be recovering that Medicaid payment. Therefore, when 
a State Medicaid Agency accepts a provider's refunded payment 6 months 
or more after the service was furnished, then the third condition of 
Sec.  424.44(b)(3) will be met. Of course, the first two conditions of 
Sec.  424.44(b)(3) will also need to be met in order for an extension 
to be granted under Sec.  424.44(b)(3).
    Comment: One commenter stated that due to the limited home infusion 
benefit under Medicare Part B, home infusion suppliers often bill 
Medicare for the purpose of obtaining Medicare denial billing 
remittance advices, which are required by other payers. It would be 
unreasonably costly and confusing for home infusion suppliers to 
receive timely filing limit denials for services provided to 
individuals for whom the supplier is unaware of retroactive Medicare 
entitlement during the allowable filing period. The commenter urged CMS 
to ensure that infusion suppliers do not have to face this situation.
    Response: Although this comment was unclear, we believe the 
commenter is concerned that home infusion suppliers will be 
disadvantaged by the exception at Sec.  424.44(b)(2). If the conditions 
for Sec.  424.44(b)(2) are met, then home infusion suppliers will be 
able to utilize that exception the same as any other provider or 
supplier and therefore will not be adversely impacted by this rule.

[[Page 73454]]

    Comment: One commenter urges CMS to make communication about this 
new deadline a priority for the Agency. This should include a prominent 
banner on the CMS Web site home page as well as clear and concise 
written communications with Medicare providers. It is important that 
providers not have claims rejected due to lack of awareness of new 
claims submission deadlines.
    Response: Although this comment is outside the scope of this rule, 
we issued sub-regulatory guidance regarding section 6404 of the ACA on 
May 7, 2010 via Change Request 6960 and on July 30, 2010 via Change 
Request 7080. As a result of issuing that sub-regulatory guidance, two 
provider education articles were posted to CMS's Medlearn Matters Web 
site educating providers and suppliers about the new 1 calendar year 
timely filing requirement.
    In order to effectuate the changes made by the ACA, we are 
finalizing our proposed changes to Sec.  424.44, with four 
modifications. First, we are including another exception at Sec.  
424.44(b) by re-designating Sec.  424.44(b)(4) of the proposed rule to 
Sec.  424.44(b)(5) and designating the new exception for retroactive 
disenrollment from Medicare Advantage plans or Program of All-inclusive 
Care for the Elderly (PACE) provider organizations as Sec.  
424.44(b)(4). We are adding this new exception so that beneficiaries, 
providers, and suppliers may be granted an extension to file claims in 
Medicare Advantage situations when the following conditions are met:
    <bullet> At the time the service was furnished the beneficiary was 
enrolled in a Medicare Advantage plan or PACE provider organization.
    <bullet> The beneficiary was subsequently disenrolled from the 
Medicare Advantage plan or Program of All-inclusive Care for the 
Elderly (PACE) provider organization effective retroactively to or 
before the date of the furnished service.
    <bullet> The Medicare Advantage plan or Program of All-inclusive 
Care for the Elderly (PACE) provider organization recovered its payment 
for the furnished service from a provider or supplier 6 months or more 
after the service was furnished.
    In these situations, if we or one of our contractors determines 
that all of the conditions are met, then the time to file a claim will 
be extended through the last day of the 6th calendar month following 
the month in which the Medicare Advantage plan or Program of All-
inclusive Care for the Elderly (PACE) provider organization recovered 
its payment for the furnished service from the provider or supplier.
    The second modification changes Sec.  424.44(b)(5)(ii) because in 
retroactive entitlement situations there could be situations where a 
provider or supplier may not be notified of a beneficiary's retroactive 
entitlement in order to utilize the exception at Sec.  424.44(b)(2). 
Therefore, we are modifying Sec.  424.44(b)(5)(ii) so that notification 
to either party (that is, the beneficiary or the provider/supplier) for 
the first time about a beneficiary's retroactive entitlement will 
trigger when the extension of time to file the claim through the last 
day of the 6th calendar month begins.
    The third modification changes Sec.  424.44(b)(5)(i) because there 
may be situations where a provider or supplier may be able to utilize 
the exception under Sec.  424.44(b)(1) commonly referred to as the 
``administrative error'' exception, but the provider or supplier is not 
notified about the correction until it is too late to utilize the 
exception. Therefore, we are modifying Sec.  424.44(b)(5)(i) so that 
notification to either party (that is, the beneficiary or the provider/
supplier) for the first time about the administrative error correction 
will trigger the beginning of the extension of time to file the claim 
through the last day of the 6th calendar month.
    The fourth modification changes the 11 months or more after the 
date of service requirement in Sec.  424.44(b)(3)(iii) to 6 months or 
more after the date of service because the 11 months or more 
requirement was too restrictive.

V. Section 6410 of the Affordable Care Act and Section 154 of MIPPA: 
Adjustments to the Metropolitan Statistical Areas (MSA) for Medicare 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
Competitive Acquisition Program

    In the July 13, 2010 proposed rule we proposed a number of 
revisions to the DMEPOS CBP as a result of changes to the statute made 
by both the Medicare Improvements for Patients and Provider Act of 2008 
(MIPPA) and the ACA of 2010. Since both MIPPA and the ACA specify 
requirements for Metropolitan Statistical Area (MSA) selection for 
Round 2 and subsequent rounds, we outlined our proposals for 
implementing the statutory requirements related to MSA selection and 
the phase in of competitive bidding areas under the DMEPOS CBP. First, 
we proposed to use the authority provided by the statute at section 
1847(a)(1)(D)(ii) of the Act, as amended by MIPPA, to subdivide MSAs 
with populations of greater than 8,000,000 under Round 2 of the DMEPOS 
CBP. Second, we proposed to exclude certain areas from competitive 
bidding after Round 2 as mandated by section 1847(a)(1)(D)(iii) of the 
Act, as amended by MIPPA. Third, we proposed to implement the 
requirement of section 6410 of the ACA to expand Round 2 of the program 
by adding 21 of the largest MSAs based on total population to the 
original 70 already selected for Round 2.
1. Background
    Section VII.H of this final rule provides background on the DMEPOS 
CBP, including a description of many of the changes made to the program 
by section 154 of the MIPPA. In this section, we provide additional 
information regarding changes made by both section 154(a) of the MIPPA 
and section 6410 of the ACA. In addition to the changes discussed 
previously in this final rule, MIPPA also added subparagraph (D) to 
section 1847(a)(1) of the Act. Section 1847(a)(1)(D)(ii) of the Act, as 
added by MIPPA, addresses Round 2 of the DMEPOS CBP, and section 
1847(a)(1)(D)(iii) of the Act addresses subsequent rounds of the 
Program.
    Section 1847(a)(1)(D)(ii)(II) of the Act specifies that the 
Secretary shall implement DMEPOS competitive bidding in the areas 
previously selected for Round 2 of the program and also allows the 
Secretary, in implementing Round 2 of the program, to subdivide MSAs 
with populations of greater than 8,000,000 into separate CBAs. Section 
1847(a)(1)(D)(iii) of the Act imposes new requirements on the Secretary 
for competitions occurring before 2015 in subsequent rounds of the 
program. For such competitions (other than national mail order), the 
following areas are to be excluded from the program: (I) rural areas; 
(II) MSAs not selected under Round 1 or 2 with a population of less 
than 250,000; and (III) certain areas with low population density 
within a selected MSA. These requirements do not apply to a national 
mail order program.
    Finally, MIPPA required that we implement Round 2 of the DMEPOS CBP 
in the same MSAs that were designated as of June 1, 2008. In 2010, 
section 6410(a) of the ACA amended sections 1847(a)(1)(B)(i)(II) and 
(D)(ii) of the Act to expand Round 2 of the program from 70 MSAs to 91 
MSAs by adding the next 21 largest MSAs by total population not already 
selected for Rounds 1 or 2.

[[Page 73455]]

2. Subdividing Large MSAs Under Round 2
    We have selected MSAs for Round 1 and for Round 2 consistent with 
MIPPA's requirement. For Round 1, CBAs generally were comparable to 
MSAs, however, for Round 2 we proposed to subdivide MSAs of 8,000,000 
or more in population. The authority to subdivide MSAs into separate 
areas for competitive bidding purposes is set forth in section 
1847(a)(1)(D)(ii)(II) of the Act which states, ``[t]he Secretary may 
subdivide metropolitan statistical areas with populations (based upon 
the most recent data from the Census Bureau) of at least 8,000,000 into 
separate areas for competitive acquisition purposes.'' We have 
identified three MSAs which, based on the 2009 estimate from the Census 
Bureau data, we subdivided under section 1847(a)(1)(D)(ii)(II) of the 
Act: (1) Chicago-Naperville-Joliet, Illinois-Indiana-Wisconsin (IL-IN-
WI) MSA with a population of 9,569,624; (2) Los Angeles-Long Beach-
Santa Ana, California (CA) MSA with a population of 12,872,808; and (3) 
New York-Northern New Jersey-Long Island, New York-New Jersey-
Pennsylvania (NY-NJ-PA) MSA with a population of 19,006,798. We 
proposed to divide these MSAs into separate CBAs because we believe 
this approach would create more manageable CBAs for contract suppliers 
to serve and allow more small suppliers to be considered for 
participation in the program.
    We considered certain factors when deciding whether to subdivide 
the MSAs with populations of at least 8,000,000. We considered the 
geographic, social, and economic integration of each of the MSAs. We 
applied all of these factors when grouping counties into CBAs and we 
believe it is also appropriate to use these factors to determine: (1) 
Whether or not to subdivide an MSA into separate CBAs, and (2) if the 
decision is made to subdivide the MSA, how to subdivide the MSA. We 
considered the following factors, generally in the order in which they 
are listed:
    <bullet> Geographic size of the MSA and the location of the 
counties within each MSA compared to neighboring counties.
    <bullet> The driving distances from north to south and east to west 
within each MSA and county.
    <bullet> The total population and the population of FFS Medicare 
beneficiaries using DMEPOS items subject to competitive bidding.
    <bullet> The DMEPOS allowed charges for items subject to 
competitive bidding.
    <bullet> Comparably sized Round 1 and Round 2 MSAs based on 
beneficiary counts and allowed charges for competitive bid items.
    <bullet> The interstate highway infrastructures of the MSAs.
    <bullet> The current service patterns of suppliers in each county 
of the MSA.
    We used each of the factors to the extent practical to develop 
initial proposals for reasonable and workable subdivisions of these 
highly and densely populated MSAs. We believe consideration of these 
factors will help us meet our goal of subdividing large and densely 
populated MSAs and creating CBAs that are attractive to suppliers and 
incentivize them to bid competitively for a contract. With this goal in 
mind, we proposed to establish CBAs that provide for a good volume of 
DMEPOS business for winning bidders, avoid obvious geographic 
obstacles, mimic existing supplier service patterns, and, to the extent 
possible, do not cross State lines. We stated that we believed the 
factors we have selected will achieve those objectives.
    We found that counties clearly delineate areas within a MSA, and as 
we have done for Round 1 by identifying CBAs by counties and zip codes, 
we proposed to subdivide the MSAs at a county level. Since the Office 
of Management and Budget (OMB) defines the MSAs by counties and county-
based subdivisions are stable, we use counties to subdivide CBAs. When 
subdividing an MSA into counties, we consider counties that share 
social, economic, and geographic integration. We have first summarized 
the proposed subdivisions, then summarized the comments and finalized 
the CBAs.
    The Chicago-Naperville-Joliet, IL-IN-WI MSA comprises 14 counties 
within 3 States: Illinois, Indiana, and Wisconsin. This MSA has 207,106 
beneficiaries and $218,161,562 of DMEPOS allowed charges subject to the 
DMEPOS CBP. Using the factors that we indentified, we proposed to 
subdivide the Chicago-Naperville-Joliet, IL-IN-WI MSA into four 
separate CBAs: Indiana-Chicago Metro CBA; South-West-Chicago-Metro CBA; 
Central-Chicago Metro CBA; and Northern-Chicago Metro CBA.
    The Los Angeles-Long Beach-Santa Ana, CA MSA comprises two 
counties: Los Angeles County and Orange County. The MSA has 173,631 
fee-for-service beneficiaries receiving DMEPOS subject to competitive 
bidding and $244,523,957 in DMEPOS allowed charges subject to the 
DMEPOS CBP. As mentioned previously, we proposed to subdivide MSAs 
using counties, and since the Los Angeles-Long Beach-Santa Ana, CA MSA 
only has two counties, it offers only one subdivision along the county 
lines. Hence, we proposed to divide the MSA by the two counties 
creating two CBAs: Los Angeles County CBA and Orange County CBA. We 
also proposed to use the authority in section 1847(a)(3)(A) of the Act 
to exclude certain areas within the Los Angeles-Long Beach-Santa Ana, 
CA MSA. We believe these areas meet the requirement of section 
1847(a)(3)(A) of the Act; they are rural areas with a low population 
density within an urban area that are not competitive. In the April 10, 
2007 DMEPOS CBP final rule (72 FR 17992), we finalized our regulations 
at Sec.  414.410(c) that defined the factors we consider when 
determining an area is considered a low population density area or an 
area that would not be competitive. Based on our review of the County 
Subdivision Population from the 2000 Census from the U.S. Census 
Bureau, and using the factors set forth in the April 10, 2007 final 
rule, we proposed to exclude the area of Los Angeles County north of 
the San Gabriel Mountains. This large geographic area has a population 
of about 357,000, which is only 4 percent of the total population of 
Los Angeles County, and is separated from the rest of the county by the 
San Gabriel Mountains. The area north of the San Gabriel Mountains has 
one major road and many terrains which make this area remote. The 
majority of the population in Los Angeles County lives south of the San 
Gabriel Mountains. We believe that excluding this area will create a 
more manageable CBA that still provides sufficient volume of DMEPOS 
items while avoiding the geographic obstacle of the mountains. We 
believe including this area in the DMEPOS CBP would result in fewer 
small suppliers being considered for participation under the program, 
because we would not expect small suppliers to have the resources to 
serve these more remote areas. As a result, we expect that it will 
increase the number of bids submitted for the CBAs within the Los 
Angeles-Long Beach-Santa Ana, CA MSA.
    The Los Angeles County includes the two islands of Santa Catalina 
and San Clemente off the west coast. We proposed that the two islands 
be included as a part of the Los Angeles County CBA in order to ensure 
that beneficiaries presently residing on these islands or who move to 
these islands in the future are ensured access to competitively bid 
items by contract suppliers. San Clemente Island is a military base 
with a current population of zero; and therefore, the inclusion of

[[Page 73456]]

this area in the CBA would not result in this island being a part of 
the supplier service area at this time.
    The New York-Northern New Jersey-Long Island, NY-NJ-PA MSA 
comprises 23 counties in three States: New York, New Jersey and 
Pennsylvania. The MSA has 344,879 FFS beneficiaries receiving DMEPOS 
subject to the DMEPOS CBP and $350,449,795 in allowed charges for 
DMEPOS items subject to competitive bidding. We proposed to subdivide 
the New York-Northern New Jersey-Long Island, NY-NJ-PA MSA into five 
CBAs. The proposed Nassau-Brooklyn-Queens CBA would be contiguous to 
Suffolk County and would consist of the western part of Long Island and 
extend to the eastern part of New York City. The proposed Suffolk 
County CBA would consist of the eastern part of Long Island and would 
encompass most of Long Island. The proposed Bronx-Manhattan NY CBA 
would include the entire area of Manhattan and the Bronx. The proposed 
North-West NY Metro CBA would be situated north and west of New York 
City and would extend into New Jersey and Pennsylvania. The proposed 
Southern NY Metro CBA included Staten Island and would extend south to 
Ocean County, New Jersey.
    At the March 17, 2010 meeting of the Program Advisory and Oversight 
Committee (PAOC), we presented these proposals for subdividing these 
three large MSAs. Various members of the PAOC had the following 
suggestions for subdividing these MSAs:
    <bullet> Draw the boundaries of CBAs using the interstate highways 
rather than the divisions by County.
    <bullet> Determine the current servicing areas of suppliers by MSA 
and product category by using a scatter plot.
    <bullet> Use the Hudson River to divide the CBAs for the New York 
MSA.
    <bullet> Carve out Pike and Putnam Counties from the New York MSA 
due to their location and their low population density.
    <bullet> Include Manhattan as a separate CBA, due to its unique 
nature as a self contained area.
    <bullet> Consider State licensure requirements when we divide the 
MSAs into CBAs.
    <bullet> In the LA County CBA, exclude the area north of the San 
Gabriel Mountains from the CBA.
    <bullet> Consider traffic patterns when dividing the Los Angeles 
MSAs into CBAs.
    In the July 13, 2010 proposed rule, we stated that we would 
consider the PAOC's advice and recommendations and further invited 
comments on the proposed subdivision of the three MSAs.
    Comment: One commenter suggested that CMS use main travel arteries 
to subdivide MSAs. The commenter further explained that using zip codes 
or county boundaries may be unworkable across a large MSA if the travel 
arteries do not correspond to the physical boundary lines for counties 
and zip codes.
    Response: We examined travel arteries used by suppliers and 
supplier service and traffic patterns closely in developing the 
proposed CBAs. The commenter provided no rationale for use of travel 
arteries alone to establish CBA boundaries, nor did the commenter 
provide a specific methodology or information to use in making 
selections regarding which of the various highways to use as 
boundaries. We believe it is appropriate to consider travel arteries as 
one factor when designing CBAs. However, using this factor alone would 
result in unworkable CBAs. For example, if the interstate highway 
system in the Chicago-Naperville-Joliet, IL-IN-WI MSA, consisting of 11 
different interstate highways (I-55, I-57, I-65, I-80, I-88, I-90, I-
94, I-190, I-290, I-294, and I-355), were used as boundaries for CBAs, 
this would result in approximately 30 different, very small CBAs. As 
noted above, the numerous highway systems that cut through the MSAs 
were considered in determining which counties to include in each 
proposed CBA; therefore, travel arteries were considered and used to 
develop the CBAs.
    In phasing in the competitive bidding program, we adopted the 
definition of the term ``Metropolitan Statistical Area'' consistent 
with that issued by the OMB. The MSA comprises the central county or 
counties containing the core, plus adjacent outlying counties having a 
high degree of social and economic integration with the central county 
as measured through commuting. Using OMB's standards for MSAs, we have 
found that counties clearly delineate areas within a MSA. Therefore, as 
we have done for Round 1, we will continue to identify CBAs by counties 
and zip codes. For the large MSAs, although we used the counties as the 
basis for determining the CBAs, we considered various factors when 
determining how to subdivide and group each county within the MSA, 
including which major travel arteries serve which counties or group of 
counties in a geographic location.
    Comment: One commenter suggested that CMS should not finalize 
regulations expanding the DMEPOS CBP to implement Round 2 until the 
impact of implementation of Round 1 of the program on Medicare 
beneficiaries, suppliers and providers is fully evaluated and 
understood.
    Response: Section 1847(a)(1)(B)(i)(II) of the Act mandates that 
competitions occur in 2011 for Round 2 of the CBP.
    We did not receive comments on the specific CBAs proposed for the 
Chicago-Naperville-Joliet, IL-IN-WI MSA and are finalizing the CBAs in 
that MSA as proposed. The counties that comprise each of the final CBAs 
for this MSA are shown in Table 68. The DMEPOS allowed amount, 
beneficiary count subject to competitive bidding, and the general 
population that comprise these four final CBAs are shown in this table.

                                  Table 68--Chicago-Naperville-Joliet, IL-IN-WI
----------------------------------------------------------------------------------------------------------------
                                                                                   DMEPOS
                                                                                 beneficiary
                      CBA name/county                        DMEPOS  allowed    count subject        General
                                                               Charles \*\     to competitive    population \**\
                                                                                 bidding \*\
----------------------------------------------------------------------------------------------------------------
Indiana-Chicago Metro CBA:
    Lake, IN..............................................       $18,600,917            16,637           493,800
    Jasper, IN............................................         1,238,119             1,191            32,544
    Newton, IN............................................           580,842               393            13,933
    Porter, IN............................................         4,856,838             4,526           162,181
                                                           -----------------------------------------------------
        CBA Total.........................................        25,276,716            22,747           702,458
South-West-Chicago-Metro CBA:
    Will, IL..............................................        13,523,185            12,522           681,097

[[Page 73457]]

 
    Grundy, IL............................................         1,417,511             1,405            47,958
    Kendall, IL...........................................           978,215             1,052           103,460
    DeKalb, IL............................................         2,358,319             2,323           106,321
    Kane, IL..............................................         9,273,504             9,082           507,579
                                                           -----------------------------------------------------
        CBA Total.........................................        27,550,734            26,384         1,446,415
Central-Chicago Metro CBA:
    Cook, IL..............................................       124,854,279           116,360         5,294,664
    DuPage, IL............................................        16,945,135            18,492           930,528
                                                           -----------------------------------------------------
        CBA Total.........................................       141,799,414           134,852         6,225,192
Northern-Chicago Metro CBA:
    Lake, IL..............................................        12,352,802            12,482           712,453
    McHenry, IL...........................................         7,020,768             6,852           318,641
    Kenosha, WI...........................................         4,161,128             3,789           164,465
                                                           -----------------------------------------------------
        CBA Total.........................................        23,534,698            23,123         1,195,559
            MSA Total.....................................       218,161,562           207,106         9,569,624
----------------------------------------------------------------------------------------------------------------
\*\ Source: Medicare claims from 10/1/08 to 9/30/09 for items subject to competitive bidding.
\**\ Source U.S. Census Bureau 2009 population estimates.

    We did not receive comments on the specific CBAs proposed for the 
Los Angeles-Long Beach-Santa Ana, CA MSA and are finalizing the CBAs in 
that MSA as proposed, with one exception, based on further 
consideration of issues raised by the PAOC. We will not include Santa 
Catalina Island and San Clemente Island in the Los Angeles County CBA 
as initially proposed. We discussed the factors to consider when 
excluding low population density areas from a CBA in the April 10, 2007 
DMEPOS CBP final rule (72 FR 17992). Exclusion of low population 
density areas results in smaller CBAs that may reduce supplier costs in 
servicing the CBAs. Lower supplier costs may result in lower bids, 
which would increase savings under the program. Although an area may be 
a low population density area, in accordance with existing regulations 
at Sec.  414.410(c), it cannot be excluded from a CBA unless a 
determination is made that the area is non-competitive based on one or 
more of the following factors: Low utilization of DMEPOS items by 
Medicare beneficiaries receiving fee-for-service benefits relative to 
similar geographic areas; low number of DMEPOS suppliers relative to 
similar geographic areas; or low number of Medicare fee-for-service 
beneficiaries relative to similar geographic areas. The island of San 
Clemente has a population of zero and including the island in the 
program would therefore result in no savings. Approximately 70 Medicare 
beneficiaries receiving $57,000 in DMEPOS items and services reside on 
the island of Santa Catalina. This area can therefore be considered a 
non-competitive area given the low number of Medicare beneficiaries and 
low level of DMEPOS utilization, especially considering that the total 
allowed charges for DMEPOS for Los Angeles County as a whole is over 
$200 million. We took into consideration, when deciding whether to 
finalize this proposal, comments from the March 17, 2010, meeting of 
the PAOC, during which a supplier of DMEPOS highlighted the high costs 
of furnishing items to Santa Catalina Island, 20 miles off the coast of 
mainland California and accessible only by boat, helicopter, or 
amphibious aircraft. Contract suppliers, and in particular small 
suppliers, that do not have a location near the ferry ports for this 
island would be burdened by having to serve this area in accordance 
with their contract, and we expect that this may have an impact on the 
bids submitted for this CBA. Medicare beneficiaries who are residents 
of Santa Catalina Island and require delivery of DMEPOS items must 
currently make special arrangement with suppliers for delivery of those 
DMEPOS items. Suppliers are not currently obligated to serve this 
island, so it is the beneficiary and not the supplier that bears the 
cost of any additional expense associated with delivery of items. Under 
the DEMPOS CBP, the supplier would be obligated to serve this island, 
if it were included in the CBA, and the additional expense of 
delivering items to this remote island are therefore transferred from 
the beneficiary to the supplier. Although we originally proposed to 
include Santa Catalina Island in the Los Angeles CBA to ensure access 
to DMEPOS items for these beneficiaries, we have further examined this 
issue and believe that beneficiaries will continue to have the ability 
to make special arrangements for delivery of these items if this area 
is not included in the CBA. We therefore believe that excluding the 
islands of San Clemente and Santa Catalina from the Los Angeles CBA is 
consistent with existing regulations at Sec.  414.410(c).
    The counties that comprise each of the final CBAs for this MSA are 
shown in Table 69. The DMEPOS allowed amount, beneficiary count subject 
to competitive bidding, and the general population that comprise these 
two final CBAs are shown in this table.

[[Page 73458]]



                                 Table 69--Los Angeles-Long Beach-Santa Ana, CA
----------------------------------------------------------------------------------------------------------------
                                                                                   DMEPOS
                         CBA name                            DMEPOS  allowed     beneficiary         General
                                                               amount \*\         count \*\      population \**\
----------------------------------------------------------------------------------------------------------------
Los Angeles County CBA \***\..............................      $201,244,121           137,408         9,862,049
                                                           -----------------------------------------------------
    CBA Total.............................................       201,244,121           137,408     9,862,049 \*\
Orange County CBA.........................................        43,279,836            36,223         3,010,759
                                                           -----------------------------------------------------
    CBA Total.............................................        43,279,836            36,223         3,010,759
                                                           -----------------------------------------------------
        MSA Total.........................................       244,523,957           173,631        12,872,808
----------------------------------------------------------------------------------------------------------------
\*\ Source: Medicare claims from 10/1/08 to 9/30/09 for items subject to competitive bidding.
\**\ Source U.S. Census Bureau 2009 population estimates.
\***\ The counts and amounts are not adjusted for the area excluded north of the San Gabriel Mountains.

    We did not receive comments on the specific CBAs proposed for the 
New York-Northern New Jersey-Long Island, NY-NJ-PA MSA. However, we 
have decided to make three changes based on further consideration of 
issues raised by the PAOC. We carefully considered the PAOC suggestion 
noted in the proposed rule to exclude Pike and Putnam counties from the 
New York-Northern New Jersey-Long Island, NY-NJ-PA MSA in order to 
result in a smaller and more manageable CBA than the proposed North-
West NY Metro CBA. This proposed North-West NY Metro CBA is a large 
area situated north and west of New York City and covering the three 
states of New York, New Jersey, and Pennsylvania. Pike County, 
Pennsylvania is a low population density area and makes up only 0.3 
percent of the total DMEPOS utilization for the New York-Northern New 
Jersey-Long Island, NY-NJ-PA MSA. Therefore, we believe that excluding 
Pike County from the North-West NY Metro CBA is consistent with 
existing regulations at Sec.  414.410(c). In addition, the PAOC pointed 
out that excluding Pike County, PA, would help reduce the burden of 
suppliers having to comply with different state licensure requirements. 
As noted in the proposed rule, the PAOC also suggested that CMS 
consider state licensure requirements when dividing the MSAs into CBAs. 
To eliminate the complexity of complying with different state licensure 
requirements, we have decided to split the proposed North-West NY Metro 
CBA into two CBAs: One containing the New Jersey counties of Bergen, 
Essex, Hudson, Morris, Passaic, and Sussex; and one containing the New 
York counties of Putnam, Rockland, and Westchester. To summarize, with 
regard to the proposed North-West NY Metro CBA, the PAOC suggested 
excluding Pike and Putnam counties to reduce the size of this large CBA 
we proposed for the area in the north and west of the MSA. It was noted 
by the PAOC that removing Pike County would also reduce complications 
of multi-state licensing as Pennsylvania licensing rules and 
requirements would no longer be an issue. Based on the advice to reduce 
the size of the proposed North-West NY Metro CBA and reduce multi-state 
licensure complexities, we are removing Pike County from the CBA and 
are splitting the CBA into two new CBAs: A fairly large CBA containing 
the New Jersey counties from the proposed North-West NY Metro CBA; and 
a smaller CBA containing the New York counties from the proposed North-
West NY Metro CBA. As a result of this change, there is now no need to 
remove Putnam County from the CBA as the three county area of Putnam, 
Rockland, and Westchester counties in New York will be served by 
suppliers contracted to furnish items in this area, which is now 
significantly smaller than the proposed North-West NY Metro CBA.
    In further response to the PAOC's advice to consider State 
licensure requirements when subdividing the MSAs into separate CBAs, we 
have decided to remove Richmond County, NY from the proposed South New 
York Metro, leaving this CBA to be comprised of six counties in New 
Jersey. We are therefore moving Richmond County, NY to the Nassau-
Brooklyn-Queens-County Metro CBA and have changed the name of the CBA 
to Nassau-Brooklyn-Queens-Richmond County Metro CBA. We note that 
Hudson River is in between Richmond County and the other counties in 
the Nassau-Brooklyn-Queens-Richmond County Metro CBA but we took into 
consideration the social integration of this area in that there is a 
major bridge/highway connecting Richmond County to Long Island. Also, 
we believe that for each final CBA set forth in this rule, the supplier 
servicing patterns supports our decision. We determined that both large 
and small suppliers in the MSA generally furnish items within the CBAs 
we proposed. The counties, DMEPOS allowed amount and beneficiary count 
subject to competitive bidding and the general populations that 
comprise each CBAs based on our final provisions are shown in Table 70.

                          Table 70--New York-Northern New Jersey-Long Island, NY-NJ-PA
----------------------------------------------------------------------------------------------------------------
                                                                                   DMEPOS
                      CBA name/county                        DMEPOS  allowed     beneficiary         General
                                                               amount \*\         count \*\      population \**\
----------------------------------------------------------------------------------------------------------------
Nassau-Brooklyn-Queens-Richmond County Metro CBA:
    Nassau, NY............................................       $30,888,889            29,857         1,351,625
    Kings, NY.............................................        47,044,915            44,893         2,556,598
    Queens, NY............................................        33,406,236            32,798         2,293,007
    Richmond, NY..........................................         7,054,863             6,626           487,407
                                                           -----------------------------------------------------
        CBA Total.........................................       118,394,903           114,174         6,688,637
Suffolk County CBA:

[[Page 73459]]

 
    Suffolk, NY...........................................        31,950,806            31,476         1,512,224
                                                           -----------------------------------------------------
        CBA Total.........................................        31,950,806            31,476         1,512,224
Bronx-Manhattan NY CBA:
    Bronx, NY.............................................        19,791,646            17,002         1,391,903
    New York, NY..........................................        26,483,792            26,414         1,634,795
                                                           -----------------------------------------------------
        CBA Total.........................................        46,275,438            43,416         3,026,698
Northern NJ Metro CBA:
    Hudson, NJ............................................        13,622,910            12,644           595,419
    Bergen, NJ............................................        19,948,837            20,278           894,840
    Passaic, NJ...........................................        10,266,137            10,233           490,948
    Essex, NJ.............................................         9,911,767            10,735           770,675
    Morris, NJ............................................         9,094,758             9,830           487,548
    Sussex, NJ............................................         2,905,240             2,819           150,909
                                                           -----------------------------------------------------
        CBA Total.........................................        65,749,650            66,540         3,390,339
North East NY CBA Metro:
    Putnam, NY............................................         1,997,668             1,876            99,244
    Rockland, NY..........................................         6,421,317             6,265           298,545
    Westchester, NY.......................................        16,971,210            17,220           953,943
                                                           -----------------------------------------------------
        CBA Total.........................................        25,390,195            25,361         1,351,732
Southern NY Metro CBA:
    Hunterdon, NJ.........................................         2,709,880             2,356           129,031
    Union, NJ.............................................        10,466,838            10,654           523,249
    Middlesex, NJ.........................................        15,803,473            16,649           789,102
    Monmouth, NJ..........................................        14,979,747            15,110           642,448
    Ocean, NJ.............................................        20,913,022            21,600           569,111
    Somerset, NJ..........................................         4,941,838             5,425           324,563
                                                           -----------------------------------------------------
        CBA Total.........................................        69,814,798            71,794         2,977,504
        MSA Total.........................................       358,968,794           354,235        19,006,798
----------------------------------------------------------------------------------------------------------------

    In summary, we are finalizing our proposal to divide the Chicago-
Naperville-Joliet, IL-IN-WI MSA into four CBAs. We are finalizing, with 
the modification discussed above, two CBAs in the Los Angeles-Long 
Beach-Santa Ana, CA MSA. Lastly, we are finalizing, with modifications 
discussed above, six CBAs in the New York-Northern New Jersey-Long 
Island, NY-NJ-PA MSA.
3. Exclusions of Certain Areas after Round 2 and Prior to 2015
    Section 154(a) of MIPPA amended the statute by requiring that 
competition under Round 2 takes place in 2011 and by adding section 
1847(a)(1)(D)(iii) of the Act that requires us to exclude the following 
areas from the competitive bid program for competitions after Round 2 
of the program and before 2015:
    <bullet> Rural Areas.
    <bullet> Metropolitan Statistical Areas not selected under Round 1 
or Round 2 with a population of less than 250,000.
    <bullet> Areas with a low population density within a MSA that is 
otherwise selected consistent with section 1847(a)(3)(A) of the Act.
    We proposed to incorporate these requirements and timeframes in 
proposed Sec.  414.410(c).
    We received no comments on this proposal and therefore are 
finalizing this provision without modification.
4. Expansion of Round 2
    Section 6410(a) of the ACA expanded the areas to be included in 
Round 2 of the program. As amended by section 6410(a) of the ACA, 
section 1847(a)(1)(B)(i)(II) of the Act requires that the competition 
for Round 2 of the program occur in 91 of the largest MSAs in 2011. 
Prior to this change, Round 2 was to include 70 MSAs. Section 
1847(a)(1)(D)(ii)(II) of the Act, as added by section 6410(a) of the 
ACA, specifies that the additional 21 MSAs to be included in Round 2 
``include the next 21 largest metropolitan statistical areas by total 
population'' (after those already selected Round 2). The 2009 annual 
population estimates from the U.S. Census Bureau are the most recent 
estimates of population that will be available prior to the Round 2 
competition mandated to take place in 2011. Therefore, we proposed to 
use these estimates to determine the additional 21 MSAs to be included 
in Round 2 of the program. Table 71 is a list of the additional 21 MSAs 
added to Round 2.

              Table 71--Additional 21 MSAs Added to Round 2
------------------------------------------------------------------------
                                                              2009 Total
                     21 Additional MSAs                       population
------------------------------------------------------------------------
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD................    5,968,252
Washington-Arlington-Alexandria, DC-VA-MD-WV...............    5,476,241
Boston-Cambridge-Quincy, MA-NH.............................    4,588,680
Phoenix-Mesa-Scottsdale, AZ................................    4,364,094

[[Page 73460]]

 
Seattle-Tacoma-Bellevue, WA................................    3,407,848
St. Louis, MO-IL...........................................    2,828,990
Baltimore-Towson, MD.......................................    2,690,886
Portland-Vancouver-Beaverton, OR-WA........................    2,241,841
Providence-New Bedford-Fall River, RI-MA...................    1,600,642
Buffalo-Niagara Falls, NY..................................    1,123,804
Rochester, NY..............................................    1,035,566
Tucson, AZ.................................................    1,020,200
Honolulu, HI...............................................      907,574
Albany-Schenectady-Troy, NY................................      857,592
Worcester, MA..............................................      803,701
Oxnard-Thousand Oaks-Ventura, CA...........................      802,983
Springfield, MA............................................      698,903
Bradenton-Sarasota-Venice, FL..............................      688,126
Poughkeepsie-Newburgh-Middletown, NY.......................      677,094
Stockton, CA...............................................      674,860
Boise City-Nampa, ID.......................................      606,376
------------------------------------------------------------------------

    We received no comments on this proposal and therefore are 
finalizing this provision without modification.

W. Section 10501(i)(3): Collection of HCPCS Data for Development and 
Implementation of a Prospective Payment System for the Medicare 
Federally Qualified Health Center Program

    The Omnibus Budget Reconciliation Act (OBRA) of 1989 amended the 
Act by creating new FQHC benefit programs under both Medicare and 
Medicaid. The Medicare FQHC benefit provides coverage for a full range 
of primary care services, including physician and certain nonphysician 
services (PAs, NPs), clinical social worker, psychologist services, and 
preventive services. FQHCs are ``safety net'' providers (for example, 
community health centers and programs serving migrants, the homeless, 
public housing centers, and tribal groups). The main purpose of the 
FQHC program is to enhance the provision of primary care services in 
underserved urban and rural communities. FQHCs typically enhance the 
availability of care to vulnerable populations, including Medicare, 
Medicaid, SCHIP, and the uninsured. Most of these health centers 
receive HRSA grants for services to the uninsured.
    Medicare pays FQHCs on the basis of reasonable cost, subject to an 
upper payment limit on the reasonableness of incurred cost. Actual 
Medicare reasonable cost is determined based upon a Medicare cost 
report filed by the FQHC after the end of its fiscal year. Prior to the 
start of the year, an interim all-inclusive per-visit payment amount, 
based upon an estimate of Medicare reasonable costs, is calculated for 
each Medicare FQHC. During the year, this interim all-inclusive per-
visit payment amount is paid for each covered visit between a Medicare 
beneficiary and an FQHC health professional. After the end of the 
Medicare FQHC's cost reporting year, interim per-visit payments are 
reconciled to actual Medicare reasonable costs based upon the Medicare 
cost report filed by the FQHC. Section 10501(i)(3) of the ACA now 
amends this current Medicare FQHC payment policy with an entirely 
different payment system, effective with cost reporting periods 
beginning on or after October 1, 2014.
    Section 10501(i)(3)(A) of the ACA amended section 1834 of the Act 
by adding a new subsection (o), Development and Implementation of 
Prospective Payment System. This subsection provides the statutory 
framework for development and implementation of a prospective payment 
system for Medicare FQHCs. Section 1834(o)(1)(B) of the Act, as 
established by the ACA, addresses collection of data necessary to 
develop and implement the new Medicare FQHC prospective payment system. 
Specifically, section 1834(o)(1)(B) of the Act, Collection of Data and 
Evaluation, grants the Secretary of HHS the authority to require FQHCs 
to submit such information as may be required in order to develop and 
implement the Medicare FQHC prospective payment system, including the 
reporting of services using HCPCS codes. Section 1834(o)(1)(B) of the 
Act requires that the Secretary impose this data collection submission 
requirement no later than January 1, 2011. Accordingly, we proposed to 
add a new paragraph (d) to Sec.  405.2470 to require Medicare FQHCs to 
begin reporting all services furnished using HCPCS codes for these 
services starting January 1, 2011. Beginning January 1, 2011, we 
proposed that the Medicare FQHC would be required to report on Medicare 
FQHC claims all pertinent service(s) provided for each Medicare FQHC 
visit (defined in Sec.  405.2463). This additional reporting would 
include the information needed to develop and implement a PPS for 
FQHCs. For example, corresponding HCPCS code(s) would be required to be 
reported along with the presently required Medicare revenue code(s) for 
the Medicare FQHC visit(s). We noted in our proposal that our Medicare 
FQHC claims processing system would be revised to accept the addition 
of the new reporting requirements effective January 1, 2011. In our 
proposal, we also noted that the proposed new data collection effort 
would be for informational and data gathering purposes only, and would 
not be utilized to determine Medicare payment to the FQHC. Until the 
FQHC prospective payment system is implemented in 2014 and the Medicare 
claims processing system is revised to reflect such a system, we noted 
that Medicare FQHC payment would continue in the current manner 
(utilizing revenue codes and the interim per-visit payment rate 
methodology).
    In our proposed rule, we further noted that Medicare FQHCs would be 
required to adhere to the information collection requirements in 
accordance with the content and terms of their Medicare agreement as 
stipulated at Sec.  405.2434. We indicated in the proposed rule that 
failure to do so could result in the termination of the FQHC's Medicare 
agreement in accordance with Sec.  405.2436 of the Medicare FQHC 
regulations.

[[Page 73461]]

    At the time of publication of the proposed rule, we noted that we 
did not foresee additional claims or other information collection needs 
beyond collection of HCPCS codes. Accordingly, we did not propose 
additional information collection requirements at that time. However, 
we solicited public comment on any additional information FQHCs believe 
may be necessary in order to develop and implement a prospective 
payment system for Medicare FQHCs.
    We received a number of comments on the proposed information 
collection requirements. We address these comments as follows:
    Comment: One commenter requested that CMS ensure that its systems 
are appropriately updated to be able to accept HCPCS codes from 
Medicare FQHCs.
    Response: CMS will work to assure that its contracts are provided 
with adequate notice allowing for claims processing systems to accept 
these new reporting requirements.
    Comment: One commenter requested that health centers be given 
adequate time to learn the new reporting requirements, and to work with 
health centers that might need additional assistance.
    Response: CMS, through its Contractors, presently works to assist 
and train all providers in Medicare reporting requirements, 
particularly new requirements such as the collection of HCPCS 
information from Medicare FQHCs. Medicare contractors have a variety of 
assistance measures at their disposal to train Medicare FQHCs in HCPCS 
coding. Assistance measures include seminars, web learning portals, and 
telephone information lines. We note that there are numerous private 
sector training and educational opportunities in HCPCS coding as well. 
With the specific language regarding HCPCS data collection from 
Medicare FQHCs included in the ACA itself, and the resultant lead time 
prior to January 1, 2011 implementation of the reporting requirements, 
we believe health centers have had sufficient time to prepare 
themselves to meet these requirements.
    Comment: One commenter suggested that data collection begin with a 
representative sample of health centers, and that it generally be 
phased in across the nation, in order to ensure that CMS not penalize 
health centers that might need additional assistance.
    Response: With the tight ACA implementation time frames for 
implementation of a Medicare FQHC prospective payment system, as well 
as the limited total number of FQHCs, we believe both provider sampling 
and phase-in approaches to information collection requirements would 
jeopardize CMS' ability to meet statutory requirements for the Medicare 
FQHC PPS. Accordingly, we cannot accept comments to delay or limit 
collection of Medicare FQHC data we believe necessary to meet the 
statutory requirements.
    Comment: One commenter suggested that HHS estimate the additional 
administrative burden placed on FQHCs and, if that is significant, 
increase reimbursement proportionately during the proposed collection 
period.
    Response: Medicare FQHCs are paid on the basis of reasonable cost. 
Administrative costs attributable to added information collection 
requirements that might be incurred by Medicare FQHCs are already to be 
reported by the Medicare FQHC on its Medicare costs report and included 
as part of its Medicare FQHC all-inclusive rate.
    Comment: One commenter suggested that HHS use the quality measures 
reported to CMS as part of its meaningful use of electronic health 
record requirements, instead of coding additional information into the 
claims.
    Response: We do not believe that quality measures reported to CMS 
as part of meaningful use requirements would be sufficient in scope or 
representative in breadth in order to establish a National Medicare PPS 
sample which would be representative of the entire population of 
Medicare FQHCs. Accordingly, we cannot accept this comment.
    As a result of these comments, we are making no changes to our 
proposal to require FQHCs to begin the reporting of services using 
HCPCS codes. Accordingly, we are finalizing this provision without 
modification. We will add a new paragraph (d) to Sec.  405.2470 to 
require Medicare FQHCs to begin reporting all services furnished using 
HCPCS codes for these services starting January 1, 2011.
    We received no public comment suggesting collection of additional 
information collection requirements beyond HCPCS codes. Therefore we 
add no additional Medicare FQHC information collection requirements, 
beyond the collection of the aforementioned HCPCS data requirements, in 
this final rule.

VII. Other Provisions of the Proposed Regulation

A. Part B Drug Payment: Average Sales Price (ASP) Issues

1. ``Carry Over'' ASP
    The average sales price (ASP) payment methodology is authorized 
under section 303(c) of the MMA, which amends Title XVIII of the Act by 
adding section 1847A. This section establishes the use of the ASP 
methodology for payment for Medicare Part B drugs and biologicals 
described in section 1842(o)(1)(C) of the Act furnished on or after 
January 1, 2005. For purposes of this part, unless otherwise specified, 
the term ``drugs'' will hereafter refer to both drugs and biologicals. 
The ASP methodology applies to most drugs furnished incident to a 
physician's service, drugs furnished under the DME benefit, certain 
oral anti-cancer drugs, and oral immunosuppressive drugs.
    Sections 1847A and 1927(b) of the Act specify quarterly ASP data 
reporting requirements for manufacturers. Specific ASP reporting 
requirements are set forth in section 1927(b) of the Act. Although 
delays in reporting have been uncommon, they create a risk that: (1) 
Could result in the publication of payment limits that do not reflect 
prices for drug products, and (2) could result in inaccurate payments, 
the need for correction of files and unintentional ASP payment limit 
variability.
    As a result of these concerns, we sought to establish a process for 
addressing situations where manufacturers fail to report manufacturer 
ASP data in a timely fashion, that is within 30 days after the end of a 
quarter. The proposal in CY 2011 PFS proposed rule was intended to 
allow us to calculate and report ASP payment limits for a given quarter 
within the existing timelines and would not affect CMS or the OIG's 
authority to assess civil monetary penalties associated with untimely 
or false ASP reporting. Manufacturers who misrepresent or fail to 
report manufacturer ASP data will remain subject to civil monetary 
penalties, as applicable and described in sections 1847A and 1927(b) of 
the Act.
    For the purposes of reporting under section 1847A of the Act, the 
term ``manufacturer'' is defined in section 1927(k)(5) of the Act and 
means any entity engaged in the following: production, preparation, 
propagation, compounding, conversion, or processing of prescription 
drug product, either directly or indirectly by extraction from 
substances of natural origin, or independently by means of chemical

[[Page 73462]]

synthesis, or by a combination of extraction and chemical synthesis; or 
packaging, repackaging, labeling, relabeling, or distribution of 
prescription drug products. The term manufacturer does not include a 
wholesale distributor of drugs or a retail pharmacy licensed under 
State law. However, manufacturers that also engage in certain 
wholesaler activities are required to report ASP data for those drugs 
that they manufacture. Note that the definition of manufacturers for 
the purposes of ASP data reporting includes repackagers.
    In accordance with section 1847A of the Act, manufacturers are 
required to report data on the National Drug Code (NDC) level, which 
include the following elements: the manufacturer ASP for drugs; the 
Wholesale Acquisition Cost (WAC) in effect on the last day of the 
reporting period; the number of units sold; and the NDC. Currently, 
when manufacturer ASP data or specific data elements are not available, 
we calculate an ASP price for a billing code based on other applicable 
and available pricing data from manufacturers for that drug. This 
alternative method used when manufacturer data are not available for a 
billing code includes WAC prices from compendia. WAC prices tend to be 
higher than manufacturer ASP prices.
    Although problems with reporting have been uncommon, we have 
recently encountered situations where delays in manufacturer ASP 
reporting could have led to significant ASP payment limit fluctuations 
for highly used HCPCS codes. The greatest potential impact occurs when 
data for high volume drug products within a HCPCS code that is 
represented by a limited number of NDCs have not been reported and 
cannot be included in the ASP volume weighted calculations described in 
section 1847A(b) of the Act. For multisource drugs, such a situation is 
likely to artificially increase or decrease Medicare ASP payment 
limits, which in turn would affect beneficiary cost sharing amounts. 
Such artificial fluctuations of the ASP payment limit could provide the 
appearance of instability unrelated to market forces and could also 
create access issues for providers and beneficiaries and confusion that 
could ultimately affect product demand in the marketplace.
    In order to minimize the possibility of ASP payment limit 
fluctuations due to missing data, we proposed a process, consistent 
with our authority in section 1847A(c)(5)(B) of the Act, to update ASPs 
based on the manufacturer's ASP calculated for the most recent quarter 
for which data is available. Specifically, we proposed to carry over 
the previously reported manufacturer ASP for an NDC(s) when missing 
manufacturer ASP and/or WAC data could cause significant changes or 
fluctuations in ASP payment limits for a billing code, and efforts by 
CMS to obtain manufacturer-reported ASP before Medicare ASP payment 
limits publication deadlines are not successful. For example, the most 
recently reported manufacturer ASP prices for products on the market 
would be carried over to the next quarter if a manufacturer's entire 
submission were not received, manufacturer ASP price data for specific 
NDCs have not been reported, or when only WAC data has been reported; 
however, NDCs that have zero sales or are no longer being manufactured 
will not be subjected to this process. Also, we proposed to apply the 
carryover process only in cases where missing data results in a 10 
percent or greater change in the ASP payment limit compared to the 
previous quarter. Based on experience with ASP methodology since 2004, 
we believe that this percentage threshold constitutes significant 
change. We specifically sought comments on our use of 10 percent as the 
threshold amount. In order to better represent actual market trends, 
that is, actual increases or decreases in manufacturer reported ASP for 
the group of NDCs that represent the HCPCS code, we also proposed that 
the manufacturer ASP payment amounts for the individual NDCs that are 
carried over will be adjusted by the weighted average of the change in 
the manufacturer ASP for the NDCs that were reported during both the 
most recently available quarter and the current quarter. We requested 
comments about whether other methods to account for marketplace price 
trends could be a better substitute for applying the weighted average 
change. The previous quarter's sales volumes will be carried over. An 
example of the proposed process appears in Table 72.
    We proposed to apply this process to both single source drugs and 
multiple source drugs. However, we are concerned that including single 
source drugs in the carry over process could create an incentive for 
nonreporting in situations where ASPs for a single source drug are 
falling and the manufacturer stops reporting ASPs in an effort to 
preserve a higher payment amount despite the risk of significant 
statutory penalties for such an action. Therefore, we specifically 
requested comments on this option and the effect of limiting this 
proposal to multiple source drugs only. We noted that we would consider 
these comments carefully before including both single source and 
multisource drugs in the process.

                                            Table 72--ASP Carryover Example for NDCs in a Specific HCPCS Code
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          Previous                                   Current                                     Current       Current
                                          quarter      Previous   Current quarter    quarter      Current    Current quarter     quarter       quarter
    Previous quarter reported NDCs        reported   quarter ASP   reported NDCs     reported   quarter ASP      NDCs for      volume for     price for
                                           volume                                     volume                   calculation     calculation   calculation
--------------------------------------------------------------------------------------------------------------------------------------------------------
12345-6789-10.........................         2000       $1.000    12345-6789-10         2500       $0.980    12345-6789-10          2500        $0.980
12345-6789-11.........................         3000        1.000    12345-6789-11         1700        0.980    12345-6789-11          1700         0.980
12345-6789-12.........................         5000        1.000    12345-6789-12         5500        0.980    12345-6789-12          5500         0.980
45678-1234-90.........................         9000        1.100            (\2\)        (\2\)        (\2\)    45678-1234-90          9000     \1\ 1.078
45678-1234-99.........................        27000        1.100            (\2\)        (\2\)        (\2\)    45678-1234-99         27000     \1\ 1.078
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ This result is obtained by calculating the weighted average price change in NDCs available (that is, 12345-6789-10 thru 12345-6789-12) in both the
  previous and current quarters, which is -2% [(0.98-1.00)*100], and applying that change to the previous quarter's manufacturer ASP for the missing
  NDCs (that is, 45678-1234-90 and 45678-1234-99). The last two columns on the right would be used to calculate the weighted ASP and payment limits for
  the 5 NDCs as a HCPCS code and accounts for missing prices for two high volume NDCs that represent most of the units sold within the HCPCS code and
  therefore heavily influence the price calculation for the HCPCS code.
\2\ Missing.

    Our proposed approach was intended to establish a straightforward 
and transparent solution that minimizes the effect of missing 
manufacturer ASP data on Medicare ASP payment limits. We believe that 
the availability of a

[[Page 73463]]

mechanism to minimize non-market-related price fluctuations is 
desirable when efforts to obtain manufacturer's ASP data by deadlines 
have not been successful. Our proposed mechanism was not intended to 
alter or adjust reported prices and will not be used to do so, but 
instead is intended to more accurately represent prices in the 
marketplace in the rare circumstance where manufacturer ASP data for 
particular drug product(s) is missing. Based on our experience with ASP 
reporting since 2004, we do not believe that this process will be used 
frequently. However, as we stated previously, recent concerns about 
delays in reporting of manufacturer ASP data have led to this proposal.
    We also remind manufacturers that significant civil monetary 
penalties (CMP) for not reporting or misrepresenting manufacturer ASP 
data are authorized under sections 1847A(d)(4) and 1927(b)(3)(C) of the 
Act and codified in regulations at Sec.  414.806. This proposal should 
not be interpreted to mean that CMS and the OIG will refrain from 
collecting such penalties for ASP reporting violations. Late or missing 
reports will not be tolerated. This proposed policy would be 
implemented regardless of any efforts by the OIG to impose CMPs for 
nonreporting.
    We would also like to remind manufacturers that additional specific 
information about reporting ASP data to us is available. (For examples, 
see the following: 69 FR 17936, 69 FR 66299, 70 FR 70215, 71 FR 69665, 
72 FR 66256, 73 FR 69751, and 74 FR 61904.) Also, Frequently Asked 
Questions are posted in the related links inside CMS section of the ASP 
Overview Web page at http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/01_overview.asp#TopOfPage, and the downloads section of the same Web 
page contains a link to the ASP Data Form (Addendum A), which includes 
examples of how ASP data must be reported and formatted for submission. 
In particular, we would like to remind manufacturers to report sales 
volume in quantities of NDC units sold (not vials or other units of 
sale), and to use a zero (that is, the character ``0'') instead of a 
blank when reporting items that did not have any sales in a particular 
quarter. In addition, manufacturers should report both the ASP and the 
WAC for each NDC, the expiration date for the last lot sold, if 
applicable, and the date of first sale for an NDC.
    We received several comments about our proposals. In general, 
comments supported our proposal, including the use of a weighted 
average when calculating the carry over amounts, but the comments also 
requested clarification about certain details. We did not receive any 
comments that would lead us to reconsider the 10 percent threshold that 
we proposed.
    Comment: Several commenters specifically requested that CMS clarify 
what will be done to obtain a manufacturer's ASP information before 
carrying over previous manufacturer ASP information. The comments 
recommended that CMS establish contact with manufacturers using contact 
information from the manufacturer's submission before applying the 
carryover policy.
    Response: We follow a routine internal quality check process that 
prompts communication with contacts listed on manufacturers' ASP 
submissions when we believe that ASP data may be late, missing, or 
incomplete. The process includes contacting the manufacturer as 
recommended above. Our experience with using the reported contact 
information to reach the manufacturer generally has been satisfactory, 
and we plan to continue using it to manage and track submissions and to 
coordinate follow-up action by CMS or other agencies. However, we also 
believe that the carryover policy will serve as a backup in the event 
information cannot be obtained in a timely manner. Again, we reiterate 
that sections 1847A and 1927 of the Act require manufacturers to report 
ASP quarterly, and that that section 1847A(d)(5) of the Act provides 
for significant CMPs in situations when misreporting of ASP data 
occurs.
    Comment: A few commenters requested that we clarify how we 
determine whether products are no longer being sold. The comments 
agreed with our approach to exclude from the carryover process products 
with no sales or those products that are no longer manufactured.
    Response: In most cases, the manufacturers' ASP reports clearly 
establish whether a product is still being sold because manufacturers 
are required to report NDCs with zero sales. As noted above, CMS also 
contacts the manufacturers, as needed, in order to clarify information. 
If a situation arises where the product's sales status is not clear and 
we are unable to get clarification from the manufacturer, we use 
multiple sources of information, including but not limited to internal 
quality checks, compendia data, and public information about drug 
products to determine the product's status. Our experience has shown 
that this approach is effective, and we would use this approach to 
determine whether to apply the carryover policy if information supplied 
by the manufacturer was not available or not clear. Based on our 
experience, we believe that this approach will be sufficient to prevent 
the use of carryover data from products that are not sold during a 
quarter. We also would like to reiterate that manufacturers have a 
reporting obligation for NDCs with zero sales (71 FR 69676). In other 
words, the reporting obligation for an NDC ends only after the 
expiration date of the last lot sold. As mentioned above, a zero (the 
character ``0'') should be used to report the number of units of a drug 
product sold if that product had no reportable sales for a quarter.
    Comment: A commenter requested that CMS announce the exact deadline 
for the application of the carryover policy each quarter.
    Response: The ASP reporting deadline is specified in regulation 
text at Sec.  414.804, which states that data must be submitted to CMS 
within 30 days after the close of a quarter. We decline to provide an 
additional ``grace period'' beyond the stated statutory and regulatory 
deadline--not only have we not proposed such a grace period, but also 
we believe such a policy could be misconstrued as permitting late 
submission of manufacturer data. As we stated earlier, our proposal was 
not intended (nor should it be construed) to affect manufacturers' 
obligations to submit ASP data timely, and penalties for noncompliance 
with the timely reporting requirement continue to apply. For these 
reasons, we decline to adopt the commenter's suggestion.
    Comment: A commenter recommended that the carryover policy not be 
used for more than one quarter due to a concern about the accuracy of 
payment amounts based on data that is more than 2 quarters old.
    Response: We will not specify the duration for the carryover policy 
at this time in order to prevent a situation where prolonged 
nonreporting of ASP data could influence ASP payment limit 
calculations. Based on our experience, reporting problems and delays 
with a duration of 2 or more quarters would be unlikely.
    Comment: Commenters recommended that CMS carry over prices only if 
there is a manufacturer rebate agreement in place and a ``track 
record'' of four or more quarters of data have been reported.
    Response: We disagree with these comments. First of all, the 
carryover process is unrelated to the manufacturer's reporting 
obligations under sections 1847A and 1927 and the

[[Page 73464]]

ASP regulations--in other words, our proposal does not serve to relieve 
manufacturers of any reporting obligations. Rather, our proposal is 
intended to solve the problem of how to accurately calculate ASP in 
instances where we do not have complete information. Thus, applying the 
carryover process only to certain manufacturers as the commenter 
suggests is not only unnecessary, but also, in our view, not 
appropriate. In addition, although we appreciate the commenter's desire 
to establish a baseline, for the reasons stated above, we do not 
believe that implementing a standard whereby we apply the carryover 
process only after a manufacturer has submitted four or more quarters 
of data is advisable. Such a policy would be contrary to our intent in 
making this proposal, which is to provide us with a standard procedure 
for addressing missing data. Further, we have no information indicating 
that manufacturers with four or more quarters of reporting are any more 
or less likely to fail to submit data for a particular product in 
future reporting periods. Therefore, we will not be modifying our 
policy based on these comments.
    Comment: One commenter agreed with carrying over a weighted average 
price, but suggested that the carryover weighting calculation be based 
on the manufacturer's own NDCs within the given HCPCS code rather than 
the NDCs for all manufacturers within a given HCPCS code instead of 
weighting based on all manufacturers NDCs in the HCPCS code. The 
commenter believes that price changes for the manufacturer's own NDCs 
in the same HCPCS code will better represent price changes for the 
manufacturer's missing NDCs.
    The commenter also recommended that CMS only use all other 
manufacturers' NDCs in the carryover weighting calculation as proposed 
if a manufacturer has not reported any data for any NDCs in the code.
    Response: We disagree with these comments. We believe that basing 
weighting calculations on all of the reported NDCs in the code is the 
best approach because it permits us to maintain ASP stability without 
potentially providing manufacturers with an incentive not to report 
their ASP data. We are concerned that basing the carryover weighting 
calculation solely on the manufacturer's own NDCs in the applicable 
code could incentivize manufacturer non-reporting, particularly in 
situations where a manufacturer has multiple NDCs that comprise a large 
share of sales for a HCPCS code. Indeed, we are aware of situations 
where a very wide variety of price changes have been reported for a 
single manufacturer's multisource products for a single code. If we 
were to calculate the weight for the carryover data using only the NDCs 
that the manufacturer reported, then a manufacturer might decide to 
risk sanction and purposefully report only a subset of NDCs for the 
quarter in order to increase the ASP payment limit for the HCPCS code, 
and this would result in inaccurate payment limits. For example, if a 
manufacturer omitted data for a single NDC in a code that had a price 
decrease and only reported one or two NDCs in that code that had price 
increases, the carryover weighting calculations could be skewed toward 
overpayment if only the manufacturer's own price changes were used in 
the carryover calculation. Again, we reiterate that that Section 1847A 
of the statute requires manufacturers to report ASP quarterly, and that 
that section 1847A(d)(5) of the Act provides for significant CMPs in 
situations when misreporting of ASP data occurs.
    Comment: Two commenters recommended that CMS expand our proposed 
regulation text at Sec.  414.904(i) to include more detail such as the 
10 percent threshold, a requirement that we make contact with a 
manufacturer before applying the carryover policy, and that the policy 
not be applied to products with zero sales or products that are no 
longer being manufactured.
    Response: Based on these comments, we will update the regulation 
text at Sec.  414.904(i) to state that the carryover policy will apply 
only if the ASP payment limit change due to missing data is 
significant. Our threshold for a ``significant'' change is 10 percent 
up or down. We do not believe that adding further detail to the 
regulation text is necessary at this time because the preamble language 
and the clarifications sufficiently detail our approach.
    Comment: In the proposed rule, we specifically requested comments 
about the applicability of our proposals to single source and multiple 
source drugs. One commenter agreed with our concerns that despite the 
potential for civil monetary penalties, single source drug 
manufacturers still could perceive an incentive not to report ASPs in 
order to maximize the margin between the ASP payment and the actual 
price for which providers acquire drugs. The commenter stated that the 
carryover process, if applied to single source drugs, could provide 
purchasers with an incentive to buy increased quantities of the product 
because of the widening gap between their purchase price and Medicare 
payments. Further, because of the potential for increased sales volume, 
manufacturers of single source drugs may determine that the gains in 
volume outweigh the statutory penalties. The commenter recommended 
applying the carryover policy only to multiple source drugs because the 
absence of data for one product within a multiple source code could 
result in payment rate instability from quarter to quarter unrelated to 
market forces.
    Response: We are persuaded by the comment to finalize our proposal 
with limitation that the carryover policy applies to multiple source 
drugs only because we agree that including single source drugs in the 
policy could result in inappropriate ASP payment limits for a HCPCS 
code and may unintentionally provide an incentive for nonreporting of 
single source drugs despite the likelihood of CMPs. In contrast, we 
believe that for multiple source drugs the carryover process can 
improve payment stability and keep the payment calculation more in line 
with market forces. Moreover, multiple source drugs present less risk 
for nonreporting because data from more than one manufacturer is used 
in pricing calculations and thus, the impact of one manufacturer's 
missing data is decreased. For these reasons and based on the comment 
we received, we will limit our carryover policy to multisource drugs. 
However, we will continue to monitor manufacturers' reporting practices 
for single source drugs, biologicals, and multiple source drugs.
    In summary, we are finalizing our proposal as follows: When a 
manufacturer's reported data for a multiple source drug product with 
sales during a quarter is missing, and efforts by us to obtain 
manufacturer reported ASP data before Medicare ASP payment limits 
publication deadlines have not been successful, we will use the 
following process to calculate the payment limit for that drug 
product's billing code: First, we will determine whether calculating 
the payment limit without accounting for the missing data would result 
in a 10 percent or greater change in the ASP payment limit compared to 
the previous quarter. In that event, we will use (that is, carry 
forward) the most recent data available for that multiple source drug 
product(s) (that is, the individual NDCs), adjusted by the weighted 
average of the change in the manufacturer ASP for the NDCs that were 
reported during both the most recently available quarter and the 
current quarter. The previous quarter's sales volumes also will be 
carried over for the NDCs with missing data. The

[[Page 73465]]

carryover process as described above applies, for example, if a 
manufacturer's entire submission was not received, manufacturer ASP 
price data for specific multiple source NDCs has not been reported, or 
when WAC data only has been reported. However, single source drugs and 
biologicals, and multiple source drug NDCs that have zero sales or that 
have been permanently discontinued by the manufacturer will not be 
subject to this process. We are also finalizing Sec.  414.804(i) with 
minor modifications as described elsewhere in this section.
    Our process is intended to more accurately represent prices in the 
marketplace if manufacturer ASP data for particular drug product(s) is 
missing. Based on our experience with ASP reporting since 2004, we do 
not believe that this process will be used frequently.
2. Partial Quarter ASP Data
    Section 1847A(c)(4) of the Act states that, ``In the case of a drug 
or biological during an initial period (not to exceed a full calendar 
quarter) in which data on the prices for sales for the drug or 
biological is not sufficiently available from the manufacturer to 
compute an average sales price for the drug or biological, the 
Secretary may determine the amount payable under this section for the 
drug or biological based on--(A) the wholesale acquisition cost; or (B) 
the methodologies in effect under this part on November 1, 2003, to 
determine payment amounts for drugs or biologicals.''
    When a new drug product enters the market, the first date of sale 
rarely coincides with the beginning of a calendar quarter. Therefore, 
the ASP data for many new drug products falls into partial quarter 
status during the first quarter of sales. We are taking this 
opportunity to describe our policy regarding how we use data from the 
first quarter of sales in the calculation of ASP payment limits.
    In accordance with section 1847A(c)(4)(A) of the Act, our policy 
has been to price new single source drugs and biologicals at WAC for 
the first quarter (unless the date of first sale is on the first day of 
the quarter), and to add new NDCs for multisource drugs and product 
line expansions of single source drugs and biologicals to the ASP 
calculation for a quarter as soon as these products are reported.
    We believe that the approaches for single source drugs, 
biologicals, and multisource drugs are consistent with the statute, 
particularly section 1847A(c)(4) of the Act, and we intend to continue 
this policy.
    Although this section of the rule did not contain any proposals, we 
received several comments about our description of current policy.
    Comment: Several commenters asked that CMS clarify how our policy 
coincides with previously published preamble language from the CY 2005 
PFS rule (69 FR 66302) that states that the initial period ``start[s] 
on the date that sales of the drug begin and end[s] at the beginning of 
the quarter after we receive information from the manufacturer 
regarding ASP for the first full quarter of sales.''
    Response: We believe our clarification is consistent with 
previously published materials referenced by the commenters, and we 
appreciate the opportunity to better explain our approach. The CY 2011 
PFS proposed rule discussion pertains to our determination of the ASP-
based payment limits under section 1847A of the Act using data from the 
drug's first quarter of sales--in other words, how we calculate payment 
once we have received ASP data from the manufacturer for a drug. These 
payment limits become effective two quarters after the drug's first 
quarter of sales. In contrast, our preamble discussion in the CY2005 
PFS rule pertained to payment under section 1847A of the Act in 
quarters before sufficient ASP data that is needed to calculate payment 
limits has been reported to CMS--that is, the CY2005 preamble discusses 
payment for drugs that are administered on dates of service during 
their first or second quarter of sales.
    The ASP reporting and publishing time table has a two quarter lag, 
so payment limits calculated using data reported from the first quarter 
of sales become effective two quarters later. By way of example only, a 
manufacturer's prices for a new single source drug first sold on 
January 10 would be reflected in the ASP data that a manufacturer 
reports to CMS no later than April 30, and that data would be 
considered partial quarter data because sales began after the first day 
of the quarter. If CMS determines that the drug should be added to the 
national price files (that is, the drug is not priced by a contractor/
MAC), payment limits using the data from January 10 to March 31 would 
then be calculated and become effective for the first quarter of sales 
from July 1 to September 30 of that year. In this example, the first 
full quarter of sales of the new drug would take place between April 1 
and June 30. ASP data from the new drug's first full quarter of sales 
would be reported to CMS no later than July 30, and payment limits 
calculated using this data would become effective for the period 
October 1 to December 31. Our approach is consistent with the initial 
period for ASP based payment limit calculations described in the CY 
2005 PFS final rule (69 FR 66302), which states that the ``time period 
will start on the date that sales of the drug begin and end at the 
beginning of the quarter after we receive information from the 
manufacturer regarding ASP for the first full quarter of sales.''
    Comment: Commenters also requested that CMS clarify whether we use 
100 percent or 106 percent of WAC to set payment limits after new drugs 
are introduced.
    Response: As we mentioned above, our discussion of partial quarter 
data in the 2011 PFS proposed rule is limited to situations where 
national payment limit determinations under section 1847A of the Act 
are being made using reported data from the first quarter of a drug's 
sales.
    The national payment limits for single source drugs that are 
calculated from partial quarter data and are published in CMS's 
quarterly ASP price files use 106 percent of WAC. This percentage is 
consistent with sections 1847A(c)(4)(A) and 1847A(b) of the Act and is 
also described in Chapter 17 Section 20.1.3 of the Medicare Claims 
Processing Manual.
    Comment: Commenters requested that CMS make regulation text changes 
to clarify that 106 percent of WAC is applied as a payment limit for 
the period that starts on the date that sales of the drug begin and 
ends at the beginning of the quarter after we receive information from 
the manufacturer regarding ASP for the first full quarter of sales.
    Response: Our policy is consistent with existing regulation text 
language at Sec.  414.904, the manual, and preamble language. 
Therefore, we are not making any regulation text changes.
    Comment: One commenter asked that CMS clarify what ``product line 
expansions of single source drugs'' means.
    Response: For the purpose of the discussion of partial quarter ASP 
data above, the term ``line expansion'' refers to an additional package 
size or sizes of a single source drug or biological; by way of example 
only, a new larger vial size of a new antibiotic that is introduced for 
sale nine months after the drug's initial sales begin would represent a 
line expansion. Sales data for such new, additional NDCs is 
incorporated into the weighted ASP payment limit calculation for single 
source drugs beginning with the first quarter of sales that is reported 
to CMS. In other words, data for NDCs added to

[[Page 73466]]

a single source drug code that is already priced using the weighted 
average calculations is not considered partial quarter data.
    Comment: CMS received several comments that request other changes 
to the regulations in connection with the first quarter of sales. These 
comments included recommendations that CMS--
    <bullet> Develop regulation text changes that describes an apparent 
expansion of the initial period described in section 1847A(c)(4)(A) of 
the Act;
    <bullet> Define when invoice pricing may be used if payments are 
made under section 1847A;
    <bullet> Discuss the determination of payment amounts made under 
section 1847A for dates of service during the first or second quarter 
of a drug's sales;
    <bullet> Add additional information requirements to ASP reporting 
templates used by manufacturers; and
    <bullet> Clarify how payments are calculated when a drug leaves the 
market.
    Response: As noted previously, our discussion of partial quarter 
data is limited to and pertains to the use of less than a full 
quarter's worth of data to calculate an ASP-based payment limit, not to 
other issues such as the payment limit for drugs administered during 
the first quarter of sales, or reporting procedures. Thus, these 
comments are outside the scope of this rule.
    We will continue to apply the policy as previously clarified in 
this section and described in the proposed rule.
3. Determining the Payment Amount for Drugs and Biologicals Which 
Include Intentional Overfill
    The methodology for developing Medicare drug payment allowances 
based on the manufacturers' submitted ASP data is specified in 42 CFR 
part 414, subpart K. We initially established this regulatory text in 
the CY 2005 PFS final rule with comment period (69 FR 66424). We 
further described the formula used to calculate the payment amount for 
each HCPCS billing code in the CY 2006 PFS proposed rule (70 FR 45844) 
and final rule with comment period (70 FR 70217). With enactment of the 
Medicare, Medicaid and SCHIP Extension Act (MMSEA) (Pub. L. 110-173), 
the formula we use changed beginning April 1, 2008. Section 112(a) of 
the MMSEA amended section 1847A(b) of the Act to require CMS to 
calculate payment amounts using a specified volume-weighting 
methodology. In addition, section 112(b) of the MMSEA sets forth a 
special rule for determining the payment amount for certain drugs and 
biologicals. We addressed these changes in the CY 2009 PFS proposed and 
final rules (73 FR 38520 and 69571, respectively).
    For each billing code, we calculate a volume weighted, ASP based 
payment amount using the ASP data submitted by manufacturers. 
Manufacturers submit ASP data to CMS at the 11-digit National Drug Code 
(NDC) level, including the number of units of the 11-digit NDC sold and 
the manufacturer's ASP for those units. We determine the number of 
billing units in an NDC based on the amount of drug in the package. For 
example: A manufacturer sells a box of 4 vials of a drug. Each vial 
contains 20 milligrams (mg); the billing code is per 10 MG. The number 
of billing units in this NDC for this billing code is (4 vials x 20mg)/
10mg = 8 billable units.
    Beginning April 1, 2008, we use a two step formula to calculate the 
payment amount for each billing code. We sum the product of the 
manufacturer's ASP and the number of units of the 11 digit NDC sold for 
each NDC assigned to the billing and payment code, and then divide this 
total by the sum of the product of the number of units of the 11 digit 
NDC sold and the number of billing units in that NDC for each NDC 
assigned to the billing and payment code. This process is discussed 
further in the CY2009 Physician Fee Schedule rule at 73 FR 69752.
    The provisions in section 112 of the MMSEA were self implementing 
for services on and after April 1, 2008. Because of the limited time 
between enactment and the implementation date, it was not feasible to 
undertake and complete rulemaking on this issue prior to implementing 
the required changes. As a result of the legislation, we revised Sec.  
414.904 to codify the changes to the determination of payment amounts 
consistent with section 112 of the MMSEA.
    Since that time, we have become aware of situations where 
manufacturers, by design, include a small amount of ``intentional 
overfill'' in containers of drugs. We understand that this 
``intentional overfill'' is intended to compensate for loss of product 
when a dose is prepared and administered properly. For instance, a 
hypothetical drug is intended to be delivered at a 0.5 mg dose that 
must be drawn into a syringe from a vial labeled for single use only. 
The vial is labeled to contain 0.5 mg of product but actually contains 
1.5mg of product. The additional 1.0 mg of product is included, by 
design, and is intended to be available to the provider so as to ensure 
a full 0.5 mg dose is administered to the patient.
    Our ASP payment calculations are based on data reported to us by 
manufacturers. This data includes the ``volume per item''. In our 
``Appendix A--Average Sales Price Reporting Data Elements'' available 
on our Web site at http://www.cms.gov/McrPartBDrugAvgSalesPrice/, we 
define ``volume per item'' as, ``The amount in one item (ex., 10 ml in 
one vial, or 500 tablets in one bottle). Enter ``1'' for certain forms 
of drugs (for example, powders and sheets) when ``Strength of the 
Product'' indicates the amount of the product per item.'' In order to 
accurately calculate Medicare ASP payment limits under section 1847A of 
the Act, we interpret ``the amount in one item'' to be the amount of 
product in the vial or other container as indicated on the FDA approved 
label.
    It has been longstanding Medicare policy that in order to meet the 
general requirements for coverage under the ``incident to'' provision, 
services or supplies should represent an expense incurred by the 
physician or entity billing for the services or supplies (See Medicare 
Benefit Policy Manual (Publication <greek-i> 100-02), Chapter 15, 
Sections 50.3, 60.1.A). Such physicians' services and supplies include 
drugs and biologicals under section 1861(s)(2)(A) of the Act. In 
accordance with this policy, providers may only bill for the amount of 
drug product actually purchased and that the cost of the product must 
represent an expense to the physician.
    We further understand that when a provider purchases a vial or 
container of product, the provider is purchasing an amount of drug 
defined by the product packaging or label. Any excess product (that is, 
overfill) is provided without charge to the provider. In accordance 
with our current policy as explained above, providers may not bill 
Medicare for overfill harvested from single use containers, including 
overfill amounts pooled from more than one container, because that 
overfill does not represent a cost to the provider. Claims for drugs 
and biologicals that do not represent a cost to the provider are not 
reimbursable, and providers who submit such claims may be subject to 
scrutiny and follow up action by CMS, its contractors, and OIG.
    Because such overfill is currently not included in the calculation 
of payment limits under the methodology in section 1847A of the Act and 
does not represent an incurred cost to a provider, we proposed to 
update our regulations at 42 CFR part 414 Subpart K to clearly state 
that Medicare ASP payment limits are based on the amount of product in 
the vial or container as reflected on the FDA-approved label. We also 
proposed to update our regulations at Subpart J to clearly state that 
payment for amounts

[[Page 73467]]

of free product, or product in excess of the amount reflected on the 
FDA-approved label, will not be made under Medicare.
    We received several comments supporting our proposal. Several other 
comments raised concerns about whether our proposal attempts to 
regulate or even prohibit the use of overfill. Our policy is not 
intended to limit the use of intentional overfill during the care of 
beneficiaries or in medical practice; such measures are beyond CMS' 
authority. Rather, we are clarifying our ASP pricing and payment 
policies, describing how we utilize manufacturer reported data, and 
updating our regulations at 42 CFR part 414. The following is a summary 
of the comments we received and our responses.
    Comments: Several commenters supported our proposal, agreeing that 
a provider does not incur a cost in obtaining the intentional overfill 
amount. One commenter noted that statute, regulations, and policies 
effective since CY 1965 regarding the ``incident to'' provision have 
required the provider to incur costs in order to receive Medicare 
payment. Another commenter supported the proposal because it protects 
the Medicare Trust Fund and the taxpayer, reduces fraud and abuse, and 
ensures quality patient care by reducing the influence of profit rather 
than clinical efficacy on medical decisions for the patient. One 
commenter agreed with the CMS proposal because of the variations in the 
amount of overfill that could be found in each vial or packaging. This 
commenter also noted previous OIG reports that expressly excluded 
intentional overfill in the calculation of acquisition costs because of 
variability in the amount of and different practices for the use of 
overfill. Some commenters, in support of the proposal, mentioned 
ongoing litigation which alleges that some manufacturers provided 
kickbacks to providers by marketing and furnishing intentional overfill 
and encouraging providers to bill federal health care programs to 
increase the providers' profits and sales volumes for the drugs.
    Response: We appreciate the comments in support of our proposal. We 
believe these comments help to illustrate the variety of perspectives 
regarding overfill.
    Comments: Several commenters expressed concern that our proposed 
regulation changes are, in effect, a restriction on providers' ability 
to use intentional overfill. Comments emphasized that intentional 
overfill is provided to account for loss of drug during dosage 
preparation, and some comments noted that the FDA allows for 
intentional overfill to be included in the packaging to account for 
this loss of drug. Similarly, comments noted that current United States 
Pharmacopeia (USP) 797 standards for compounding sterile injections 
also allow for the use of overfill during drug preparation. Some 
comments suggested we work closely with the FDA and the USP to address 
the issue of intentional overfill in the manufacturing and packaging of 
the drugs. One comment suggested that we require providers to comply 
with USP 797 standards regarding the use of overfill. Commenters 
asserted that any regulation of intentional overfill should be imposed 
upon manufacturers rather than providers.
    Response: We disagree with the commenters that believe our proposal 
would restrict the clinical use of intentional overfill. The comments 
that suggest that we impose requirements or implement standards 
regarding the amount or clinical use of overfill are beyond the scope 
of this rulemaking. In response to the commenters' concerns, however, 
we believe it is necessary to reiterate the distinction between the 
amount of drug product that is contained in a vial or other packaging 
for use in the care of a beneficiary and the amount of drug product 
that manufacturers report to CMS for pricing purposes and used to 
calculate payment limits under section 1847A of the Act. Our policy 
discussion is limited to the latter issue. Our policy is not intended 
to allow, prohibit, or otherwise regulate the amount of overfill that 
manufacturers include in a container, or how that overfill is used in 
clinical practice. Indeed, we do not have the authority to regulate the 
manufacturing of drugs or biologicals or the practice of medicine. The 
appropriate use of drug products, including sterile products, depends 
on numerous factors, including, but not limited to: approved labeling, 
State law, the setting in which the product is prepared and used, how 
the product is stored, sterility, and chemical stability. For many 
drugs, overfill quantities are small and are not completely used. In 
many settings, harvesting small amounts of overfill, when appropriate, 
can make up for doses that are lost or are discarded because of an 
error, short stability, or accidental contamination, for example. Our 
proposal does not pertain to, or apply to, any of these issues. The 
intent of this proposal is merely to clarify that the Medicare ASP 
payment limit is based on the amount of drug conspicuously indicated on 
the FDA label, and that no payment will be made for any intentional 
overfill included as free drug for the proper preparation of a single 
therapeutic dose.
    Comments: Some commenters estimated significant increases in 
Medicare costs if the proposal is finalized. These estimates were based 
on concerns that our policy would prohibit the use of overfill. These 
commenters emphasized that providers would be required to use 
additional vials and drugs if the use of intentional overfill were 
prohibited. They stated that the proposal will not reduce Medicare 
costs, but will transfer the costs associated with intentional overfill 
from the pharmaceutical companies to the providers and, in turn, to the 
Medicare and its beneficiaries. Several commenters stated that 
providers minimize wastage and cost through the use of intentional 
overfill and efforts to schedule patients efficiently.
    Response: Because we disagree that our proposal limits utilization 
of overfill, we accordingly disagree that our proposal will increase 
costs. We are not prohibiting the use of overfill, thus we do not 
anticipate providers or other entities buying additional amounts of 
drug as a result of this policy. Further, we do not believe that our 
policy will require significant changes in procedures or practices for 
most providers and suppliers because most providers and suppliers use 
overfill in clinically appropriate circumstances, and we therefore do 
not believe that our policy will cause them to incur significant costs 
on that basis.
    However, as we stated in our proposal, we believe it is 
inappropriate for a provider or supplier to bill Medicare for any 
amount of intentional overfill beyond the labeled amount in a single-
use vial or package, and we agree with the commenters that such 
inappropriate billing does not occur routinely.
    Comments: Several commenters expressed concern that the proposed 
intentional overfill policy may cause lower reimbursement rates for 
overhead costs relating to procurement, preparation, and dispensing of 
affected drugs. Several comments expressed concern about the burden of 
tracking doses that are prepared as a service for providers who bill 
under Medicare Part B. Some commenters stated that the intentional 
overfill proposal is impossible to apply to multi-dose vials or 
packages, and will cause unnecessary administrative burden to maintain 
accurate inventory and medical records regarding overfill and drug 
wastage from single-dose vials.

[[Page 73468]]

    Response: We disagree with these comments. As we stated previously, 
our policy on intentional overfill pertains to payment under section 
1847A of the Act--it is not an attempt to mandate or direct how the 
contents of a drug product package are used. Our policy relates to the 
providers and suppliers who furnish drugs or biologicals under Part B 
and who bill for such services. We have no authority under section 
1847A of the Act to dictate how entities that prepare and sell doses of 
drugs for use in various clinical settings set their rates. We would 
expect that providers and suppliers who purchase prepared doses from 
these entities have incurred a cost for them. For these reasons, we do 
not anticipate that our policy will affect entities that do not bill 
separately for Part B drugs, such as entities that prepare doses of 
sterile products for sale to providers or suppliers who bill Medicare 
for the drug.
    This proposal also is not intended to affect the current cost or 
waste-saving batch processes in place when using multiple-dose vials or 
packages. Instead, the intent of this proposal is to clarify that the 
ASP payment limit is currently based on the amount of drug indicated on 
the FDA label, and that no payment will be made for any intentional 
overfill.
    We expect that providers will continue to maintain accurate medical 
records for all beneficiaries as well as accurate inventory records of 
all drugs that were actually purchased and appropriately billed to 
Medicare.
    Comment: One commenter noted an increased burden upon CMS to 
examine the beneficiaries' records to verify that no intentional 
overfill was billed to Medicare.
    Response: For the reasons stated above, we do not believe that our 
proposal will significantly affect procedures used in most clinical 
settings. We therefore do not expect an additional burden for the 
agency to track and monitor this policy beyond the procedures that are 
in place right now.
    Comment: One commenter noted that the proposal is contrary to our 
current policy regarding discarded drugs and specifically stated that 
billing Medicare for discarded drug is only appropriate for single-use 
vials, and that the provider must make good faith efforts to schedule 
patients to efficiently deliver the drugs to patients in a clinically 
appropriate manner, and that any discarded drug amount billed to 
Medicare must not be used on any other patient.
    Response: We disagree with this comment. Although our policy on 
discarded drugs may appear to be similar to our proposed policy for 
overfill (in that they both pertain to how providers and suppliers deal 
with drug product that remains in a package after a dose has been 
administered), there is a key distinction. Our policy on discarded 
drugs acknowledges that providers and suppliers acting in good faith to 
minimize wastage should not be financially burdened when, for clinical 
reasons, it is not possible or advisable to use the full labeled amount 
of drug product in a single-use vial--in other words, we permit, in 
limited circumstances, billing for drugs for which the provider or 
supplier incurred a cost, but that the provider or supplier did not 
administer. In contrast, our policy on intentional overfill applies to 
drug product for which the provider or supplier did not incur a cost, 
that is, amounts of drug that are beyond the labeled amount. Thus, in 
addition to complying with the overfill policy, we expect providers to 
continue to make good faith efforts to efficiently minimize the amount 
of discarded drug by facilitating clinically appropriate methods of 
administering the required dose to each beneficiary and is consistent 
with the discarded drug policy in Chapter 17 Section 40 of the Medicare 
Claims Processing Manual (http://www.cms.gov/manuals/downloads/clm104c17.pdf).
    Comments: Several commenters agreed with our position that 
intentional overfill is considered free product for which the provider 
did not incur a cost. However, other commenters stated that the 
purchase of a drug includes not only the amount of drug identified on 
the FDA label, but also encompasses the entire package including 
accompanying items such as syringes, diluents, and intentional overfill 
that is required to assure the drug is prepared and administered 
properly. One commenter suggested that it is more appropriate to see 
any excessive overfill as an in-kind discount that reduces the per-unit 
price of a drug. This commenter believes that manufacturers have 
factored overfill into the pricing of their products and that providers 
indirectly pay for overfill regardless of its use. Some commenters also 
that intentional overfill is within the Discount Exception and Safe 
Harbor under the Anti-Kickback statute. These commenters believe that 
CMS should similarly interpret intentional overfill as a discount and 
require accurate reporting of the price of the item (taking into 
consideration the discount) by the manufacturer, but not should not 
require the provider to reduce the amount billed or refrain from 
billing for the overfill.
    Response: We acknowledge that drugs and biologicals are supplied in 
various containers or kits that include accessories and diluents, as 
well as a variable amount of intentional overfill to ensure that the 
single dose is prepared and administered appropriately. Sections 
1847A(b)(2) and (b)(5) of the Act require that payment limit 
calculations be carried out without regard to any diluents or special 
packaging for the drug. We believe these statutory provisions support 
our position that overfill is not an in-kind discount. Further, we have 
authority under section 1847A(c)(3) of the Act to identify price 
concessions that must be included in the ASP calculation. However, we 
have a practical reason for declining to consider overfill to be a 
discount for purposes of the ASP calculation--namely, operational 
feasibility. The amount of overfill in vials varies from drug to drug 
and often is not easily or consistently quantifiable because actual 
fill amounts may also vary slightly due to the manufacturing process. 
In contrast, manufacturer sales data, ASP calculations, and ASP payment 
limits use exact quantities of drug that are represented by exact 
monetary values. Payment limits are currently calculated using the 
amount of drug that is reported by manufacturers to CMS each quarter. 
We base our price, in part, on the quantity indicated on the drug 
package, which does not indicate an overfill amount. The calculation of 
the Medicare payment limit is based on the reported data from the 
manufacturer. We do not have access to information that would permit us 
to account for overfill in the ASP calculation. Further, we are 
concerned that attempting to account for a variable amount of overfill 
could result in price instability or inaccuracy.
    The application of safe harbor provisions to this proposal is 
outside the scope of this rule.
    Comments: Some commenters suggested the issue of intentional 
overfill should be addressed in the ASP calculations. One commenter 
specifically suggested that the ASP calculation methodology be changed 
to consider intentional overfill when defining the units relevant to 
the calculation of the Medicare payment limit per billing code.
    Response: Manufacturers are currently reporting ASP and sales data 
based on the labeled amount of the drug product. The intent of this 
proposal is to clarify that the ASP payment limit is based on the 
amount of drug clearly identified as the amount on the FDA label and 
packaging. We do not intend to change the ASP calculation

[[Page 73469]]

methodology to include intentional overfill because of the operational 
difficulty in accurately identifying the amount of overfill.
    Comments: Many commenters suggested CMS clarify the applicability 
of the proposal to specific providers. Other commenters suggested that 
the proposal be applied and enforced prospectively only in the 
physician office setting and not in hospitals or other provider 
settings. Another commenter noted that drugs furnished in the 
outpatient department are reimbursed based on ASP when separately 
payable, and requests clarification regarding whether this proposal 
must be required of hospital outpatient clinics paid under the Hospital 
Outpatient Prospective Payment System (OPPS). This commenter also 
requested that CMS clarify whether this proposal applies to acute care 
hospitals, skilled nursing facilities, dialysis facilities and other 
providers or suppliers of services under bundled payment methodologies. 
Another commenter requested the proposal not be applied to dialysis 
facilities. The commenter stated that intentional overfill is included 
in their costs reports, that the ``incident-to'' provision does not 
apply to dialysis facilities, and that the policy may cause confusion 
during the transition into the new End Stage Renal Disease payment 
bundle.
    Response: Section 1847A(a)(1) of the Act specifies that the ASP 
methodology applies to drugs or biologicals described in section 
1842(o)(1)(C) of the Act, which indicates that the ASP-based payment 
limit in 1847A of the Act affects a physician, supplier or any other 
person that bills for Part B covered drugs that are not paid under a 
cost or prospective payment system. We did not propose to change the 
manner in which we calculate ASP-based payment limits to reflect the 
setting in which the drug was provided, and we believe that not only 
would such a policy be unduly complicated, but also would likely be 
beyond our authority under the ASP statute. We note that regardless of 
the benefit category for a drug or biological, if it is paid under 
section 1847A of the Act, we calculate the payment limit without regard 
to overfill--thus, the fact that certain providers or suppliers do not 
furnish drugs on an ``incident to'' basis is irrelevant to our policy 
for the ASP calculation. This rule's scope is limited to the payment of 
overfill under section 1847A of the Act.
    Comment: One comment suggested that we encourage providers to the 
use intentional overfill and bill Medicare only for the amount 
administered to the patient, but not the wasted amount. The commenter 
also suggested that drug billing code increments be reduced for those 
drugs that are dosed in smaller amounts than what is currently on the 
billing code. For example, if a patient dose is 710mg but the billing 
increment is 100mg, then the provider must bill Medicare for 800mg and 
waste the left over 90mg.
    Response: We are continuing to work closely to review all billing 
codes to assure that such codes describe drugs at the most clinically 
appropriate dosage descriptors. As stated in the discarded drug policy 
(Chapter 17 Section 40 of the Medicare Claims Processing Manual; http://www.cms.gov/manuals/downloads/clm104c17.pdf), Medicare will continue 
to make payment for the administered amount of drug plus any 
appropriately discarded drug that sums to the labeled amount on a 
single-use vial or package.
    Comments: Some commenters disagree that Medicare has a longstanding 
policy that an expense must be incurred by the provider in order for 
payment to be made by Medicare. One commenter stated that there is no 
existing law or regulation that prohibits a provider from billing for 
intentional overfill or for any free product. This commenter further 
discussed previous OIG reports that identified providers were using 
intentional overfill which would alter their costs, and added that CMS 
did not express any concerns about these overfill utilization 
practices. Another commenter recommended that CMS determine overfill 
amounts for all injectable drugs and validate whether excess product 
pooled from more than one container and billed to Medicare does not 
represent a cost to the provider.
    Response: We believe our preamble adequately describes the 
longstanding Medicare policy based upon section 1861(s)(2)(A) of the 
Act. We maintain that services or supplies reimbursed by Medicare under 
the ``incident-to'' provision should represent an expense incurred by 
the physician or entity billing for the drugs, services or supplies. 
Our policy clarifies that we will not pay for intentional overfill. For 
reasons described elsewhere in this preamble, we do not intend to track 
overfill amounts for injectable drugs.
    Comments: Some commenters requested that CMS define what is meant 
by ``intentional'' overfill since many injectable drugs include a 
variable amount of overfill to allow the labeled dose to be 
appropriately prepared and administered to the patient. One comment 
cited that the USP recommends a 10 percent overfill by volume for 
liquid medicines, and stated that the example in the proposal 
describing a 100 percent overfill is inconsistent with USP guidelines.
    Response: We described ``intentional'' overfill in the proposed 
rule (75 FR 40155) and we agree that the amount of intentional overfill 
may vary from product to product; however, we are not aware of an 
absolute limit on the amount of overfill. In summary, the preamble 
describes intentional overfill as any amount of drug greater than the 
amount identified on the conspicuous FDA approved label on the outside 
of the package, and characterizes overfill as excess or free product 
that does not represent a cost to the provider.
    After reviewing the public comments, we are finalizing our proposal 
to update our regulations at 42 CFR part 414 Subpart J to clearly state 
that Medicare ASP payment limits are based on the amount of product in 
the vial or container as reflected on the FDA-approved label, and 
Subpart K to clearly state that payment for amounts of product in 
excess of the amount reflected on the FDA-approved label, will not be 
made under Medicare. We are finalizing the regulations as proposed. 
These provisions will be effective January 1, 2011.
4. Widely Available Market Price (WAMP)/Average Manufacturer Price 
(AMP)
    Section 1847A(d)(1) of the Act states that ``The Inspector General 
of HHS shall conduct studies, which may include surveys to determine 
the widely available market prices (WAMP) of drugs and biologicals to 
which this section applies, as the Inspector General, in consultation 
with the Secretary, determines to be appropriate.'' Section 1847A 
(d)(2) of the Act states, ``Based upon such studies and other data for 
drugs and biologicals, the Inspector General shall compare the ASP 
under this section for drugs and biologicals with--
    <bullet> The widely available market price (WAMP) for these drugs 
and biologicals (if any); and
    <bullet> The average manufacturer price (AMP) (as determined under 
section 1927(k) (1) of the Act) for such drugs and biologicals.''
    Section 1847A(d)(3)(A) of The Act states, ``The Secretary may 
disregard the ASP for a drug or biological that exceeds the WAMP or the 
AMP for such drug or biological by the applicable threshold percentage 
(as defined in subparagraph (B)).'' Section 1847A(d)(3)(C) of the Act 
states that if the Inspector General (OIG) finds that the ASP for a 
drug or

[[Page 73470]]

biological is found to have exceeded the WAMP or AMP by this threshold 
percentage, the OIG ``shall inform the Secretary (at such times as the 
Secretary may specify to carry out this subparagraph) and the Secretary 
shall, effective as of the next quarter, substitute for the amount of 
payment otherwise determined under this section for such drug or 
biological, the lesser of--(i) the widely available market price for 
the drug or biological (if any); or (ii) 103 percent of the average 
manufacturer price.* * *''
    The applicable threshold percentage is specified in section 
1847A(d)(3)(B)(i) of the Act as 5 percent for CY 2005. For CY 2006 and 
subsequent years, section 1847A(d)(3)(B)(ii) of the Act establishes 
that the applicable threshold percentage is ``the percentage applied 
under this subparagraph subject to such adjustment as the Secretary may 
specify for the WAMP or the AMP, or both.'' In the CY 2006 (70 FR 
70222), CY 2007 (71 FR 69680), CY 2008 (72 FR 66258), CY 2009 (73 FR 
69752), and CY 2010 (74 FR 61904) PFS final rules with comment period, 
we specified an applicable threshold percentage of 5 percent for both 
the WAMP and AMP. We based this decision on the fact that data was too 
limited to support an adjustment to the current applicable threshold 
percentage.
    For CY 2011, we proposed to specify two separate adjustments to the 
applicable threshold percentages. When making comparisons to the WAMP, 
we proposed the applicable threshold percentage to remain at 5 percent. 
The applicable threshold percentage for the AMP is addressed below in 
this section of the preamble. Although the latest WAMP comparison was 
published in 2008, the OIG is continuing to perform studies comparing 
ASP to WAMP. Based on available OIG reports that have been published 
comparing WAMP to ASP, we do not have sufficient information to 
determine that the 5 percent threshold percentage is inappropriate. As 
a result, we believe that continuing the 5 percent applicable threshold 
percentage for the WAMP is appropriate for CY 2011. Therefore, we 
proposed to revise Sec.  414.904(d)(3) to include the CY 2011 date.
    As we noted in the CY 2010 PFS final rule with comment period (74 
FR 61904), we understand that there are complicated operational issues 
associated with this policy. We continue to proceed cautiously in this 
area. We remain committed to providing stakeholders, including 
providers and manufacturers of drugs impacted by potential price 
substitutions with adequate notice of our intentions regarding such, 
including the opportunity to provide input with regard to the processes 
for substituting the WAMP for the ASP.
    We solicited comments on our proposal to continue the applicable 
threshold percentage at 5 percent for the WAMP for 2011.
    The following is a summary of the comments we received and our 
responses:
    Comment: Several commenters supported maintaining the threshold at 
5 percent. Other commenters commended CMS for the cautious approach 
toward determining price substitutions based on WAMP to ASP 
comparisons, and supported the exclusion of WAMP from the price 
substitution proposal discussed elsewhere in this rule. One comment 
suggested the AMP threshold be increased to reflect recent changes to 
the definition of AMP but did not provide a specific percentage. One 
commenter suggested that OIG also review whether existing discrepancies 
in the various reporting rules for bundled arrangements and price 
concessions have impacted the reported pricing for the same products 
under AMP and ASP.
    Response: We appreciate the comments supporting the continuation of 
the 5 percent threshold. As we noted in the CY 2010 PFS rule (74 FR 
61904), we understand there are complex operational issues associated 
with potential payment substitutions. We will continue to proceed 
cautiously in this area and provide stakeholders, particularly 
manufacturers of drugs impacted by potential price substitutions, with 
adequate notice of our intentions regarding such, include the 
opportunity to provide input with regard to the processes for 
substituting the WAMP or the AMP for the ASP. As part of our approach 
we intend to continue to work closely with the OIG to develop a better 
understanding of the issues that may be related to certain drugs for 
which the WAMP and AMP may be lower than the ASP over time.
    After reviewing the public comments, we are finalizing our proposal 
to continue the 5 percent WAMP threshold for CY2011.
5. AMP Threshold and Price Substitutions
    As mentioned elsewhere in this final rule with comment period, when 
making comparisons of ASP to AMP, the applicable threshold percentage 
for CY 2005 was specified in statute as 5 percent. Section 1847A(d)(3) 
of the Act allows the Secretary to specify adjustments to this 
threshold percentage for years subsequent to 2005, and to specify the 
timing for any price substitution. For CY 2006 (70 FR 70222) CY 2007 
(71 FR 69680), CY 2008 (72 FR 66258), CY 2009 (73 FR 69752), and CY 
2010 (74 FR 61904), the Secretary made no adjustments to the threshold 
percentage; it remained at 5 percent.
    For CY 2011, we proposed with respect to AMP substitution to apply 
the applicable percentage subject to certain adjustment such that 
comparisons of ASP to AMP will only be made when the ASP exceeds the 
AMP by 5 percent in two consecutive quarters immediately prior to the 
current pricing quarter, or three of the previous four quarters 
immediately prior to the current quarter. We further proposed to apply 
the applicable AMP threshold percentage only for those situations where 
AMP and ASP comparisons are based on the same set of NDCs for a billing 
code (that is, ``complete'' AMP data).
    Furthermore, we proposed a price substitution policy to substitute 
103 percent of AMP for 106 percent of ASP for both multiple and single 
source drugs and biologicals as defined respectively at section 
1847(A)(c)(6)(C) and (D) of the Act. Specifically, we proposed that 
this substitution:
    <bullet> Would occur when the applicable percentage has been 
satisfied for a number of calendar quarters as discussed elsewhere in 
this rule (that is, for two consecutive quarters immediately prior to 
the current pricing quarter, or three of the previous four quarters 
immediately prior to the current quarter);
    <bullet> Would permit for a final comparison between the OIG's 
volume-weighted 103 percent of AMP for a billing code (calculated from 
the prior quarter's data) and the billing code's volume weighted 106 
percent ASP, as calculated by CMS, for the current quarter to avoid a 
situation in which the Secretary would inadvertently raise the Medicare 
payment limit through this price substitution policy; and
    <bullet> That the duration of the price substitution would last for 
only one quarter.
    We also sought comment on other issues related to the comparison 
between ASP and AMP, such as:
    <bullet> Any effect of definitional differences between AMP and 
ASP, particularly in light of the revised definition of AMP per the 
ACA;
    <bullet> The impact of any differences in AMP and ASP reporting by 
manufacturers on price substitution comparisons; and,
    <bullet> Whether and/or how general differences and similarities 
between

[[Page 73471]]

AMP and manufacturer's ASP would affect comparisons between these two.
    Comment: CMS received a number of comments pertaining to its 
proposals regarding the AMP threshold. Some commenters generally agreed 
that any proposal should be transparent, cautious, and should account 
for inter-quarter price fluctuations. Some commenters also supported 
our proposal to limit the price substitution to those HCPCS codes for 
which ASP and AMP comparisons are based on the same set of NDCs. One 
commenter requested that CMS specifically note that the volume used to 
calculate the volume-weighted AMP is identical to that used in the 
calculation of the volume-weighted ASP. Other commenters supported 
maintaining the applicable threshold at 5 percent for CY 2011.
    Response: We appreciate the comments regarding our proposed AMP 
threshold policies. Since the publication of the PFS proposed rule, the 
preliminary injunction issued by the United States District Court for 
the District of Columbia in National Association of Chain Drug Stores 
et al. v. Health and Human Services, Civil Action No. 1:07-cv-02017 
(RCL) is still in effect. Additionally, CMS continues to expect to 
develop regulations that will implement the provisions of section 2503 
of the ACA, which amended the definition of AMP. Moreover, section 202 
of the Federal Aviation Administration Air Transportation Modernization 
and Safety Improvement Act (Pub. L. 111-226), (enacted on August 10, 
2010) has further amended section 1927(k) of the Act. Finally, on 
September 3, 2010, we proposed to withdraw certain provisions of the 
AMP final rule published on July 17, 2007 (75 FR 54073).
    In light of these factors and comments received, we are finalizing 
our proposal that the AMP applicable threshold be 5 percent for CY 
2011. However, we are not finalizing our proposed adjustments to the 5 
percent AMP threshold that would specifically apply the applicable 
percentage such that comparisons of ASP to AMP will only be made when--
    <bullet> The ASP exceeds the AMP by 5 percent in two consecutive 
quarters immediately prior to the current pricing quarter, or three of 
the previous four quarters immediately prior to the current quarter; 
and
    <bullet> For those situations where AMP and ASP comparisons are 
based on the same set of NDCs for a billing code (that is, ``complete'' 
AMP data).
    We appreciate the submitted comments and will take them into 
account when we revisit the price substitution and AMP threshold issues 
in future rulemaking.
    Comment: We received a number of comments regarding our price 
substitution proposed policies. Some commenters supported our proposal 
that any substitution would last only for a single quarter. The 
majority of commenters requested that any proposal should not be 
implemented until after CMS published regulations on the revised 
definition of AMP. A few commenters also recommended that CMS provide 
adequate notice to manufacturers prior to making a price substitution. 
One commenter suggested that additional OIG comparison studies are 
needed to examine the impact of the new definition of AMP. Several 
commenters requested clarification on and suggested changes to our 
proposed regulatory language. Another commenter requested clarification 
on the timing of price substitutions and suggested that any price 
substitution policies should not be implemented until the lag time 
between when the comparison is made and when the substitution would be 
implemented was decreased. One commenter noted that the OIG studies are 
not a reliable indicator of predicted savings since the substitution 
timeframes within the studies differed from that in our proposal. All 
commenters agreed that any price substitution policy should not be 
implemented until after the preliminary injunction is vacated.
    Moreover, several commenters provided additional information 
related to the comparison between ASP and AMP, including:
    <bullet> How ASP and AMP each encompass different sales and rebate 
data and are calculated based on differing statutory definitions;
    <bullet> The impact of restated AMP data on comparisons; and
    <bullet> The effect of price substitutions on physician acquisition 
of drugs.
    Response: We appreciate the comments submitted regarding our price 
substitution proposal. As discussed above, recent legislative and 
regulatory changes have further affected this issue.
    After careful review and consideration of the comments received, we 
will not be finalizing our price substitution proposal at this time and 
thus we will not be finalizing the proposed regulation text at section 
414.904(d). Specifically, we are not finalizing our proposal for a 
policy to substitute 103 percent of AMP for 106 percent of ASP for both 
multiple and single source drugs and biologicals as defined 
respectively at section 1847(A)(c)(6)(C) and (D) of the Act. This 
proposal specifically would have--
    <bullet> Occurred when the applicable percentage had been satisfied 
for a number of calendar quarters as discussed elsewhere in this rule;
    <bullet> Permitted for a final comparison between the OIG's volume-
weighted 103 percent of AMP for a billing code (calculated from the 
prior quarter's data) and the billing code's volume weighted 106 
percent ASP, as calculated by CMS, for the current quarter to avoid a 
situation in which the Secretary would inadvertently raise the Medicare 
payment limit through this price substitution policy; and
    <bullet> Had the duration of the price substitution lasting for 
only one quarter.
    We are finalizing the portion of our proposal that sets the AMP 
threshold at 5 percent CY2011 and have revised the regulations text 
accordingly. We remain committed to proceeding cautiously as we 
continue to evaluate the impact of any future policy developments in 
this area.
6. Out of Scope Comments
    We received comments pertaining to: (1) Part B payment for insulin; 
(2) bona fide service fees; (3) price concessions and bundled 
arrangements in the calculation of manufacturer ASP data; (4) updating 
supplying and dispensing fees for Part B drugs; (5) developing 
standards for manufacturers to not submit related ASP data; (6) low 
reimbursement in a HCPCS-based claims systems for pharmacies; (7) 
claims processing, claims rejection, and payment delays in Medicare 
Part B as compared to Part D; and (8) publishing reimbursement rates 
for radiopharmaceuticals on contractor Web sites. These comments are 
outside the scope of this rule, and therefore are not addressed in this 
final rule with comment period.

B. Ambulance Fee Schedule Issue: Policy for Reporting Units When 
Billing for Ambulance Fractional Mileage

    Under the ambulance fee schedule, the Medicare program pays for 
transportation services for Medicare beneficiaries when other means of 
transportation are contraindicated and all other applicable medical 
necessity requirements are met. Ambulance services are classified into 
different levels of ground (including water) and air ambulance services 
based on the medically necessary treatment provided during transport. 
These services include the following levels of service:
    <bullet> For Ground--
    ++ Basic Life Support (BLS) (emergency and nonemergency).
    ++ Advanced Life Support, Level 1 (ALS1) (emergency and 
nonemergency).

[[Page 73472]]

    ++ Advanced Life Support, Level 2 (ALS2).
    ++ Specialty Care Transport (SCT).
    ++ Paramedic ALS Intercept (PI).
    <bullet> For Air--
    ++ Fixed Wing Air Ambulance (FW).
    ++ Rotary Wing Air Ambulance (RW).
1. History of Medicare Ambulance Services
a. Statutory Coverage of Ambulance Services
    Under sections 1834(l) and 1861(s)(7) of the Act, Medicare Part B 
(Supplementary Medical Insurance) covers and pays for ambulance 
services, to the extent prescribed in regulations, when the use of 
other methods of transportation would be contraindicated by the 
beneficiary's medical condition. The House Ways and Means Committee and 
Senate Finance Committee Reports that accompanied the 1965 Social 
Security Amendments suggest that the Congress intended that--
    <bullet> The ambulance benefit cover transportation services only 
if other means of transportation are contraindicated by the 
beneficiary's medical condition; and
    <bullet> Only ambulance service to local facilities be covered 
unless necessary services are not available locally, in which case, 
transportation to the nearest facility furnishing those services is 
covered (H.R. Rep. No. 213, 89th Cong., 1st Sess. 37 and Rep. No. 404, 
89th Cong., 1st Sess. Pt 1, 43 (1965)).
    The reports indicate that transportation may also be provided from 
one hospital to another, to the beneficiary's home, or to an extended 
care facility.
b. Medicare Regulations for Ambulance Services
    Our regulations relating to ambulance services are set forth at 42 
CFR part 410, subpart B, and 42 CFR part 414, subpart H. Section 
410.10(i) lists ambulance services as one of the covered medical and 
other health services under Medicare Part B. Therefore, ambulance 
services are subject to basic conditions and limitations set forth at 
Sec.  410.12 and to specific conditions and limitations as specified in 
Sec.  410.40 and Sec.  410.41. Part 414, subpart H, describes how 
payment is made for ambulance services covered by Medicare.
2. Mileage Reporting--Provisions of the CY 2011 Proposed Rule
    In the CY 2011 PFS proposed rule (75 FR 40159-40161, issued July 
13, 2010), we proposed that, effective for claims with dates of service 
on and after January 1, 2011, ambulance providers and suppliers would 
be required to report mileage rounded up to the nearest tenth of a mile 
on all claims for mileage totaling up to 100 covered miles, as further 
discussed below. We stated that we would revise the instructions set 
forth in our Claims Processing Manual to reflect the revised billing 
procedures. In this section, we describe our proposals in the CY 2011 
PFS proposed rule, including the background and current process for 
reporting ambulance mileage, the proposed fractional mileage billing 
policy, and our reasons for proposing revisions to the current mileage 
reporting policy.
a. Background and Current Process for Reporting Ambulance Mileage
    Historically, the Medicare FFS claims processing system lacked the 
capability to accept and process fractional unit amounts reported in 
any claim format. Therefore, the standard for reporting units for 
ambulance mileage was to bill in whole number increments. Thus, if the 
total units of service for ambulance mileage included a fractional 
amount, providers and suppliers of ambulance services (hereafter 
referred to collectively as ``providers and suppliers'') were 
instructed to round the fraction up to the next whole number. Claims 
billed with fractional units of service were, at that time, returned as 
unprocessable as CMS' claims processing systems could not accept nor 
adjudicate fractional unit amounts properly.
    Consequently, in Change Request (CR) 1281 (Transmittal AB-00-88, 
issued on September 18, 2000), we instituted an operational procedure 
requiring whole-unit reporting of mileage on ambulance claims. 
Specifically, we instructed providers and suppliers that ``If mileage 
is billed, the miles must be whole numbers. If a trip has a fraction of 
a mile, round up to the nearest whole number.'' Our instructions also 
stated that ``1'' should be reported for trips totaling less than a 
single mile. This was an operational instruction based on Medicare's 
FFS system limitations and capabilities at the time, as our claims 
processing systems were not capable of accepting and processing claims 
submitted with fractional units of service. Since then, our claims 
processing system functionality has evolved to the point where this 
rounding process is no longer necessary for ambulance transports, as it 
is now possible for our FFS systems to capture and accurately process 
fractional units on both paper and electronic forms.
    Based on our prior instructions, providers and suppliers continue 
to report loaded mileage as whole-number units on both paper and 
electronic claims. Providers and suppliers utilize the appropriate 
HCPCS code for ambulance mileage to report the number of miles traveled 
during a Medicare-covered trip rounded up to the nearest whole mile at 
a minimum of 1 unit for the purpose of determining payment for mileage. 
Transmittal AB-00-88 established a list of HCPCS codes accepted by 
Medicare for the purpose of billing mileage. Providers and suppliers 
were instructed to use these specific HCPCS codes and enter the total 
number of covered miles in the ``units'' field of the claim form. For 
example, if a covered trip from the point of pickup (POP) to the 
Medicare-approved destination (see Sec.  414.40 for a list of approved 
destinations) totaled 9.1 miles, the provider would enter the 
appropriate HCPCS code for covered mileage and a ``10'' in the units 
field. Providers and suppliers billing for trips totaling, for example, 
0.5 covered miles, would enter ``1'' in the units field along with the 
appropriate HCPCS code for mileage.
b. Concerns Regarding the Potential for Inaccuracies in Reporting Units 
and Associated Considerations
    Often an ambulance provider will transport a distance that is 
either not an exact whole number of miles or less than one whole mile 
during a covered trip. Based on our current instructions, providers and 
suppliers billing for ambulance services must round up the total 
billable mileage to the nearest whole mile for trips that include a 
fraction of a mile or less than one whole mile. Because of those 
instructions, a provider or supplier is required to bill as much as 0.9 
of a mile more than what was actually traveled.
    We have been contacted by suppliers on several occasions with 
concerns regarding our current instructions for reporting ambulance 
mileage. Certain suppliers believe that our instructions require them 
to bill inaccurately. One company in particular stated that they 
routinely need to bill for trips totaling less than 1 mile. The 
beneficiaries that are being transported by this company live in the 
immediate vicinity of the facility to which they are being transported, 
and therefore, the number of loaded miles for each trip totals 
approximately one half of a mile. The company was concerned that since 
Medicare requires that they enter a ``1'' in the units field of their 
claims for mileage, they are being overpaid by Medicare for mileage 
based on the service they actually provided.

[[Page 73473]]

    However, the company's main concern revolved around the risk of 
creating an appearance of impropriety. Although our instructions 
clearly state that providers and suppliers should, as a matter of 
procedure, round up fractional mileage amounts to the nearest whole 
mile, some providers and suppliers indicated that they wanted to bill 
as accurately as possible and that they only wanted to be paid for the 
service they actually provided. We thoroughly considered these concerns 
while reevaluating the procedure for reporting units for fractional 
mileage amounts.
    As we stated in the CY 2011 PFS proposed rule (75 FR 40160), our 
first priority in considering the issues raised by ambulance providers 
and suppliers was to ascertain the basis for the current mileage 
reporting instructions. As previously discussed, the original 
instructions for reporting fractional mileage were published in 
Transmittal AB-00-88, issued on September 18, 2000. We instructed 
providers and suppliers to round fractional mileage amounts ``up to the 
nearest whole mile'' and to enter ``1'' for fractional mileage totaling 
less than one mile. This particular process had also been in place 
prior to issuance of the transmittal. The reason for the procedure was 
that our claims processing systems were not capable of accepting and 
processing claims submitted with fractional units of service--even if 
the service was commonly measured in fractional amounts, as with 
ambulance mileage.
    In the CY 2011 PFS proposed rule (75 FR 40160), we then explored 
whether a change in our procedure would be: (1) Appropriate; (2) 
possible considering our current system capabilities and industry 
standards of measurement; and (3) applicable to any service other than 
ambulance mileage. As to the appropriateness of changing the procedure 
for reporting units of service on provider claims for fractional 
ambulance mileage, we stated in the proposed rule (75 FR 40160) that we 
believe that we should make every effort to create and implement 
policies and processes that create the best opportunity for accuracy in 
billing. It is not our intention to put providers and suppliers in a 
position where they are required to bill inaccurately for the service 
they provide. We continue to strive toward ensuring that providers and 
suppliers bill and are paid only for services actually provided. In the 
CY 2011 PFS proposed rule (75 FR 40160), we stated that we believe that 
changing our current procedure for reporting units of service to 
require reporting of fractional mileage will help to ensure that 
providers and suppliers can submit claims that more precisely reflect 
actual mileage, and are reimbursed more accurately for the services 
they actually provided. We originally instituted a policy of accepting 
and processing only whole units because at that time system limitations 
prevented us from accepting and processing fractional ambulance 
mileage.
    Second, we considered in the CY 2011 PFS proposed rule (75 FR 
40160) whether it is currently possible for our claims processing 
systems to accept and process fractional unit amounts on both paper and 
electronic claims. Upon reevaluating our system capabilities, we found 
that technological advancements in Optical Character Recognition (OCR) 
and electronic claim submission have made it possible for our FFS 
systems to capture and accurately process fractional units on both 
paper and electronic claims. We note that our systems currently have 
the capability to accept fractional units with accuracy up to as much 
as one thousandth of a unit (that is, to 3 decimal places).
    We also considered in the CY 2011 PFS proposed rule (75 FR 40160) 
whether ambulance providers and suppliers have the capability to 
measure fractional mileage. This was an important point because if 
providers and suppliers are not able to measure mileage with any more 
specificity than the nearest whole number mile, then there would be no 
need to modify the current procedure for billing fractional mileage. In 
that case, providers and suppliers would continue to report mileage as 
whole numbers since they could measure no more accurately than that. We 
stated in the proposed rule that both analog and digital motor vehicle 
odometers are designed to measure mileage accurately to within a 
minimum of a tenth of a mile. While we found that some vehicle 
odometers measure mileage more accurately than a tenth of a mile, most 
odometers are accurate to the nearest tenth of a mile. Additionally, 
aircraft geographic positioning system (GPS) technology provides the 
means to accurately determine billable mileage to the tenth of a mile.
    Third, we considered whether a policy of billing fractional units 
would be applicable to any other service besides ambulance mileage. The 
units of service field on both the electronic and paper claim is used 
to report the quantity of services or supplies provided to Medicare 
beneficiaries and is used to report a wide range of services and 
supplies including, but not limited to: number of office visits; 
anesthesia minutes; quantity of drugs administered; covered miles. 
Although Medicare currently makes payment based on fractional units for 
some services (for example, calculation of payment after conversion of 
anesthesia time reported in minutes to time units), there is currently 
no requirement that providers bill fractional units on the claim. We 
stated that if we were to implement a policy of requiring reporting of 
fractional units for other types of services or supplies, we would 
first need to evaluate whether it is possible to do so considering 
industry standards of measurement. As discussed in the CY 2011 PFS 
proposed rule (75 FR 40160), we found that providers and suppliers of 
ambulance services have the capability to determine fractional mileage 
using standard onboard equipment, that is, an odometer, GPS, and/or 
other similar equipment used to measure distance traveled. We stated 
that this would enable us to readily implement a fractional unit 
billing policy for ambulance mileage; whereas applicability to other 
areas (such as anesthesia, drugs, etc.) would require more analysis to 
determine whether a fractional unit billing policy is feasible, 
efficacious, and cost effective. Additionally, this issue was first 
raised by ambulance suppliers who were concerned about overbilling and 
being overpaid by Medicare. Therefore, we stated in the proposed rule 
(75 FR 40160) that we believe it is most reasonable to first address 
the area where concerns have been raised (that is, ambulance mileage) 
and consider applicability of this procedure to other types of services 
and items in the future.
    Finally, and perhaps most importantly, we considered that our 
claims processing system should be configured to process claims as 
accurately as possible so as to provide for more accurate payments and 
to safeguard Medicare dollars. As previously discussed, we found that 
ambulance providers and suppliers currently have the capability to 
measure mileage accurately to within a minimum of a tenth of a mile 
using devices (for example, odometers, and GPS technology, etc.) 
already equipped onboard their vehicles. We stated in the CY 2011 PFS 
proposed rule (75 FR 40160) that we believe that requiring ambulance 
providers and suppliers to round (and report) fractional ambulance 
mileage up to the next tenth of a mile strikes a proper balance between 
ensuring that the claims processing system adjudicates a claim as 
accurately as the system will permit without unduly burdening the 
ambulance community.

[[Page 73474]]

    Based on all of the considerations noted previously, we proposed 
that our claims processing instructions for submission of claims for 
ambulance mileage should be revised to reflect the current 
functionality of our claims processing systems so as to maximize the 
accuracy of claims payment, as further discussed in this section (75 FR 
40160).
c. Billing of Fractional Units for Mileage
    It is both reasonable and prudent that, in order to ensure accuracy 
of payment, we facilitate and allow submission of the most accurate 
information on all Medicare ambulance claims. Furthermore, since our 
claims processing systems are currently capable of accepting and 
processing fractional units of service, we believe that ambulance 
mileage should be billed to and paid by Medicare in fractional amounts 
to enhance payment accuracy. Based on all the considerations discussed 
previously, in the CY 2011 PFS proposed rule (75 FR 40161), we proposed 
to require that claims for mileage submitted by ambulance providers and 
suppliers for an ambulance transport (ground and air) be billed in 
fractional units, by rounding up to the nearest tenth of a mile (with 
the exception discussed below). As previously discussed, we believe 
that requiring ambulance providers and suppliers to round (and report) 
fractional mileage up to the next tenth of a mile would allow us to 
provide for more accurate claims payment without unduly burdening the 
ambulance community.
    Therefore, in the CY 2011 PFS proposed rule (75 FR 40161), we 
proposed that, effective for claims with dates of service on and after 
January 1, 2011, ambulance providers and suppliers would be required to 
report mileage rounded up to the nearest tenth of a mile for all claims 
for mileage totaling up to 100 covered miles. Providers and suppliers 
would submit fractional mileage using a decimal in the appropriate 
place (for example, 99.9). Since standard vehicle mileage (analog, 
digital, and GPS) is or can be calculated accurately to the nearest 
tenth of a mile, we proposed that the mileage billed to Medicare by 
ambulance providers and suppliers be reported by rounding up to the 
next tenth of a mile.
    We also stated in the proposed rule (75 FR 40161) that although the 
electronic claim formats can accommodate fractional mileage when 
mileage is equal to or greater than 100 covered miles (for example, 
100.0), the paper claim cannot. Because the Form CMS-1500 paper claim 
currently only supports four characters (including the decimal point) 
in the units field (Item 24G), we also proposed that mileage equal to 
or greater than 100 covered miles continue to be reported in whole 
number miles on both paper and electronic claims. We proposed that 
providers and suppliers would round up fractional mileage to the next 
whole number for mileage that exceeds 100 covered miles and report the 
resulting whole number in the units' field. We stated that we would 
revise the instructions set forth in our Claims Processing Manual to 
reflect the revised procedures for submitting and paying claims for 
fractional ambulance mileage.
3. Analysis of and Responses to Public Comments
    We received approximately 131 comments in response to the proposed 
rule. We received comments from, among others, public and private 
ambulance companies, national ambulance organizations, local fire and 
EMS departments as well as other interested parties such as attorneys 
and consultants. The responses we received pertained primarily to the 
proposed rule's financial and administrative impact, the impact on 
patient care, and the overall impact on the ambulance services 
industry. A summary of the comments and our responses are included 
below.
a. Basis for Reconsideration of the Ambulance Mileage Reporting 
Requirements
    Comment: A few commenters believed that the concerns discussed in 
the proposed rule regarding certain suppliers' belief that the current 
mileage reporting requirement forced them to bill inaccurately, were an 
attempt by CMS to achieve budgetary savings by using the concerns of a 
few companies as justification. These commenters stated that CMS should 
have addressed the suppliers' concerns by educating providers and 
suppliers about its current policy of rounding up to the next whole 
mile so that they would be aware that this billing practice is 
appropriate, and suggested that CMS include the current whole mile 
billing policy in the regulations to further reinforce this, rather 
than implement the new fractional mileage policy. They stated that any 
change to the ambulance mileage reporting requirement would be 
unreasonable and unfounded. The commenters believed that if accuracy 
was a priority, then CMS should have implemented the fractional mileage 
billing policy in Transmittal AB-00-88, issued September 18, 2000.
    Response: While the impetus for reconsidering our policy on 
ambulance mileage billing was the concerns raised by ambulance 
suppliers wishing to bill accurately, our basis for moving forward with 
the proposed policy was that the conditions that dictated the original 
mileage billing policy have now changed. As we stated in the proposed 
rule (75 FR 40160), technological advancements in our system 
capabilities enabled us to reconsider our policy for reporting 
ambulance mileage. We were originally not capable of receiving or 
processing fractional unit amounts on electronic or paper claims, and 
thus, initially, it was necessary to implement a policy that required 
providers and suppliers to round mileage up to the nearest whole mile--
even though that amount exceeded the miles actually traveled. As 
discussed in the CY 2011 PFS proposed rule (75 FR 40159), under the 
current policy, the result could be overpayment for mileage of up to 
0.9 of a mile.
    Therefore, this change to our policy regarding ambulance mileage 
billing represents a reasonable and appropriate change to improve 
payment accuracy. The fact that we did not implement such a policy in 
the Transmittal cited by commenters does not negate the fact that the 
change is both needed and appropriate. Again, the original policy for 
rounding mileage up to the nearest whole number mile was based on the 
fact that we could not capture and process fractional mileage on a 
Medicare claim. To ignore the current systems' capability to more 
accurately process claims than what was possible 10 years ago would 
unnecessarily perpetuate a less accurate method of processing claims 
and would result in less accurate payments than is possible with 
current system capabilities.
    For the reasons discussed previously and in the CY 2011 PFS 
proposed rule, we continue to believe that it is reasonable and 
appropriate to revise our claims processing instructions as discussed 
in the proposed rule to require that ambulance mileage be reported in 
fractional amounts by rounding up to the next tenth of a mile.
b. Appropriateness of Fractional Mileage Reporting Policy
    As we discussed in the CY 2011 PFS proposed rule (75 FR 40160), we 
believe that reporting of and payment based on fractional ambulance 
mileage is appropriate because it permits ambulance providers and 
suppliers to submit claims that more precisely reflect actual mileage 
and to be reimbursed more accurately for the services they provide. 
Although many

[[Page 73475]]

commenters agreed that billing and payment accuracy are important, 
commenters cited various concerns regarding the appropriateness of the 
policy.
(1) Statutory Compliance and Financial Impact of Fractional Mileage 
Policy
    Comment: Many commenters believed that the fractional mileage 
reporting policy does not adhere to the ``budget neutrality 
principles'' set forth in 42 U.S.C. 1395m(l)(3)(B). These commenters 
interpreted 42 U.S.C.1395m(l)(3)(B) as requiring that CMS pay the same 
amount for ambulance services after implementation of the fee schedule 
as it did prior to the fee schedule with an inflation adjustment, and 
stated that in order to comply with this statute, the fractional 
mileage policy must be implemented in a manner such that any savings 
generated by this policy are reinvested in the ambulance fee schedule.
    Furthermore, commenters asked that CMS comply with the 
``requirement and commitment made during negotiated rulemaking to 
ensure that no money is taken out of the system.'' Commenters cited to 
the February 27, 2002 final rule implementing the ambulance fee 
schedule, in which we stated that we would monitor payment data and 
make adjustments to the conversion factor (CF) if the actual experience 
under the fee schedule is significantly different from the assumptions 
used to establish the original CF. (67 FR 9102 and 9102). Several 
commenters stated that the fractional mileage policy alters the fee 
schedule and therefore requires reconsideration of the conversion 
factor (CF) used to set the ambulance fee schedule payment amounts so 
that no money is removed from the system. Some commenters believed that 
the policy will have a greater effect on ground ambulance services and 
recommended a greater proportional increase to the CF for ground 
ambulance transports versus air ambulance rates.
    Response: Section 1834(l)(3)(B) of the Act (42 U.S.C. 
1395m(l)(3)(B)) does not require that we pay the same aggregate amount 
for ambulance services after implementation of the fee schedule as we 
did before implementation of the ambulance fee schedule, or that we 
ensure that any savings generated by the fractional mileage policy be 
put back into the ambulance fee schedule. Rather, this statutory 
section sets forth the ambulance inflation factor to be used to update 
the ambulance fee schedule rates each year. Section 1834(l)(3)(B) of 
the Act requires that we set the ambulance fee schedule rates each year 
at the same level as the previous year increased by the percentage 
increase in the CPI-U (U.S. city average) for the 12-month period 
ending in June of the previous year (as discussed in section VI.P. of 
this final rule with comment period, effective January 1, 2011, the 
annual update to the fee schedule rates is subject to a productivity 
adjustment). We have interpreted this provision at Sec.  414.610(f) as 
requiring that the CF, the air ambulance rates and the mileage rates be 
updated annually by the ambulance inflation factor set forth in the 
statute. The fractional mileage billing policy does not alter the 
payment rates set under the ambulance fee schedule; rather, it is a 
change to our operational instructions for reporting ambulance mileage 
intended to improve billing and payment accuracy. After implementation 
of the fractional mileage billing policy, we will continue to update 
the rates each year as required by section 1834(l)(3)(B) of the Act, 
and thus we believe this policy is consistent with section 
1834(l)(3)(B) of the Act. Furthermore, we note that while section 
1834(l)(3)(A) of the Act required the Secretary to ensure that the 
aggregate amount of payments made for ambulance services during 2000 
(originally expected to be the first year of the ambulance fee 
schedule) did not exceed the aggregate amount of payments that would 
have been made for such services during such year absent the fee 
schedule, it did not set forth a budget neutrality requirement for 
subsequent years.
    While some commenters stated that the fractional mileage billing 
policy alters the fee schedule and therefore requires reconsideration 
of the conversion factor (CF) used to set the ambulance fee schedule 
payment amounts so that no money is removed from the system (citing to 
the February 27, 2002 final rule implementing the ambulance fee 
schedule), we believe that commenters have misunderstood our statements 
in the February 27, 2002 final rule. In the February 27, 2002 final 
rule, we stated that we would monitor payment data and make adjustments 
to the conversion factor (CF) if the actual experience under the fee 
schedule is significantly different from the assumptions used to 
establish the original CF as discussed in the February 27, 2002 final 
rule (67 FR 9102 and 9103).
    As stated previously, the fractional ambulance mileage billing 
policy does not change the rates under the ambulance fee schedule. 
Rather, it is a change to our operational procedures for reporting 
ambulance mileage intended to improve billing and payment accuracy. We 
do not believe that it is appropriate to adjust the CF or air ambulance 
rates as a result of this policy, as further discussed below.
    In the February 27, 2002 final rule implementing the ambulance fee 
schedule (67 FR 9102-9103, 9127, 9134), we stated that we would monitor 
the payment data and adjust the CF and the air ambulance rates if 
actual experience under the fee schedule proved to be significantly 
different from the assumptions used to determine the initial CF and air 
ambulance rates (for example, the relative volumes of the different 
levels of service (service mix) and the extent to which providers and 
suppliers charge below the fee schedule (low billers)). Thus, in the 
February 27, 2002 final rule, we finalized Sec.  414.610(g), which at 
that time stated, in part, that the ``Secretary will annually review 
rates and will adjust the CF and air ambulance rates if actual 
experience under the fee schedule is significantly different from the 
assumptions used to determine the initial CF and air ambulance rates.''
    In each of the 4 years following implementation of the ambulance 
fee schedule, we reevaluated the effects of the relative volume of 
different levels of ambulance service (service mix) and the extent to 
which ambulance providers and suppliers bill less than the ambulance 
fee schedule (low billers) to determine whether the assumptions used to 
set the CF were accurate when compared to actual billing data. We found 
only insignificant differences in the observed data versus our 
assumptions. The differences observed in any single year were not 
significant enough to warrant a change to the CF in any of the years we 
monitored. (See 71 FR 69624, 69717, and 69718). Consequently, in the 
December 1, 2006 final rule (71 FR 69717-69718), we discontinued our 
annual review of the original CF assumptions and the air ambulance 
rates, and revised Sec.  410.610(g) to state, in part, that the 
``Secretary monitors payment and billing data on an ongoing basis and 
adjusts the CF and air ambulance rates as appropriate to reflect actual 
practices under the fee schedule.''
    We do not believe that adjustments to the CF or the air ambulance 
rates are appropriate as a result of the fractional mileage billing 
policy. First, as discussed previously, the fractional mileage billing 
policy has no effect on the fee schedule rates; rather, it is an 
operational procedure for reporting ambulance mileage. Second, the 
purpose of this policy is to improve billing and payment accuracy for 
ambulance mileage. As discussed

[[Page 73476]]

previously, under the current whole mile reporting policy, ambulance 
providers and suppliers are billing as much as 0.9 of a mile more than 
what is actually traveled. Commenters suggest that adjustments to the 
CF and the air ambulance rates are necessary to make up for the fact 
that ambulance providers and suppliers will be permitted to round up 
only to the nearest tenth of a mile rather than the nearest whole mile, 
resulting in lower mileage reimbursement on some claims compared to 
under the current policy. The purpose of the fractional mileage billing 
policy is to provide for more accurate billing and payment for 
ambulance transports, which we do not believe can be achieved if we 
were to make the adjustments suggested by commenters. Furthermore, we 
note that the current regulation at Sec.  410.610(g) requires us to 
monitor billing and payment data and adjust the CF and air ambulance 
rates ``as appropriate'' to reflect actual practices under the fee 
schedule. This regulation does not require that we adjust the fee 
schedule rates prospectively each time we adopt operational procedures 
that differ from those in place prior to implementation of the fee 
schedule.
    Furthermore, we believe that the policy does not have a significant 
bearing on the original CF assumptions that were discussed in the 
February 27, 2002 final rule (67 FR 9102-03, 9115-16), and for this 
reason too, we do not believe that adjustments to the CF and air 
ambulance rates would be appropriate. Having reevaluated the CF during 
the 4 years after implementation of the ambulance fee schedule and 
finding no significant differences in the observed data versus our 
original assumptions, we believe that we will continue to find 
insignificant differences, if any at all, after implementation of the 
fractional mileage billing policy, such that changing the CF or air 
ambulance rates would be unnecessary.
    However, as required by Sec.  410.610(g), we will continue to 
monitor the billing and payment data on an ongoing basis, and will 
consider adjusting the CF and air ambulance rates in the future if (and 
to the extent) we determine appropriate to reflect actual experience 
under the fee schedule after the policy is implemented.
    Comment: The commenters believed that the proposed rule would lower 
ambulance reimbursement that is already too low and noted that the fee 
schedule rates have not been increased in the last 2 years. Most of the 
same commenters cited a May 2007 Government Accountability Office (GAO) 
report detailing GAO's research findings which indicated that 
Medicare's reimbursement for ambulance services averages between 6 
percent and 17 percent less than the cost to ambulance companies for 
the services they provide.
    Response: We reiterate that the fractional ambulance mileage 
billing policy does not change the ambulance fee schedule rates. The 
base payment rate and mileage reimbursement rate will not be changed by 
the fractional mileage billing policy. The fractional mileage billing 
policy is strictly an effort to improve billing and payment accuracy, 
and as such, we believe that it is both reasonable and appropriate to 
implement this policy.
    In response to the comment that the fee schedule rates have not 
been increased in the past 2 years, we note that the ambulance 
inflation factor for CY 2008 was 2.7 percent and in CY 2009 it was 
increased to 5 percent, and thus the CF, air ambulance rates and 
mileage rates were increased by 2.3 percent over the previous calendar 
year in accordance with the section 1834(l)(3)(B) of the Act. However, 
we recognize that the fee schedule rates were not increased in CY 2010 
because the CPI-U for the 12 month period ending with June 2009 was 
negative, resulting in no increase to the rates under the statutory 
formula set forth in section 1834(l)(3)(B) of the Act.
    The 2007 GAO report cited by commenters estimated that between 39 
percent and 56 percent of ambulance providers and suppliers will 
realize a profit under the ambulance fee schedule after expiration of 
the temporary payment provisions in the MMA. The GAO also noted in the 
same report that providers' expected Medicare margins will vary greatly 
depending on their ability to keep their operating cost low, and 
because of that variance, they were not able to conclude with any 
certainty whether providers and suppliers would see a decrease, 
increase, or no change in their profitability as it relates to the 
Medicare reimbursement rates after expiration of the temporary payment 
provisions in the MMA.
    We seriously considered the findings in the May 2007 GAO report 
and, although we were not bound to the GAO findings, we agreed with 
their recommendation that CMS monitor utilization of ambulance 
transports to ensure that Medicare payments are adequate to provide for 
beneficiary access to ambulance services, particularly in ``super 
rural'' areas. We note that in the years since the May 2007 GAO report, 
certain temporary payment provisions originally set forth in Sec.  414 
of the MMA have been increased and extended in subsequent legislation 
to address these issues. Specifically, Sec.  414(d) of the MMA added 
section 1834(l)(13) of the Act which set forth payment increases of 1 
percent and 2 percent for urban and rural ground transports, 
respectively. Section 146(a) of the MIPPA modified section 1834(l)(13) 
of the Act to increase these percentages to 2 percent and 3 percent for 
urban and rural transports, respectively, and to extend these increases 
through December 31, 2009. Subsequently, sections 3105(a) and 10311(a) 
of the ACA extended these increases through December 31, 2010. 
Furthermore, section 414(c) of the MMA added section 1834(l)(12) of the 
Act which provided a ``super rural'' bonus for certain ground 
transports that originate in qualified rural areas effective through 
December 31, 2009. Sections 3105(c) and 10311(c) of the ACA extended 
this super rural bonus through December 31, 2010. Finally, we note that 
section 146(b)(1) of the MIPPA, as amended by sections 3105(b) and 
10311(b) of the ACA, provides that any area that was designated as a 
rural area for purposes of making payment for air ambulance services 
furnished on December 31, 2006, shall continue to be treated as a rural 
area for purposes of making payment for air ambulance services 
furnished during the period July 1, 2008 through December 31, 2010. We 
have implemented these payment add-ons in Sec.  414.610(c)(1), 
(c)(5)(ii) and (h), respectively.
    Comment: Several commenters stated that cutting already low 
reimbursement rates for ambulance providers and suppliers would result 
in cutbacks that would make it difficult to stay in business and would, 
therefore, have a negative impact on patient care. Many commenters also 
noted that smaller companies would be impacted the most by lowered 
reimbursement rates, stating that small companies need the extra 
revenue to stay in business. Some commenters suggested that mileage 
charges are the only means ambulance providers and suppliers have of 
recovering increasing, variable costs for ancillaries--such as oxygen 
supplies, disposable supplies, etc.--that are not separately payable 
under the fee schedule. Other commenters believed that reporting 
mileage more accurately will be too costly and would increase the cost 
of doing business. Another commenter responded that the payment made 
for mileage represents payment for the variable cost of transporting 
patients and that even short trips have a cost associated with them. 
The same

[[Page 73477]]

commenter pointed out that lowering the mileage reimbursement would not 
adequately reimburse ambulance providers and suppliers for the cost of 
transporting their patients.
    Response: As previously stated, the fractional mileage billing 
policy is an effort to improve billing and payment accuracy. The policy 
does not modify the reimbursement rates under the ambulance fee 
schedule. While we remain cognizant of the need for ambulance providers 
and suppliers to remain financially solvent, we must also ensure that 
providers and suppliers bill accurately and that we pay accurately. We 
believe the payment implications of the fractional mileage billing 
policy are modest when considering the difference in reimbursement on a 
claim by claim basis, and should not have a significant impact on the 
overall financial viability of individual ambulance providers and 
suppliers or on patient care. We recognize that there is a cost of 
doing business. However, as discussed previously, we believe that it is 
both reasonable and appropriate to implement the policy to provide for 
more accurate billing and payment for ambulance mileage under Medicare. 
We do not believe that it is appropriate to continue the current whole 
mileage reporting procedure, which results in less accurate billing and 
payment, in order to provide extra revenue for providers and suppliers.
    Comment: One commenter responded that the lower reimbursement would 
``trickle down'' to other payers. In other words, the commenter 
believes that other payers would follow CMS' lead by adopting similar 
mileage reporting requirements, thereby potentially lowering 
reimbursement from other payers as well.
    Response: While other payers may choose to adopt similar 
requirements for reporting ambulance mileage, we would not have any 
involvement in that decision. As previously discussed, we believe that 
it is reasonable and appropriate to implement the fractional mileage 
billing policy under Medicare to provide for more accurate billing and 
payment for Medicare ambulance services.
c. Administrative Impact
    Comment: Many commenters stated that the fractional mileage policy 
would be administratively burdensome for medical and billing staff and 
would distract their medical staff from their first priority which is 
caring for the patient. The same commenters also suggested that the 
policy would be particularly burdensome for small ambulance companies. 
One commenter stated that imposing a requirement to capture fractional 
mileage would complicate the already overwhelming documentation 
requirements that they face. Another commenter believed that the 
fractional mileage billing policy creates undue hardship on an 
ambulance industry which is already overburdened and underfunded.
    Response: We believe that capturing fractional mileage amounts in 
trip documentation and on claims will not create any undue burden on 
the ambulance industry. Proper documentation of trip details, including 
mileage traveled, is already a longstanding Medicare requirement that 
remains unchanged and, we believe, uncompromised by the requirement to 
capture the additional digit beyond the decimal point. As we stated in 
the proposed rule, we believe that implementation of the policy is a 
reasonable and appropriate measure to ensure that claims are 
adjudicated and paid as accurately as possible.
    Comment: Many commenters responded that the fractional mileage 
billing policy would make it difficult for ambulance providers and 
suppliers to comply with State and local laws which prohibit billing 
fractional mileage. Several commenters cited the City of Los Angeles as 
an example of a locality requiring that mileage be rounded to a whole 
number.
    Response: We are not aware of any State or local law(s) that 
regulate how claims must be submitted to Medicare. We did not find any 
language in the City of Los Angeles or the Los Angeles County 
ordinances that governs claims submission to other payers, including 
Medicare. Further, even if there were a State or local law that 
specified a billing requirement that differed from Medicare's 
requirement, the Medicare requirement would, nevertheless, be 
controlling for claims submitted for Medicare payment. We note that the 
fractional mileage billing policy applies only to claims submitted to 
Medicare and does not dictate how a provider or supplier reports 
mileage to other payers. Thus, while we recognize the possibility that 
the requirements for billing ambulance mileage to State-funded or other 
payers may differ, we believe that the fractional mileage billing 
policy is reasonable and appropriate to ensure that claims submitted to 
Medicare more accurately reflect the service(s) rendered and that our 
payments to providers and suppliers are as accurate as possible.
    Comment: Several commenters stated that, if the fractional mileage 
billing policy is implemented, the requirements for billing ambulance 
mileage to Medicare will be different than for other payers, and it 
would make it difficult for ambulance providers and suppliers to 
maintain compliance with the differing billing requirements. One 
commenter stated that since other payers allow whole number reporting 
of mileage, their ambulance company would be forced to manually change 
claims in order to submit fractional mileage to Medicare.
    Response: We understand that payer requirements may, and often do, 
vary, and that providers and suppliers may need to comply with 
different payer billing requirements. Each payer sets its own 
requirements for billing and payment. We believe that most billing 
systems are capable of accommodating the reality of varying billing 
requirements amongst different payers. While additional changes to 
billing systems or procedures may be necessary in some cases to enable 
mileage to be reported differently for different payers, as we stated 
previously, we continue to believe that implementation of the 
fractional mileage billing policy is reasonable and appropriate to 
ensure more accurate reporting and payment of ambulance mileage under 
Medicare.
    After considering the comments, for the reasons discussed 
previously and in the CY 2011 PFS proposed rule, we continue to believe 
that it is reasonable and appropriate to revise our claims processing 
instructions to require reporting of and payment based on fractional 
mileage, as further discussed below.
(2) Technical and Other Considerations
(A) Ability To Measure Fractional Miles
    Comment: Many commenters responded that most ambulance companies do 
not have the ability to measure fractional mileage because their 
odometer does not show tenths of a mile. These commenters stated that 
67 percent of all new ambulances are Ford models which do not have a 
tenths display on the odometer. One commenter stated that digital 
odometers, in particular, only show whole miles. Another commenter 
asked that CMS prove its assertion that most vehicle odometers display 
tenths of a mile. Yet another commenter suggested that we provide 
guidance for ambulances that do not display tenths of a mile on the 
odometer. We also received a response from a commenter who believed 
that GPS can sometimes be unreliable.
    Response: Based on the statement from many commenters that most new 
ambulances are Ford models, we reviewed owner's manuals for the Ford 
E250, E350, E450 as well as the F350

[[Page 73478]]

and F450 vehicles. Our research revealed that Ford E series and F 
series vehicle (typically trucks or vans) chassis typically provide the 
base for the Ford ambulance prep package. We reviewed Ford's gauge 
specifications for model years 1996 through 2010. In model years prior 
to 2004, the standard analog odometer reflected tenths of a mile. Model 
years 2004 and later include standard digital odometers that show 
fractional miles as well as a separate trip odometer that also displays 
mileage to the tenth of a mile. Additionally, the ambulance prep 
package includes an optional onboard trip computer and navigation 
system.
    We also researched other vehicle chassis models that may provide 
the base for other ambulance prep packages and may currently be in use 
by some providers or suppliers. We reviewed owner's manuals for the 
Dodge Ram 3500 and 4500 for model years 2008 and 2009 and we also 
researched GM/Chevrolet G4500 and 3500 for model years 2009 and 2010. 
We found that both Dodge and Chevrolet model vehicle gauges include 
odometers and/or trip odometers that display fractional mileage. 
Chevrolet models also include a retroactive reset feature on the trip 
odometer that will calculate the distance traveled since the engine was 
last started in the event the trip odometer is not reset at the 
beginning of the trip.
    We found through our research that in many cases, trip odometers 
are mentioned as separate devices from the basic odometer, particularly 
in newer model cars that utilize both digital gauges. We also found 
that in some cases, the basic digital odometer does not, in fact, have 
a tenths display. In those cases, we found that the tenths display 
appears only on the trip odometer. In the proposed rule, we did not 
specify the types of odometers that that may be used to measure 
fractional mileage, and thus we are clarifying in this final rule with 
comment period that mileage may be measured using a separate trip 
odometer as well.
    In light of our review of Ford vehicle chassis and the assertion 
that most new ambulances are Ford vehicles as well as our review of the 
other vehicle chassis models as discussed above, we believe that most 
ambulance companies have the ability to measure fractional mileage to 
the tenth of a mile. However, we recognize that there may be some 
ambulance companies that have a small number of vehicles wherein the 
gauges are damaged, missing, or otherwise unusable, or that may be 
using non-standard vehicles that do not have a fractional mileage 
display on the odometer, trip odometer, GPS navigation, trip computer, 
or other onboard device that measures distance traveled. We believe 
that tools used to measure distance traveled (such as GPS navigation 
equipment) are readily available to the average consumer at a low cost. 
As such, ambulance providers and suppliers are responsible for ensuring 
that they have the necessary equipment to measure fractional mileage to 
the tenth of a mile, and ensuring that onboard vehicle gauges measuring 
trip mileage are in working order. If they are not able to repair said 
gauges, they are responsible for ensuring that they have the necessary 
equipment to measure mileage accurately to the tenth of a mile. 
Additionally, for those ambulance providers and suppliers who have 
vehicles that include a separate trip odometer, ambulance providers and 
suppliers are still responsible for ensuring that trip mileage is 
measured and reported accurately--even if they fail to reset the trip 
odometer at the beginning of a trip. For example, if the driver fails 
to reset the trip odometer at the beginning of the trip, he or she 
would simply document the mileage at the end of the trip and subtract 
the mileage for the previous trip from the total which would leave a 
remaining balance that should correspond to the distance of the current 
trip.
    With regard to the statement that GPS can sometimes be unreliable, 
CMS is not aware of data that confirms or refutes this statement. 
However, in order to continue to provide ambulance providers and 
suppliers with flexibility in how they can measure fractional mileage, 
use of GPS devices will continue to be acceptable for the purpose of 
measuring fractional mileage.
(B) Ambulance Provider Versus Supplier Billing
    Comment: We received responses from several commenters who believe 
that the fractional mileage billing policy establishes different 
requirements for Part A versus Part B ambulance providers and 
suppliers. These commenters stated that neither electronic nor paper 
institutional claims can accommodate fractional unit amounts. They 
cited 42 U.S.C. 1395m(l)(1) which requires that all ambulance services 
be paid under the same fee schedule. Many commenters believed that Part 
A providers and Part B suppliers, respectively, will be treated 
differently under the fractional mileage billing policy and will, 
therefore, be paid differently.
    Response: Per the version 4010A1 Implementation Guide and the 
version 5010 TR3 specifications, the ANSI 837I (institutional) 
electronic claim format has the capability to accept fractional unit 
amounts up to 3 decimal places, and thus both ambulance providers and 
suppliers will be able to bill fractional mileage on electronic claims. 
The commenters are correct that the Form UB-04 paper institutional 
claim does not currently support fractional unit amounts. However, the 
National Uniform Billing Committee (NUBC) has recently approved a 
change to the Form UB-04 that will allow fractional unit billing, and 
this change is scheduled to take effect in July 2011. Currently, less 
than 0.5 percent of all institutional providers bill Medicare using the 
paper Form UB-04. Based on the low number of providers billing 
ambulance services on the Form UB-04 and the fact that the form is 
expected to be capable of accepting fractional unit amounts in July 
2011, we are delaying the implementation date for ambulance providers 
billing on the paper Form UB-04. If the Form UB-04 is capable of 
accepting fractional mileage unit amounts by the end of July 2011 as 
scheduled, ambulance providers billing on the paper Form UB-04 will be 
required to submit fractional mileage in accordance with this final 
rule with comment period for dates of service on and after August 1, 
2011. If paper Form UB-04 is not capable of accepting fractional 
mileage by July 31, 2011, then implementation of the fractional mileage 
policy for these ambulance providers will be further delayed until 
January 1, 2012 to allow ample time for any changes to the UB-04 to be 
implemented. As with other claim types, ambulance providers billing on 
the paper Form UB-04 will report fractional mileage on all claims for 
mileage totaling up to 100 miles.
    We note that delayed implementation of the fractional mileage 
billing policy for the small number of providers using Form UB-04 does 
not result in suppliers and providers receiving different rates under 
the ambulance fee schedule. As discussed previously, the fractional 
mileage billing policy does not change the rates under the ambulance 
fee schedule for providers or suppliers. It is strictly a change to our 
operational instructions for reporting ambulance mileage intended to 
improve billing and payment accuracy. Thus, after implementation of the 
fractional mileage billing policy, providers and suppliers will 
continue to be paid under the same fee schedule and there will be no 
differentiation in rates between providers and suppliers.

[[Page 73479]]

(C) Billing Software
    Comment: We received a few comments stating that billing systems 
will need to be modified to accommodate the fractional mileage billing 
policy. Three commenters stated that modification of billing software 
would be too costly, with one commenter further stating that the change 
would create a hardship for the billing software developer. Another 
commenter believed that changing their billing system would mean that 
they would have to report fractional mileage to all payers, not just 
Medicare.
    Response: While minor changes to billing software may be required, 
any billing software that is compliant with ANSI 837 electronic claim 
standards should have the capability to accept and submit fractional 
unit amounts in the appropriate field. For providers and suppliers 
using paper claim forms to submit claims to Medicare, again, we believe 
that only minor changes to the units field will be required in order to 
submit fractional mileage amounts.
    As discussed previously, we understand that payer requirements 
may--and often do--vary, and that providers and suppliers may need to 
comply with different payer billing requirements. However, the 
requirement to bill fractional mileage to Medicare does not necessarily 
mean that providers and suppliers will have to also submit fractional 
mileage to other payers. Each payer sets its own requirements for 
billing and payment. We believe that most billing systems are capable 
of accommodating the reality of varying billing requirements amongst 
different payers. While additional changes to billing systems or 
procedures may be necessary in some cases to enable mileage to be 
reported differently for different payers, as we stated previously, we 
continue to believe that implementation of the fractional mileage 
billing policy is reasonable and appropriate to ensure more accurate 
reporting of and payment for ambulance mileage under Medicare.
(D) Enforcement and Compliance
    Comment: One commenter stated that the fractional mileage billing 
policy would be impossible to verify and/or enforce.
    Response: Upon implementation of the fractional mileage billing 
policy, ambulance providers and suppliers will still be subject to the 
same statutory and regulatory requirements regarding documentation, 
fraudulent billing, and pre- and post-payment review.
    Comment: One commenter requested guidance for providers and 
suppliers who cannot comply with the fractional mileage billing policy.
    Response: We believe that providers and suppliers are capable of 
complying with the new policy. As discussed above, we believe that most 
ambulance companies have the ability to measure fractional mileage 
using standard onboard devices. Furthermore, we believe that tools used 
to measure distance traveled (such as GPS navigation) are readily 
available to the average consumer at a low cost. Thus, in those 
instances where gauges are damaged, missing or otherwise unusable, or 
where companies are using non-standard vehicles that do not include a 
device to measure fractional mileage, ambulance providers and suppliers 
are responsible for ensuring that they have the necessary equipment to 
measure fractional mileage to the tenth of a mile. Furthermore, billing 
software that is compliant with the ANSI 837 electronic claim format is 
capable of capturing and submitting fractional unit amounts, and 
fractional mileage units can be captured on paper claims (with the 
exception of paper Form UB04 claims as discussed previously). We 
believe that implementing the fractional mileage policy is a reasonable 
and appropriate measure to ensure more accurate billing and payment of 
Medicare ambulance transports and thus, ambulance providers and 
suppliers (except for providers billing on Form UB-04 as discussed 
previously) are expected to comply effective January 1, 2011 with the 
fractional mileage billing policy finalized in this final rule with 
comment period.
(E) Air Ambulance
    Comment: One commenter responded that the air ambulance segment of 
the ambulance industry is overpaid by Medicare and suggested that we 
look to generate savings by changing the reimbursement for air 
ambulance mileage to be based on nautical miles instead of statutory 
miles.
    Response: As we stated in the proposed rule, our claims processing 
system should be configured to process claims as accurately as possible 
so as to provide more accurate Medicare payments. Thus, we believe that 
the fractional mileage billing policy is a reasonable and appropriate 
measure to enhance billing and payment accuracy for both air and ground 
transports. The issue of basing air ambulance reimbursement on nautical 
miles versus statutory miles was not discussed or proposed in the CY 
2011 PFS proposed rule, and thus we are not addressing this issue in 
this final rule with comment period.
    Comment: A few commenters suggested that the fractional mileage 
billing policy will affect ground ambulance transports but not air 
ambulance transports.
    Response: The fractional mileage billing policy will be applied in 
the same manner to, and will affect, both ground and air ambulance 
transports. However, since the fractional mileage billing policy does 
not apply to mileage exceeding 100 miles, we recognize that it may 
impact a greater percentage of ground transports than air transports, 
as a larger percentage of air transports may exceed 100 miles. We 
analyzed claim payment data for all Part B ambulance claims paid in 
2008. If the fractional mileage billing policy had been implemented in 
2008, approximately 92 percent of all claims for air ambulance mileage 
would have been impacted versus 99 percent of all claims for ground 
ambulance mileage. However, since air ambulance companies receive 
higher mileage reimbursement rates, we found that the average financial 
impact per claim would have been greater for air ambulance versus 
ground ambulance transports. Thus, when we consider both factors 
together, it is not clear whether the overall impact will be greater 
for ground ambulance companies than for air ambulance companies. 
Regardless of any potential differential impact, we believe that 
implementation of the fractional mileage billing policy is a reasonable 
and appropriate measure to ensure more accurate reporting of mileage 
and more accurate payments under Medicare for both ground and air 
transports.
(F) Miscellaneous Comments
    Comment: One commenter questioned whether the new rounding rule 
would create no reimbursement for 0.49 miles.
    Response: No. The correct rounding, based on the fractional mileage 
billing policy, would be to always round up the hundredths place. 
Therefore, the provider or supplier in the commenter's example would 
bill 0.5 miles. Likewise, if the provider or supplier traveled 0.43 
miles, they would bill 0.5 miles on their claim. CMS would apply the 
normal calculations for determining the payment amount using the 
fractional mileage units reported.
4. Applicability of the Fractional Billing Policy to Other Services
    We received no comments regarding the applicability of the 
fractional unit billing policy to other services. Therefore, for the 
reasons discussed in the CY 2011 PFS proposed rule (75 FR

[[Page 73480]]

40160), we are applying the fractional unit billing policy only to 
ambulance mileage.
5. Final Fractional Mileage Billing Policy
    For the reasons discussed above and in the CY 2011 PFS proposed 
rule (75 FR 40159), we believe that it is reasonable and appropriate to 
implement the fractional mileage billing policy as proposed in the CY 
2011 PFS proposed rule effective for claims with dates of service on 
and after January 1, 2011 (with the exception discussed below relating 
to providers billing on paper Form UB-04).
    Therefore, effective for claims with dates of service on and after 
January 1, 2011, ambulance providers and suppliers (except for 
providers billing on paper Form UB-04) are required to report mileage 
rounded up to the nearest tenth of a mile on all claims for mileage 
totaling up to 100 covered miles. Providers and suppliers must submit 
fractional mileage using a decimal in the appropriate place (for 
example, 99.9). For example, if the total miles traveled equals 1.59 
miles, then the provider or supplier must report ``1.6'' on the claim 
for mileage. Likewise, if the total mileage equals 1.53 miles, the 
provider or supplier must report ``1.6'' on the claim.
    Although the electronic claim formats can accommodate fractional 
mileage when mileage is equal to or greater than 100 covered miles (for 
example, 100.0), as discussed in the proposed rule, the paper claim 
cannot. The Form CMS-1500 paper claim currently only supports four 
characters (including the decimal point) in the units field (Item 24G). 
Therefore, we are finalizing our proposal that mileage equal to or 
greater than 100 covered miles must continue to be reported in whole 
number miles on both paper and electronic claims. Providers and 
suppliers must round up fractional mileage to the next whole number for 
mileage that exceeds 100 covered miles and report the resulting whole 
number in the unit field. The instructions set forth in our Claims 
Processing Manual will be updated to reflect the revised procedures for 
submitting and paying claims for fractional ambulance mileage.
    Because the changes to the paper Form UB-04 necessary to 
accommodate fractional units are scheduled to be completed in July 
2011, implementation of this policy for ambulance providers that are 
permitted to bill using the Form UB-04 is delayed until August 1, 2011 
(that is, ambulance providers permitted to bill on paper form UB-04 
will be required to report fractional mileage in accordance with this 
final rule with comment period for dates of service on and after August 
1, 2011). If the paper Form UB-04 is not capable of accepting 
fractional mileage by July 31, 2011, then implementation of this policy 
for these ambulance providers will be further delayed until January 1, 
2012. As with other claim types, upon implementation of the fractional 
mileage policy for providers billing on the paper Form UB-04, these 
providers will report fractional mileage on all claims for mileage 
totaling up to 100 miles.
    As discussed previously, providers and suppliers are responsible 
for ensuring that they have the necessary equipment to measure 
fractional mileage to the tenth of a mile, and ensuring that onboard 
vehicle gauges measuring trip mileage are in working order. If they are 
not able to repair said gauges, they are responsible for ensuring that 
they have the necessary equipment to measure mileage accurate to the 
tenth of a mile. Tools that may be used to measure trip mileage 
include, but are not limited to: Digital or analog odometers, trip 
odometers, GPS navigation, onboard trip computers or navigation 
systems.

C. Clinical Laboratory Fee Schedule: Signature on Requisition

    In the March 10, 2000 Federal Register, we published the ``Medicare 
Program; Negotiated Rulemaking: Coverage and Administrative Policies 
for Clinical Diagnostic Laboratory Services'' proposed rule (65 FR 
13082) announcing and soliciting comments on the results of our 
negotiated rulemaking committee tasked to establish national coverage 
and administrative policies for clinical diagnostic laboratory tests 
under Part B of Medicare. In our final rule published in the November 
23, 2001 Federal Register (66 FR 58788), we explained our policy on 
ordering clinical diagnostic laboratory services and amended Sec.  
410.32 to make our policy more explicit. Our regulation at Sec.  
410.32(a) states the requirement that ``[a]ll diagnostic x-ray tests, 
diagnostic laboratory tests, and other diagnostic tests must be ordered 
by the physician who is treating the beneficiary.'' In the November 23, 
2001 final rule, we added paragraph (d)(2) to Sec.  410.32 to require 
that the physician or qualified nonphysician practitioner (NPP) (that 
is, clinical nurse specialists, clinical psychologists, clinical social 
workers, nurse-midwives, nurse practitioners (NPs), and physician 
assistants (PAs)) who order the service must maintain documentation of 
medical necessity in the beneficiary's medical record (66 FR 58809). In 
the preamble discussions to the March 10, 2000 proposed rule and 
November 23, 2001 final rule (65 FR 13089 and 66 FR 58802, 
respectively), we noted that ``[w]hile the signature of a physician on 
a requisition is one way of documenting that the treating physician 
ordered the test, it is not the only permissible way of documenting 
that the test has been ordered.'' In those preambles, we described the 
policy of not requiring physician signatures on requisitions for 
clinical diagnostic laboratory tests, but implicitly left in place the 
existing requirements for a written order to be signed by the ordering 
physician or NPP for clinical diagnostic laboratory tests, as well as 
other types of diagnostic tests. We further stated in the preambles of 
the proposed and final rules that we would publish an instruction to 
Medicare contractors clarifying that the signature of the ordering 
physician is not required for Medicare purposes on a requisition for a 
clinical diagnostic laboratory test (65 FR 13089 and 66 FR 58802).
    On March 5, 2002, we published a program transmittal implementing 
the administrative policies set forth in the final rule, including the 
following instruction: ``Medicare does not require the signature of the 
ordering physician on a laboratory service requisition. While the 
signature of a physician on a requisition is one way of documenting 
that the treating physician ordered the service, it is not the only 
permissible way of documenting that the service has been ordered. For 
example, the physician may document the ordering of specific services 
in the patient's medical record.'' (Transmittal AB-02-030, Change 
Request 1998, dated March 5, 2002).
    On January 24, 2003, we published a program transmittal in order to 
manualize the March 5, 2002 Transmittal. (Transmittal 1787, Change 
Request 2410, dated January 24, 2003). The cover note to the 
transmittal states, ``Section 15021, Ordering Diagnostic Tests, 
manualizes Transmittal AB-02-030, dated March 5, 2002. In accordance 
with negotiated rulemaking for outpatient clinical diagnostic 
laboratory services, no signature is required for the ordering of such 
services or for physician pathology services.'' In the manual 
instructions in that transmittal in a note, we stated: ``No signature 
is required on orders for clinical diagnostic services paid on the 
basis of the physician fee schedule or for physician pathology 
services.'' The manual instructions did not explicitly reference 
clinical diagnostic laboratory tests as the cover note did. Rather, the 
transmittal seemed to extend the policy set forth in the Federal 
Register (that no

[[Page 73481]]

signature is required on requisitions for clinical diagnostic 
laboratory tests paid under the CLFS) to also apply to clinical 
diagnostic tests paid on the basis of the PFS and physician pathology 
services. In addition, the manual instructions used the term ``order'' 
instead of ``requisition,'' which some members of the industry have 
asserted caused confusion.
    When we transitioned from paper manuals to the current electronic 
Internet Only Manual system, these manual instructions were 
inadvertently omitted from the new Benefit Policy Manual (BPM).
    In August 2008, we issued a program transmittal (Transmittal 94, 
Change Request 6100, dated August 29, 2008) to update the BPM to 
incorporate language that was previously contained in section 15021 of 
the Medicare Carriers Manual. The reissued language states, ``No 
signature is required on orders for clinical diagnostic tests paid on 
the basis of the CLFS, the physician fee schedule, or for physician 
pathology services.'' Based on further review, we determined that there 
are no clinical diagnostic laboratory tests paid under the PFS. After 
Transmittal 94 was published, we received numerous inquiries from 
laboratory, diagnostic testing, and hospital representatives who had 
questions about whether the provision applied to all diagnostic 
services, including x-rays, MRIs, and other nonclinical laboratory fee 
schedule diagnostic services.
    To resolve any existing confusion surrounding the implementation of 
the policy in 2001 and subsequent transmittals, we restated and 
solicited public comments on our policy in the CY 2010 PFS proposed 
rule (74 FR 33641). Our current policy is that a physician's signature 
is not required on a requisition for clinical diagnostic laboratory 
tests paid on the basis of the CLFS. However, it must be evident, in 
accordance with our regulations at Sec.  410.32(d)(2) and (3), that the 
physician ordered the services.
    We note that we solicited and received comments on this signature 
requirement during the notice and comment period for the March 10, 2000 
proposed rule in the context of our proposal to add paragraph (d)(2)(i) 
to Sec.  410.32 to require that the practitioner who orders a 
diagnostic laboratory test must maintain documentation of medical 
necessity in the beneficiary's medical record. The majority of comments 
supported the adoption of a policy that the signature of the 
practitioner on a requisition for a clinical diagnostic laboratory test 
paid under the CLFS is not the only way of documenting that the test 
has been ordered and, thus, should not be required provided such 
documentation exists in an alternate form.
    This policy regarding requisitions for clinical diagnostic 
laboratory tests does not supersede other applicable Medicare 
requirements (such as those related to hospital Conditions of 
Participation (CoPs)) which require the medical record to include an 
order signed by the physician who is treating the beneficiary. Nor do 
we believe that anything in our policy regarding signatures on 
requisitions for clinical diagnostic laboratory tests supersedes other 
requirements mandated by professional standards of practice or 
obligations regarding orders and medical records promulgated by 
Medicare, the Joint Commission (TJC), or State law; nor do we believe 
the policy would require providers to change their business practices.
    We also restated and solicited public comment on our longstanding 
policy consistent with the principle in Sec.  410.32(a) that a written 
order for diagnostic tests including those paid under the CLFS and 
those that are not paid under the CLFS (for example, that are paid 
under the PFS or under the OPPS), such as X-rays, MRIs, and the TC of 
physician pathology services, must be signed by the ordering physician 
or NPP. That is, the policy that signatures are not required on 
requisitions for clinical diagnostic laboratory tests paid based on the 
CLFS applies only to requisitions (as opposed to written orders) (74 FR 
33642).
    Additionally, we solicited public comments about the distinction 
between an order and a requisition (74 FR 33642). We note that an 
``order'' as defined in our IOM, 100-02, Chapter 15, Section 80.6.1, is 
a communication from the treating physician/practitioner requesting 
that a diagnostic test be performed for a beneficiary. The order may 
conditionally request an additional diagnostic test for a particular 
beneficiary if the result of the initial diagnostic test ordered yields 
to a certain value determined by the treating physician/practitioner 
(for example, if test X is negative, then perform test Y). As set forth 
in the CY 2010 PFS final rule (FR 74 61930), an order may be delivered 
via any of the following forms of communication:
    <bullet> A written document signed by the treating physician/
practitioner, which is hand-delivered, mailed, or faxed to the testing 
facility.
    <bullet> A telephone call by the treating physician/practitioner or 
his or her office to the testing facility.
    <bullet> An electronic mail, or other electronic means, by the 
treating physician/practitioner or his or her office to the testing 
facility.
    If the order is communicated via telephone, both the treating 
physician/practitioner, or his or her office, and the testing facility 
must document the telephone call in their respective copies of the 
beneficiary's medical records.
    In the CY 2010 PFS proposed rule (74 FR 33642), we defined a 
``requisition'' as the actual paperwork, such as a form, which is 
provided to a clinical diagnostic laboratory that identifies the test 
or tests to be performed for a patient. It may contain patient 
information, ordering physician information, referring institution 
information, information about where to send reports, billing 
information, specimen information, shipping addresses for specimens or 
tissue samples, and checkboxes for test selection. We believe it is 
ministerial in nature, assisting laboratories with billing and handling 
of results, and serves as an administrative convenience to providers 
and patients. We believe that a written order, which may be part of the 
medical record, and the requisition, are two different documents, 
although a requisition that is signed may serve as an order. We 
welcomed comments from the public about the distinction between 
requisitions and orders.
    During the proposed and final rulemaking process for CY 2010, we 
received numerous comments on these issues, including, among others: 
Expressions of continued confusion over the difference between an 
``order'' and a ``requisition''; requests that we develop a single 
policy for all outpatient laboratory services, without the distinction 
for those paid under the CLFS or the PFS; and concerns about reference 
laboratory technicians who believed compelled to perform a test in 
order to protect the viability of the specimen although they did not 
have the proper documentation. (See 74 FR 61929 through 61931 for a 
complete discussion of the comments received and responses to these 
issues.) In the CY 2010 PFS final rule with comment period (74 FR 
61931), we stated that, in light of the issues and concerns raised 
during the comment period, and our desire to create policy that will 
address the concerns in a meaningful, clear and thoughtful way, we 
would continue to carefully consider the issues of physician signatures 
on requisitions and orders and that we plan to revisit these issues in 
the future paying particular attention to the definitions of order and 
requisition.

[[Page 73482]]

    Since the publication of the CY 2010 PFS final rule with comment 
period, we have considered an approach that would address the concerns 
raised. Therefore, in the CY 2011 PFS proposed rule (75 FR 40162), we 
proposed to require a physician's or NPP's signature on requisitions 
for clinical diagnostic laboratory tests paid on the basis of the CLFS. 
We stated that we believe that this policy would result in a less 
confusing process because a physician's signature would then be 
required for all requisitions and orders, eliminating uncertainty over 
whether the documentation is a requisition or an order, whether the 
type of test being ordered requires a signature, or which payment 
system does or does not require a physician or NPP signature. We also 
stated that we believe that it would not increase the burden on 
physicians because it is our understanding that, in most instances, 
physicians are annotating the patient's medical record with either a 
signature or an initial (the ``order''), as well as providing a 
signature on the paperwork that is provided to the clinical diagnostic 
laboratory that identifies the test or tests to be performed for a 
patient (the ``requisition'') as a matter of course. Further, we stated 
that this policy would make it easier for the reference laboratory 
technicians to know whether a test is appropriately requested, and 
potential compliance problems would be minimized for laboratories 
during the course of a subsequent Medicare audit because a signature 
would be consistently required. We stated in the CY 2011 OPPS/ASC 
proposed rule that this minimizes confusion and provides a 
straightforward directive for laboratories to meet.
    Comment: Some commenters stated that physicians continue to be 
unfamiliar with when a signature is required and when it is not 
required on requisitions for physician pathology services, x-ray 
services, and services other than clinical diagnostic laboratory tests 
paid under the CLFS. The commenters also asked for consistency in 
signature requirements between services required under the CLFS and the 
Physician Fee Schedule (PFS).
    Response: We proposed to require a physician's or NPP's signature 
on requisitions for clinical diagnostic laboratory tests paid under the 
CLFS. We did not propose to change, and we are not changing, the 
signature requirements for other services. One of the reasons we made 
this proposal is because we believed that it would be less confusing 
for a physician's signature to be required for all requisitions and 
orders, eliminating uncertainty over whether the documentation is a 
requisition or an order, whether the type of test being ordered 
requires a signature, or which payment system does or does not require 
a physician or NPP signature.
    Comment: Some commenters were supportive of our proposal.
    Response: We appreciate the commenters' support of our proposed 
policy, which we are finalizing in this rule.
    Comment: The commenters seemed to interpret the proposed policy to 
mean that clinical diagnostic laboratory tests requested by telephone 
or electronic means would not be acceptable because they would not 
contain a signature. The commenters stated that there must be a way to 
validate electronic requests for services by the physician or NPP and 
that, as the medical world moves toward electronic records, everything 
must be annotated (that is, ``signed'') in some way to authenticate 
that the service is ordered by the physician.
    Response: Our proposed policy does not concern electronic or 
telephonic requests, because we do not consider these types of requests 
to be requisitions. As we discussed previously, a requisition is the 
actual paperwork, such as a form, that is provided to a clinical 
diagnostic laboratory that identifies the test or tests to be performed 
for a patient. It may contain patient information, ordering physician 
information, referring institution information, information about where 
to send reports, billing information, specimen information, shipping 
addresses for specimens or tissue samples, and checkboxes for test 
selection. We believe it is ministerial in nature, assisting 
laboratories with the billing and handling of results, and serves as an 
administrative convenience to providers and patients. When a physician 
or NPP chooses to use a requisition to request a clinical diagnostic 
laboratory test paid under the CLFS, under the policy we are adopting 
in this rule, the physician or NPP must sign the requisition.
    Comment: The commenters pointed out that it should be evident from 
the medical record that the physician actually ordered the service.
    Response: We did not propose to change any requirements with 
respect to orders. As discussed above, a requisition is the actual 
paperwork, such as a form, which is provided to a clinical diagnostic 
laboratory that identifies the test or tests to be performed for a 
patient. Our proposal only applies to signatures on requisitions for 
clinical diagnostic laboratory tests paid under the CLFS. A signature 
on a requisition should be sufficient for a clinical diagnostic 
laboratory to verify that a physician or NPP is requesting a clinical 
diagnostic laboratory test.
    Comment: The commenters stated that the patient rarely takes the 
requisition to the laboratory himself/herself because the patient does 
not go to the laboratory. These commenters seemed to believe that, in 
those cases, a paper request for clinical diagnostic laboratory 
services would have to be created where there may not have been a need 
for one to exist. The commenters suggested that only the medical 
record, and not any other paper materials, should be signed or 
initialed by the physician.
    Response: As stated previously, a requisition is the actual 
paperwork, such as a form, which is provided to a clinical diagnostic 
laboratory that identifies the test or tests to be performed for a 
patient. Under our proposed policy, which we are finalizing in this 
rule, if a physician or NPP chooses to use a requisition to request a 
clinical diagnostic laboratory test paid under the CLFS, the physician 
or NPP must sign the form. However, this policy does not require a 
physician or NPP to use a requisition to request a clinical diagnostic 
laboratory test paid under the CLFS. Many physicians and NPPs currently 
request clinical diagnostic laboratory tests using an order, such as an 
annotated medical record or documented telephonic request, and they may 
continue to do so without being impacted by our new policy for 
requisitions.
    Comment: The commenters suggested that physicians would need to be 
educated about the new signature requirement on requisitions for 
clinical diagnostic laboratory tests paid under the CLFS to alleviate 
problems such as physician non-compliance with this policy because they 
are unaware of it or do not understand it. Some commenters stated that 
they firmly believe that the physician will neglect to sign any 
document that directs the clinical diagnostic laboratory to perform a 
service. In order to incentivize physicians to provide a signature, 
some commenters suggested tying the physician's ability to bill for a 
service to the requirement to provide a signature.
    Response: We understand the need to educate physicians and NPPs. As 
such, in addition to updating our manuals, we will direct the Medicare 
contractors to educate physicians and NPPs concerning this issue. We 
did not propose to adopt a policy linking the physician's ability to 
bill for a service to the requirement to provide a signature

[[Page 73483]]

and we are not adopting such policy in this final rule.
    Comment: The commenters believe that medical personnel are already 
required to provide an extensive amount of identifying information on 
the requisition. The commenters stated that either the physician or NPP 
is completing the paperwork but then, in most cases, not signing it or 
initialing it to confirm that the required service was documented by a 
medical practitioner.
    Response: If physicians and NPPs are completing extensive written 
documentation concerning each beneficiary on requisitions, the addition 
of a signature should not be an issue.
    Comment: The commenters expressed continued confusion over the 
terms ``requisition'' and ``order.'' The commenters stated that CMS 
should define ``requisition'' and ``order'' in the CMS Internet Only 
Manual (IOM) system.
    Response: We recognize that there is confusion around the 
definition of these terms. However, as we stated above, we define an 
``order'' (IOM, 100-02, Chapter 15, Section 80.6.1) as a communication 
from the treating physician/practitioner requesting that a diagnostic 
test be performed for a beneficiary. We further provided that an order 
may be delivered via any of the following forms of communication: (1) A 
written document signed by the treating physician/practitioner, which 
is hand-delivered, mailed, or faxed to the testing facility; (2) a 
telephone call by the treating physician/practitioner or his or her 
office to the testing facility; or (3) an electronic mail, or other 
electronic means, by the treating physician/practitioner or his or her 
office to the testing facility. If the order is communicated via 
telephone, both the treating physician/practitioner, or his or her 
office, and the testing facility must document the telephone call in 
their respective copies of the beneficiary's medical records. We define 
a ``requisition'' as the actual paperwork, such as a form, which is 
provided to a clinical diagnostic laboratory that identifies the test 
or tests to be performed for a patient. It may contain patient 
information, ordering physician information, referring institution 
information, information about where to send reports, billing 
information, specimen information, shipping addresses for specimens or 
tissue samples, and checkboxes for test selection. We believe it is 
ministerial in nature, assisting laboratories with billing and handling 
of results, and serves as an administrative convenience to providers 
and patients. We believe that a written order, which may be part of the 
medical record, and the requisition, are two different documents, 
although a requisition that is signed may serve as an order. We are 
revising our manuals to reflect our new requirement for physicians' and 
NPPs' signatures on requisitions for clinical diagnostic laboratory 
tests paid under the CLFS.
    Comment: The commenters note that there is no corresponding 
suggested change in the language of the Code of Federal Regulations 
(CFR) concerning the physician signature issue.
    Response: We have determined that a change to Sec.  410.32(d)(2) is 
not necessary with respect to this issue because this provision 
involves orders not requisitions. We articulated our policy regarding 
requisitions for clinical diagnostic laboratory tests in our manuals 
and in preamble language. Therefore, we are changing our manuals to 
reflect our new policy.
    Comment: The commenters suggested that the requirement to provide 
some type of signature represents an undue burden on the clinical 
diagnostic laboratory, especially in the long term care world where 
standing orders in the form of a ``plan of care'' are maintained in the 
beneficiary's records onsite and tests are ordered by the long term 
care staff as required based on directions provided by the physician. 
The commenters asserted that the physician rarely appears onsite at the 
facility to sign requests for medical services and, as a result, an 
exception for these types of facilities is warranted. However, 
commenters also pointed to a Drug Enforcement Administration (DEA) 
requirement for long term care facilities which states that, ``The 
facility must provide or obtain laboratory services only when ordered 
by the attending physician.''
    Response: Again, the change in policy discussed in this final rule 
only affects requisitions and does not affect orders. The policy that 
we proposed and are adopting as final in this rule is that a 
physician's or NPP's signature is required on requisitions for clinical 
diagnostic laboratory tests paid under the CLFS.
    Comment: The commenters suggested that the following language was 
clear and should stand as the entire policy here: ``A physician's 
signature is not required on a requisition for clinical diagnostic 
laboratory tests paid on the basis of the Clinical Laboratory Fee 
Schedule (CLFS); however, it must be evident, in accordance with 
regulations at Sec.  410.32(d)(2) and (3), that the physician ordered 
the services.''
    Response: We appreciate the commenters' viewpoint. However, for the 
reasons discussed previously, we are finalizing our proposal, without 
modification, to require a physician's or NPP's signature on 
requisitions for clinical diagnostic laboratory tests paid under the 
CLFS.
    Comment: The commenters suggested that a pre-printed physician 
signature or letterhead showing the physician's name should serve in 
the place of a ``signature.''
    Response: A pre-printed signature or letterhead cannot be construed 
as a document, the contents of which a physician or NPP has affirmed. 
In order to discourage fraud and abuse, and to affirm that a medical 
service was ordered by a medical practitioner who currently works in 
the practice, a signature is required.
    Comment: The commenters stated that the services are transcribed 
from the medical record onto the requisition by office staff, not 
written and signed by the physician. The commenters seemed to indicate 
that the medical record that would be maintained in the physician's 
office, but not necessarily the requisition, would be signed or 
annotated in some way.
    Response: It seems that the commenters believe that a physician or 
his/her representative has no problem providing a signature or 
annotation for the medical record. In addition, some commenters 
consider the ``requisition'' to be the medical record and use it for a 
dual purpose--as the beneficiary's file and as the request for 
services.
    After careful consideration of all the comments received, we are 
finalizing our proposed policy without modification to require a 
physician's or NPP's signature on requisitions for clinical diagnostic 
laboratory tests paid under the CLFS. This policy does not affect 
physicians or NPPs who choose not to use requisitions to request 
clinical diagnostic laboratory tests paid under the CLFS. Such 
physicians or NPPs can continue to request such tests by other means, 
such as by using the annotated medical records, documented telephonic 
requests, or electronically. We will make changes to our manuals to 
reflect this final policy.

D. Discussion of Budget Neutrality for the Chiropractic Services 
Demonstration

    Section 651 of MMA requires the Secretary to conduct a 
demonstration for up to 2-years to evaluate the feasibility and 
advisability of expanding coverage for chiropractic services under 
Medicare. Current Medicare coverage for chiropractic services is 
limited to manual manipulation of the spine to correct a subluxation 
described in section 1861(r)(5) of the Act. The

[[Page 73484]]

demonstration expanded Medicare coverage to include ``A) care for 
neuromusculoskeletal conditions typical among eligible beneficiaries; 
B) and diagnostic and other services that a chiropractor is legally 
authorized to perform by the State or jurisdiction in which such 
treatment is provided'' and was conducted in four geographically 
diverse sites, two rural and two urban regions, with each type 
including a Health Professional Shortage Area (HPSA). The two urban 
sites were 26 counties in Illinois and Scott County, Iowa, and 17 
counties in Virginia. The two rural sites were the States of Maine and 
New Mexico. The demonstration, which ended on March 31, 2007, was 
required to be budget neutral as section 651(f)(1)(B) of MMA mandates 
the Secretary to ensure that ``the aggregate payments made by the 
Secretary under the Medicare program do not exceed the amount which the 
Secretary would have paid under the Medicare program if the 
demonstration projects under this section were not implemented.''
    In the CY 2006, 2007, and 2008 PFS final rules with comment period 
(70 FR 70266, 71 FR 69707, 72 FR 66325, respectively), we included a 
discussion of the strategy that would be used to assess budget 
neutrality (BN) and the method for adjusting chiropractor fees in the 
event the demonstration resulted in costs higher than those that would 
occur in the absence of the demonstration. We stated BN would be 
assessed by determining the change in costs based on a pre-post 
comparison of total Medicare costs for beneficiaries in the 
demonstration and their counterparts in the control groups and the rate 
of change for specific diagnoses that are treated by chiropractors and 
physicians in the demonstration sites and control sites. We also stated 
that our analysis would not be limited to only review of chiropractor 
claims because the costs of the expanded chiropractor services may have 
an impact on other Medicare costs for other services.
    In the CY 2010 PFS final rule with comment period (74 FR 61926), we 
discussed the evaluation of this demonstration conducted by Brandeis 
University and the two sets of analyses used to evaluate budget 
neutrality. In the ``All Neuromusculoskeletal Analysis,'' which 
compared the total Medicare costs of all beneficiaries who received 
services for a neuromusculoskeletal condition in the demonstration 
areas with those of beneficiaries with similar characteristics from 
similar geographic areas that did not participate in the demonstration, 
the total effect of the demonstration to Medicare was a $114 million 
increase in costs. In the ``Chiropractic User Analysis,'' which 
compared the Medicare costs of beneficiaries who used expanded 
chiropractic services to treat a neuromusculoskeletal condition in the 
demonstration areas, with those of beneficiaries with similar 
characteristics who used chiropractic services as currently covered by 
Medicare to treat a neuromusculoskeletal condition from similar 
geographic areas that did not participate in the demonstration, the 
total effect of the demonstration to Medicare was a $50 million 
increase in costs.
    As explained in the CY 2010 PFS final rule, we based the BN 
estimate on the ``Chiropractic User Analysis'' because of its focus on 
users of chiropractic services rather than all Medicare beneficiaries 
with neuromusculoskeletal conditions, including those who did not use 
chiropractic services and who may not have become users of chiropractic 
services even with expanded coverage for them (74 FR 61926 through 
61927). Users of chiropractic services are most likely to have been 
affected bythe expanded coverage provided by this demonstration. Cost 
increases and offsets, such as reductions in hospitalizations or other 
types of ambulatory care, are more likely to be observed in this group.
    As explained in the CY 2010 PFS final rule (74 FR 61927), because 
the costs of this demonstration were higher than expected and we did 
not anticipate a reduction to the PFS of greater than 2 percent per 
year, we finalized a policy to recoup $50 million in expenditures from 
this demonstration over a 5-year period, from CYs 2010 through 2014 (74 
FR 61927). Specifically, we are recouping $10 million for each such 
year through adjustments to the chiropractic CPT codes. Payment under 
the PFS for these codes will be reduced by approximately 2 percent. We 
believe that spreading this adjustment over a longer period of time 
will minimize its potential negative impact on chiropractic practices.
    We are continuing the implementation of the required budget 
neutrality adjustment by recouping $10 million in CY 2011. Our Office 
of the Actuary estimates chiropractic expenditures in CY 2011 to be 
approximately $524 million based on actual Medicare spending for 
chiropractic services for the most recent available year. To recoup $10 
million in CY 2011, the payment amount under the PFS for the 
chiropractic CPT codes (that is, CPT codes 98940, 98941, and 98942) 
will be reduced by approximately 2 percent. We are reflecting this 
reduction only in the payment files used by the Medicare contractors to 
process Medicare claims rather than through adjusting the relative 
value units (RVUs). Avoiding an adjustment to the RVUs would preserve 
the integrity of the PFS, particularly since many private payers also 
base payment on the RVUs.
    We received no comments on this policy and we will continue the 
implementation of the required budget neutrality adjustment in CY 2011 
by reducing the payment amount under the PFS for chiropractic codes 
(that is, CPT codes 98940, 98941, and 98942) by approximately 2 percent 
resulting in a $10 million recoupment. This is the second year of an 
adjustment which is required in order to satisfy the budget neutrality 
requirement in section 651 of MMA and that is being made over a 5-year 
period to recoup the costs of a demonstration that expanded Medicare 
coverage for chiropractic services. This reduction will only be 
reflected in the payment files used by Medicare contractors to process 
Medicare claims and not through an adjustment to the RVUs.

E. Provisions Related to Payment for Renal Dialysis Services Furnished 
by End-Stage Renal Disease (ESRD) Facilities

    Subsequent to the July 13, 2010 publication of the CY 2011 PFS 
proposed rule (75 FR 40040) we published in the Federal Register, on 
August 12, 2010 a final rule entitled ``End-Stage Renal Disease 
Prospective Payment System'' (75 FR 49030). In that rule, we 
established a case-mix adjusted bundled PPS for renal dialysis services 
furnished beginning January 1, 2011, in accordance with the statutory 
provisions set forth in section 153(b) of MIPPA. The ESRD PPS is 
mandated to replace the current basic case-mix adjusted composite 
payment system and the methodologies for the reimbursement of 
separately billable outpatient ESRD services.
    As explained in the ESRD PPS final rule (75 FR 49162), section 
1881(b)(14)(E)(i) of the Act requires a 4-year transition (phase-in) 
from the current composite payment system to the ESRD PPS, and section 
1881(b)(14)(E)(ii) of the Act allows ESRD facilities to make a one-time 
election to be excluded from the transition. Electing to be excluded 
from the 4-year transition means that the ESRD facility receives 
payment for renal dialysis services based on 100 percent of the payment 
rate established under the ESRD PPS, rather than a blended rate for 
each year of the transition based in part on the payment rate under the 
current

[[Page 73485]]

payment system and in part on the payment rate under the ESRD PPS.
    For renal dialysis services furnished during CY 2011, ESRD 
facilities that elect to go through the ESRD PPS the transition would 
be paid a blended amount that will consist of 75 percent of the basic 
case-mix adjusted composite payment system and the remaining 25 percent 
would be based on the ESRD PPS payment. Thus, we must continue to 
update the basic case-mix adjusted composite payment system during the 
ESRD PPS 4-year transition (CYs 2011 through 2013).
    For a historical perspective of the basic case-mix adjusted 
composite rate payment system for ESRD facilities that furnish 
outpatient dialysis services, see the following PFS final rules with 
comment period:
    <bullet> CY 2005 (69 FR 66319 through 66334).
    <bullet> CY 2006 (70 FR 70161 through 70171).
    <bullet> CY 2007 (71 FR 69681 through 69688).
    <bullet> CY 2008 (72 FR 66280 through 66285).
    <bullet> CY 2009 (73 FR 69754 through 69761).
    <bullet> CY 2010 (74 FR 61921 through 61926).
    In the CY 2011 PFS proposed rule (75 FR 40165 through 40168), we 
outlined the proposed updates to the basic case-mix adjusted composite 
payment system established under section 1881(b)(12) of the Act, which 
included updates to the drug add-on, as well as the wage index values 
used to adjust the labor component of the composite rate. Specifically, 
as described in more detail below in this section, we proposed the 
following:
    <bullet> A zero growth update to the drug add-on, resulting in a 
proposed 14.7 percent add-on adjustment to the composite rate for 2011 
required by section 1881(b)(12)(F) of the Act to maintain a $20.33 per 
treatment drug add-on amount.
    <bullet> An update to the wage index adjustment to reflect the 
latest available wage data, including a revised budget neutrality (BN) 
adjustment factor of 1.056929.
    <bullet> A reduction to the ESRD wage index floor from 0.6500 to 
0.6000.
    We received very few comments on our proposals. The ESRD payment 
related comments are discussed below in this section.
1. Update to the Drug Add-on Adjustment to the Composite Rate
    In the CY 2011 PFS proposed rule (75 FR 40165), we described the 
drug payment methodology used to update the drug add-on adjustment to 
the composite rate. Since we now have 4 years of drug expenditure data 
based on ASP pricing, we proposed to continue estimating growth in drug 
expenditures based on the trends in available data.
    We did not receive any comments objecting to the drug add-on update 
methodology, and therefore, we used the proposed update methodology to 
compute the drug add-on adjustment for CY 2011. We used trend analysis 
from drug expenditure data to update the per treatment drug add-on 
adjustment. We then removed growth in enrollment for the same time 
period from the expenditure growth, so that the residual reflects per 
patient expenditure growth (which includes price and utilization 
combined).
    To estimate drug expenditure growth using trend analysis, we looked 
at the average annual growth in total drug expenditures between 2006 
and 2009. First, we estimated the total drug expenditures for all ESRD 
facilities in CY 2009. For this final rule, we used the final CY 2006 
through CY 2009 ESRD claims data with dates of service for the same 
timeframe updated through June 30, 2010 (that is, claims with dates of 
service from January 1 through December 31, 2009, that were received, 
processed, paid, and passed to the National Claims History File as of 
June 30, 2010).
    Using the full-year 2009 drug expenditure figure, we calculated the 
average annual change in drug expenditures from 2006 through 2009. This 
average annual change showed an increase of 1.9 percent for this 
timeframe. We used this 1.9 percent increase to project drug 
expenditures for both CY 2010 and CY 2011.
2. Estimating Per Patient Growth
    Once we had the projected growth in drug expenditures from 2010 to 
2011 (1.9 percent), to calculate the per patient expenditure growth 
between CYs 2010 and 2011, we removed the enrollment component by using 
the estimated growth in enrollment data between CY 2010 and CY 2011, 
which was approximately 3.6 percent. Specifically, we divided the total 
drug expenditure factor between 2010 and 2011 (1.019) by enrollment 
growth of 3.6 percent (1.036) for the same timeframe. The result is a 
per patient growth factor equal to 0.984 (1.019/1.036=0.984). Thus, we 
are projecting a 1.6 percent decrease in per patient growth in drug 
expenditures between 2010 and 2011.
3. Update to the Drug Add-on Adjustment
    As previously discussed, we estimate a 1.9 percent increase in drug 
expenditures between CY 2010 and CY 2011. Combining this reduction with 
a 3.6 percent increase in enrollment, as described above, we are 
projecting a 1.6 percent decrease in per patient growth of drug 
expenditures between CY 2010 and CY 2011. A 1.6 percent decrease in the 
per patient drug add-on of $20.33 would result in a decrease of 33 
cents (.016*20.33=.33). Hence a decrease of 33 cents in the drug add-on 
would result in negative update equal to 0.2 percent (.33/138.53, 
138.53 is the 2011 base composite rate). Therefore, we are projecting 
that the combined growth in per patient utilization and pricing for CY 
2011 would result in a negative update equal to 0.2 percent. However, 
as we have done previously, we proposed a zero update to the drug add-
on adjustment. We believe this approach is consistent with the language 
under section 1881(b)(12)(F) of the Act which states in part that ``the 
Secretary shall annually increase'' the drug add-on amount based on the 
growth in expenditures for separately billed ESRD drugs. Our 
understanding of the statute contemplates ``annually increase'' to mean 
a positive or zero update to the drug add-on.
    Also, as required by section 1881(b)(14)(F), as amended by section 
3401(h) of the Affordable Care Act, a 2.5 percent ESRD market basket 
increase, as established in the ESRD PPS final rule (75 FR 49161), is 
applied to the current basic case-mix adjusted composite rate portion 
of the blended payment amount, resulting in a CY 2011 composite rate of 
$138.53 ($135.15*1.025). This 2.5 percent market basket increase does 
not apply to the drug add-on adjustment to the composite rate. Since 
the drug add-on is calculated as a percentage of the composite rate, we 
note that the drug add-on percentage would be reduced from 15.0 to 14.7 
as a result of the increase to the composite rate in CY 2011.
    Comment: Several commenters agreed with CMS' decision to apply a 
zero update to the drug add-on adjustment.
    Response: We appreciate the commenters' support that we continue 
with a zero update to the drug add-on adjustment.
    Accordingly, after a review of the public comments, we are 
finalizing the proposed policy decisions to apply a zero update to the 
drug add-on, maintain a $20.33 per treatment drug add-on amount, as 
well as apply a 14.7 percent add-on adjustment to the

[[Page 73486]]

composite rate for CY 2011. Also, as previously discussed a 2.5 percent 
ESRD market basket increase is applied to the current basic case-mix 
adjusted composite rate portion of the blended payment amount, 
resulting in a CY 2011 composite rate of $138.53 ($135.15*1.025).
    Comment: One commenter agreed with our decision to continue to use 
the ASP+6 percent methodology for separately billable drugs.
    Response: This comment is out of the scope of the proposed ESRD 
provisions, however, we appreciate the commenters' support of our use 
of the ASP+6 percent methodology.
4. Update to the Geographic Adjustments to the Composite Rate
    In the CY 2011 PFS proposed rule (75 FR 40165), we proposed to 
update the wage index adjustment to reflect the latest available wage 
data. The purpose of the wage index is to adjust the composite rates 
for differing wage levels covering the areas in which ESRD facilities 
are located. The wage indexes are calculated for each urban and rural 
area. In addition, we generally have followed wage index policies used 
under the inpatient hospital prospective payment system (IPPS), but 
without regard to any approved geographic reclassification authorized 
under sections 1886(d)(8) and (d)(10) of the Act or other provisions 
that only apply to hospitals paid under the IPPS (70 FR 70167). 
Therefore, for purposes of the ESRD wage index methodology, the 
hospital wage data we use is pre-classified, pre-floor hospital data 
and unadjusted for occupational mix.
5. Updates to Core-Based Statistical Area (CBSA) Definitions
    In the CY 2006 PFS final rule with comment period (70 FR 70167), we 
announced our adoption of the OMB's CBSA-based geographic area 
designations to develop revised urban/rural definitions and 
corresponding wage index values for purposes of calculating ESRD 
composite rates. The CBSA-based geographic area designations are 
described in OMB Bulletin 03-04, originally issued June 6, 2003, and is 
available online at http://www.whitehouse.gov/omb/bulletins/b03-04.html. In addition, OMB has published subsequent bulletins regarding 
CBSA changes, including changes in CBSA numbers and titles. We note 
that this and all subsequent ESRD rules and notices are considered to 
incorporate the CBSA changes published in the most recent OMB bulletin 
that applies to the hospital wage index used to determine the current 
ESRD wage index. The OMB bulletins may be accessed online at http://www.whitehouse.gov/omb/bulletins/index.html.
6. Updated Wage Index Values
    In the CY 2007 PFS proposed rule (71 FR 69685), we proposed to 
update the ESRD wage index values annually. The ESRD wage index values 
for CY 2011 were developed from FY 2007 wage and employment data 
obtained from the Medicare hospital cost reports. As we indicated, the 
ESRD wage index values are calculated without regard to geographic 
classifications authorized under sections 1886(d)(8) and (d)(10) of the 
Act and utilize pre-floor hospital data that is unadjusted for 
occupational mix.
    Comment: One commenter wanted CMS to consider the wage index 
policies that are adopted under the IPPS and that similar wage index 
policies should be developed for ESRD facilities.
    Response: We appreciate the commenters concern as to how ESRD are 
geographically classified and although we did not propose a change in 
the geographic reclassification for ESRD facilities at this time, we 
will take the commenters suggestions into consideration in future 
rulemaking.
    Comment: MedPAC commented that the statutory update to the 
composite rate for CY 2011 will benefit both rural and urban 
facilities, and they urge CMS to monitor access to dialysis care 
especially in rural areas.
    Response: We agree with MedPAC's recommendation and we plan to 
continue to monitor access to dialysis care in rural areas and the 
impact or influence these effects may have for the ESRD basic case-mix 
adjusted composite payment rate system wage index.
7. Wage Index Values for Areas With No Hospital Data
    In the CY 2011 PFS proposed rule (75 FR 40167), we proposed to use 
the methodology established in CY 2006 for wage index values for areas 
with no hospital data. While adopting the CBSA designations, we 
identified a small number of ESRD facilities in both urban and rural 
geographic areas where there are no hospital wage data from which to 
calculate ESRD wage index values. The affected areas were rural Puerto 
Rico, rural Massachusetts (Barnstable Town, MA (CBSA 12700), and 
Providence-New Bedford-Fall River, RI-MA (CBSA 39300)), and the urban 
area of Hinesville, GA (CBSA 25980). As with prior years, for CY 2011, 
we calculated the ESRD wage index values for those areas as follows:
    <bullet> For the urban area of Hinesville-Fort Stewart, GA (CBSA 
25980), which is an urban area without specific hospital wage data, we 
applied the same methodology used to impute a wage index value that we 
used in CY 2010. Specifically, we used the average wage index value for 
all urban areas within the State of Georgia.
    <bullet> For rural Massachusetts, we adopted an alternative 
methodology we used for CY's 2008, 2009 and 2010, which we proposed to 
use to determine the wage index value for rural Massachusetts for CY 
2011. Specifically, for rural areas without hospital wage data, we 
proposed to use the average wage index values from all contiguous CBSAs 
as a reasonable proxy for that rural area. In determining the imputed 
rural wage index, we interpreted the term ``contiguous'' to mean 
sharing a border. In the case of Massachusetts, the entire rural area 
consists of Dukes and Nantucket Counties. We determined that the 
borders of Dukes and Nantucket counties are contiguous with CBSA 12700, 
Barnstable Town, MA, and Providence-New Bedford-Fall River, RI-MA. For 
purposes of rural Massachusetts, we proposed to use the same 
methodology for CY 2011.
    <bullet> For rural Puerto Rico, because all geographic areas in 
Puerto Rico were subject to the wage index floor in CY 2011, we 
proposed to apply the ESRD wage index floor to rural Puerto Rico as 
well. For CY 2011, the ESRD wage index floor is 0.60. Therefore, we 
proposed to apply the ESRD wage index floor to 0.60 to facilities that 
are located in rural Puerto Rico. We note, however, that there are 
currently no ESRD facilities located in rural Puerto Rico.
    We received no comments on our proposals for the wage areas as 
previously discussed with no hospital data. Therefore, we are 
finalizing our policies for wage areas with no hospital data. Also, we 
will continue to evaluate existing hospital wage data and possibly wage 
data from other sources such as the Bureau of Labor Statistics, to 
determine if other methodologies might be appropriate for imputing wage 
index values for areas without hospital wage data for CY 2010 and 
subsequent years. To date, no data from other sources, superior to that 
currently used in connection with the IPPS wage index has emerged. 
Therefore, for ESRD purposes, we continue to believe this is an 
appropriate policy. Also, the wage index values associated with these 
areas are located in the addenda section of this final rule.
    Also, in the CY 2011 PFS proposed rule (75 FR 40167), we reported 
an additional urban area--Anderson, SC

[[Page 73487]]

(CBSA 11340)--with no hospital data. For this urban area, we proposed 
to use the same methodology we have used for the other urban area with 
no hospital data, that is, Hinesville-Fort Stewart, GA (CBSA 25980). 
However, since the publication of the CY 2011 PFS proposed rule, we 
have received hospital wage data for this area, and therefore, the 
methodology we proposed no longer applies.
8. Reduction to the ESRD Wage Index Floor
    In the PFS proposed rule (75 FR 40167), we proposed to continue to 
reduce the wage index floor to the composite rate portion of the blend 
during the transition. For CY 2011, we proposed that the ESRD wage 
index floor would be reduced from 0.65 to 0.60. We believe maintaining 
the wage index floor provides some relief for ESRD facilities going 
through the transition that have low wage index values.
    For CY 2011, all urban areas in Puerto Rico that have a wage index 
are eligible for the ESRD wage index floor of 0.60. Currently there are 
no ESRD facilities located in rural Puerto Rico, however, should any 
facilities open in rural Puerto Rico, as previously discussed, we 
intend to apply the CY 2011 wage index floor of 0.60 to these rural 
facilities.
    We received no comments on our proposal regarding the reduction to 
the ESRD wage index floor with regard to the composite rate portion of 
the blend during the transition. Therefore, we are finalizing our 
policy to reduce the wage index floor as proposed.
9. Budget Neutrality Adjustment
    We have previously interpreted the statute as requiring that the 
geographic adjustment be made in a budget neutral manner. Given our 
application of the ESRD wage index, this means that aggregate payments 
to ESRD facilities in CY 2011 would be the same as aggregate payments 
that would have been made if we had not made any changes to the 
geographic adjustments. We note that this BN adjustment only addresses 
the impact of changes in the geographic adjustments. A separate BN 
adjustment was developed for the case-mix adjustments required by the 
MMA.
    Since we did not propose any changes to the case-mix measures for 
basic case-mix adjusted payment system for CY 2011, the current case-
mix BN adjustment of 0.9116 would remain in effect for CY 2011. 
Consistent with prior rulemaking, for CY 2011, we will apply the wage-
index BN adjustment factor of 1.056929 directly to the ESRD wage index 
values to the composite rate portion of the blend. Because the ESRD 
wage index is only applied to the labor-related portion of the 
composite rate, we computed the BN adjustment factor based on that 
proportion (53.711 percent).
    To compute the CY 2011 wage index BN adjustment factor, we used the 
FY 2007 pre-floor, pre-reclassified, non-occupational mix-adjusted 
hospital data to compute the wage index values, 2009 outpatient claims 
(paid and processed as of June 30, 2010), and geographic location 
information for each facility which may be found through Dialysis 
Facility Compare Web page on the CMS Web site at http://www.cms.hhs.gov/DialysisFacilityCompare/. The FY 2011 hospital wage 
index data for each urban and rural locale by CBSA may also be accessed 
on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The wage index data are located in the section entitled, ``FY 
2011 Occupational Mix Adjusted and Unadjusted Average Hourly Wage and 
Pre-Reclassified Wage Index by CBSA.''
    Using treatment counts from the 2009 claims and facility-specific 
CY 2010 composite rates, we computed the estimated total dollar amount 
each ESRD provider would have received in CY 2010. The total of these 
payments became the target amount of expenditures for all ESRD 
facilities for CY 2011. Next, we computed the estimated dollar amount 
that would have been paid for the same ESRD facilities using the ESRD 
wage index for CY 2011. The total of these payments becomes the new CY 
2011 amount of wage-adjusted composite rate expenditures for all ESRD 
facilities.
    After comparing these two dollar amounts (target amount divided by 
the new CY 2011 amount), we calculated an adjustment factor that, when 
multiplied by the applicable CY 2011 ESRD wage index value, would 
result in aggregate payments to ESRD facilities that would remain 
within the target amount of composite rate expenditures. When making 
this calculation, the ESRD wage index floor value of 0.60 is applied 
whenever appropriate. The wage BN adjustment factor for CY 2011 is 
1.056929.
    To ensure BN, we also must apply the BN adjustment factor to the 
wage index floor 0.60, which results in an adjusted wage index floor of 
0.6342 (0.6000 x 1.056929) for CY 2011. This budget neutrality factor 
is not applied to the wage index values for the ESRD PPS portion of the 
blend.
10. ESRD Wage Index Tables
    The CY 2011 ESRD final wage index tables are located in Addenda K 
and L of this final rule with comment period. Also, we indicated in the 
ESRD PPS final rule (75 FR 49117), we would finalize the CY 2011 ESRD 
PPS wage index tables in this final rule. The wage index tables lists 
two separate columns of wage index values. The first column lists the 
wage index values will be applied under the composite rate portion and 
includes the budget neutrality adjustment of 1.056929. The second 
column lists the wage index values that will be applied under the ESRD 
PPS beginning January 1, 2011.

F. Issues Related to the Medicare Improvements for Patients and 
Providers Act of 2008 (MIPPA)

1. Section 131: Physician Payment, Efficiency, and Quality 
Improvements--Physician Quality Reporting System
a. Program Background and Statutory Authority
    Section 101 of Division B of the Tax Relief and Health Care Act of 
2006--the Medicare Improvements and Extension Act of 2006 (Pub. L. 109-
432) (MIEA-TRHCA), which was enacted on December 20, 2006, required us 
to implement a physician quality reporting system in 2007, which we 
named the Physician Quality Reporting Initiative (PQRI). The Physician 
Quality Reporting System is a quality reporting program that provides 
an incentive payment to identified eligible professionals who 
satisfactorily report data on quality measures for covered professional 
services furnished during a specified reporting period. Under section 
1848(k)(3)(B) of the Act, the term ``eligible professional'' means any 
of the following: (1) A physician; (2) a practitioner described in 
section 1842(b)(18)(C); (3) a physical or occupational therapist or a 
qualified speech-language pathologist; or (4) a qualified audiologist.
    The PQRI was extended and further enhanced as a result of the 
MMSEA, which was enacted on December 29, 2007, and the MIPPA, which was 
enacted on July 15, 2008. Changes to the PQRI as a result of these 
laws, as well as information about the PQRI in 2007, 2008, 2009, and 
2010, are discussed in detail in the CY 2008 PFS proposed and final 
rules (72 FR 38196 through 38204 and 72 FR 66336 through 66353, 
respectively), CY 2009 PFS proposed and final rules (73 FR 38558 
through 38575 and 73 FR 69817 through 69847, respectively), and CY 2010 
PFS proposed and final rules (74 FR 33559 through 33600 and 74 FR 61788 
through 61861, respectively). Further detailed information, about the 
PQRI program, related laws, and help desk resources, is

[[Page 73488]]

available on the CMS Web site at http://www.cms.gov/PQRI.
    The ACA makes a number of changes to the PQRI, including the 
following: Authorizing incentive payments through 2014; requiring a 
payment adjustment beginning in 2015 for eligible professionals who do 
not satisfactorily report data on quality measures in the applicable 
reporting period for the year; requiring timely feedback to 
participating eligible professionals; requiring the establishment of an 
informal appeals process whereby eligible professionals may seek a 
review of the determination that an eligible professional did not 
satisfactorily submit data on quality measures for purposes of 
qualifying for a PQRI incentive payment; making available an additional 
incentive payment for those eligible professionals satisfactorily 
reporting data on quality measures for a year and having such data 
submitted on their behalf through a Maintenance of Certification 
Program and participating in a Maintenance of Certification Program 
practice assessment more frequently than is required to qualify for or 
maintain board certification status; requiring the establishment of a 
Physician Compare Web site; and requiring the development of a plan to 
integrate reporting on quality measures relating to the meaningful use 
of electronic health records (EHRs). Whereas in the past we only had 
the authority to continue the PQRI incentive payments for a specified 
period of time, we believe the changes authorized by the ACA 
(particularly the fact that the payment adjustments are authorized for 
2015 and each subsequent year) lend permanency to the PQRI. To reflect 
this transition from the PQRI being a temporary initiative to a 
permanent quality reporting program, we are hereafter referring to the 
PQRI as the ``Physician Quality Reporting System.'' We will be updating 
our documents and the relevant Web sites to reflect this name change 
over time.
    In the CY 2011 PFS proposed rule (75 FR 40162) we proposed to add 
Sec.  414.90 to title 42 of the Code of Federal Regulations to 
implement the provisions of the Physician Quality Reporting System.
    We received several comments from the public on the CY 2011 PFS 
proposed rule related to the Physician Quality Reporting System. 
General comments about the Physician Quality Reporting System are 
addressed as follows.
    Comment: We received positive feedback supporting the Physician 
Quality Reporting System program as a whole, particularly efforts that 
encourage eligible professional reporting through registries, 
Maintenance of Certification Programs, and EHRs. We also received 
positive feedback regarding our proposals for providing timely feedback 
and the establishment of an informal appeals process.
    Response: We appreciate the commenters' positive feedback. We 
believe that these options provide eligible professionals with greater 
flexibility.
    Comment: We received one comment expressing dissatisfaction with 
the Physician Quality Reporting System program as a whole. The 
commenter stated that while they have been reporting Physician Quality 
Reporting System data for the past few years, they have not received 
the incentive payment. As a result, the commenter feels that their 
clinical professionalism and patient service is not improved by the 
program and that it diminishes the time they spend on direct patient 
care.
    Response: We are sorry that the commenter has not received a 
Physician Quality Reporting System incentive. We are hopeful that the 
improvements that we are making to the Physician Quality Reporting 
System will make it easier for eligible professionals to participate 
satisfactorily. We recommend that all participating eligible 
professionals review their Physician Quality Reporting System feedback 
report. In addition to providing performance information, eligible 
professionals who are not incentive eligible will be able to use their 
feedback report to determine why they did not qualify for an incentive 
payment. We encourage any eligible professional who has questions about 
the information contained in their feedback report to contact the 
QualityNet Help Desk at 866-288-8912 or <a href="/cdn-cgi/l/email-protection#5f2e313a2b2c2a2f2f302d2b1f2c3b2f2c71302d38"><span class="__cf_email__" data-cfemail="4e3f202b3a3d3b3e3e213c3a0e3d2a3e3d60213c29">[email protected]</span></a>. The Help 
Desk is available from 7 a.m. to 7 p.m. Central Time to answer a 
variety of questions about the Physician Quality Reporting System from 
general program questions to feedback report availability and access. 
The help desk can provide detailed information about the reasons that 
an eligible professional failed to earn an incentive as well.
    Comment: Some commenters urged us to aggressively provide 
additional Physician Quality Reporting System education and training 
opportunities. One commenter requested we provide more ``hands-on'' 
Physician Quality Reporting System education and training opportunities 
at the local level by the state/regional contractors.
    Response: We appreciate the commenters' valuable input. We will 
continue to work with national and regional stakeholder organizations 
to educate their members on Physician Quality Reporting System program 
requirements. We also expect to continue to host monthly national 
provider calls in which we would provide guidance on specific topics 
and provide updated educational materials and resources. To augment our 
portfolio of educational materials and resources, we also anticipate 
providing a series of educational videos to help educate eligible 
professionals on Physician Quality Reporting System program 
requirements.
    Comment: One commenter expressed disappointment with the exclusion 
of eligible professionals in institutional settings. Other commenters 
urged us to identify and adopt a Physician Quality Reporting System 
reporting mechanism that could apply to all eligible professionals in 
all settings, including eligible therapists providing services in 
CORFs, SNFs Part B, and outpatient departments of a hospital.
    Response: As we stated in the CY 2010 PFS final rule with comment 
period (74 FR 61791), for professionals who practice in an 
institutional setting where the provider of service is an institution 
and not a physician or other professional paid under the PFS or where 
claims submission does not identify the professional by his or her NPI, 
we are unable to make the determination of satisfactory reporting and 
calculate earned incentive payment amounts at the individual eligible 
professional level without extensive modifications to the claims 
processing systems of CMS and providers, which would represent a 
material administrative burden to us and to providers. It would also 
require modifications to the industry standard claims formats, which 
would require substantial time to effect through established processes 
and structures that we do not maintain or control. We have also found 
that most institutions that employ eligible professionals do not tie 
the individual professional to the service rendered to an individual 
patient. In this case, there are no individual provider identifiers 
available to use in processing these claims.
    Comment: One commenter was concerned that one of the analytical 
changes that was made to facilitate satisfactory Physician Quality 
Reporting System reporting may have had an unintended consequence on 
radiologists by overly inflating their eligible cases, or reporting 
denominator. Specifically, the commenter is requesting that, for 
radiology, we look at the CPT/ICD-9 combinations only for the specific 
line item in which the CPT/ICD-9

[[Page 73489]]

combination is present rather than across any dates of service.
    Response: We are aware of this issue and are currently analyzing 
the impact. We believe there are only a handful of measures where this 
is a concern because the measure specifications tie a procedure to a 
diagnosis. We are working with the appropriate measure developers/
owners to analyze the specifications for these measures to see if they 
can be changed for 2011 to lessen the impact.
    Comment: One commenter encouraged us to consider strategies to move 
the Physician Quality Reporting System toward a more robust role in 
quality improvement. Individual clinicians and smaller group practices' 
self-selection of measures, the small number of measures required to be 
reported, and variations in the required sample sizes make the measures 
less meaningful than they could be if the program was more structured 
and rigorous.
    Response: The commenter brings up a number of valid points. As the 
program matures and we phase out the incentives for satisfactory 
reporting and phase in payment adjustments for failing to 
satisfactorily report, we envision continuing to make further 
refinements to the program to address the commenter's concerns. Any 
such changes would be described in notice and comment rulemaking prior 
to implementation.
    Comment: Another commenter urged us to transition to rewarding 
performance, not just reporting. Changes made now should lay the 
groundwork for moving towards this goal.
    Response: As we noted in the CY 2011 PFS proposed rule (75 FR 40114 
through 40115), section 3007 of the ACA requires the Secretary to apply 
a separate, budget-neutral payment modifier to the FFS PFS payment 
formula. The payment modifier, which will be phased in beginning 
January 1, 2015 through January 1, 2017, will provide for differential 
payment under the fee schedule to a physician or groups of physicians, 
and later, possibly to other eligible professionals, based upon the 
relative quality and cost of care of their Medicare beneficiaries.
    Comment: One commenter was concerned that eligible professionals 
would not decide to participate in the Physician Quality Reporting 
System. The commenter was concerned that given the current status of 
the industry in trying to meet 5010/ICD10 regulations and incentive 
requirements for achieving the meaningful use of EHR adoption, the 
additional reporting requirements will serve as a disincentive.
    Response: We are unclear what additional reporting requirements the 
commenter is referring to nor are we clear on how they relate to the 
5010/ICD10 regulations and the incentive requirements for achieving the 
meaningful use of EHR adoption. However, if the commenter is concerned 
that eligible professionals may not be motivated to participate in the 
Physician Quality Reporting System in light of other quality programs 
and/or requirements, we agree that this is a valid concern.
    Upon consideration of the comments, we are finalizing our proposal 
to add Sec.  414.90 to title 42 of the Code of Federal Regulations to 
implement the provisions of the Physician Quality Reporting System as 
discussed in this section. We made certain technical changes to Sec.  
414.90 as appropriate to reflect the change in the name of the PQRI to 
``Physician Quality Reporting System,'' to eliminate the unnecessary 
use of acronyms, and to add cross-references to relevant statutory or 
regulatory provisions where appropriate, to specify the particular 
program year addressed in this rulemaking, and to make other technical 
changes as noted.
b. Incentive Payments for the 2011 Physician Quality Reporting System
    For years 2011 through 2014, section 3002(a) of the ACA extends the 
opportunity for eligible professionals to earn a Physician Quality 
Reporting System incentive payment for satisfactorily reporting 
Physician Quality Reporting System quality measures. For the 2011 
Physician Quality Reporting System, section 1848(m)(2)(B) of the Act, 
as amended by section 3002(a) of the ACA, authorizes a 1.0 percent 
incentive, and for 2012 through 2014, a 0.5 percent incentive, for 
qualified eligible professionals who satisfactorily submit Physician 
Quality Reporting System quality measures data.
    The following is a summary of the comments we received regarding 
the 2011 Physician Quality Reporting System incentive payment amount.
    Comment: One commenter expressed support for the extension of the 
Physician Quality Reporting System incentives through 2014 for eligible 
professionals who satisfactorily report.
    Response: We appreciate the commenters' positive feedback.
    Comment: Some commenters expressed concern that the incentive 
payment is too small to motivate eligible professionals to report 
Physician Quality Reporting System measures, even if they are providing 
quality care in their practice, or to drive quality. The commenters 
stated that added administrative cost and time should be considered 
when setting the incentive and disincentive rates, in an effort to 
better reflect the financial incentive to begin utilizing the measures 
and financial disincentives to maintain such practice. Commenters were 
specifically concerned that the incentives are not commensurate with 
the burden of reporting.
    Response: While we understand commenters' concerns with the costs 
and burdens associated with satisfactory reporting under the Physician 
Quality Reporting System, we have neither the authority to change the 
basis for calculation of the incentive payment nor the authority to 
change the incentive amount. We continue to seek ways to minimize 
impact on eligible professionals, such as by continuing to offer 
multiple reporting options in order to give eligible professionals the 
flexibility to choose the option that best fits their practice. 
Furthermore, we note that under section 1848(a)(8) of the Act, 
beginning 2015, eligible professionals who do not satisfactorily report 
Physician Quality Reporting System measures will be subject to a 
payment adjustment. Eligible professionals who participate in the 
Physician Quality Reporting System prior to 2015 receive the added 
benefit of familiarizing themselves with the Physician Quality 
Reporting System prior to the implementation of the payment adjustment. 
Moreover, beginning 2015, eligible professionals who satisfactorily 
report under the Physician Quality Reporting System will avoid the 
payment adjustment.
    Comment: One commenter requested clarification and examples on how 
the incentive payment calculations are determined and an explanation of 
what is meant by ``allowable.''
    Response: As stated in the CY 2011 PFS proposed rule (75 FR 40169), 
the Physician Quality Reporting System incentive payment amount is 
calculated using estimated Medicare Part B PFS allowed charges for all 
covered professional services, not just those charges associated with 
the reported quality measures. ``Allowed charges'' refers to total 
charges, including the beneficiary deductible and coinsurance, and is 
not limited to the 80 percent paid by Medicare or the portion covered 
by Medicare where Medicare is secondary payer. Amounts billed above the 
PFS amounts for assigned and non-assigned claims will not be included 
in the calculation of the incentive payment amount. In addition, since, 
by definition

[[Page 73490]]

under section 1848(k)(3)(A) of the Act, ``covered professional 
services'' are limited to services for which payment is made under, or 
is based on, the PFS and which are furnished by an eligible 
professional, other Part B services and items that may be billed by 
eligible professionals, but are not paid under or based upon the 
Medicare Part B PFS, are not included in the calculation of the 
incentive payment amount.
    Therefore, eligible professionals and group practices that 
satisfactorily report quality data under the 2011 Physician Quality 
Reporting System will qualify for an incentive payment equal to 1.0 
percent of their total estimated Medicare Part B PFS allowed charges 
for the all covered professional services furnished by the eligible 
professional during the applicable 2011 Physician Quality Reporting 
System reporting period. For satisfactory reporting at the individual 
level in 2011, 1.0 percent of allowed charges will be paid at the TIN/
NPI level. For satisfactory reporting at the group practice level in 
2011, 1.0 percent of allowed charges will be paid at the TIN level.
c. 2011 Reporting Periods for Individual Eligible Professionals
    Under section 1848(m)(6)(C) of the Act, the ``reporting period'' 
for the 2008 Physician Quality Reporting System and subsequent years is 
defined to be the entire year, but the Secretary is authorized to 
revise the reporting period for years after 2009 if the Secretary 
determines such revision is appropriate, produces valid results on 
measures reported, and is consistent with the goals of maximizing 
scientific validity and reducing administrative burden. For the 2011 
Physician Quality Reporting System, we proposed the following reporting 
periods: (1) 12-Month reporting period for claims-based reporting and 
registry-based reporting (that is, January 1, 2011 through December 31, 
2011); (2) 12-month reporting period for EHR-based reporting (that is, 
January 1, 2011 through December 31, 2011; and (3) 6-month reporting 
period for claims-based reporting and registry-based reporting (that 
is, July 1, 2011 through December 31, 2011). Additionally, we proposed 
the 12-month reporting period for the group practice reporting option 
(GPRO) for both the Physician Quality Reporting System and the 
Electronic Prescribing (eRx) Incentive Program Prescribing Incentive 
Program (January 1, 2011 through December 31, 2011).
    The following is a summary of the comments we received regarding 
the proposed reporting periods.
    Comment: We received comments generally supporting the proposed 
reporting periods as well as comments specifically supporting the 6-
month reporting period for registry-based reporting.
    Response: We appreciate the commenters' positive feedback. As these 
comments support our proposed reporting periods and for the reasons 
discussed, we are finalizing the reporting periods, as proposed.
    Comment: One commenter was opposed to the elimination of the 6-
month reporting period for claims-based reporting as this would create 
an unnecessary obstacle for the reporting mechanism that is available 
to nearly all eligible professionals.
    Response: We agree with the commenter's urging of the preservation 
of the 6-month reporting period for 2011, and, as such, we did not 
propose to eliminate the 6-month reporting period for claims-based 
reporting. In an effort to encourage participation by eligible 
professionals who may not be ready to do so at the beginning of the 
year, for the 2011 Physician Quality Reporting System, there will 
continue to be both a 12-month and 6-month reporting period for all 
reporting options except for EHR reporting and the group practice 
reporting option.
    Comment: Another commenter requested that we consider a 6-month 
reporting period for registry-based reporting.
    Response: We proposed a 6-month reporting period for registry-based 
reporting in the CY 2011 PFS proposed rule (75 FR 40169). As previously 
stated, for the 2011 Physician Quality Reporting System, there will 
continue to be a 12-month and 6-month reporting period for all 
reporting options except for EHR reporting and the group practice 
reporting option.
    Comment: One commenter requested that we consider providing both 6-
month and 12-month EHR-based reporting options, consistent with the 6-
month reporting period options available for the claims-based and 
registry-based reporting mechanisms.
    Response: As we stated in the CY 2010 PFS final rule with comment 
period (74 FR 61794), we may consider including a 6-month reporting 
period for EHR reporting in future years once we have additional 
experience with EHR reporting in the Physician Quality Reporting 
System. At this time, no data has yet been collected from EHRs for the 
Physician Quality Reporting System. EHR data submission for the 2010 
Physician Quality Reporting System will not occur until early 2011. 
Therefore, we are not adding a 6-month reporting period for EHR-based 
reporting at this time.
    Comment: One commenter opposed tying the incentive amount to the 
reporting period in which the eligible professional satisfactorily 
reports.
    Response: Section 1848(m)(1)(A) of the Act specifies that the 
incentive payment is based on the covered professional services 
furnished during the reporting period for which the eligible 
professional or group practice satisfactorily reports. Therefore, we 
are obligated to tie the incentive amount to the reporting period in 
which the eligible professional satisfactorily reports. We note, 
however, the incentive is not limited to the charges for the services 
associated with the measures being reported. Rather the incentive is 
calculated based on all of covered professional services furnished 
during the applicable reporting period.
    Upon consideration of the comments received, we will finalize the 
2011 reporting periods as proposed. As discussed previously, if an 
eligible professional only satisfactorily reports for the 6-month 
reporting period, then the professional's incentive payment will be 
calculated based on the eligible professional's charges for covered 
professional services furnished between July 1, 2011 and December 31, 
2011 only. Services furnished prior to July 1, 2011 would not be 
included in the professional's incentive payment calculation.
    We are also deleting the definition for the term ``quality 
reporting period'' proposed at Sec.  414.90(b) since the reporting 
period is defined at Sec.  414.90(g)(1).
d. 2011 Physician Quality Reporting System Reporting Mechanisms for 
Individual Eligible Professionals
    For the 2011 Physician Quality Reporting System, we proposed to 
retain the claims-based, registry-based, and EHR-based reporting 
mechanism from 2010 and invited comments on other options that could be 
included in the 2011 Physician Quality Reporting System. We also 
discussed in the CY 2011 PFS proposed rule that we continue to consider 
significantly limiting the claims-based mechanism of reporting clinical 
quality measures in future program years (75 FR 40170).
    The following is a summary of the comments received with regard to 
the proposed 2011 Physician Quality Reporting System reporting 
mechanisms and our intent to lessen reliance on the claims-based 
reporting mechanism beyond 2011.
    Comment: Several commenters supported the proposed reporting

[[Page 73491]]

mechanisms for the 2011 Physician Quality Reporting System, including 
strong support for the continuation of claims-based reporting and 
continued availability of multiple reporting mechanisms. Many 
commenters noted that claims-based reporting is the only reporting 
mechanism available to all eligible professionals. One commenter 
believes claims-based reporting may be a more accurate reporting method 
overall and that it would be unduly burdensome and costly to force 
practitioners into changing their established reporting methods. 
Another commenter thought CMS should not totally discontinue claims-
based reporting as some practitioners, such as radiologists, work at 
several different locations where they may not consistently have access 
to a registry or EHR. One commenter noted that many small practices may 
not yet be linked to EHR systems. Commenters also noted that registry 
reporting frequently requires additional costs, which adds another 
burden on eligible professionals who wish to participate in the 
Physician Quality Reporting System. Another commenter stated that in 
the transition to payment adjustments beginning in 2015, where it is 
crucial to encourage greater participation, it would be premature to 
eliminate claims-based reporting. Other commenters urged us to delay 
eliminating or lessening our reliance on claims-based reporting until 
eligible professionals can demonstrate that they understand how to use 
and capture quality data via EHRs or registers and can consistently and 
successfully do so. Finally, another commenter encouraged us to provide 
a one or two year transition period if we want to proceed with 
eliminating claims-based reporting in future years.
    Response: We appreciate the commenters' positive feedback. We agree 
with some of the reasons cited by commenters for retaining claims-based 
reporting and/or retaining multiple reporting mechanisms. For these 
reasons and in the discussion that follows, we are retaining, for 2011, 
the three 2010 Physician Quality Reporting System reporting mechanisms 
for individual eligible professionals, including claims-based 
reporting.
    Comment: While a majority of commenters requested that we delay or 
reconsider lessening our reliance on claims-based reporting after 2011, 
some commenters recommended that the claims-based reporting option be 
phased out with the expectation that registry-based and EHR-based 
reporting will become the mainstay of the program, especially as EHR 
adoption increases. Commenters noted that claims-based reporting has 
been problematic for eligible professionals and that transitioning the 
Physician Quality Reporting System away from claims-based reporting 
would maximize the potential of registries and EHRs for quality 
measurement reporting. One commenter requested clarification around the 
timing for phasing out claims-based reporting in order to assist 
eligible professionals' decision-making around how and when to 
implement various parts of an EHR or registry.
    Response: In addition to the reasons offered by commenters, our 
ability to lessen our reliance on the claims-based reporting mechanism 
is dependent on there being an adequate number and variety of 
registries available and/or EHR reporting options. We believe that it 
would be premature to eliminate the claims-based reporting mechanism 
for 2011 and doing so would create a barrier to participation. For 
2009, approximately 75 percent of eligible professionals used claims-
based reporting. We do not anticipate phasing out claims-based 
reporting while it continues to be actively used by eligible 
professionals.
    Comment: One commenter requested that we allow certified registered 
nurse anesthetists (CRNAs) to submit Physician Quality Reporting System 
data through an EHR-based reporting mechanism.
    Response: CRNAs are not precluded from reporting via a qualified 
Physician Quality Reporting System EHR. However, CRNAs may find the 
current measures available for Physician Quality Reporting System EHR 
reporting to be beyond their scope of practice. Additionally, CRNAs 
tend to collect the majority of their data in operating rooms and may 
require specific EHR products which, due to their specialization, may 
have Physician Quality Reporting System qualification later on their 
timeline.
    Comment: One commenter expressed support for the use of registries 
as a recognized instrument to leverage existing clinical data 
collection efforts.
    Response: We appreciate the supportive comment and agree that 
registries may be able to augment data collection efforts, particularly 
for measures that are more difficult to collect and require longer time 
horizons to get complete data information.
    Comment: One commenter expressed concern about the discrepancy 
between claims-based reporting and registry reporting. Physician 
Quality Reporting System analysis for 2007 and 2008 showed that 
providers who did registry reporting had a 90 percent success rate for 
earning a Physician Quality Reporting System bonus and claims-based 
reporting had a 50 percent success rate. Due to this large discrepancy, 
the commenter believed that it will be very important to know which 
reporting method results in actual performance improvement based on 
patient outcomes and whether methods are subject to manipulation. The 
commenter encouraged us to ensure the processes and resulting data of 
the reporting methods are reliable and not susceptible to manipulation.
    Response: We understand the commenter's concerns about the 
differences in the registry results compared to the claims results. We 
are continually assessing the accuracy and reliability of all data 
submitted under the Physician Quality Reporting System. We compare the 
data that is submitted to us from registries against claims data and 
are exploring reasons for any discrepancies found.
    Comment: Some commenters, in the spirit of harmonization, noted 
that several aspects of the Physician Quality Reporting System are 
different from the Hospital Inpatient Quality Reporting Program, 
formerly known as the Reporting Hospital Quality Data Annual Payment 
Update Program (RHQDAPU). One commenter stated that while we are moving 
away from claims-based quality measures for eligible professionals, 
they are moving toward claims-based quality measures for hospitals. The 
commenter strongly encouraged us to harmonize their programs and make 
this same conclusion for the Hospital Inpatient Quality Reporting 
Program.
    Response: We understand the commenters' desire for harmonization of 
our various quality reporting programs and we attempt to do so when 
practical and feasible. We note, however, that the Physician Quality 
Reporting System and the Hospital Inpatient Quality Reporting Program 
are separate and distinct programs. The two programs apply to two 
different types of providers, have different goals, and are governed by 
different laws and requirements.
    Claims-based submission for the Physician Quality Reporting System 
provides a means to submit additional data, using QDCs, beyond what is 
required for billing. Claims as used for hospital quality reporting 
does not require the submission of additional QDCs to be added to 
applicable patient claims.
    Based upon consideration of the comments received and for the 
reasons previously explained, we are retaining the claims, registry, 
and EHR reporting mechanisms for use by individual eligible 
professionals for the 2011 Physician Quality Reporting System. As

[[Page 73492]]

in previous years, depending on which Physician Quality Reporting 
System individual quality measures or measures groups an eligible 
professional selects, one or more of the 2011 reporting mechanisms may 
not be available for reporting a particular 2011 Physician Quality 
Reporting System individual quality measure or measures group. In 
addition, while eligible professionals can attempt to qualify for a 
Physician Quality Reporting System incentive under multiple reporting 
mechanisms, an eligible professional must satisfy the 2011 criteria for 
satisfactory reporting with respect to a single reporting mechanism to 
qualify for a 2011 incentive. For example, an eligible professional who 
starts submitting individual Physician Quality Reporting System 
measures via claims in January 2011 and then switches to registry-based 
reporting for services furnished after April 2011 would be able to 
qualify for a 2011 Physician Quality Reporting System incentive based 
on a 12-month reporting period only if he or she satisfies the 
appropriate reporting criteria for either claims-based reporting or 
registry-based reporting for this reporting period. We will not combine 
data submitted via multiple reporting mechanisms to determine incentive 
eligibility.
(1) Final Requirements for Individual Eligible Professionals Who Choose 
the Claims-Based Reporting Mechanism
    For eligible professionals who choose to participate in the 2011 
Physician Quality Reporting System by submitting data on individual 
quality measures or measures groups through the claims-based reporting 
mechanism, we proposed the eligible professional would be required to 
submit the appropriate Physician Quality Reporting System quality data 
codes (QDCs) on the professionals' Medicare Part B claims. QDCs for the 
eligible professional's selected individual Physician Quality Reporting 
System quality measures or measures group may be submitted to CMS at 
any time during 2011. However, as required by section 1848(m)(1)(A) of 
the Act, all claims for services furnished between January 1, 2011 and 
December 31, 2011, would need to be processed by no later than February 
28, 2012, to be included in the 2011 Physician Quality Reporting System 
analysis.
    We did not receive any comments specific to the requirements for 
individual eligible professionals who choose claims-based reporting. 
Therefore, we are finalizing the requirements as proposed (75 FR 40171) 
and previously discussed. Eligible professionals should refer to the 
``2011 Physician Quality Reporting System Implementation Guide'' to 
facilitate satisfactory reporting of QDCs for 2011 Physician Quality 
Reporting System individual measures on claims and to the ``Getting 
Started with 2011 Physician Quality Reporting System Reporting of 
Measures Groups'' to facilitate satisfactory reporting of QDCs for 2011 
Physician Quality Reporting System measures groups on claims. By no 
later than December 31, 2010, both of these documents will be posted on 
the Physician Quality Reporting System section of the CMS Web site at 
http://www.cms.gov/pqri.
(2) Final Requirements for Individual Eligible Professionals Who Choose 
the Registry-Based Reporting Mechanism
    We proposed that in order to report quality data on the 2011 
Physician Quality Reporting System individual quality measures or 
measures groups through a qualified clinical registry, an eligible 
professional must enter into and maintain an appropriate legal 
arrangement with a qualified 2011 Physician Quality Reporting System 
registry. Such arrangements would provide for the registry's receipt of 
patient-specific data from the eligible professional and the registry's 
disclosure of quality measures results and numerator and denominator 
data on Physician Quality Reporting System quality measures or measures 
groups on behalf of the eligible professional to CMS. Thus, the 
registry would act as a Health Insurance Portability and Accountability 
Act of 1996 (Pub. L. 104-191) (HIPAA) Business Associate and agent of 
the eligible professional. Such agents are referred to as ``data 
submission vendors.'' The ``data submission vendors'' would have the 
requisite legal authority to provide clinical quality measures results 
and numerator and denominator data on individual quality measures or 
measures groups on behalf of the eligible professional for the 
Physician Quality Reporting System.
    We proposed that the registry, acting as a data submission vendor, 
would submit CMS-defined registry-derived measures information to our 
designated database for the Physician Quality Reporting System, using a 
CMS-specified record layout, which would be provided to the registry by 
CMS. Similarly, we proposed that eligible professionals choosing to 
participate in the Physician Quality Reporting System through the 
registry-based reporting mechanism for 2011 would need to select a 
qualified Physician Quality Reporting System registry and submit 
information on Physician Quality Reporting System individual quality 
measures or measures groups to the selected registry in the form and 
manner and by the deadline specified by the registry.
    In addition to meeting the proposed requirements specific to 
registry-based reporting, we proposed that eligible professionals who 
choose to participate in the Physician Quality Reporting System through 
the registry-based reporting mechanism would need to meet the relevant 
criteria proposed for satisfactory reporting of individual measures or 
measures groups that all eligible professionals must meet in order to 
satisfactorily report for the Physician Quality Reporting System 2011.
    We did not receive any comments specific to the requirements for 
individual eligible professionals who choose registry-based reporting. 
Therefore, we are finalizing the requirements for individual eligible 
professionals who choose the registry-based reporting mechanism as 
proposed (75 FR 40171 through 40173) and previously discussed.
    We will post a list of qualified registries for the 2011 Physician 
Quality Reporting System on the Physician Quality Reporting System 
section of the CMS Web site at http://www.cms.gov/pqri, which will 
include the registry name, contact information, and the 2011 measures 
and/or measures group and eRx reporting (if qualified) for which the 
registry is qualified and intends to report. However, we do not 
anticipate making this list available prior to the start of the 2011 
program year as we had proposed. We proposed to post the names of the 
2011 Physician Quality Reporting System qualified registries in 3 
phases starting with a list of those registries qualified for the 2011 
Physician Quality Reporting System based on: (1) Being a qualified 
registry for a prior Physician Quality Reporting System program year 
that successfully submitted 2008 and/or 2009 Physician Quality 
Reporting System quality measures results and numerator and denominator 
data on the quality measures; (2) having received a letter indicating 
their continued interest in being a Physician Quality Reporting System 
registry for 2011 by October 31, 2010; and (3) the registry's 
compliance with the 2011 Physician Quality Reporting System registry 
requirements. As discussed further in section VII.F.1.j. of this final 
rule with comment period, we proposed and are finalizing new 
requirements for the 2011 Physician Quality Reporting System 
registries. Since there are new requirements that did not apply to 
previously qualified

[[Page 73493]]

registries, we will need to ensure that the previously qualified 
registries meet the new requirements for 2011. While we fully expect 
all of the previously qualified registries to meet the new registry 
requirements for the 2011 Physician Quality Reporting System, we do not 
expect to be able to determine previously qualified registries' 
compliance with these new registry requirements for 2011 until the 
middle of 2011. Thus, by Summer 2011, we expect to post a list of 
registries (this list will include both registries that were previously 
qualified and those that self-nominate to be newly qualified for 2011) 
that are conditionally qualified to submit numerator and denominator 
data on 2011 Physician Quality Reporting System measures and measures 
groups and Physician Quality Reporting System measure results. After we 
receive a test file from the registries, we will finalize the list of 
2011 Physician Quality Reporting System registries. We anticipate 
finalizing the list of 2011 Physician Quality Reporting System 
registries by Fall 2011.
    An eligible professional's ability to report Physician Quality 
Reporting System quality measures results and numerator and denominator 
data on Physician Quality Reporting System quality measures or measures 
groups using the registry-based reporting mechanism should not be 
impacted by the list of qualified registries for the 2011 Physician 
Quality Reporting System being made available after the start of the 
reporting period. First, registries will not begin submitting eligible 
professionals' Physician Quality Reporting System quality measures 
results and numerator and denominator data on the quality measures or 
measures groups to CMS until 2012. Second, if an eligible professional 
decides that he or she is no longer interested in submitting quality 
measures results and numerator and denominator data on Physician 
Quality Reporting System individual quality measures or measures groups 
through the registry-based reporting mechanism after the complete list 
of qualified registries becomes available, this does not preclude the 
eligible professional from attempting to meet the criteria for 
satisfactory reporting through another 2011 Physician Quality Reporting 
System reporting mechanism.
    In any event, even though a registry is listed as ``qualified,'' we 
cannot guarantee or assume responsibility for the registry's successful 
submission of the required Physician Quality Reporting System quality 
measures results or measures group results or required data elements 
submitted on behalf of a given eligible professional.
(3) Final Requirements for Individual Eligible Professionals Who Choose 
the EHR-Based Reporting Mechanism
    For 2011, in addition to meeting the criteria for satisfactory 
reporting of at least 3 individual measures, we proposed the following 
requirements associated with EHR-based reporting: (1) Selection of a 
Physician Quality Reporting System qualified EHR product; and (2) 
submission of clinical quality data extracted from the EHR to a CMS 
clinical data warehouse in the CMS-specified manner and format (75 FR 
40172). Similar to the 2010 Physician Quality Reporting System, a test 
of quality data submission from eligible professionals who wish to 
report 2011 quality measure data directly from their qualified EHR 
product will be required and is anticipated to occur in early 2012 
immediately followed by the submission of the eligible professional's 
actual 2011 Physician Quality Reporting System data. This entire final 
test/production 2011 data submission timeframe is expected to be 
January 2012 through March 2012. As discussed in the CY 2010 PFS final 
rule with comment period (74 FR 61801 through 61802), we are currently 
vetting newly self-nominated EHR vendor products for possible 
qualification for the 2011 Physician Quality Reporting System program 
year. We expect to list any additional Physician Quality Reporting 
System qualified EHR products by January 2011. It is expected that 
these newly qualified products would be able to submit 2011 Physician 
Quality Reporting System data in early 2012.
    The following is a summary of the comments we received regarding 
the proposed requirements for individual eligible professionals whose 
choose the EHR-based reporting mechanism for the 2011 Physician Quality 
Reporting System.
    Comment: One commenter recommended that we consider accepting 
measure rates from EHRs rather than just numerator and denominator 
data. Rates generated within the system will be more readily available 
for local quality improvement purposes and timely feedback to eligible 
professionals and office staff. Timely feedback has been and will 
continue to be a problem for this program. System characteristics that 
promote and facilitate local improvement efforts should be designed in 
from the outset.
    Response: We agree that an EHR's ability to calculate measure 
results locally will provide useful and timely information to eligible 
professionals who are participating in the Physician Quality Reporting 
System. However, receiving individual data elements allows us to ensure 
that measure results are calculated in a more standardized fashion 
across eligible professionals. Individual data elements can also more 
readily be combined with other data from other sources. Additionally, 
if measure specifications change, there would be no need to recode the 
EHR to account for these specification changes. Rather we can make one 
change to the measures engine to obviate the need for a change to the 
EHR itself.
    Comment: One commenter finds problematic the definition of a 
qualified EHR as one incorporating eRx functionality. Such 
functionality is unnecessary and costly for eligible professionals who 
do not prescribe. As a result, the current proposed definition of EHR 
could disenfranchise practitioners lacking prescriptive authority by 
automatically denying them the opportunity to use EHRs for reporting 
performance measures. Another commenter requested clarification on 
whether the electronic prescription function is E-Prescribing, which 
requires the patient's pharmacy benefits information, or E-Prescription 
Writing, which does not.
    Response: We believe the commenters are referring to the eRx 
functionality required of a certified EHR for the EHR Incentive 
Program, which is beyond the scope of this final rule with comment 
period. This final rule is limited to the use of EHRs in the Physician 
Quality Reporting System and eRx Incentive Programs as one of multiple 
reporting mechanisms available to eligible professionals to report on 
Physician Quality Reporting System measures and/or the electronic 
prescribing quality measure.
    Upon consideration of the comments and for the reasons we 
highlighted based on our experience thus far with EHR-based reporting, 
eligible professionals who choose the EHR-based reporting mechanism for 
the 2011 Physician Quality Reporting System will be required to (in 
addition to meeting the appropriate criteria for satisfactory reporting 
of individual measures):
    <bullet> Have a Physician Quality Reporting System qualified EHR 
product;
    <bullet> Have access to the identity management system specified by 
CMS (such as, but not limited to, the Individuals Authorized Access to 
CMS Computer Systems, or IACS) to submit clinical quality data 
extracted from the EHR to a CMS clinical data warehouse;

[[Page 73494]]

    <bullet> Submit a test file containing real or dummy clinical 
quality data extracted from the EHR to a CMS clinical data warehouse 
via an identity management system specified by CMS during a timeframe 
specified by CMS;
    <bullet> Submit a file containing the eligible professional's 2011 
Physician Quality Reporting System clinical quality data extracted from 
the EHR for the entire reporting period (that is, January 1, 2011 
through December 31, 2011) via the CMS-specified identify management 
system during the timeframe specified by CMS in early 2012.
    Measures groups reporting continues to not be an option for EHR-
based reporting of quality measures for the 2011 Physician Quality 
Reporting System.
    We also cannot assume responsibility for the successful submission 
of data from eligible professionals' EHRs. Any eligible professional 
who chooses to submit Physician Quality Reporting System data extracted 
from an EHR should contact the EHR product's vendor to determine if the 
product is qualified and has been updated to facilitate 2011 Physician 
Quality Reporting System quality measures data submission. Such 
professionals also should begin attempting submission soon after the 
opening of the clinical data warehouse in order to assure the 
professional has a reasonable period of time to work with his or her 
EHR and/or its vendors to correct any problems that may complicate or 
preclude successful quality measures data submission through that EHR.
    The specifications for the electronic transmission of the 2011 
Physician Quality Reporting System measures identified in Tables 81 and 
82 of this final rule with comment period as being available for EHR-
based reporting in 2011 are posted in the Alternative Reporting 
Mechanisms page of the Physician Quality Reporting System section of 
the CMS Web site. The requirements that an EHR vendor must meet in 
order for one or more of its products to be considered qualified for 
purposes of an eligible professional submitting 2011 Physician Quality 
Reporting System data extracted from the EHR product(s) were described 
in the CY 2010 PFS final rule with comment period (74 FR 61800 through 
61802) and are posted on the Alternative Reporting Mechanisms page of 
the Physician Quality Reporting System section of the CMS Web site. We 
expect to post the names of the EHR vendors and the specific product(s) 
and version(s) that are qualified for the 2011 Physician Quality 
Reporting System on the Alternative Reporting Mechanisms page of the 
Physician Quality Reporting System section of the CMS Web site by 
January 2011.
(4) Final Qualification Requirements for Registries
    For the 2011 Physician Quality Reporting System, we proposed to 
require a self-nomination process for registries wishing to submit 2011 
Physician Quality Reporting System quality measures or measures groups 
on behalf of eligible professionals for services furnished during the 
applicable reporting periods in 2011 (75 FR 40173). To be considered a 
qualified registry for purposes of submitting individual quality 
measures and measures groups on behalf of eligible professionals who 
choose this reporting mechanism, we proposed that both registries new 
to the Physician Quality Reporting System and those previously 
qualified must:
    <bullet> Be in existence as of January 1, 2011;
    <bullet> Have at least 25 participants by January 1, 2011;
    <bullet> Provide at least 1 feedback report per year to 
participating eligible professionals;
    <bullet> Not be owned and managed by an individual locally-owned 
single-specialty group (in other words, single-specialty practices with 
only 1 practice location or solo practitioner practices would be 
prohibited from self-nominating to become a qualified Physician Quality 
Reporting System registry);
    <bullet> Participate in ongoing 2011 Physician Quality Reporting 
System mandatory support conference calls hosted by CMS (approximately 
1 call per month), including an in-person registry kick-off meeting to 
be held at CMS headquarters in Baltimore, MD. Registries that miss more 
than one meeting will be precluded from submitting Physician Quality 
Reporting System data for the reporting year (2011);
    <bullet> Be able to collect all needed data elements and transmit 
to CMS the data at the TIN/NPI level for at least 3 measures in the 
2011 Physician Quality Reporting System (according to the posted 2011 
Physician Quality Reporting System Measure Specifications);
    <bullet> Be able to calculate and submit measure-level reporting 
rates or the data elements needed to calculate the reporting rates by 
TIN/NPI;
    <bullet> Be able to calculate and submit, by TIN/NPI, a performance 
rate (that is, the percentage of a defined population who receive a 
particular process of care or achieve a particular outcome) for each 
measure on which the TIN/NPI reports or the data elements needed to 
calculate the reporting rates;
    <bullet> Be able to separate out and report on Medicare Part B FFS 
patients;
    <bullet> Provide the name of the registry;
    <bullet> Provide the reporting period start date the registry will 
cover;
    <bullet> Provide the reporting period end date the registry will 
cover;
    <bullet> Provide the measure numbers for the Physician Quality 
Reporting System quality measures on which the registry is reporting;
    <bullet> Provide the measure title for the Physician Quality 
Reporting System quality measures on which the registry is reporting;
    <bullet> Report the number of eligible instances (reporting 
denominator);
    <bullet> Report the number of instances of quality service 
performed (numerator);
    <bullet> Report the number of performance exclusions;
    <bullet> Report the number of reported instances, performance not 
met (eligible professional receives credit for reporting, not for 
performance);
    <bullet> Be able to transmit this data in a CMS-approved XML 
format.
    <bullet> Comply with a CMS-specified secure method for data 
submission, such as submitting the registry's data in an XML file 
through an identity management system specified by CMS or another 
approved method such as over the NHIN (national health information 
network) if technically feasible;
    <bullet> Submit an acceptable ``validation strategy'' to CMS by 
March 31, 2011. A validation strategy ascertains whether eligible 
professionals have submitted accurately and on at least the minimum 
number (80 percent) of their eligible patients, visits, procedures, or 
episodes for a given measure. Acceptable validation strategies often 
include such provisions as the registry being able to conduct random 
sampling of their participant's data, but may also be based on other 
credible means of verifying the accuracy of data content and 
completeness of reporting or adherence to a required sampling method;
    <bullet> Perform the validation outlined in the strategy and send 
the results to CMS by June 30, 2012 for the 2011 reporting year's data;
    <bullet> Enter into and maintain with its participating 
professionals an appropriate Business Associate agreement that provides 
for the registry's receipt of patient-specific data from the eligible 
professionals, as well as the registry's disclosure of quality measure 
results and numerator and denominator data on behalf of eligible 
professionals who wish to participate in

[[Page 73495]]

the Physician Quality Reporting System program;
    <bullet> Obtain and keep on file signed documentation that each 
holder of an NPI whose data are submitted to the registry has 
authorized the registry to submit quality measures and numerator and 
denominator data to CMS for the purpose of Physician Quality Reporting 
System participation. This documentation must be obtained at the time 
the eligible professional signs up with the registry to submit 
Physician Quality Reporting System quality measures data to the 
registry and must meet any applicable laws, regulations, and 
contractual business associate agreements;
    <bullet> Provide CMS access (if requested for validation purposes) 
to review the Medicare beneficiary data on which 2011 Physician Quality 
Reporting System registry-based submissions are founded or provide to 
CMS a copy of the actual data (if requested);
    <bullet> Provide the reporting option (reporting period and 
reporting criteria) that the eligible professional has satisfied or 
chosen; and
    <bullet> Provide CMS a signed, written attestation statement via 
mail or e-mail which states that the quality measure results and any 
and all data including numerator and denominator data provided to CMS 
are accurate and complete.
    For registries that intend to report on 2011 Physician Quality 
Reporting System measures groups, we proposed that both registries new 
to the Physician Quality Reporting System and those previously 
qualified must:
    <bullet> Indicate the reporting period chosen for each eligible 
professional who chooses to submit data on measures groups;
    <bullet> Base reported information on measures groups only on 
patients to whom services were furnished during the 12-month reporting 
period of January through December 2011 or the 6-month reporting period 
of July 1, 2011 through December 31, 2011;
    <bullet> Agree that the registry's data may be inspected or a copy 
requested by CMS and provided to CMS under our oversight authority;
    <bullet> Be able to report data on all applicable measures in a 
given measures group on either 30 or more Medicare Part B FFS patients 
from January 1, 2011 through December 31, 2011, or on 80 percent of 
applicable Medicare Part B FFS patients for each eligible professional 
(with a minimum of 15 patients during the January 1, 2011, through 
December 31, 2011, reporting period or a minimum of 8 patients during 
the July 1, 2011, through December 31, 2011, reporting period).
    Although these proposed qualification requirements for 2011 
registries are similar to those in previous years, we noted that 
registries would no longer be permitted to include non-Medicare 
patients for measures group reporting. Additionally, in an effort to 
reduce the variation in measures results across registries and better 
allow eligible professional comparisons, we also proposed that all 
current and future registries would have to meet the following new 
requirements:
    <bullet> Use Physician Quality Reporting System measure 
specifications and the CMS provided measure calculation algorithm, or 
logic, to calculate reporting rates or performance rates unless 
otherwise stated. CMS will provide registries a standard set of logic 
to calculate each measure and/or measures group they intend to report 
in 2011.
    <bullet> Provide a calculated result using the CMS supplied measure 
calculation logic and XML file for each measure that the registry 
intends to calculate. The registries will be required to show that they 
can calculate the proper measure results (that is, reporting and 
performance rates) using the CMS-supplied logic and send the calculated 
data back to CMS in the specified format.
    <bullet> Provide us the individual data elements used to calculate 
the measures if so requested by CMS for validation purposes, if 
aggregated data submission is still the selected method of data 
collection. Registries that are subject to validation will be asked to 
send discrete data elements for a measure (determined by CMS) in the 
required data format for us to recalculate the registries' reported 
results. Validation will be conducted for several measures at a 
randomly selected sample of registries in order to validate their data 
submissions.
    We also invited comments on an alternative considered in which 
registries would be required to send CMS beneficiary-level data 
provided to the registry by the eligible professional and CMS would use 
the data to calculate the eligible professional's measure results (that 
is, reporting and performance rates).
    The following is a summary of the comments we received regarding 
the proposed qualification requirements and self-nomination process for 
registries for the 2011 Physician Quality Reporting System.
    Comment: One commenter supported the CMS proposal to limit 
registries based on size and sophistication. The intent of allowing 
registry reporting was to allow physicians to benefit from an 
infrastructure that could enable real time reporting and comparison 
with other groups. A registry from a single physician practice does not 
meet the intent of why registry reporting was allowed and should not be 
allowed for registry reporting.
    Response: We believe that the costs (time and money) associated 
with creating and testing a registry for Physician Quality Reporting 
System qualification are not insignificant. This and the increased 
potential for individual practices to ``game'' Physician Quality 
Reporting System has influenced our decision to require registries to 
report on larger numbers of eligible professionals or be third party 
vendors.
    Comment: One commenter indicated that it is not clear if reporting 
needs to be at both the TIN and NPI level or the TIN or NPI level and 
recommended that all quality reporting be required to include NPI 
information and feedback at that level.
    Response: Reporting from registries is to be submitted at the 
individual TIN/NPI level. Feedback is available at the individual NPI 
level as well as a TIN's rolled-up NPI report, that is, all NPIs under 
a particular TIN. For reporting 2011 measures groups via a registry, we 
will no longer accept data from non-Medicare beneficiaries. This will 
allow a better comparison of registry-submitted data and measure 
calculations to ensure accurate reporting and meaningful feedback 
reports to eligible professionals.
    Comment: Some commenters supported the proposal that registries 
would no longer use their own measure calculation logic or measure 
flows to calculate measure results but instead use a CMS-specified 
standard set of logic for calculating measures. Some commenters 
supported the proposal based on the fact that registry data results 
have been inconsistent in the past, and the results do not yield 
reliable information for eligible professionals to analyze their 
performance results for practice improvement.
    Response: We agree with the commenter and plan to provide 
registries with a calculation flow diagram for each measure they intend 
to report and also provide the registry with a use case. As part of 
their qualification process, registries will need to calculate the 
measure reporting and performance rates and send this information to 
CMS or our contractor in the specified XML format.
    Comment: One commenter, while supporting the use of a CMS-specified

[[Page 73496]]

measure calculation logic, suggested that at least three months be 
provided to account for the development time necessary to convert 
measures to use CMS's algorithms. The actual development effort for a 
registry, however, would be proportionate to the quantity of measures 
supported by a registry.
    Response: We respect and appreciate the time requirements of 
registries as they attempt qualification. We try to balance the needs 
of the registries with the importance of letting eligible professionals 
know which registries are qualified so they can begin selecting and 
reporting to their registry of choice.
    Comment: Another commenter who supported the use of a CMS-specified 
measure calculation logic, suggested that we make the logic public 
prior to implementation in order to determine the best logic and 
calculations for measure results.
    Response: We do not believe that public input for measure logic 
calculation beyond what is already allowed for measure development and 
endorsement is prudent. We attempt to use the measures as the developer 
intended and only make changes when necessary for implementation 
purposes or as required by Medicare policy.
    Comment: Some commenters opposed the proposal for registries to use 
a CMS-specified logic to calculate measures results. One commenter 
stated they do not believe requiring registries to use a CMS-specified 
measure calculation logic will lessen the observed variation in measure 
results. The commenter believes the rate calculation from the numerator 
and denominator data involves simple arithmetic and is unlikely to be 
the cause of the observed variation. The more likely cause is a 
variation in how the data is collected or defined within the system. 
Another commenter was concerned that a CMS-developed logic might not 
accurately calculate measure reporting or performance rates in all 
instances for all eligible professionals since it will likely be based 
on claims and may not be appropriate to examine the data that is 
submitted to registries.
    Response: We appreciate these comments and agree that a CMS-
specified logic may not eliminate all of the data variations or 
inconsistencies but believe providing a specific logic calculation will 
help reduce these data differences.
    Comment: One commenter believes that registries should have 
reasonable latitude in interpreting the measure flows or logic provided 
by us to account for variability in the ways that data are collected by 
the registries.
    Response: While this may seem like a good idea on the surface, this 
proposal would allow too much data variation and prevent us and outside 
stakeholders from comparing an eligible professional's performance. 
This is contrary to our desire to increase standardization in the way 
registries calculate measure reporting and performance rates.
    Comment: A few commenters did not support the alternative approach 
in which registries would be required to send us discrete data elements 
and we would calculate the results for eligible professionals.
    Response: We do not intend to adopt this method of registry data 
submission for the 2011 Physician Quality Reporting System.
    Comment: One commenter requested that we publish the list of 
registries and EHR products qualified for purposes of submitting 
Physician Quality Reporting System data prior to the beginning of the 
reporting year.
    Response: We strive to qualify registries and EHRs in as timely a 
manner as is possible, however while we do not guarantee successful 
submission of data by an EHR or a given registry, we want to be as 
thorough as possible in vetting these systems to increase the 
likelihood of successful data submission. To date, we have not had any 
qualified registries who have not successfully reported data to us. We 
do try to post a partial list of qualified registries (based on 
successful participation in a prior year) prior to the start of the 
next reporting period.
    Comment: One commenter urged us to include additional information 
related to the registries such as the physician participants' success 
rate, the number of participants and the cost.
    Response: We agree that providing cost information may be helpful 
to eligible professionals as they choose a qualified registry. There 
has been considerable objection by the registries to listing this 
information on our Web site as the registries report that comparison of 
their fees is misleading since some of the registries solely report 
Physician Quality Reporting System information on behalf of eligible 
professionals to us while others provide additional information and 
tools to their participants.
    Upon considering the comments received, we are finalizing the 2011 
qualification requirements as proposed (75 FR 40173 through 40175), 
including the new requirements for registries to:
    <bullet> Use Physician Quality Reporting System measure 
specifications and a standard set of measure calculation logic provided 
by CMS to calculate reporting rates or performance rates unless 
otherwise stated;
    <bullet> Provide a calculated result using the CMS-supplied logic 
and XML file for each measure that the registry intends to calculate; 
and
    <bullet> Provide us the individual data elements used to calculate 
the measures if so requested by CMS for validation purposes.
    We intend to post the final 2011 Physician Quality Reporting System 
registry requirements on the Physician Quality Reporting System section 
of the CMS Web site at http://www.cms.gov/PQRI by November 15, 2010 or 
shortly thereafter. We anticipate that new registries that wish to 
self-nominate for 2011 would be required to do so by January 31, 2011.
    Similar to the 2010 Physician Quality Reporting System, registries 
that were ``qualified'' for 2010 and wish to continue to participate in 
2011 will not need to be ``re-qualified'' for 2011 but instead 
demonstrate that they can meet the new 2011 data submission 
requirements. For technical reasons, however, we do not expect to be 
able to complete this vetting process for the new 2011 data submission 
requirements until mid-2011. Therefore, we will not be able to post the 
names of registries that are qualified for the 2011 Physician Quality 
Reporting System until we have determined the previously qualified 
registries that wish to be qualified for the 2011 Physician Quality 
Reporting System are in compliance with the new registry requirements.
    Nevertheless, registries ``qualified'' for 2010, who were 
successful in submitting 2010 Physician Quality Reporting System data, 
and wish to continue to participate in 2011 will need to indicate their 
desire to continue participation for 2011 by submitting a letter to CMS 
indicating their continued interest in being a Physician Quality 
Reporting System registry for 2011 and their compliance with the 2011 
Physician Quality Reporting System registry requirements by no later 
than October 31, 2010. Additionally, registries that are unsuccessful 
submitting 2010 Physician Quality Reporting System data (that is, fail 
to submit 2010 Physician Quality Reporting System data per the 2010 
Physician Quality Reporting System registry requirements) will need to 
go through a full self-nomination vetting process for 2011.
    Similar to the 2010 Physician Quality Reporting System, if a 
qualified 2010 Physician Quality Reporting System registry fails to 
submit 2010 Physician Quality Reporting System data per the 2010 
Physician Quality Reporting

[[Page 73497]]

System registry requirements, the registry will be considered 
unsuccessful at submitting 2010 Physician Quality Reporting System data 
and will need to go through the full self-nomination process again to 
participate in the 2011 Physician Quality Reporting System. By March 
31, 2011, registries that are unsuccessful at submitting quality 
measures results and numerator and denominator data for 2010 will need 
to be able to meet the 2011 Physician Quality Reporting System registry 
requirements and go through the full vetting process again. This would 
include CMS receiving the registry's self-nomination by March 31, 2011. 
As discussed in another section of this final rule with comment period, 
the aforementioned registry requirements will also apply for the 
purpose of a registry qualifying to submit the electronic prescribing 
measure for the 2011 Electronic Prescribing Incentive Program.
(5) Final Qualification Requirements for EHR Vendors and Their Products
    The EHR vendor qualification process for the 2011 Physician Quality 
Reporting System was finalized in the 2010 PFS final rule with comment 
period (74 FR 61800 through 61802) and is currently underway. We 
anticipate the 2011 EHR vendor vetting process will be complete in 
early 2011, at which point those EHR products meeting all of the 2011 
vendor requirements will be listed on the Physician Quality Reporting 
System section of the CMS Web site as a ``qualified'' Physician Quality 
Reporting System EHR product.
    During 2011, we proposed to use the same self-nomination process 
described in the ``Requirements for Electronic Health Record (EHR) 
Vendors to Participate in the 2011 Physician Quality Reporting System 
EHR Testing Program'' posted on the Physician Quality Reporting System 
section of the CMS Web site at http://www.cms.gov/PQRI/20_AlternativeReportingMechanisms.asp#TopOfPage, to qualify additional EHR 
vendors and their EHR products to submit quality data extracted from 
their EHR products to the CMS clinical quality data warehouse for the 
2012 Physician Quality Reporting System. Specifically, we proposed that 
the 2011 Physician Quality Reporting System EHR test vendors, who, if 
their testing is successful, may report 2012 Physician Quality 
Reporting System data to CMS, must meet the following requirements:
    <bullet> Be able to collect and transmit all required data elements 
according to the 2012 EHR Specifications.
    <bullet> Be able to separate out and report on Medicare Part B FFS 
patients only.
    <bullet> Be able to include TIN/NPI information submitted with an 
eligible professional's quality data.
    <bullet> Be able to transmit this data in the CMS-approved format.
    <bullet> Comply with a secure method for data submission.
    <bullet> Not be in a beta test form.
    <bullet> Have at least 25 active users.
    Additionally, we proposed that previously qualified Physician 
Quality Reporting System EHR vendors and 2012 EHR test vendors must 
participate in ongoing Physician Quality Reporting System mandatory 
support conference calls hosted by CMS (approximately one call per 
month). These requirements would apply not only for the purpose of a 
vendor's EHR product being qualified so that the product's users may 
submit data extracted from the EHR for the 2012 Physician Quality 
Reporting System in 2013, but also for the purpose of a vendor's EHR 
product being qualified so that the product's users may electronically 
submit data extracted from the EHR for the electronic prescribing 
measure for the 2012 eRx Incentive Program in 2013. We proposed that if 
a vendor misses more than one mandatory support call or meeting, the 
vendor and their product would be disqualified for the Physician 
Quality Reporting System reporting year, which is covered by the call.
    We proposed that previously qualified vendors and new vendors will 
need to incorporate any new EHR measures (that is, electronically-
specified measures) added to the Physician Quality Reporting System for 
the reporting year they wish to maintain their Physician Quality 
Reporting System qualification, as well as update their electronic 
measure specifications and data transmission schema should either or 
both change.
    The following is a summary of the comments received regarding the 
proposed 2012 EHR vendor qualification requirements and/or process.
    Comment: We received a comment disagreeing that an EHR should be 
required to support all new measures. The commenter noted that an EHR 
might not collect all the necessary data points for all measures and 
that this is not required for the EHR Incentive Program.
    Response: While the commenter makes a valid point, selecting an 
appropriate EHR can be challenging for eligible professionals. As such, 
we are requiring qualified EHRs to be able to report all Physician 
Quality Reporting System measures with electronic specifications. We 
believe that this will lessen the burden on eligible professionals in 
deciding which system to purchase. That is, either the EHR is qualified 
for the Physician Quality Reporting System (completely) or not at all.
    Upon consideration of these comments, we are finalizing the 2012 
EHR vendor qualification requirements that will be used to vet EHR 
vendors in 2011 for 2012 Physician Quality Reporting System data 
submission in 2013 as proposed in the CY 2011 PFS proposed rule (75 FR 
40175 through 40176). Any EHR vendor interested in having one or more 
of their EHR products ``qualified'' to submit quality data extracted 
from their EHR products to the CMS clinical quality data warehouse for 
the 2012 Physician Quality Reporting System will be required to submit 
their self-nomination letter by January 31, 2011. Instructions for 
submitting the self-nomination letter will be provided in the 2012 EHR 
vendor requirements, which we expect to post in the 4th quarter of CY 
2010. Specifically, for the 2012 Physician Quality Reporting System, 
only EHR vendors that self-nominate to participate in the 2012 EHR Test 
Program will be considered qualified EHR vendors for the 2012 Physician 
Quality Reporting System.
e. Criteria for Satisfactory Reporting of Individual Quality Measures 
for Individual Eligible Professionals
    Section 1848(m)(3)(A) of the Act established the criteria for 
satisfactorily submitting data on individual quality measures as at 
least 3 measures in at least 80 percent of the cases in which the 
measure is applicable. If fewer than 3 measures are applicable to the 
services of the professional, the professional may meet the criteria by 
submitting data on 1 or 2 measures for at least 80 percent of 
applicable cases where the measures are reportable. For years after 
2009, section 1848(m)(3)(D) of the Act provides additional authority to 
the Secretary, in consultation with stakeholders and experts, to revise 
the criteria for satisfactorily reporting data on quality measures. 
Based on this authority and the input we have previously received from 
stakeholders, we proposed (75 FR 40176), for 2011, the following 2 
criteria for claims-based reporting of individual measures by 
individual eligible professionals:
    <bullet> Report on at least 3 measures that apply to the services 
furnished by the professional; and
    <bullet> Report each measure for at least 50 percent of the 
eligible professional's Medicare Part B FFS patients for whom

[[Page 73498]]

services were furnished during the reporting period to which the 
measure applies.
    To the extent that an eligible professional has fewer than 3 
Physician Quality Reporting System measures that apply to the eligible 
professional's services, we proposed the eligible professional would be 
able to meet the criteria for satisfactorily reporting data on 
individual quality measures by meeting the following 2 criteria:
    <bullet> Report on all measures that apply to the services 
furnished by the professional (that is 1 to 2 measures); and
    <bullet> Report each measure for at least 50 percent of the 
eligible professional's Medicare Part B FFS patients for whom services 
were furnished during the reporting period to which the measure 
applies.
    We also proposed for 2011 the requirement that an eligible 
professional who reports on fewer than 3 measures through the claims-
based reporting mechanism may be subject to the Measure Applicability 
Validation (MAV) process, which would allow us to determine whether an 
eligible professional should have reported quality data codes for 
additional measures. This process was applied in prior years. Under the 
proposed MAV process, when an eligible professional reports on fewer 
than 3 measures, we propose to review whether there are other closely 
related measures (such as those that share a common diagnosis or those 
that are representative of services typically provided by a particular 
type of eligible professional). We further proposed that if an eligible 
professional who reports on fewer than 3 measures in 2011 reports on a 
measure that is part of an identified cluster of closely related 
measures and did not report on any other measure that is part of that 
identified cluster of closely related measures, then the eligible 
professional would not qualify as a satisfactory reporter in the 2011 
Physician Quality Reporting System or earn an incentive payment. In 
2011, we proposed that these criteria for satisfactorily reporting data 
on fewer than 3 individual quality measures would apply for the claims-
based reporting mechanism only.
    For the 2011 Physician Quality Reporting System, we proposed the 
following 2 criteria for satisfactory reporting of data on individual 
Physician Quality Reporting System quality measures for registry-based 
and EHR-based reporting:
    <bullet> Report on at least 3 measures that apply to the services 
furnished by the professional; and
    <bullet> Report each measure for at least 80 percent of the 
eligible professional's Medicare Part B FFS patients for whom services 
were furnished during the reporting period to which the measure 
applies.
    We also proposed, in 2011, not to count measures that are reported 
through a registry or EHR that have a zero percent performance rate. 
That is, if the recommended clinical quality action is not performed on 
at least 1 patient for a particular measure or measures group reported 
by the eligible professional via a registry or EHR, we will not count 
the measure (or measures groups) as a measure (or measures group) 
reported by an eligible professional. We proposed to disregard measures 
(or measures groups) that are reported through a registry or EHR that 
have a zero percent performance rate in the 2011 Physician Quality 
Reporting System because we are assuming that the measure was not 
applicable to the eligible professional and was likely reported from 
EHR-derived data (or from data mining) and was unintentionally 
submitted from the registry or EHR to CMS. We also seek to avoid the 
possibility of intentional submission of spurious data solely for the 
purpose of receiving an incentive payment for reporting.
    The following is a summary of the comments received regarding the 
criteria for satisfactory reporting of individual quality measures for 
individual eligible professionals.
    Comment: We received several comments in support of the proposal to 
decrease the reporting sample from 80 percent to 50 percent of 
applicable cases where the measures are reportable as this would 
encourage greater Physician Quality Reporting System participation. One 
commenter expressed support for the lower percentage due to the errors 
and complexity seen to date with claims-based reporting in the 
Physician Quality Reporting System. Other commenters noted that a less 
restrictive requirement is a step forward in decreasing the costs and 
burdens associated with Physician Quality Reporting System 
participation.
    Response: We appreciate the commenters' positive feedback. In 
lowering the reporting threshold for claims-based reporting from 80 
percent to 50 percent, we are, as indicated by a commenter, 
acknowledging the complexity of claims-based reporting. As stated in 
the CY 2011 PFS proposed rule (75 FR 40176), a major reason that 
eligible professionals who participate in the Physician Quality 
Reporting System via claims-based reporting fail to do so 
satisfactorily is that they fail to report at the required 80 percent. 
As shown in the quarterly QDC Error Reports that we post on the CMS 
Physician Quality Reporting System Web site at http://www.cms.gov/PQRI, 
eligible professionals often do not report QDCs on claims that are 
eligible for inclusion in a measure's denominator or report QDCs on 
claims that are not eligible for inclusion in a measure's denominator. 
When an eligible professional fails to report QDCs on eligible cases, 
it negatively impacts their reporting rate for that measure or measures 
group. When an eligible professional reports QDCs on ineligible cases, 
it neither improves nor negatively impacts their reporting rate for 
that measure or measures group. Thus, while lowering the reporting 
threshold may decrease the number of cases on which an eligible 
professional is required to report, it is still crucial that eligible 
professionals carefully review and understand the measure 
specifications for each measure or measures group they intend to report 
in order to be able to properly identify eligible cases.
    Comment: A few commenters supportive of the proposal to reduce the 
reporting sample requirement from 80 percent to 50 percent recommended 
we also use our existing authority to apply the new 50 percent 
threshold retrospectively to the 2010 Physician Quality Reporting 
System.
    Response: We finalized the 2010 Physician Quality Reporting System 
criteria for satisfactory reporting by individual eligible 
professionals in the CY 2010 PFS final rule with comment (74 FR 61802 
through 61807). Therefore, we are not applying the 50 percent threshold 
retrospectively to the 2010 Physician Quality Reporting System. Any 
eligible professional who would have participated in the 2010 Physician 
Quality Reporting System had they known that we were lowering the 
reporting threshold for claims-based reporting to 50 percent would be 
disadvantaged. Such eligible professionals are not likely to be able to 
start participating in the 2010 Physician Quality Reporting System and 
meet the 2010 criteria for satisfactory reporting in the time between 
publication of this final rule with comment period and December 31, 
2010.
    Comment: A couple of commenters requested that the threshold for 
registry-based and EHR-based reporting also be reduced to 50 percent in 
order to facilitate overall participation via an EHR or registry.
    Response: As we stated in the CY 2011 PFS proposed rule (75 FR 
40177), we do not believe that reducing the reporting sample to 50 
percent for

[[Page 73499]]

registry-based reporting and EHR-based reporting would substantially 
impact the portion of participating eligible professionals who qualify 
for the Physician Quality Reporting System incentive. Over 90 percent 
of eligible professionals submitting data through registries were 
incentive eligible. The level of effort for EHR-reporting should be the 
same regardless of whether the reporting threshold is 50 percent, 80 
percent, or 100 percent since the EHR could theoretically be programmed 
to submit data on all eligible cases to CMS.
    Comment: A few commenters opposed the proposal to weaken the 
standard for claims-based reporting from 80 percent to 50 percent. The 
commenters stated it was unclear why we would suggest that we want to 
move toward more meaningful reporting mechanisms such as registries and 
EHRs, while at the same time lowering the bar for claims-based 
reporting. Another commenter suggested that we strengthen the reporting 
requirements.
    Response: In light of the Physician Quality Reporting System 
payment adjustments that are required by section 1848(a)(8) of the Act 
beginning in 2015 for eligible professionals who do not satisfactorily 
report and the fact that claims-based reporting still remains the only 
reporting mechanism that is available to all eligible professionals, we 
believe that it is important to take steps to facilitate Physician 
Quality Reporting System reporting where feasible. As we have seen from 
Physician Quality Reporting System results from prior years, meeting 
the 80 percent reporting threshold for claims-based reporting is 
challenging because of the multiple billing codes as specified by the 
measure developer, that can place patients in the denominator of a 
measure combined with the inability to resubmit claims solely for the 
purpose of adding a QDC. Thus far, we have not experienced the same 
issues with other reporting mechanisms. As we stated in the CY 2011 PFS 
proposed rule (75 FR 40176), we believe that lowering the reporting 
threshold for claims-based reporting will encourage greater 
participation in the Physician Quality Reporting System without 
increasing the likelihood that professionals will selectively report 
based on whether the performance expectation of a measure is met for 
that particular patient. Once a substantial proportion of eligible 
professionals begin participating in the Physician Quality Reporting 
System, we envision that we will gradually strengthen the reporting 
requirements.
    Comment: A few commenters recommended we remove the restriction on 
registry reporting for those eligible professionals that cannot report 
3 measures, especially given that our results show that those who 
report via a registry are roughly twice as successful as those who 
report via claims.
    Response: We have received similar comments to this effect in the 
past. We continue to maintain that permitting an eligible professional 
to report fewer than 3 measures through the registry-based reporting 
mechanism (if fewer than 3 measures apply to him or her) would be 
inefficient. It would be analytically difficult in that if an eligible 
professional submits fewer than 3 measures via registries, we would not 
know whether the eligible professional did so because only 2 measures 
applied to him or her or because the registry only accepts data for 2 
of the professional's measures and he or she is reporting the third 
measure via claims. We also look for the most favorable method of 
reporting (that is, did the eligible professional report via a 
different method for a longer reporting period as well as whether an 
eligible professional satisfactorily reported under a different 
reporting option if he or she did not satisfactorily report for a 
particular reporting period. Accepting fewer than 3 measures from 
registries would increase the amount of cross-checking already 
required, which would impact the timeline for paying incentives.
    Comment: Some commenters recommended we change the reporting 
requirements for individual eligible professionals with respect to 
increasing the number of required measures and/or requiring reporting 
on a standard cluster of measures. One commenter recommended that we 
create a standard risk-adjusted list of Physician Quality Reporting 
System quality measures for all eligible professionals that we would 
update annually. Similarly, another commenter suggested that we assign 
a core set of measures that applies across eligible professions. The 
commenter also suggested that we assign sets of measures for individual 
and small group practice participants for high-volume conditions, based 
on services provided to their patient population. Additional 
recommendations for strengthening the reporting requirements include, 
requiring eligible professionals to stratify measures by patient race, 
ethnicity, preferred language and gender, constructing composites for 
the current measures groups, using a reliability threshold of 0.70 in 
lieu of, or in conjunction with, a minimum sample size, increasing the 
sample size for larger group practices, and maintaining the reporting 
threshold of 80 percent for claims-based reporting.
    Response: We appreciate the constructive feedback and agree with 
the potential benefit of core measures, moving to more sets or groups 
of measures, and being more specific as to which measures eligible 
professionals should report in order to achieve more consistency of 
reporting across eligible professionals in the future.
    After consideration of the comments and for the reasons we 
previously explained, the final 2011 criteria for satisfactory 
reporting of data on individual Physician Quality Reporting System 
quality measures for individual eligible professionals are summarized 
in Table 73 and are arranged by reporting mechanism and reporting 
period.

   Table 73--2011 Criteria for Satisfactory Reporting of Data on Individual Physician Quality Reporting System
                          Quality Measures, by Reporting Mechanism and Reporting Period
----------------------------------------------------------------------------------------------------------------
      Reporting mechanism         Reporting criteria                        Reporting period
----------------------------------------------------------------------------------------------------------------
Claims-based reporting........  <bullet> Report at     January 1, 2011-December 31, 2011.
                                 least 3 PQRI
                                 measures, or 1-2
                                 measures if less
                                 than 3 measures
                                 apply to the
                                 eligible
                                 professional; and
                                <bullet> Report each
                                 measure for at least
                                 50% of the eligible
                                 professional's
                                 Medicare Part B FFS
                                 patients seen during
                                 the reporting period
                                 to which the measure
                                 applies.
Claims-based reporting........  <bullet> Report at     July 1, 2011-December 31, 2011.
                                 least 3 PQRI
                                 measures, or 1-2
                                 measures if less
                                 than 3 measures
                                 apply to the
                                 eligible
                                 professional; and
                                <bullet> Report each
                                 measure for at least
                                 50% of the eligible
                                 professional's
                                 Medicare Part B FFS
                                 patients seen during
                                 the reporting period
                                 to which the measure
                                 applies.

[[Page 73500]]

 
Registry-based reporting......  <bullet> Report at     January 1, 2011-December 31, 2011.
                                 least 3 PQRI
                                 measures (measures
                                 with a 0%
                                 performance rate
                                 will not be
                                 counted); and
                                <bullet> Report each
                                 measure for at least
                                 80% of the eligible
                                 professional's
                                 Medicare Part B FFS
                                 patients seen during
                                 the reporting period
                                 to which the measure
                                 applies.
Registry-based reporting......  <bullet> Report at     July 1, 2011-December 31, 2011.
                                 least 3 PQRI
                                 measures (measures
                                 with a 0%
                                 performance rate
                                 will not be
                                 counted); and
                                <bullet> Report each
                                 measure for at least
                                 80% of the eligible
                                 professional's
                                 Medicare Part B FFS
                                 patients seen during
                                 the reporting period
                                 to which the measure
                                 applies.
EHR-based reporting...........  <bullet> Report at     January 1, 2011-December 31, 2011.
                                 least 3 PQRI
                                 measures (measures
                                 with a 0%
                                 performance rate
                                 will not be
                                 counted); and
                                <bullet> Report each
                                 measure for at least
                                 80% of the eligible
                                 professional's
                                 Medicare Part B FFS
                                 patients seen during
                                 the reporting period
                                 to which the measure
                                 applies.
----------------------------------------------------------------------------------------------------------------

    For the 2011 Physician Quality Reporting System, we are finalizing 
a total of 5 reporting options, or ways, in which an eligible 
professional may meet the criteria for satisfactory reporting on 
individual measures. Each reporting option consists of the criteria for 
satisfactory reporting such data and results on individual quality 
measures relevant to a given reporting mechanism and reporting period. 
Eligible professionals must meet the requirements for at least 1 of 
these 5 reporting options using a single reporting mechanism in order 
to qualify for a 2011 Physician Quality Reporting System incentive for 
satisfactorily reporting individual measures. CMS will not combine data 
received via different reporting mechanisms to determine whether the 
reporting criteria are met. It is possible, however, for eligible 
professionals to potentially qualify as satisfactorily reporting 
individual quality measures under more than one of the reporting 
criteria, reporting mechanisms, and/or for more than one reporting 
period. In this case, only one incentive payment will be made to an 
eligible professional based on the longest reporting period for which 
the eligible professional satisfactorily reports.
f. Criteria for Satisfactory Reporting Measures Groups for Individual 
Eligible Professionals
    For the 2011 Physician Quality Reporting System, we proposed that 
individual eligible professionals have the option to report measures 
groups instead of individual quality measures to qualify for the 2011 
Physician Quality Reporting System incentive, using claims or 
registries. The criteria that we proposed for 2011 for satisfactory 
reporting of measures groups through claims-based or registry-based 
reporting for either the 12-month or 6-month reporting period are as 
follows: (1) For claims-based reporting, the reporting of at least 1 
measures group for at least 50 percent of patients to whom the measures 
group applies, during the reporting period; or (2) for registry-based 
reporting, the reporting of at least 1 measures group for at least 80 
percent of patients to whom the measures group applies during the 
reporting period. Eligible professionals, for both claims-based and 
registry-based reporting under these criteria, would be required to 
submit data on a minimum of 15 unique Medicare Part B FFS patients for 
the 12-month reporting period and a minimum of 8 Medicare Part B FFS 
patients for the 6-month reporting period.
    Additionally for 2011, we proposed to retain the criteria, 
available only for the 12-month reporting period, based on reporting on 
at least 1 measures group for at least 30 unique patients for whom 
services were furnished between January 1, 2011, and December 31, 2011, 
to whom the measures group applies. As in previous years, we proposed 
that for 2011, the patients, for claims-based reporting, would be 
limited to Medicare Part B FFS patients. Finally, for registry-based 
reporting in 2011, in contrast to prior program years, we proposed to 
require that the minimum patient numbers or percentages must be met by 
Medicare Part B FFS patients exclusively and not non-Medicare Part B 
FFS patients.
    The following is a summary of the comments received regarding the 
proposed criteria for reporting measures groups for individual eligible 
professionals.
    Comment: One commenter strongly supported the proposed Physician 
Quality Reporting System measures group reporting option for claims-
based and registry reporting, especially the change in the reporting 
threshold for claims-based reporting from 80 percent to 50 percent .
    Response: We appreciate the commenter's positive feedback.
    Comment: A few commenters supported the proposal that for registry 
reporting of measures groups for 2011 that the minimum patient numbers 
or percentages must be met by Medicare Part B FFS patients exclusively 
and exclude data on non-Medicare Part B FFS patients. It is thought 
that this will reduce the difficulty of analyzing the data we received 
from registries where patients other than Medicare Part B FFS patients 
are included. Another commenter was concerned that this change 
eliminates any benefit that eligible professionals had for using the 
registry more broadly than just for Medicare patients. The commenter 
also noted that registries are most useful for improved patient care 
when all patients in the practice with a particular condition are 
included in the system.
    Response: We appreciate the supportive comment. We believe that 
limiting the reporting sample for registry-based reporting of measures 
groups to Medicare Part B FFS patients will facilitate validation of 
registry-submitted data against the Medicare claims data.
    Comment: One commenter supported our proposal to eliminate the 
requirement for reporting on consecutive patients for registry-based 
reporting of measures groups.
    Response: We appreciate the commenter's support. We assume that the 
commenter is referring to a requirement in the 2008 and 2009 Physician 
Quality Reporting System where eligible professionals were required to 
report on patients seen consecutively by date of service. We

[[Page 73501]]

note that we removed the requirement for reporting on consecutive 
patients for registry-based reporting of measures groups for the 2010 
Physician Quality Reporting System. We did not propose nor are we 
requiring eligible professionals to report on consecutive patients when 
reporting measures groups for the 2011 Physician Quality Reporting 
System.
    Based on the comments, the final 2011 criteria for satisfactory 
reporting of data on measures groups are summarized in Table 74 and are 
arranged by reporting mechanism and reporting period.

   Table 74--2011 Criteria for Satisfactory Reporting on Measures Groups, by Reporting Mechanism and Reporting
                                                     Period
----------------------------------------------------------------------------------------------------------------
      Reporting mechanism              Reporting criteria                        Reporting period
----------------------------------------------------------------------------------------------------------------
Claims-based reporting........  <bullet> Report at least 1 PQRI  January 1, 2011-December 31, 2011.
                                 measures group;
                                <bullet> Report each measures
                                 group for at least 30 Medicare
                                 Part B FFS patients.
Claims-based reporting........  <bullet> Report at least 1 PQRI  January 1, 2011-December 31, 2011.
                                 measures group;
                                <bullet> Report each measures
                                 group for at least 50% of the
                                 eligible professional's
                                 Medicare Part B FFS patients
                                 seen during the reporting
                                 period to whom the measures
                                 group applies; and
                                <bullet> Report each measures
                                 group on at least 15 Medicare
                                 Part B FFS patients seen
                                 during the reporting period to
                                 which the measures group
                                 applies.
Claims-based reporting........  <bullet> Report at least 1 PQRI  July 1, 2011-December 31, 2011.
                                 measures group;
                                <bullet> Report each measures
                                 group for at least 50% of the
                                 eligible professional's
                                 Medicare Part B FFS patients
                                 seen during the reporting
                                 period to whom the measures
                                 group applies; and
                                <bullet> Report each measures
                                 group on at least 8 Medicare
                                 Part B FFS patients seen
                                 during the reporting period to
                                 which the measures group
                                 applies.
Registry-based reporting......  <bullet> Report at least 1 PQRI  January 1, 2011-December 31, 2011.
                                 measures group (measures
                                 groups with a 0% performance
                                 rate will not be counted);
                                <bullet> Report each measures
                                 group for at least 30 Medicare
                                 Part B FFS patients.
Registry-based reporting......  <bullet> Report at least 1 PQRI  January 1, 2011-December 31, 2011.
                                 measures group (measures
                                 groups with a 0% performance
                                 rate will not be counted);
                                <bullet> Report each measures
                                 group for at least 80% of the
                                 eligible professional's
                                 Medicare Part B FFS patients
                                 seen during the reporting
                                 period to whom the measures
                                 group applies; and
                                <bullet> Report each measures
                                 group on at least 15 Medicare
                                 Part B FFS patients seen
                                 during the reporting period to
                                 which the measures group
                                 applies.
Registry-based reporting......  <bullet> Report at least 1 PQRI  July 1, 2011-December 31, 2011.
                                 measures group (measures
                                 groups with a 0% performance
                                 rate will not be counted);
                                <bullet> Report each measures
                                 group for at least 80% of the
                                 EP's Medicare Part B FFS
                                 patients seen during the
                                 reporting period to whom the
                                 measures group applies; and
                                <bullet> Report each measures
                                 group on at least 8 Medicare
                                 Part B FFS patients seen
                                 during the reporting period to
                                 which the measures group
                                 applies.
----------------------------------------------------------------------------------------------------------------

    As illustrated in Table 74, there are a total of 6 reporting 
options, or ways in which eligible professionals may meet the criteria 
for satisfactory reporting of measures groups for the 2011 Physician 
Quality Reporting System. As we stated previously, eligible 
professionals may potentially qualify as satisfactorily reporting for 
the 2011 Physician Quality Reporting System on measures groups under 
more than one of the reporting criteria, reporting mechanisms, and/or 
for more than one reporting period; however, only one incentive payment 
will be made to an eligible professional based on the longest reporting 
period for which the eligible professional satisfactorily reports. In 
addition, although an eligible professional could submit data under 
multiple reporting mechanisms, CMS will not combine data received from 
different reporting mechanisms to determine whether the eligible 
professional satisfactorily reported. Similarly, an eligible 
professional could also potentially qualify for the Physician Quality 
Reporting System incentive payment by satisfactorily reporting both 
individual measures and measures groups. However, only one incentive 
payment will be made to the eligible professional based on the longest 
reporting period for which the eligible professional satisfactorily 
reports.
g. Reporting Option for Satisfactory Reporting on Quality Measures by 
Group Practices
(1) Background and Authority
    Section 1848(m)(3)(C)(i) of the Act required the Secretary to 
establish and have in place a process by January 1, 2010 under which 
eligible professionals in a group practice (as defined by the 
Secretary) shall be treated as satisfactorily submitting data on 
quality measures under the Physician Quality Reporting System if, in 
lieu of reporting measures under the Physician Quality Reporting 
System, the group practice reports measures determined appropriate by 
the Secretary, such as

[[Page 73502]]

measures that target high-cost chronic conditions and preventive care, 
in a form and manner, and at a time specified by the Secretary. Section 
1848(m)(3)(C)(ii) of the Act requires that this process provide for the 
use of a statistical sampling model to submit data on measures, such as 
the model used under the Medicare Physician Group Practice (PGP) 
demonstration project under section 1866A of the Act. A group practice 
reporting option (GPRO) was established for the 2010 Physician Quality 
Reporting System in the CY 2010 PFS final rule with comment period (74 
FR 61807 through 61811).
    For the 2011 Physician Quality Reporting System, we proposed to 
continue to allow a group practice, as a whole (that is, for the 
TIN(s)), to participate in the 2011 Physician Quality Reporting System 
and to submit Physician Quality Reporting System quality measures for 
2011 and qualify to earn an incentive (75 FR 40178-40183). If, however, 
an individual eligible professional is affiliated with a group practice 
participating in the GPRO and the group practice satisfactorily reports 
under the GPRO, the eligible professional will be considered as 
satisfactorily reporting Physician Quality Reporting System quality 
measures data at the individual level under that same TIN (that is, for 
the same TIN/NPI combination).
(2) Definition of ``Group Practice''
    As stated previously, section 1848(m)(3)(C)(i) of the Act 
authorized the Secretary to define ``group practice.'' For purposes of 
determining whether a group practice satisfactorily submits Physician 
Quality Reporting System quality measures data, we proposed that for 
the 2011 Physician Quality Reporting System a ``group practice'' would 
consist of a physician group practice, as defined by a TIN, with 2 or 
more individual eligible professionals (or, as identified by NPIs) who 
have reassigned their billing rights to the TIN. This proposed 
definition for group practice is different from the 2010 Physician 
Quality Reporting System definition of group practice in that we 
proposed to change the minimum group size from 200 to 2 to enable more 
group practices to participate in the Physician Quality Reporting 
System GPRO in 2011.
    As our intent is to build on an existing quality reporting program 
with which group practices may already be familiar, we proposed to be 
consistent with the PGP demonstration and use one GPRO process, which 
we refer to as ``GPRO I'' that would be available only to similar large 
group practices. For group practices that have fewer than 200 members, 
we proposed, if technically feasible, an alternative GPRO process which 
we refer to as ``GPRO II''.
    In order to participate in the 2011 Physician Quality Reporting 
System through the GPRO, we proposed to require group practices to 
complete a self-nomination process and to meet certain technical and 
other requirements. For 2011, we proposed that group practices must 
participate in the Physician Quality Reporting System group practice 
reporting option in order to be eligible to participate in the eRx 
group practice reporting option for the 2011 Physician Quality 
Reporting System. As this is the current requirement under the 2010 
Physician Quality Reporting System and eRx Incentive Program, we 
proposed that a group practice wishing to participate in both the 
Physician Quality Reporting System group practice reporting option and 
the electronic prescribing group practice reporting option must notify 
CMS of its desire to do so at the time that it self-nominates to 
participate in the Physician Quality Reporting System group practice 
reporting option.
    In addition, we proposed that group practices that are 
participating in Medicare demonstration projects, as approved by the 
Secretary, would also be considered group practices for purposes of the 
2011 Physician Quality Reporting System GPRO. Specifically, for the 
2011 Physician Quality Reporting System we proposed to deem group 
practices participating in the PGP, Medicare Care Management 
Performance (MCMP), and EHR demonstrations to be participating in the 
Physician Quality Reporting System GPRO since many of the measures 
being reported under these demonstration programs are similar to 
Physician Quality Reporting System measures. As a result, such 
practices do not need to separately self-nominate to participate in the 
Physician Quality Reporting System GPRO, although it would be necessary 
for such groups to meet the requirements for incentive qualification 
under their respective approved demonstration project. For example, the 
MCMP demonstration sites would be required to meet the requirements for 
earning a Physician Quality Reporting System incentive specified under 
the MCMP demonstration.
    For purposes of the 2011 eRx Incentive Program, however, we 
proposed that group practices participating in CMS-approved 
demonstration projects previously discussed would be required to meet 
the proposed 2011 eRx Incentive Program GPRO requirements or the 
proposed 2011 eRx Incentive Program requirements for individual 
eligible professionals in order to qualify for a 2011 eRx incentive. 
Such group practices would not be able to qualify for a 2011 eRx 
incentive via participation in an approved demonstration project since 
there is no eRx requirement under these demonstrations.
    We also sought comment on alternatives for expanding GPRO in 2011. 
One option that we considered was to expand GPRO I to include smaller 
group practices. Specifically, we considered allowing groups of 100 or 
more eligible professionals to participate in the Physician Quality 
Reporting System under GPRO using the same reporting mechanism and 
reporting criteria required under the 2010 Physician Quality Reporting 
System GPRO and proposed for the 2011 Physician Quality Reporting 
System GPRO I. We also considered modifying the definition of ``group 
practice'' to include groups that have and use multiple TINs.
    The following is a summary of the comments received regarding the 
proposed definition of ``group practice'' and the alternatives that 
were considered.
    Comment: Several commenters expressed support for the proposed 2011 
definition of a group practice as 2 or more individual eligible 
professionals who have reassigned their billing rights to the 
appropriate TIN, as opposed to a group practice with 200 or more 
individual eligible professionals as was the case in 2010. Commenters 
believed that this will greatly expand the opportunities for 
participation in the group practice reporting option and aligns with 
the current environment.
    Response: We agree that our proposed definition of ``group 
practice'' will expand opportunities to participate in the group 
practice reporting option. To allow for expanded use of the group 
practice reporting option, we are finalizing our proposal to define 
``group practice'' as 2 or more individual eligible professionals. 
However, as noted in the discussed that follows, we are modifying the 
definition of ``group practice'' with respect to group practices 
participating in Medicare demonstration projects approved by the 
Secretary.'' Rather than including such group practices in the 
definition of ``group practice'' at Sec.  414.90(b), we are indicating 
that such practices are deemed to be participating in the Physician 
Quality Reporting System at Sec.  414.90(g)(1).

[[Page 73503]]

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Part II--Continued

Book 2 of 2 Books

Pages 73503-73934





Department of Health and Human Services





-----------------------------------------------------------------------



Center for Medicare & Medicaid Services



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42 CFR Parts 405, 409, 410 et al.



Medicare Program; Payment Policies Under the Physician Fee Schedule and 
Other Revisions to Part B for CY 2011; Final Rule

[[Page 73504]]


Federal Register / Vol. 75 , No. 228 / Wednesday, November 24, 2010 / 
Rules and Regulations
    Comment: One commenter believes that the GPRO requirement that 
physicians reassign their billing rights to the taxpayer identification 
number (TIN) could be problematic for some practices where individual 
physicians continue billing Medicare on their behalf rather than 
reassigning to the group practice. Yet, these practices still function 
as a group and use the same data systems. It was recommended that we 
reconsider the reassignment requirement, as well as continue to add 
more specialty-specific measures groups in an effort to make the GPRO a 
more viable and attractive option.
    Response: We understand that there are various scenarios that may 
occur that would result in an individual eligible professional not 
reassigning his or her billing rights to a group TIN as required for 
inclusion in the GPRO I group. However, Physician Quality Reporting 
System GPRO I patient assignment, sample selection and incentive 
calculations are based at the TIN/NPI level. We believe it would be 
burdensome on the GPRO as well as the individual eligible professionals 
to track all individual NPIs who may practice periodically with their 
group while accounting for the instances when the NPI is not providing 
services to beneficiaries assigned to the group.
    Comment: One commenter requested that we expand the definition of 
``group practice'' to include non-physician providers.
    Response: We are finalizing our proposal to define ``group 
practice'' as a single TIN with 2 or more eligible professionals, as 
identified by their individual NPI, who have reassigned their billing 
rights to the TIN, but as noted in the following discussion, we are 
modifying our definition with respect to group practices participating 
in Medicare demonstration projects approved by the Secretary. 
Therefore, although the term ``physician group'' may sometimes be used 
when referring to group practices, it is not intended to infer that 
group practices are only physicians.
    Comment: A couple of commenters commended us for taking positive 
steps to reduce the reporting burden for eligible professionals. The 
commenters were specifically referring to our proposal to deem group 
practices participating in the PGP, MCMP, and EHR demonstrations to be 
participating in the Physician Quality Reporting System such that all 
eligible professionals participating in these demonstrations 
automatically will receive Physician Quality Reporting System bonus 
payments. The commenters requested that we extend this same waiver to 
all types of providers who participate in demonstrations. One commenter 
noted that the majority of participants in the PGP demonstration are 
hospitals and, like the Physician Quality Reporting System program, 
many of the measures that hospitals report to the RHQDAPU program 
overlap with the measures required for participation in the 
demonstration.
    Response: We agree with trying to lessen the burden on eligible 
professionals who are participating in demonstrations when practical 
and feasible. We specifically focused on these three demonstrations 
because their participants are required to report on measures that are 
very similar to the Physician Quality Reporting System GPRO I measures 
and to do so using a process very similar to the Physician Quality 
Reporting System GPRO I process for their demonstrations. At this time, 
we are not aware of other demonstrations that require the same measures 
and reporting processes. Therefore, we are not granting waivers with 
regard to the group practice reporting option to providers who are 
participating in demonstrations other than the PGP, MCMP, and EHR 
demonstrations. In addition, this waiver does not apply to any quality 
reporting program other than the Physician Quality Reporting System. We 
also further note that demonstration participants will not 
automatically receive Physician Quality Reporting System incentive 
payments. Rather, they must meet the requirements for Physician Quality 
Reporting System incentive qualification under their respective 
approved demonstration project.
    Comment: One commenter noted that practices participating in either 
the MCMP or EHR demonstrations could consist of solo practitioner 
practices. In addition, practices participating in the PGP, MCMP, or 
EHR demonstrations could consist of multiple TINs. The commenter 
requested clarification on whether such practices would still be 
considered a ``group practice'' for purposes of the Physician Quality 
Reporting System GPRO.
    Response: Our intent, in proposing to include practices that are 
participating in these demonstrations in the definition of ``group 
practice'' was to reduce the burden on eligible professionals who are 
already reporting using a process similar to the Physician Quality 
Reporting System GPRO I method and on similar measures, regardless of 
the composition of the actual group. Therefore, we are modifying the 
definition of ``group practice'' with respect to group practices 
participating in Medicare demonstration projects approved by the 
Secretary.'' Rather than including such group practices in the 
definition of ``group practice'' at Sec.  414.90(b), we are indicating 
that such practices are deemed to be participating in the Physician 
Quality Reporting System at Sec.  414.90(g)(1). In addition, we are 
clarifying at Sec.  414.90(g)(1) that such practices are ``group 
practices of any size (including solo practitioners) or comprised of 
multiple TINs participating in a Medicare demonstration project 
approved by the Secretary.''
    Based on these comments, we are finalizing the proposed definition 
of ``group practice'' with the changes discussed previously for 
purposes of the 2011 Physician Quality Reporting System group practice 
reporting option. We recognize that a group's size can fluctuate 
throughout the year as professionals move from practice to practice. 
Therefore, a group practice's size, for purposes of determining which 
reporting criteria the group must satisfy, will be the size of the 
group at the time the group's participation in one of the 2011 GPRO 
options is approved by CMS.
    We also recognize that, for various reasons, there potentially 
could be a discrepancy between the number of eligible professionals 
(that is, NPIs) submitted by the practice during the self-nomination 
process and the number of eligible professionals billing Medicare under 
the practice's TIN. Therefore, if we find more NPIs in the Medicare 
claims than the number of NPIs submitted by the practice during the 
self-nomination process and this would result in the practice being 
subject to different criteria for satisfactory reporting, then we will 
notify the practice of this finding as part of the self-nomination 
process. At this point, the practice will have the option of either 
agreeing to being subject to the different criteria for satisfactory 
reporting, justifying why they should not be subject to the different 
criteria for satisfactory reporting, or opting out of participation in 
the Physician Quality Reporting System as a group practice. For 
example, if we determine that a group practice that self-nominates for 
GPRO II has more than 199 eligible professionals billing Medicare under 
the practice's TIN, the practice would have the option of agreeing to 
participate in the Physician Quality Reporting System under GPRO I, 
explaining why the

[[Page 73505]]

practice actually has fewer than 200 eligible professionals (for 
example, some of the eligible professionals who billed Medicare have 
since retired), or opting out of participation in the Physician Quality 
Reporting System GPRO for 2011. If a group practice that self-nominates 
for GPRO I has fewer than 200 NPIs billing Medicare under the 
practice's TIN, then we will give the practice the opportunity to 
participate in GPRO II.
(3) Process for Physician Group Practices To Participate as Group 
Practices and Criteria for Satisfactory Reporting
(A) Group Practice Reporting Option for Physician Group Practices With 
200 or More NPIs--GPRO I
    As stated previously, we proposed that group practices interested 
in participating in GPRO I must self-nominate to do so. For group 
practices selected to participate in the Physician Quality Reporting 
System GPRO I for 2011, we proposed to retain the existing 12-month 
reporting period beginning January 1, 2011. We proposed that group 
practices participating in GPRO I submit information on a proposed 
common set of 26 NQF-endorsed quality measures using a data collection 
tool based on the GPRO Tool used in the 2010 Physician Quality 
Reporting System GPRO by 36 participating group practices to report 
quality measures under the Physician Quality Reporting System. As part 
of the data submission process for 2011 GPRO I, we proposed that during 
2012, each group practice would be required to report quality measures 
with respect to services furnished during the 2011 reporting period 
(that is, January 1, 2011, through December 31, 2011) on an assigned 
sample of Medicare beneficiaries.
    Once the beneficiary assignment has been made for each group 
practice, which we anticipate will be done during the fourth quarter of 
2011, we proposed to provide each group practice selected to 
participate in the Physician Quality Reporting System GPRO I with 
access to a database (that is, a data collection tool) that will 
include the group's assigned beneficiary samples and the final GPRO I 
quality measures. We proposed to pre-populate the data collection tool 
with the assigned beneficiaries' demographic and utilization 
information based on all of their Medicare claims data. The group 
practice will be required to populate the remaining data fields 
necessary for capturing quality measure information on each of the 
assigned beneficiaries. Identical to the sampling method used in the 
PGP demonstration, we proposed that the random sample must consist of 
at least 411 assigned beneficiaries. If the pool of eligible assigned 
beneficiaries is less than 411, then the group practice must report on 
100 percent, or all, of the assigned beneficiaries to satisfactorily 
participate in the group practice reporting option. For each disease 
module or preventive care measure, the group practice would be required 
to report information on the assigned patients in the order in which 
they appear in the group's sample (that is, consecutively). These 
proposed reporting criteria are identical to the reporting criteria 
used in the PGP demonstration and in the 2010 Physician Quality 
Reporting System GPRO.
    For 2011, we proposed an exclusive reporting mechanism for eligible 
professionals identified as part of the group practice with respect to 
the group as identified by the TIN. However, eligible professionals who 
are part of the group practice, and who separately practice with 
respect to another TIN to which the eligible professional has 
reassigned benefits, could separately qualify as individual eligible 
professionals with respect to the other practice (TIN).
    We invited comments on our proposal for 2011 to retain 200 as the 
number of NPIs for a TIN required for each group practice under the 
GPRO I. We also invited comment on our proposal to allow those 
``qualified'' for 2010 GPRO to be rolled over for automatic 
qualification for 2011 GPRO I.
    The following is a summary of the comments received regarding the 
proposed process for physician group practices with 200 or more NPIs 
(that is, GPRO I).
    Comment: A commenter expressed support for continuation of GPRO I.
    Response: We appreciate the commenter's support. We are finalizing 
the GPRO I as proposed. We believe that this process provides an 
effective means of collecting quality data from large group practices.
    Comment: A commenter expressed support for our proposal that 2010 
GPRO participants would not need to go through the self-nomination 
process to participate in 2011.
    Response: We appreciate the time and effort taken by the commenter 
to state support of our proposal to not have 2010 GPRO participants go 
through self nomination process for GPRO I participation for 2011. We 
will not require 2010 GPRO participants to go through the self-
nomination process for 2011 but they will need to inform us of their 
desire to participate in the 2011 GPRO I.
    Comment: To encourage group reporting for large practices, and to 
reduce the risk to individual eligible professionals if the practices 
do not qualify for an incentive, one commenter requested that we allow 
the individual eligible professionals within GPRO I to continue 
reporting through traditional methods. Thus, those participants might 
be eligible for incentives if the group practice does not 
satisfactorily submit data.
    Response: We considered the feasibility of analyzing Physician 
Quality Report System data submissions for GPRO I participants at the 
individual NPI level, but we decided against this option. Analyzing 
Physician Quality Reporting System data submissions for GPRO I 
participants at the individual NPI level would require individual 
eligible professionals who are part of a group practice participating 
in GPRO I to collect and report quality data in multiple ways, which 
would be inefficient. In addition, doing so would require additional 
CMS resources and potentially delay availability of the incentive 
payments for all participants. Furthermore, we believe that a group 
practice should have little difficulty in satisfactorily reporting 
under GPRO I since they will receive feedback prior to submission of 
the data to CMS.
    Comment: We received a few comments on the proposed reporting 
criteria for GPRO I. One commenter suggested that the GPRO reporting 
requirements be limited to 411 patients in total, rather than 411 
patients per measure, in order to reduce the associated resource 
burdens to participation. Another commenter was concerned with the 
considerable resources required to complete the data collection tool 
for this sample in such a short time frame. Given the methodology used, 
the commenter believes a smaller sample size would provide an accurate 
representation of a group's performance and urges us to reevaluate the 
sample sizes required.
    Response: The sample size for GPRO I is based on research done 
through the PGP demonstration. Since 2010 is the first year that GPRO 
was used for the Physician Quality Reporting System, there is 
insufficient data to warrant changing the sample size at this time. We 
note, however, that the GPRO I is for group practices with 200 or more 
eligible professionals. On average, these group practices typically 
have 20,000 patients assigned to each group practice. Thus, the number 
of measures and the required sample size is considered to be equitable 
for practices with this volume of patients and eligible professionals. 
We will continue to evaluate the

[[Page 73506]]

number and types of measures and modules for future program years.
    Comment: One commenter recommended that group practices with 50 or 
more eligible professionals be eligible to participate in GPRO I.
    Response: The GPRO I is based on the methodology researched through 
the PGP demonstration project. We would like to further explore the 
impact of a smaller patient sample size before implementing GPRO I for 
group practices less than 200 NPI's. We are, however, finalizing a 
group practice option for groups with less than 200 eligible 
professionals (GPRO II) that group practices with 2-199 eligible 
professionals can participate in for 2011. With the implementation of 
GPRO II for 2011 it would be a potential drain on resources to also 
implement GPRO I for smaller practice at the same time.
    For the reasons discussed previously and after taking into 
consideration the comments, we are finalizing the process group 
practices will be required to use to report data on quality measures 
for the 2011 as a group practice under GPRO I and the associated 
criteria for satisfactory reporting of data on quality measures by GPRO 
I practices, which are summarized in Table 75. Group practices 
participating in the Physician Quality Reporting System GPRO I as a 
group practice will be required to report on all of the measures listed 
in Table 75 of this final rule with comment period. These quality 
measures are grouped into preventive care measures and four disease 
modules: heart failure, diabetes, coronary artery disease, and 
hypertension.

     Table 75--2011 Process for Physician Group Practices To Participate as Group Practices and Criteria for
                Satisfactory Reporting of Data on Quality Measures by Group Practices for GPRO I
----------------------------------------------------------------------------------------------------------------
      Reporting mechanism              Reporting criteria                        Reporting period
----------------------------------------------------------------------------------------------------------------
A pre-populated data            <bullet> Report on all measures  January 1, 2011-December 31, 2011.
 collection tool provided by     included in the data
 CMS.                            collection tool (26 measures);
                                 and.
                                <bullet> Complete the tool for
                                 the first 411 consecutively
                                 ranked and assigned
                                 beneficiaries in the order in
                                 which they appear in the
                                 group's sample for each
                                 disease module or preventive
                                 care measure. If the pool of
                                 eligible assigned
                                 beneficiaries is less than
                                 411, then report on 100% of
                                 assigned beneficiaries.
----------------------------------------------------------------------------------------------------------------

    As stated in the CY 2011 PFS proposed rule (75 FR 40179), group 
practices interested in participating in GPRO I must submit a self-
nomination letter accompanied by an electronic file submitted in a 
format specified by CMS (such as, a Microsoft Excel file) that includes 
the group practice's TIN(s) and name of the group practice, the name 
and e-mail address of a single point of contact for handling 
administrative issues, as well as the name and e-mail address of a 
single point of contact for technical support purposes. We will 
validate that the group practice consists of a minimum of 200 NPIs and 
will supply group practices with this list. The self-nomination letter 
must also indicate the group practice's compliance with the following 
requirements:
    <bullet> Agree to attend and participate in all mandatory GPRO 
training sessions; and
    <bullet> Have billed Medicare Part B on or after January 1, 2010 
and prior to October 29, 2010.
    We are not finalizing our proposal requiring group practices to 
indicate in their self-nomination letter that they have an active IACS 
user account. This was a requirement that we proposed to retain from 
the 2010 Physician Quality Reporting System GPRO self-nomination 
process. However, since an active IACS user account will not be needed 
to submit 2010 Physician Quality Reporting System GPRO data to us, we 
have decided not to require an IACS user account for the 2011 Physician 
Quality Reporting System GPRO I. Although access to a CMS identity 
management system will not be required for submitting 2011 PQRI GPRO I 
data to us, a group practice will need to have access to a CMS identity 
management system in order to access their 2011 PQRI feedback report.
    We intend to post the final 2011 Physician Quality Reporting System 
GPRO I participation requirements for group practices, including 
instructions for submitting the self-nomination letter and other 
requested information, on the Physician Quality Reporting System 
section of the CMS Web site at http://www.cms.gov/PQRI by November 15, 
2010 or shortly thereafter. Group practices that wish to self-nominate 
for 2011 will be required to do so by January 31, 2011. Upon receipt of 
the self-nomination letters we will assess whether the participation 
requirements were met by each self-nominated group practice using 2010 
Medicare claims data. We will not preclude a group practice from 
participating in the GPRO I if we discover, from analysis of the 2010 
Medicare claims data, that there are some eligible professionals 
(identified by NPIs) that are not established Medicare providers (that 
is, have not billed Medicare Part B on or after January 1, 2010 and 
prior to or on October 29, 2010) as long as the group has at least 200 
established Medicare providers. NPIs who are not established Medicare 
providers, however, would not be included in our incentive payment 
calculations. Group practices that were selected to participate in the 
2010 Physician Quality Reporting System GPRO will automatically be 
qualified to participate in the 2011 Physician Quality Reporting System 
GPRO I and will not need to complete the 2011 Physician Quality 
Reporting System GPRO I self-nomination process.
    The 2010 Physician Quality Reporting System GPRO Tool will be 
updated as needed to include the 2011 Physician Quality Reporting 
System GPRO I measures. We believe that use of the GPRO data collection 
tool allows group practices the opportunity to calculate their own 
performance rates for reporting quality measures.
    As stated in the CY 2011 PFS proposed rule (75 FR 40180 through 
40181), we intend to provide the selected physician groups with access 
to this pre-populated database by no later than the first quarter of 
2012. For purposes of pre-populating this GPRO I tool, we will assign 
beneficiaries to each group practice using a patient assessment 
methodology modeled after the patient assignment methodology used in 
the PGP demonstration. Based on our desire to model the Physician 
Quality Reporting System GPRO I after the PGP demonstration, we will 
also consider applying any refinements made to the methodology used in 
the PGP demonstration prior to January 1, 2011 to the 2011 Physician 
Quality Reporting System. We anticipate using Medicare claims data for 
dates of service

[[Page 73507]]

on or after January 1, 2011 and submitted and processed by 
approximately October 31, 2011 (that is, the last business day of 
October 2011) to assign Medicare beneficiaries to each group practice. 
Assigned beneficiaries will be limited to those Medicare Part B FFs 
beneficiaries with Medicare Parts A and B for whom Medicare is the 
primary payer. Assigned beneficiaries will not include Medicare 
Advantage enrollees. A beneficiary will be assigned to the group 
practice that provides the plurality of a beneficiary's office or other 
outpatient office evaluation and management allowed charges. 
Beneficiaries with only 1 office visit to the group practice will be 
eliminated from the group practice's assigned patient sample for 
purposes of the 2011 Physician Quality Reporting System GPRO I. We will 
pre-populate the GPRO I tool with the assigned beneficiaries' 
demographic and utilization information based on their Medicare claims 
data.
    Upon receipt of the pre-populated data collection tool, the group 
practice will need to populate the remaining data fields necessary for 
capturing quality measure information on each of the assigned 
beneficiaries up to 411 beneficiaries for each disease module and 
preventive care measure. If the pool of eligible assigned beneficiaries 
for any disease module or preventive care measure is less than 411, 
then the group practice must populate the remaining data files for 100 
percent of eligible assigned beneficiaries for that disease module or 
preventive care measure. For each disease module or preventive care 
measure, the group practice must report information on the assigned 
patients in the order in which they appear in the group's sample (that 
is, consecutively).
(B) Group Practice Reporting Option for Group Practices of 2-199 NPIs--
GPRO-II
    As discussed previously, section 1848(m)(3)(C) of the Act 
authorized us to define the term ``group practice'' and required us to 
establish a process under which eligible professionals in group 
practices shall be treated as satisfactorily submitting data on 
Physician Quality Reporting System quality measures, but was not 
prescriptive with regard to the characteristics of this process. 
Although for 2010 we did not provide a process for groups of less than 
200 NPIs to report under the GPRO, we believe that there are 
significant potential benefits to allowing reporting at the group level 
generally. Thus, based on this authority we proposed a new group 
practice reporting option (GPRO II) for groups of 2-199 NPIs in a TIN 
for 2011 (75 FR 40181). For GPRO II in 2011, we proposed to require 
groups of eligible professionals who decide to report as a group to 
self-nominate. We did not propose to preclude a group practice from 
participating in the GPRO II if we discover, from analysis of the 2010 
Medicare claims data, that there are some eligible professionals 
(identified by NPIs) that are not established Medicare providers (that 
is, have not billed Medicare Part B on or after January 1, 2010 and 
prior to or on) as long as the group has at least 2 established 
Medicare providers. October 29, 2010 NPIs who are not established 
Medicare providers, however, would not be included in our incentive 
payment calculations.
    We also proposed that self-nominating groups would need to indicate 
in this letter if the group intends to report as a group for the eRx 
Incentive Program and the reporting mechanism the group intends to use 
to report as a group for the eRx Incentive Program.
    Since GPRO II would be a new process available to groups in 2011, 
we proposed to initially pilot the GPRO II process with a limited 
number of groups. We proposed to select the first 500 groups that meet 
the proposed eligibility requirements to participate in the 2011 GPRO 
II. We proposed to use the postmark to determine the order in which 
groups self-nominated for GPRO II. We proposed to consider only self-
nomination letters postmarked between January 3, 2011 and January 31, 
2011. We did not propose to consider letters postmarked prior to 
January 3, 2011 to prevent groups from self-nominating before the GPRO 
II requirements are finalized and to discourage groups from self-
nominating for GPRO II prior to reviewing the final GPRO II 
requirements.
    For purposes of quality data submission, we proposed, for the GPRO 
II, to allow eligible professionals to submit their data through claims 
or through a qualified GPRO registry to the extent registries are 
technically capable of collecting, calculating and transmitting the 
required data to CMS and that we are able to accept such data from 
registries.
    For GPRO II, we proposed that in addition to reporting a specific 
number of individual measures, the group would have to report one or 
more proposed 2011 Physician Quality Reporting System measures groups 
depending on the size of the group practice.
    For purposes of satisfying the requirements under section 
1848(m)(3)(C)(i) of the Act for groups of 2-199 NPIs, we proposed that 
in order to be treated as satisfactorily reporting under GPRO II, the 
group practice would be required to report on 50 percent or more (if 
submitting through claims) of all Medicare Part B patients who fit into 
the measures group denominator or 80 percent or more of Medicare 
patients if using a registry to report.
    Additionally, to earn a Physician Quality Reporting System 
incentive payment for all allowed Medicare Part B services that are 
provided by the TIN, we proposed that a group practice must report on 
three to six individual 2011 Physician Quality Reporting System 
measures, depending on the size of the group. We proposed that the 
group practice may select from among any of the 2011 Physician Quality 
Reporting System measures on which to submit data, provided the 
measures selected are not duplicated in the measures group(s) reported.
    We proposed that, to satisfactorily report individual Physician 
Quality Reporting System measures, a group must report each measure at 
the same rate (percentage) as determined by the method of submission as 
individual eligible professionals. For example, if reporting via 
claims, to satisfactorily report individual measures, each measure 
would need to be reported on at least 50 percent of eligible Medicare 
Part B FFS patients.
    An alternative which we considered and sought comment on was to 
require that the individual measures be selected from a more limited 
set of measures, such as measures closely linked to improved population 
health, or other measures perceived to address the greatest potential 
benefit from improved performance. A second alternative that we 
considered and sought comment on was to require group practices, as 
part of the self-nomination process, to designate whether they were a 
multispecialty group with primary care, a multispecialty group without 
primary care, or a single specialty group, and if so, the specialty. 
Depending on what type of specialty the group is, we would identify a 
set of Physician Quality Reporting System measures pertaining to the 
group's specialty and require the group practice to report on the 
identified set of specialty-specific Physician Quality Reporting System 
measures.
    If a group practice participating in the 2011 Physician Quality 
Reporting System GPRO II wants to also participate in the 2011 eRx 
Incentive Program as a small group, we proposed that the group would 
need to indicate

[[Page 73508]]

that preference in their self-nomination letter and would need to 
report on a specified number of unique encounters based on their group 
size. For GPRO II reporting in the 2011 eRx Incentive Program, we 
proposed the following reporting mechanisms: claims, a GPRO eRx 
qualified registry or a GPRO qualified EHR. As with the 2011 eRx 
Incentive Program for individual eligible professionals and the 2011 
eRx Incentive Program GPRO I, at least 10 percent of a GPRO II group's 
charges would need to be comprised of codes in the denominator of the 
electronic prescribing measure and the group would need to use an 
electronic prescribing system that meets the requirements of the 2011 
electronic prescribing measure. Similar to proposed GPRO I, if a GPRO 
II group self-nominates to report the electronic prescribing measure as 
a group, we proposed that all members of the group practicing under the 
group's TIN would be ineligible to report as an individual electronic 
prescriber.
    The following is a summary of the comments received regarding our 
proposal on the GPRO II option and process for group practices to 
report Physician Quality Reporting System quality data measures.
    Comment: We received favorable support for the proposed addition of 
GPRO II as a group reporting option, including the requirement to self-
nominate and report a measures group along with 3 individual relevant 
performance measures. One commenter stated that GPRO II will help spur 
more eligible professionals, specifically those with 2-199 member 
practices, to participate in the Physician Quality Reporting System.
    Response: We appreciate the commenters' support and are finalizing 
our proposal to add GPRO II as a group reporting option. We note, 
however, that the number of measures groups and individual measures on 
which a group practice will be required to report will vary by the 
group practice's sizes. The specific requirements are described in 
Table 76 of this final rule with comment period.
    Comment: Some commenters opposed the proposed cap of the first 500 
groups that self-nominate for GPRO II. Commenters were primarily 
concerned that this would be too limiting. Another commenter noted that 
this reporting option has the advantage of mid-year interim feedback 
reports to assist participating groups in determining whether their 
Physician Quality Reporting System data is being captured 
appropriately. One commenter recommended that all self-nominations 
postmarked in the month of January 2011 be accepted for this reporting 
option. Another commenter urged us to expand GPRO II quickly beyond the 
initial cap of 500 practices.
    Response: We appreciate the commenters' enthusiasm for this new 
reporting option and would like to be able to make it available to as 
many groups as possible, but will need to initially limit the number of 
groups participating in GPRO II for operational reasons. We will accept 
at least 500 groups, but could potentially accept more depending on our 
ability to handle a higher volume of groups participating in this 
option. We expect that we will be able to expand this option further in 
future years to make it available to more groups. In addition, we would 
like to clarify that we did not propose to provide interim feedback 
reports for group practices participating in GPRO II. Rather, we 
proposed to provide interim feedback reports for individual eligible 
professionals who submitted measures group data via claims during the 
first 2 months of 2011. However, as noted in this section, we are not 
finalizing this proposal.
    Comment: Since we proposed to limit participation in GPRO II to 500 
groups in 2011, it was recommended that we strive for diversity of 
specialty representation rather than just a first-come, first-served 
approach.
    Response: We appreciate the commenter's suggestions. As stated 
previously, we will accept as many groups as resources allow and select 
a minimum of 500 GPRO II practices for 2011.
    Comment: One commenter requested that GPRO II be made available to 
groups of any size. The commenter believed this would allow group 
practices to decide whether to participate in GPRO I or GPRO II 
depending on which option works best for their practice.
    Response: We appreciate the commenter's valuable input. As we 
explore ways to further expand the GPRO II in future years we may 
consider making it available to groups of any size.
    Comment: One commenter suggested that we reduce the number of 
individual and group measures required to report for GPRO II. Other 
commenters stated that the requirement to report at least 1 measures 
group would disadvantage those group practices for which none of the 
existing measures groups applies or there are a limited number of 
applicable measures groups.
    Response: We understand the commenters' concerns and are revising 
the criteria for satisfactory reporting. Whereas we proposed to require 
group practices to report on a specified percentage of patients for 
both individual measures and measures groups, we are requiring, for 
2011, that group practices report on a specified percentage of patients 
for the individual measures only. For measures groups, group practices 
will need to report on only the specified minimum number of patients 
(see Table 76 of this final rule with comment period). In addition, we 
believe that, on average, the total reporting burden per eligible 
professional in a group practice is less than the reporting burden for 
eligible professionals reporting individually. For example, for a group 
of 5 eligible professionals that is required to report on 1 measures 
group and 3 individual measures, this means that the group is required 
to report on less than 2 measures per eligible professionals compared 
to 3 measures or 1 measures group per individual eligible professional.
    With respect to the commenter's concerns that groups with a limited 
number of applicable measures groups could be disadvantaged, we believe 
that as we increase the numbers of measures groups available, this 
would be less of a concern over time. In the meantime, eligible 
professionals in group practices that do not have any applicable 
measures groups are still able to report individual measures as 
individual eligible professionals and meet the criteria for 
satisfactory reporting individually.
    Comment: One commenter requested that we not restrict the selection 
of Physician Quality Reporting System measures (for example, only 
population health measures) for GPRO II, given that multi-specialty 
groups with primary care, multi-specialty groups without primary care, 
and single specialty groups will be participating in this reporting 
option. Restrictions to select Physician Quality Reporting System 
measures may limit the diversity of practices that elect to report 
through this option. Similarly, another commenter was concerned that 
requiring so many primary care measures will make it difficult for 
specialists, such as psychiatrists, to participate in large numbers.
    Response: The commenters appear to be suggesting that we are 
placing restrictions on the selection of measures for the GPRO II, 
which is not correct. While GPRO I groups are required to report on a 
standard set of 26 measures, the GPRO II groups can select any 2011 
Physician Quality Reporting System individual measures and measures 
groups that are relevant to their practice

[[Page 73509]]

as long as they report the required number of individual measures and 
measures groups for their group size (see Table 76 of this final rule 
with comment period). However, in future years and in future rulemaking 
we expect to reconsider alternative reporting requirements, including 
the alternatives of identifying a core set of measures for which broad 
reporting may be required.
    Comment: One commenter requested that we clearly indicate how we 
derived the performance results for each individual professional if we 
post performance information derived from the GPRO II on the Physician 
Compare Web site. The commenter was concerned that the reported 
performance that will be attributed to an individual eligible 
professional through GPRO II will not necessarily reflect individual 
performance.
    Response: We appreciate the commenter's feedback. To date, we have 
not made any Physician Quality Reporting System performance rates 
publicly available. We value input from external stakeholders. Opinions 
and alternatives that are provided will assist us in future policy 
decisions as we develop our plans for the Physician Compare Web site. 
With respect to the commenter's concern that performance information 
derived from GPRO II will be attributed to an individual eligible 
professional, group practice reporting is attributed to the entire 
group, not to the individual. Additionally, we do not intend to 
publicly report Physician Quality Reporting System performance results 
for 2011.
    Upon consideration of the comments received, group practices that 
wish to participate in the GPRO II will need to self-nominate. The 
self-nomination process will consist of sending a letter with the name 
of the group, the TIN, an e-mail address of the contact person, and the 
names and NPIs of all of the eligible professionals practicing under 
that group's TIN. The self-nomination letter must also be accompanied 
by an electronic file submitted in a format specified by CMS (such as 
Microsoft Excel) with the group practice's TIN and NPIs. Self-
nomination letters should be sent to: GPRO II, c/o CMS, 7500 Security 
Blvd., Mail Stop S3-02-01, Baltimore, MD 21244, and must be postmarked 
by January 31, 2011, for consideration in the program. We are also 
finalizing our proposal to initially limit the number of groups 
participating in GPRO II. We seek to make this option available to as 
many groups as possible but have limited resources. Therefore, as 
stated previously, we will accept at least 500 groups, but could 
potentially accept more depending on our ability to handle a higher 
volume of groups participating in this option. We expect that we will 
be able to expand this option further in future years to make it 
available to more groups.
    Table 76 sets forth the final criteria for satisfactory reporting 
under the 2011 Physician Quality Reporting System GPRO II and 
requirements for each group based on their respective group size 
(number of eligible professionals). As stated previously, GPRO II 
groups will be required to report on a specified percentage of patients 
for reporting the individual measures only. To satisfactorily report 
measures groups for the 2011 Physician Quality Reporting System GPRO 
II, the group practice need only report on the minimum number of 
patients specified in Table 76 for their group size. In addition, since 
we will not have the ability to determine whether the registries can 
ensure that only unique patients are counted, GPRO II groups must 
report the 2011 Physician Quality Reporting System data via claims 
unless the only measures groups that apply to the practice are one of 
the four registry-only measures groups listed in section 
VII.F.2.(i).(5). of this final rule with comment period. Group 
practices that must report on one of the four registry-only measures 
groups in order to meet the criteria for satisfactory reporting will be 
able to use the registry-reporting mechanism to submit their 2011 
Physician Quality Reporting System data and must submit all of their 
2011 Physician Quality Reporting System GPRO II data via the registry 
reporting mechanism. However, we anticipate that the list of registries 
qualified to submit 2011 Physician Quality Reporting System GPRO II 
data will not be available until summer 2011. Group practices will need 
to indicate the reporting mechanism they intend to use for the 2011 
Physician Quality Reporting System GPRO II in their self-nomination 
letter.

    Table 76--2011 Process for Physician Group Practices To Participate as Group Practices and Criteria for Satisfactory Reporting of Data on Quality
                                                         Measures by Group Practices for GPRO II
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Minimum                       Percent of      Percent of
                                                                        number of                     medicare part   medicare part   Required number of
                                                                      medicare part                   b patients in   b patients in  unique visits where
                                                        Number of    b  patients in     Number of      denominator     denominator            an
                                                        measures       denominator     individual          for             for       e[dash]prescription
   Group size (number of eligible  professionals)        groups            for          measures      satisfactory    satisfactory   was generated to be
                                                     required to be   satisfactory   required to be   reporting of    reporting of       a successful
                                                        reported      reporting of      reported       individual      individual         electronic
                                                                        measures                      measures via    measures via        prescriber
                                                                         groups                        claims (%)    registries (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2-10...............................................               1              35               3              50              80                  75
11-25..............................................               1              50               3              50              80                 225
26-50..............................................               2              50               4              50              80                 475
51-100.............................................               3              60               5              50              80                 925
101-199............................................               4             100               6              50              80                1875
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We are not finalizing our proposal to analyze the individual 
professional's data to see if they satisfactorily reported at the 
individual TIN/NPI level if the group does not satisfactorily report as 
a GPRO II group. We have determined that this is neither practical nor 
feasible for us. This should have no impact on how groups will report 
Physician Quality Reporting System data under GPRO since claims will 
identify both the TIN and the individual eligible professional 
rendering the service regardless of whether we analyze the claims at 
the group or individual level. Although there will be some risk to 
eligible professionals who are part of a GPRO II group if the group 
fails to satisfactorily report, we believe this risk is outweighed by 
the additional resources that would be required to process a group's 
data at both the group and individual levels and the fact that

[[Page 73510]]

all participants' incentive payments could potentially be delayed.
h. Statutory Requirements and Other Considerations for 2011 Physician 
Quality Reporting System Measures
(1) Statutory Requirements for 2011 Physician Quality Reporting System 
Measures
    Under section 1848(k)(2)(C)(i) of the Act, the Physician Quality 
Reporting System quality measures shall be such measures selected by 
the Secretary from measures that have been endorsed by the entity with 
a contract with the Secretary under subsection 1890(a) of the Act 
(currently, that is the National Quality Forum, or NQF). However, in 
the case of a specified area or medical topic determined appropriate by 
the Secretary for which a feasible and practical measure has not been 
endorsed by the NQF, section 1848(k)(2)(C)(ii) of the Act authorizes 
the Secretary to specify a measure that is not so endorsed as long as 
due consideration is given to measures that have been endorsed or 
adopted by a consensus organization identified by the Secretary, such 
as the AQA alliance. In light of these statutory requirements, we 
believe that, except in the circumstances specified in the statute, 
each proposed 2011 Physician Quality Reporting System quality measure 
would need to be endorsed by the NQF. Additionally, section 
1848(k)(2)(D) of the Act requires that for each 2011 Physician Quality 
Reporting System quality measure, ``the Secretary shall ensure that 
eligible professionals have the opportunity to provide input during the 
development, endorsement, or selection of measures applicable to 
services they furnish.''
    The statutory requirements under section 1848(k)(2)(C) of the Act, 
subject to the exception noted previously, require only that the 
measures be selected from measures that have been endorsed by the 
entity with a contract with the Secretary under section 1890(a) (that 
is, the NQF) and are silent with respect to how the measures that are 
submitted to the NQF for endorsement were developed. The basic steps 
for developing measures applicable to physicians and other eligible 
professionals prior to submission of the measures for endorsement may 
be carried out by a variety of different organizations. We do not 
believe there needs to be any special restrictions on the type or make 
up of the organizations carrying out this basic development of 
physician measures, such as restricting the initial development to 
physician-controlled organizations. Any such restriction would unduly 
limit the basic development of quality measures and the scope and 
utility of measures that may be considered for endorsement as voluntary 
consensus standards.
(2) Other Considerations for 2011 Physician Quality Reporting System 
Measures
    As stated previously, in addition to reviewing the 2010 Physician 
Quality Reporting System measures for purposes of developing the 
proposed 2011 Physician Quality Reporting System measures, we reviewed 
and considered measure suggestions including comments received in 
response to the CY 2010 PFS proposed and final rules with comment 
period. Additionally, suggestions and input received through other 
venues, such as an invitation for measures suggestions via the 
Listening Session held February 2, 2010, were also reviewed and 
considered for purposes of our development of the list of proposed 2011 
Physician Quality Reporting System quality measures.
    With respect to the selection of new measures, we applied the 
following considerations, which include many of the same considerations 
applied to the selection of 2009 and 2010 Physician Quality Reporting 
System quality measures for inclusion in the 2011 Physician Quality 
Reporting System quality measure set previously described:
    <bullet> High Impact on Healthcare.
    ++ Measures that are high impact and support CMS and HHS priorities 
for improved quality and efficiency of care for Medicare beneficiaries. 
These current and long term priority topics include the following: 
Prevention; chronic conditions; high cost and high volume conditions; 
elimination of health disparities; healthcare-associated infections and 
other conditions; improved care coordination; improved outcomes; 
improved efficiency; improved patient and family experience of care; 
improved end-of-life/palliative care; effective management of acute and 
chronic episodes of care; reduced unwarranted geographic variation in 
quality and efficiency; and adoption and use of interoperable HIT.
    <bullet> Measures that are included in, or facilitate alignment 
with, other Medicare, Medicaid, and CHIP programs in furtherance of 
overarching healthcare goals.
    <bullet> NQF Endorsement.
    ++ Measures must be NQF-endorsed by June 1, 2010, in order to be 
considered for inclusion in the 2011 Physician Quality Reporting System 
quality measure set except as provided under section 1848(k)(2)(C)(ii) 
of the Act.
    ++ Section 1848(k)(2)(C)(ii) of the Act provides an exception to 
the requirement that the Secretary select measures that have been 
endorsed by the entity with a contract under section 1890(a) of the Act 
(that is, the NQF).
    ++ The statutory requirements under section 1848(k)(2)(C) of the 
Act, subject to the exception noted previously, require only that the 
measures be selected from measures that have been endorsed by the 
entity with a contract with the Secretary under section 1890(a) (that 
is, the NQF) and are silent with respect to how the measures that are 
submitted to the NQF for endorsement are developed. The basic steps for 
developing measures applicable to physicians and other eligible 
professionals prior to submission of the measures for endorsement may 
be carried out by a variety of different organizations. We do not 
believe there needs to be any special restrictions on the type or make 
up of the organizations carrying out this basic development of 
physician measures, such as restricting the initial development to 
physician-controlled organizations. Any such restriction would unduly 
limit the basic development of quality measures and the scope and 
utility of measures that may be considered for endorsement as voluntary 
consensus standards. The requirements under section 1848(k)(2)(C) of 
the Act pertain only to the selection of measures and not to the 
development of measures.
    <bullet> Address Gaps in the Physician Quality Reporting System 
Measure Set.
    ++ Measures that increase the scope of applicability of the 
Physician Quality Reporting System measures to services furnished to 
Medicare beneficiaries and expand opportunities for eligible 
professionals to participate in the Physician Quality Reporting System.
    <bullet> Measures of various aspects of clinical quality including 
outcome measures, where appropriate and feasible, process measures, 
structural measures, efficiency measures, and measures of patient 
experience of care.
    Other considerations that we applied to the selection of measures 
for 2011, regardless of whether the measure was a 2010 Physician 
Quality Reporting System measure or not, were--
    <bullet> Measures that are functional, which is to say measures 
that can be technically implemented within the capacity of the CMS 
infrastructure for data collection, analysis, and calculation of 
reporting and performance rates. For example, we proposed to replace 
existing 2010 Physician Quality Reporting System measures <greek-i>114 
and <greek-i>115 with updated and improved measure <greek-i>TBD

[[Page 73511]]

(Preventive Care and Screening: Tobacco Use: Screening and Cessation 
Intervention), which is less technically challenging to report.
    <bullet> In the 2011 Physician Quality Reporting System, as in the 
2010 Physician Quality Reporting System, for some measures that are 
useful, but where data submission is not feasible through all otherwise 
available Physician Quality Reporting System reporting mechanisms, a 
measure may be included for reporting solely through specific reporting 
mechanism(s) in which its submission is feasible.
    In the proposed rule, we invited comments on the implication of 
including or excluding any given measure or measures for our proposed 
2011 Physician Quality Reporting System quality measure set, as well as 
feedback relative to our proposed approach in selecting measures (75 FR 
40185). We indicated that while we welcome all constructive comments 
and suggestions, and may consider such recommended measures for 
inclusion in future measure sets for the Physician Quality Reporting 
System and other programs to which such measures may be relevant, we 
were not able to consider such additional measures for inclusion in the 
final 2011 measure set.
    As discussed previously, section 1848(k)(2)(D) of the Act requires 
that the public have the opportunity to provide input during the 
selection of measures. We also are required by other applicable 
statutes to provide opportunity for public comment on provisions of 
policy or regulation that are established via notice and comment 
rulemaking. Measures that were not included in the proposed rule for 
inclusion in the 2011 Physician Quality Reporting System that are 
recommended to CMS via comments on the proposed rule have not been 
placed before the public to comment on the selection of those measures 
within the rulemaking process. Even when measures have been published 
in the Federal Register, but in other contexts and not specifically 
proposed as Physician Quality Reporting System measures, such 
publication does not provide true opportunity for public comment on 
those measures' potential inclusion in the Physician Quality Reporting 
System. Thus, such additional measures recommended for selection for 
the 2011 Physician Quality Reporting System via comments on the CY 2011 
PFS proposed rule cannot be included in the 2011 measure set. However, 
as discussed previously, we will consider comments and recommendations 
for measures, which may not be applicable to the final set of 2011 
Physician Quality Reporting System measures, for purposes of 
identifying measures for possible use in the Physician Quality 
Reporting System in future years or other initiatives to which those 
measures may be pertinent.
    In addition, as in prior years, we again note that we do not use 
notice and comment rulemaking as a means to update or modify measure 
specifications. Quality measures that have completed the consensus 
process have a designated party (usually, the measure developer/owner) 
who has accepted responsibility for maintaining the measure. In 
general, it is the role of the measure owner, developer, or maintainer 
to make changes to a measure. Therefore, comments requesting changes to 
a specific proposed Physician Quality Reporting System measure's title, 
definition, and detailed specifications or coding should be directed to 
the measure developer identified in Tables 78 through 96. Contact 
information for the 2010 Physician Quality Reporting System measure 
developers is listed in the ``2010 PQRI Quality Measures List,'' which 
is available on the Physician Quality Reporting System section of the 
CMS Web site at http://www.cms.gov/PQRI.
    However, we stress that inclusion of measures that are not NQF 
endorsed or AQA adopted is an exception to the requirement under 
section 1848(k)(2)(C)(i) of the Act that measures be endorsed by the 
NQF. We may exercise this exception authority in a specified area or 
medical topic for which a feasible and practical measure has not been 
endorsed by NQF, so long as due consideration is given to measures that 
have been endorsed by the NQF.
(3) Summary of Comments and Responses
    The following is summary of the comments we received regarding the 
statutory requirements and other considerations for the selection of 
2011 Physician Quality Reporting System measures.
    Comment: Some commenters strongly support the adoption of NQF-
endorsed measures only. One commenter stated that the AQA is no longer 
doing measure evaluation work and should not be allowed to approve 
measures for the Physician Quality Reporting System as a way to 
sidestep the well-designed and well-executed process of the NQF.
    Response: We agree that endorsement of measures by the NQF is an 
important criteria for inclusion in the Physician Quality Reporting 
System. However, section 1848(k)(2)(C)(i) of the Act provides an 
exception to the requirement that measures be endorsed by the NQF. We 
may exercise this exception authority in a specified area or medical 
topic for which a feasible and practical measure has not been endorsed 
by NQF, so long as due consideration is given to measures that have 
been endorsed by the NQF. For this reason, we retain the ability to 
include non-NQF endorsed measures in the Physician Quality Reporting 
System. Once those measures work through the NQF process, we may remove 
those that were not endorsed by the NQF from the program.
    Comment: A few commenters opposed our conclusion that any 
organization can develop quality measures. The AMA-specialty society 
quality consortium, the PCPI, should be recognized by us to specify the 
quality measures and adequately test them for inclusion in the 
Meaningful Use program.
    Response: We do not believe there needs to be any special 
restrictions on the type or make up of the organizations carrying out 
the basic development of measures for physicians and other eligible 
professionals, such as restricting the initial development to 
physician-controlled organizations. While we agree that expertise in 
measure development is important in the measure development and 
consensus processes, any such restriction would unduly limit the basic 
development of quality measures and the scope and utility of measures 
that may be considered for endorsement as voluntary consensus 
standards. In addition, physicians are not the only types of 
professionals eligible to participate in the Physician Quality 
Reporting System.
    Comment: Another commenter encouraged us to allow for other means 
for measure endorsement due to NQF's lack of timeliness and consistency 
issues.
    Response: As stated previously, section 1848(k)(2)(C)(i) of the Act 
provides an exception to the requirement that measures be endorsed by 
the NQF. We may exercise this exception authority in a specified area 
or medical topic for which a feasible and practical measure has not 
been endorsed by NQF, so long as due consideration is given to measures 
that have been endorsed by the NQF. In certain circumstance, we have 
exercised this exception authority to include measures that have not 
yet gone through the NQF endorsement process to address measure gaps.
    Comment: Many commenters requested that we encourage the 
development and use of measures in

[[Page 73512]]

specific areas or topics. The specific areas or topics that commenters 
recommended as priorities included sub-specialty specific measures, 
measures that reflect the day-to-day treatment of cancer patients, 
risk-adjusted outcome measures (as opposed to process measures), 
measures that better reflect patient preferences, patient experience, 
functional status, and care coordination, measures that capture 
demographic data in ways that enable measures to be stratified and used 
to identify and address health disparities, measures that address high-
burden disease areas especially prevalent in the Medicare beneficiary 
population, broader measures to enhance accurate identification and 
treatment of atrial fibrillation, measures that will be retooled for 
future use in EHR reporting, measures that must be retooled for the 
impending ICD-10-CM/PCS compliance date, and measures to capture 
whether patients have received preventive vaccinations.
    Response: We appreciate the commenters' recommendations for 
expanding criteria for measure selection and prioritization. We note, 
however, that we largely depend on the development of measures by 
professional organizations and other measure developers and encourage 
professional organizations and other measure developers to fund and 
develop measures that address the priority areas identified by the 
commenters. In addition, if there are specific measures that commenters 
would like us to consider for future years to address these areas, we 
urge them to submit the specific measure suggestions via the 2012 Call 
for Measures. Information on the 2012 Call for Measures will be posted 
on the Physician Quality Reporting System section of the CMS Web site 
when it becomes available. We anticipate conducting the 2012 Call for 
Measures in late 2010 or early 2011.
    Comment: One commenter suggested the proposed addition of Physician 
Quality Reporting System measures for 2011 be re-visited in context 
with the August 2010 publication of 69 NQF-endorsed[supreg] ambulatory 
performance measures.
    Response: We appreciate the commenter's valuable input. As stated 
previously and in the proposed rule (75 FR 40185), we are not able to 
consider additional measures for inclusion in the final 2011 Physician 
Quality Reporting System measure set beyond what we proposed. However, 
we may consider them for inclusion in future measure sets for the 
Physician Quality Reporting System.
    Comment: A few commenters recommended that we implement more 
meaningful and impactful measures. Some of the actions specifically 
recommended by the commenters include:
    <bullet> Require the collection of patient experience surveys, if 
there is an NQF-endorsed survey available for that professional;
    <bullet> Remove measures that ``document'' the presence of 
evaluation, assessment, and counseling as there is no relationship 
between such measures and patient outcome;
    <bullet> Consider adding measures from NQF's Ambulatory Care 
Measures Using Clinically Enriched Administrative Data that are 
appropriate for the Medicare population; and
    <bullet> Develop measures that will fill gaps in the Physician 
Quality Reporting System measure set and that adhere to key criteria 
for robust measures.
    Response: We appreciate the commenter's feedback regarding the use 
of more meaningful and impactful measures in the Physician Quality 
Reporting System. We appreciate the time and effort taken in providing 
your recommendation and, as stated previously, we urge the commenter to 
work with professional organizations and other measure developers to 
fund and develop measures that address the priority areas identified by 
the commenter and/or submit recommendations for specific measures that 
the commenter would like us to consider for future years via the 2012 
Call for Measures.
    Comment: One commenter urged us to be mindful of the resources 
required to translate quality data into improved provider performance. 
Therefore, we should ensure appropriate phasing-in of new measures into 
our current quality reporting programs.
    Response: We appreciate the commenter's valuable input. While we 
strive to identify gaps of care and ensure that specialties have 
measures to report, we also recognize that there is a level of effort 
associated with translating the quality data reported into better care. 
As such, we are adding a limited set of new measures that focuses on 
identified gaps and ensures specialties have measures to report.
    Comment: One commenter requested that we further explore and 
discuss the phase-in dates in context with the ICD-10-CM/PCS transition 
date.
    Response: We are planning for implementation of ICD-10 and are 
working in collaboration with the Physician Quality Reporting System 
measure developers/owners towards the coding transition. More 
information on the phase-in dates for this transition will be provided 
once it becomes available.
i. The Final 2011 Physician Quality Reporting System Quality Measures 
for Individual Eligible Professionals
    For 2011, we proposed to include a total of 200 measures (this 
includes both individual measures and measures that are part of a 
proposed 2011 measures group) on which individual eligible 
professionals can report for the 2011 Physician Quality Reporting 
System (75 FR 40185 through 40198).
    The following is a summary of the comments received on the proposed 
2011 Physician Quality Reporting System measures in general and 
comments on the measures from the 2010 Physician Quality Reporting 
System not proposed for inclusion in the 2011 Physician Quality 
Reporting System.
    Comment: One commenter suggested that we consider publishing a list 
of reportable measures for each eligible profession. This would make 
the reporting process more clear and accessible to professionals trying 
to participate in the program by helping them quickly determine which 
measures are relevant to their practices.
    Response: In August 2010, we posted on the Analysis and Payment 
page of the Physician Quality Reporting System section of the CMS Web 
site http://www.cms.gov/pqri, a 1st quarter 2010 aggregate QDC error 
report by specialty. For each 2010 Physician Quality Reporting System 
measure, this report lists the specialties that submitted valid QDCs 
for the measure during the 1st quarter of 2010. Thus, an eligible 
professional could use this report to ascertain whether a measure is 
reportable by his or her profession.
    Comment: One commenter suggested that it would be useful for 
participating eligible professionals, as well as other stakeholders, if 
we developed a table that clearly summarizes the status of a measure's 
NQF endorsement, AQA endorsement, owner, and how the measure aligns 
with meaningful use clinical quality measure requirements.
    Response: Tables 78 through 97 of this final rule with comment 
period includes the status of each measure's NQF endorsement, as well 
as AQA endorsement if applicable and the measure is not NQF endorsed. 
In addition, Tables 55 and 56 of the CY 2011 PFS proposed rule (75 FR 
40193), which lists the measures available for EHR reporting in 2011, 
includes information as to whether a measure is included in the EHR 
Incentive Program for program years 2011 and 2012. We

[[Page 73513]]

note, however, that the electronic specifications for measures that are 
included in the Physician Quality Reporting System and Electronic 
Health Record Incentive Program may be different. Eligible 
professionals should refer to the measure specifications for the 
appropriate program.
    Comment: We received numerous comments in support of the 2010 
Physician Quality Reporting System quality measures proposed for 
inclusion in the 2011 Physician Quality Reporting System. Specific 
measures or measures topics on which we received favorable support 
include the measures on osteoporosis, audiology, speech-language 
pathology, and measures 9, 106, 107, 124, 126, 127, 128, 130, 131, 134, 
148, 149, 150, 151, 154, 155, 173, 181, 188, 189, 190, and 200. 
Commenters often cited the applicability of a specific measure to their 
specialty and/or profession.
    Response: We appreciate the feedback and are finalizing our 
proposals to include these measures in the 2011 Physician Quality 
Reporting System measure set. These measures address one or more of the 
considerations for measures selected for inclusion in the 2011 
Physician Quality Reporting System previously discussed.
    Comment: A couple of commenters asked us to reconsider the proposal 
to retire Measure <greek-i>135, Chronic Kidney Disease (CKD): Influenza 
Immunization. Although the measure was considered for endorsement by 
NQF but was ultimately not endorsed, the measure is adopted by the AQA.
    Response: On August 26, 2010, we published a correction notice in 
the Federal Register (75 FR 52487) indicating we inadvertently included 
this measure in the table that lists the 2010 Physician Quality 
Reporting System measures not proposed to be included in the 2011 
Physician Quality Reporting System. As such, we are including Measure 
<greek-i>135 in the 2011 Physician Quality Reporting System individual 
measures set only. We are not, however, finalizing our proposal to 
include Measure <greek-i>135 from the CKD Measures Group. The reporting 
requirements for Measure <greek-i>135 are different from the other 
measures in the CKD measures group.
    Comment: A couple of commenters recommended keeping Measure 
<greek-i>136, Melanoma: Follow-Up Aspects of Care, for purposes of 
reporting to the 2011 Physician Quality Reporting System. The 
commenters believe that although the measure is no longer endorsed by 
the National Quality Forum, it is still a valuable tool in clinician 
quality improvement. The commenters also noted that this measure is 
most effective as part of a set with Measures <greek-i>137: Melanoma: 
Continuity of Care--Recall System and <greek-i>138: Melanoma: 
Coordination of Care, which are maintained in the list of measures 
available for 2011 Physician Quality Reporting System.
    Response: We are finalizing our proposal to not include Measure 
<greek-i>136 in the 2011 Physician Quality Reporting System measure 
set. As stated in the proposed rule, (75 FR 40186) and by the 
commenter, Measure <greek-i>136 was considered by NQF for possible 
endorsement but ultimately was not NQF-endorsed. We note, also, that we 
proposed and are finalizing a new melanoma measure, Melanoma: 
Overutilization of Imaging Studies in Stage 0-1A Melanoma, for the 2011 
Physician Quality Reporting System. This measure meets one or more of 
the considerations for measures selected for inclusion in the 2011 
Physician Quality Reporting System.
    Comment: We received one comment in support of our proposal to 
retire Measure <greek-i>139 Cataracts: Comprehensive Preoperative 
Assessment for Cataract Surgery with Intraocular Lens (IOL) Placement. 
Another commenter, however, requested that this measure be retained 
because it evaluates safe and appropriate use of cataract surgery.
    Response: We appreciate the commenters' feedback. Based on the fact 
that the measure was reviewed for endorsement by the NQF and ultimately 
not endorsed, we are finalizing our proposal to not include this 
measure in the 2011 Physician Quality Reporting System measure set.
    Comment: In addition to the quality measures and measures groups 
for individual eligible professionals we had proposed in Tables 52 
through 54 of the CY 2011 PFS proposed rule (75 FR 40186 through 
40192), several commenters suggested quality measures, measures groups, 
and/or topics for which additional measures or measures groups should 
be added for the 2011 Physician Quality Reporting System. Specifically, 
commenters recommended that we adopt--
    <bullet> A measure for AAA ultrasound screening;
    <bullet> A COPD measures group;
    <bullet> A stroke measures group comprised of the following 5 
measures: (1) Deep vein thrombosis (DVT) prophylaxis; (2) Discharged on 
antithrombotic therapy; (3) Patients with atrial fibrillation/flutter 
receiving anticoagulant therapy; (4) Thrombolytic therapy; and (5) 
Discharged on statin medication;
    <bullet> A measures group that focuses on quality measures common 
to every long-term care resident, which could include Physician Quality 
Reporting System measures <greek-i>47, 110, 111, 130, 154, and 155;
    <bullet> Appropriate Follow-Up Interval for Normal Colonoscopy in 
Average Risk Patients; and
    <bullet> Comprehensive Colonoscopy Documentation.
    Response: As stated previously, we have not included in this final 
rule with comment period for the 2011 Physician Quality Reporting 
System any individual and measures groups that were not identified in 
the CY 2011 PFS proposed rule as proposed 2011 Physician Quality 
Reporting System measures. We are obligated by section 1848(k)(2)(D) of 
the Act to give eligible professionals an opportunity to provide input 
on measures recommended for selection, which we do via the proposed 
rule. Thus, such additional measures recommended via comments on the 
proposed rule cannot be included in the 2011 Physician Quality 
Reporting System quality measure set. However, we have captured these 
recommendations and will have them available for consideration in 
identifying measure sets/groups for the Physician Quality Reporting 
System for future years and other initiatives to which those measures 
or measures groups may apply.
    Comment: Some commenters asked that we reconsider measures or 
measures groups that had been previously submitted to us as suggestions 
for 2011 Physician Quality Reporting System measures but were not 
proposed for inclusion in the 2011 Physician Quality Reporting System 
measure set. Specifically, commenters requested that we reconsider 
inclusion of the Parkinson's disease and epilepsy measurement sets in 
the Physician Quality Reporting System program, a diabetic retinopathy 
measures group with 2 measures, and a cataracts measures group with 2 
measures.
    Response: All measures or measures groups that were previously 
submitted to us as suggestions for 2011 Physician Quality Reporting 
System measures were reviewed for possible inclusion in the 2011 
Physician Quality Reporting System measure set. Upon review, however, 
some measures either failed to meet the threshold criteria for 
inclusion in the 2011 Physician Quality Reporting system measure set 
(as described previously) or did not meet the definition of ``measures 
group'' proposed and finalized at 42 CFR 414.90. These measures that 
did not pass the review process were not proposed for inclusion in the 
2011 Physician Quality Reporting System measure set.

[[Page 73514]]

    Comment: Several commenters recommended changes to the detailed 
specifications or coding for one or more of the proposed measures or 
measures groups. Many of the requests were specifically concerned that 
measures be expanded to include additional professionals to whom the 
measure(s) may apply.
    Specifically, one commenter requested that any measure used by 
primary care physicians be expanded to include not just the office, but 
home and domiciliary codes as well. One commenter requested that the 
denominator codes for the CAP measures group be expanded to include 
other infectious pneumonia ICD-9-CM diagnostic codes than ``acute'' 
pneumonia diagnosis codes so pulmonologists can have sufficient numbers 
of patients to report this measures group. A few commenters requested 
that the age range for the proposed asthma measures group be expanded, 
instead of being restricted to 5 to 50 years of age. One commenter 
requested that the Initial Hospital Admit Evaluation and Management 
codes (99221, 99222, and 99223) be removed from the denominators of 
measures <greek-i>32, <greek-i>33 and <greek-i>36 and added to measures 
<greek-i>56-59 for 2011. The commenter also requested that an exemption 
be given to eligible professionals penalized for not reaching an 80 
percent reporting threshold on measures <greek-i>32, <greek-i>33, and 
<greek-i>36 because of the unintended effect of substituting the 99221, 
99222, and 99223 series codes for the consultation 99251-99255 series 
that had been eliminated from the Medicare program. Lastly, another 
commenter requested that allowable performance exclusion codes be 
created for measures <greek-i>201 and <greek-i>202.
    Response: Although the Secretary is required to provide 
opportunities for public comment on selected measures and do so through 
notice and comment rulemaking, we do not use notice and comment 
rulemaking as a means to update or modify measure specifications. In 
general, it is the role of the measure owner, developer, or maintainer 
to make substantive changes to the measures, such as the changes 
suggested by the commenters. The measure maintainer and/or the 
developer/owner of a measure included in the final set of 2011 
Physician Quality Reporting System measures is identified in the 
``Measure developer'' column of Tables M6 through M24. In addition, for 
those measures which are NQF-endorsed, the NQF has an established 
maintenance process that could be accessed to recommend the changes 
suggested by the commenters.
    Comment: One commenter supported our proposal to replace Physician 
Quality Reporting System Measures <greek-i>114 and <greek-i>115 with 
the Preventive Care and Screening: Tobacco Use: Screening and Cessation 
Intervention measure (NQF Measure Number 0028). Another commenter, 
however, requested that Physician Quality Reporting System Measures 
<greek-i>114 and <greek-i>115 be included in the 2011 Physician Quality 
Reporting System as these measures are included in the EHR Incentive 
Program clinical quality measures and thus will be of great interest 
for eligible professionals to report on.
    Response: Although Physician Quality Reporting System Measures 
<greek-i>114 and <greek-i>115 are included as clinical quality measures 
under the EHR Incentive Program, we have decided, for the Physician 
Quality Reporting System, to replace Physician Quality Reporting System 
Measures <greek-i>114 Preventive Care and Screening: Inquiry Regarding 
Tobacco Use and <greek-i>115 Preventive Care and Screening: Advising 
Smokers and Tobacco Users to Quit with an NQF-endorsed measure, 
Preventive Care and Screening: Tobacco Use: Screening and Cessation 
Intervention. We believe this measure is more comprehensive and less 
technically challenging than Physician Quality Reporting System 
Measures <greek-i>114 and <greek-i>115. We may consider aligning the 
preventive care and screening measures related to tobacco use and 
smoking under these 2 programs in future years.
    Comment: One commenter stressed the importance of publishing the 
detailed Physician Quality Reporting System specifications for 
individual measures and measures groups by November 15, 2010.
    Response: We will make every attempt to post the detailed 
specifications and specific instruction for reporting 2011 individual 
and measures groups on the Physician Quality Reporting System section 
of the CMS Web site at http://www.cms.hhs.gov/PQRI as close to November 
15, 2010 as possible. In any event, the detailed specifications will be 
posted by no later than December 31, 2010.
    Based on the criteria previously discussed and our review of these 
comments, we are including the individual measures listed in Tables M6 
through M10 in the final 2011 Physician Quality Reporting System 
individual quality measure set. We are also including 14 measures 
groups in the final 2011 Physician Quality Reporting System quality 
measure set, which are listed in Tables M11 through M24. The individual 
measures selected for the 2011 Physician Quality Reporting System can 
be categorized as follows:
    <bullet> 2011 Individual Quality Measures Selected From the 2010 
Physician Quality Reporting System Quality Measures Set Available for 
Claims-based Reporting and Registry-based Reporting;
    <bullet> 2011 Individual Quality Measures Selected From the 2010 
Physician Quality Reporting System Quality Measures Set Available for 
Registry-based Reporting Only;
    <bullet> New Individual Quality Measures for 2011; and
    <bullet> 2011 Measures Available for EHR-based Reporting.
    In addition, we are retiring the 5 measures in Table 77 because 
they did not meet one or more of the considerations for selection of 
2011 measures. Specifically, we retired Physician Quality Reporting 
System Measures <greek-i>136, <greek-i>139, and <greek-i>174 for 2011 
because they were considered by NQF for possible endorsement but 
ultimately were not NQF-endorsed. In addition, we are replacing 2010 
Physician Quality Reporting System Measures <greek-i>114 and 
<greek-i>115 with an updated and improved measure (<greek-i>TBD 
``Preventive Care and Screening: Tobacco Use: Screening and Cessation 
Intervention''), which is less technically challenging to report.

 TABLE 77--2011 Physician Quality Reporting System Quality Measures Not
         Included in the 2011 Physician Quality Reporting System
------------------------------------------------------------------------
 Physician Quality  Reporting
     System  Measure No.                     Measure title
------------------------------------------------------------------------
114..........................  Preventive Care and Screening: Inquiry
                                Regarding Tobacco Use.
115..........................  Preventive Care and Screening: Advising
                                Smokers and Tobacco Users to Quit.
136..........................  Melanoma: Follow-Up Aspects of Care.
139..........................  Cataracts: Comprehensive Preoperative
                                Assessment for Cataract Surgery with
                                Intraocular Lens (IOL) Placement.

[[Page 73515]]

 
174..........................  Pediatric End-Stage Renal Disease (ESRD):
                                Plan of Care for Inadequate
                                Hemodialysis.
------------------------------------------------------------------------

(1) 2011 Individual Quality Measures Selected From the 2010 Physician 
Quality Reporting System Quality Measures Set Available for Claims-
Based Reporting and Registry-Based Reporting
    For 2011, we proposed to retain 171 measures currently used in the 
2010 Physician Quality Reporting System. These 171 proposed measures 
include 45 registry-only measures currently used in the 2010 Physician 
Quality Reporting System, and 126 individual quality measures for 
either claims-based reporting or registry-based reporting (75 FR 40186 
through 40190 and 52489 through 52490). These 171 proposed measures did 
not include any measures that are proposed to be included as part of 
the 2011 Back Pain measures group. Similar to the 2010 Physician 
Quality Reporting System, for 2011, we proposed that any 2011 Physician 
Quality Reporting System measures that are included in the Back Pain 
measures group would not be reportable as individual measures through 
claims-based reporting or registry-based reporting.
    Although they were ultimately not NQF-endorsed, we proposed to 
exercise our exception authority under section 1848(k)(2)(C)(ii) of the 
Act and include measures <greek-i>188, <greek-i>189, and <greek-i>190, 
since we are not aware of any other NQF-endorsed measures that are 
available to audiologists.
    The following is a summary of the comments received on the proposed 
2011 individual quality measures selected from the 2010 Physician 
Quality Reporting System quality measures set available for claims-
based reporting and registry-based reporting.
    Comment: A commenter urged us to continue to allow reporting of 
measure <greek-i>175, Plan of Care for Inadequate Hemodialysis in 2011, 
regardless of NQF endorsement since this was approved by the AQA in 
2008.
    Response: We are unclear whether the commenter is referring to 
measure <greek-i>174, which is the Pediatric ESRD: Plan of Care for 
Inadequate Hemodialysis measure or measure <greek-i>175, which is the 
Pediatric ESRD: Influenza Immunization measure since both of these are 
AQA adopted measures. For the reasons described previously, we are not 
retaining measure <greek-i>174 for the 2011 Physician Quality Reporting 
System. We are, however, retaining measure <greek-i>175 for the 2011 
Physician Quality Reporting System.
    Comment: A commenter supported the 2011 proposed measures selected 
from the 2010 Physician Quality Reporting System measure set available 
for either claims-based reporting or registry-based reporting but noted 
there have been inquiries about how the process component of Measure 
<greek-i>193: Perioperative Temperature Management is defined. As a 
result, the commenter pointed out that this measure is undergoing 
revision.
    Response: We appreciate the commenter's valuable input and will 
continue to monitor the status of this measure.
    For the reasons discussed previously and based on the comments 
received, we are finalizing in the 2011 Physician Quality Reporting 
System quality measure set the 171 2010 Physician Quality Reporting 
System measures that were proposed to be available in the 2010 
Physician Quality Reporting System for claims and registry reporting 
identified in Table 78. The 171 individual 2010 Physician Quality 
Reporting System measures selected for inclusion in the 2011 Physician 
Quality Reporting System quality measure set as individual quality 
measures for either claims-based reporting or registry-based reporting 
are listed by their Physician Quality Reporting System Measure Number 
and Title in Table 78, along with the name of the measure's developer/
owner and NQF measure number, if applicable. The Physician Quality 
Reporting System Measure Number is a unique identifier assigned by CMS 
to all measures in the Physician Quality Reporting System measure set. 
Once a Physician Quality Reporting System Measure Number is assigned to 
a measure, it will not be used again to identify a different measure, 
even if the original measure to which the number was assigned is 
subsequently retired from the Physician Quality Reporting System 
measure set. A description of the measures listed in Table 78 can be 
found in the ``2010 PQRI Quality Measures List,'' which is available on 
the Measures and Codes page of the Physician Quality Reporting System 
section of the CMS Web site at http://www.cms.hhs.gov/PQRI.
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    Please note that detailed measure specifications, including the 
measure's title, for 2010 individual Physician Quality Reporting System 
quality measures may have been updated or modified during the NQF 
endorsement process or for other reasons prior to 2011. The 2011 
Physician Quality Reporting System quality measure specifications for 
any given individual quality measure may, therefore, be different from 
specifications for the same quality measure used in prior years. 
Specifications for all 2011 individual Physician Quality Reporting 
System quality measures, whether or not included in the 2010 Physician 
Quality Reporting System program, must be obtained from the 
specifications document for 2011 individual Physician Quality Reporting 
System quality measures, which will be available on the Physician 
Quality Reporting System section of the CMS Web site on or before 
December 31, 2010.
(2) 2011 Individual Quality Measures Selected From the 2010 Physician 
Quality Reporting System Quality Measures Set Available for Registry-
Based Reporting Only
    We proposed to include 45 registry-only individual measures from 
the 2010 Physician Quality Reporting System (75 FR 40191). As in the 
2010 Physician Quality Reporting System, we proposed to designate these 
measures as registry-only measures for 2011 to relieve ongoing 
analytical difficulties encountered with claims-based reporting of 
these measures in prior program years. The following is a summary of 
the comments received on the proposed registry-only measures.
    Comment: One commenter expressed concern over our proposal to limit 
measure <greek-i>174, Pediatric End-Stage Renal Disease (ESRD): Plan of 
Care for Inadequate Hemodialysis, to registry-based reporting for 2011. 
The commenter stated that since there are only two pediatric ESRD 
measures included in the Physician Quality Reporting System for 2010 
and we require eligible professionals who report via a registry to 
report 3 measures, it is difficult for pediatric nephrologists to 
participate in this valuable program. Further, the commenter indicated 
that even if participation could be based on the reporting of two 
measures, the registry process itself is not available to the vast 
majority of pediatric nephrologists who practice in small, academic 
departments, none of whose other members care for Medicare 
beneficiaries. Thus, the commenter suggested that similar to the 
provision that allows one of the pediatric ESRD measures (influenza 
immunization) to be reported in this individual manner, a mechanism be 
made available allowing pediatric dialysis centers to report adequacy 
results separately. In the absence of changes in the requirement to 
report at least three measures, separate reporting of individual 
measures would allow more pediatric nephrologists to participate in the 
Physician Quality Reporting System and advance the ultimate goal of 
quality improvement.
    Response: We appreciate the comment and interest expressed on 
behalf of the pediatric nephrology community. For the 2011 Physician 
Quality Reporting System, we have decided not to include Physician 
Quality Reporting System Measure <greek-i>174, since this measure was 
recently reviewed by NQF but not endorsed. As a result, only 1 of the 2 
individual measures identified by the commenter as being relevant to 
pediatric nephrologists, <greek-i>175, Pediatric End-Stage Renal 
Disease (ESRD): Influenza Immunization, is included in the final 2011 
Physician Quality Reporting System measure set. This measure is 
available for claims-based reporting. Eligible professionals who have 
fewer than 3 applicable measures can still participate in the 2011 
Physician Quality Reporting System via claims. Such eligible 
professionals would need to report on the applicable measure available 
for claims-based reporting via claims and meet the appropriate criteria 
for satisfactory reporting of individual measures in order to qualify 
for a 2011 Physician Quality Reporting System incentive payment.
    For the reasons discussed previously and based on the comments 
received, we are finalizing in the 2011 Physician Quality Reporting 
System quality measure set 44 of the 45 proposed 2010 Physician Quality 
Reporting System measures identified in Table 78 of the proposed rule 
for registry reporting only. As stated previously, we are not 
finalizing Physician Quality Reporting System Measure <greek-i>174 
because the measure was reviewed for endorsement by NQF but not 
ultimately endorsed.
    The 44 2010 Physician Quality Reporting System measures selected 
for the 2011 Physician Quality Reporting System that are available for 
registry reporting only are listed in Table 79 of this final rule with 
comment period. These measures are listed by their Physician Quality 
Reporting System Measure Number and Title, along with the name of the 
measure's developer/owner and NQF endorsement status, if applicable. A 
description of the measures listed in Table 79 can be found in the 
``2010 PQRI Quality Measures List,'' which is available on the Measures 
and Codes page of the Physician Quality Reporting System section of the 
CMS Web site at http://www.cms.hhs.gov/PQRI.
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    Although we are designating certain measures as registry-only 
measures, we cannot guarantee that there will be a registry qualified 
to submit each registry-only measure for 2011. We rely on registries to 
self-nominate and identify the measures for which they would like to be 
qualified to submit quality measures results and numerator and 
denominator data on quality measures. If no registry self-nominates to 
submit measure results and numerator and denominator data on a 
particular measure for 2011, then an eligible professional would not be 
able to report that particular measure.
    We note also that detailed measure specifications, including a 
measure's title, for 2010 Physician Quality Reporting System quality 
measures may have been updated or modified during the NQF endorsement 
process or for other reasons prior to 2011. Therefore, the 2011 
Physician Quality Reporting System quality measure specifications for 
any given quality measure may be different from specifications for the 
same quality measure used for 2010. Specifications for all 2011 
individual

[[Page 73525]]

Physician Quality Reporting System quality measures, whether or not 
included in the 2010 Physician Quality Reporting System, must be 
obtained from the specifications document for 2011 individual Physician 
Quality Reporting System quality measures, which will be available on 
the Physician Quality Reporting System section of the CMS Web site on 
or before December 31, 2010.
(3) New Individual Quality Measures for 2011
    We proposed to include in the 2011 Physician Quality Reporting 
System quality measure set 20 measures that were not included in the 
2010 Physician Quality Reporting System quality measures set provided 
that each measure obtains NQF endorsement by June 1, 2010 and its 
detailed specifications are completed and ready for implementation in 
the Physician Quality Reporting System by August 15, 2010 (75 FR 
40192). Besides having NQF endorsement, we proposed that the 
development of a measure is considered complete for the purposes of the 
2011 Physician Quality Reporting System if by August 15, 2010: (1) The 
final, detailed specifications for use in data collection for the 
Physician Quality Reporting System have been completed and are ready 
for implementation, and (2) all of the Category II Current Procedural 
Terminology (CPT II) codes required for the measure have been 
established and will be effective for CMS claims data submission on or 
before January 1, 2011.
    Due to the complexity of their measure specifications, we proposed 
that 8 of these 20 measures would be available as registry-only 
measures for the 2011 Physician Quality Reporting System. The remaining 
15 measures were proposed to be available for reporting through either 
claims-based reporting or registry-based reporting.
    The following is a summary of the comments received on the 20 new 
individual quality measures proposed for 2011.
    Comment: We received numerous comments in support of the proposed 
additional quality measures for the 2011 Physician Quality Reporting 
System. One commenter stated that the new Physician Quality Reporting 
System measures will help to spur additional eligible professional 
participation in the Physician Quality Reporting System. Several 
comments were received specifically in support of the following `Change 
in Risk-Adjusted Functional Status' measures, developed by FOTO:
    <bullet> Change in Risk-Adjusted Functional Status for Patients 
with Knee Impairments
    <bullet> Change in Risk-Adjusted Functional Status for Patients 
with Hip Impairments
    <bullet> Change in Risk-Adjusted Functional Status for Patients 
with Lower Leg, Foot or Ankle Impairments
    <bullet> Change in Risk-Adjusted Functional Status for Patients 
with Lumbar Spine Impairments
    <bullet> Change in Risk-Adjusted Functional Status for Patients 
with Shoulder Impairments
    <bullet> Change in Risk-Adjusted Functional Status for Patients 
with Elbow, Wrist or Hand Impairments
    <bullet> Change in Risk-Adjusted Functional Status for Patients 
with a Functional Deficit of the Neck, Cranium, Mandible, Thoracic 
Spine, Ribs or other General Orthopedic Impairment
    Commenters stated these measures support ``improved quality and 
efficiency of care for Medicare beneficiaries including: High cost and 
high volume conditions; improved outcomes; improved efficiency; 
improved patient and family experience of care; reduced unwarranted 
variation in quality and efficiency.'' We also received support for the 
inclusion of the following measures:
    <bullet> Hypertension (HTN): Plan of Care;
    <bullet> Heart Failure (HF): Left Ventricular Function (LVF) 
Testing;
    <bullet> Reminder System for Mammograms measure;
    <bullet> Preventive Care and Screening: Tobacco Use: Screening and 
Cessation Intervention;
    <bullet> Recording of Performance Status Prior to Lung or 
Esophageal Cancer Resection; and
    <bullet> Pulmonary Function Tests Before Major Anatomic Lung 
Resection.
    Response: We appreciated the commenters' support of the proposed 
measures and agree with the reasons stated by the commenters. We are 
finalizing all of the proposed new measures supported by the 
commenters. The new individual quality measures for the 2011 Physician 
Quality Reporting System are identified in Table 80 of this final rule 
with comment period.
    Comment: Several commenters expressed support for the inclusion of 
the new care transitions measures developed by the AMA-PCPI as these 
measures are based on evidence-based processes that have been shown to 
reduce readmissions, limit medication errors, and improve the patient 
perspective of their care. The measures' developer, however, commented 
that the measures were not designed for individual physician level 
measurement. The measures are specified at the facility (hospital) 
level, using the UB04 administrative data to identify the denominator 
population.
    Response: We appreciate the commenters' support for the new care 
transitions measures. Based on the measure developer's comments, 
however, we are not finalizing our proposal to include the following 
measures in the final 2011 Physician Quality Reporting System measure 
set:
    <bullet> Care Transitions: Reconciled Medication List Received by 
Discharged Patients (Inpatient Discharges to Home/Self Care or Any 
Other Site of Care);
    <bullet> Care Transitions: Transition Record with Specified 
Elements Received by Discharged Patients (Inpatient Discharges to Home/
Self Care or Any Other Site of Care);
    <bullet> Care Transitions: Timely Transmission of Transition Record 
(Inpatient Discharges to Home/Self Care or Any Other Site of Care); and
    <bullet> Care Transitions: Transition Record with Specified 
Elements Received by Discharged Patients (Emergency Department 
Discharges to Ambulatory Care [Home/Self Care] or Home Health Care.
    Comment: One commenter recommended that the proposed Hypertension 
(HTN): Plan of Care measure not be included in the final set of 2011 
Physician Quality Reporting System measures, claiming that this measure 
was developed as a ``test measure'' and was not designed for individual 
physician accountability, but rather internal quality improvement.
    Response: We appreciate the commenter's input but are finalizing 
our proposal to include this measure in the 2011 Physician Quality 
Reporting System measure set. This measure meets the considerations for 
the selection of 2011 Physician Quality Reporting System measures and 
is also a clinical quality measure under the EHR Incentive Program.
    Based on the reasons discussed previously and upon consideration of 
the comments received, we are finalizing in the 2011 Physician Quality 
Reporting System quality measure set 16 of the 20 proposed 2011 
Physician Quality Reporting System measures identified in Table 80 of 
the proposed rule. In addition to not finalizing our proposal to 
include the 4 new care transitions measures previously listed, we note 
that 3 measures--Thoracic Surgery: Recording of Performance Status 
Prior to Lung or Esophageal Cancer Resection; Thoracic Surgery: 
Pulmonary Function Test Before Major Anatomic Lung Resection

[[Page 73526]]

(Pneumonectomy, Lobectomy, or Formal Segmentectomy); and Melanoma: 
Overutilization of Imaging Studies in Stage 0-1A Melanoma--that were 
proposed to be available for either registry or claims reporting will 
be made available for registry reporting only for the 2011 Physician 
Quality Reporting System. Upon further analysis of these measures, we 
have determined that these measures would be analytically challenging 
to collect via claims and, therefore, are not finalizing such measures 
for the claims-based reporting option for the 2011 Physician Quality 
Reporting System.
    The titles of the 16 additional, or new, Physician Quality 
Reporting System measures for 2011 are listed in Table 80 along with 
the name of the measure developer, the reporting mechanism(s) available 
(that is, whether the measure will be reportable using claims, 
registries, or both), and the NQF Measure Number, if applicable.

                               Table 80--New Individual Quality Measures for 2011
----------------------------------------------------------------------------------------------------------------
                                                NQF measure
                Measure title                     number       Measure  developer      Reporting  mechanism(s)
----------------------------------------------------------------------------------------------------------------
Functional Deficit: Change in Risk-Adjusted             0422  FOTO                  Registry.
 Functional Status for Patients with Knee
 Impairments.
Functional Deficit: Change in Risk-Adjusted             0423  FOTO                  Registry.
 Functional Status for Patients with Hip
 Impairments.
Functional Deficit: Change in Risk-Adjusted             0424  FOTO                  Registry.
 Functional Status for Patients with Lower
 Leg, Foot or Ankle Impairments.
Functional Deficit: Change in Risk-Adjusted             0425  FOTO                  Registry.
 Functional Status for Patients with Lumbar
 Spine Impairments.
Functional Deficit: Change in Risk-Adjusted             0426  FOTO                  Registry.
 Functional Status for Patients with
 Shoulder Impairments.
Functional Deficit: Change in Risk-Adjusted             0427  FOTO                  Registry.
 Functional Status for Patients with Elbow,
 Wrist or Hand Impairments.
Functional Deficit: Change in Risk-Adjusted             0428  FOTO                  Registry.
 Functional Status for Patients with Neck,
 Cranium, Mandible, Thoracic Spine, Ribs, or
 Other General Orthopedic Impairment.
Hypertension (HTN): Plan of Care............            0017  AMA-PCPI              Claims, Registry.
Heart Failure (HF): Left Ventricular                    0079  CMS                   Registry.
 Function (LVF) Testing.
Melanoma: Overutilization of Imaging Studies            0562  AMA-PCPI              Registry.
 in Stage 0-IA Melanoma.
Radiology: Reminder System for Mammograms...            0509  AMA-PCPI              Claims, Registry.
Asthma: Tobacco Use: Screening--Ambulatory    Not applicable  AMA-PCPI              Claims, Registry.
 Care Setting.
Asthma: Tobacco Use: Intervention--           Not applicable  AMA-PCPI              Claims, Registry.
 Ambulatory Care Screening.
Preventive Care and Screening: Tobacco Use:             0028  AMA-PCPI              Claims, Registry.
 Screening and Cessation Intervention.
Thoracic Surgery: Recording of Performance              0457  Society of Thoracic   Registry.
 Status Prior to Lung or Esophageal Cancer                     Surgery (STS)
 Resection.
Thoracic Surgery: Pulmonary Function Tests              0458  Society of Thoracic   Registry.
 Before Major Anatomic Lung Resection.                         Surgery (STS)
----------------------------------------------------------------------------------------------------------------

(4) 2011 Measures Available for EHR-Based Reporting
    For 2011, we proposed to again accept Physician Quality Reporting 
System data from EHRs for a limited subset (22) of the proposed 2011 
Physician Quality Reporting System quality measures, contingent upon 
the successful completion of our 2010 EHR data submission process and a 
determination that accepting data from EHRs on quality measures for the 
2011 Physician Quality Reporting System continues to be practical and 
feasible. The 22 measures we proposed to be available for EHR-based 
reporting in the 2011 Physician Quality Reporting System include the 10 
measures available for EHR-based reporting in the 2010 Physician 
Quality Reporting System and 12 additional measures that overlap with 
the clinical quality measures used in the EHR incentive program 
established by the American Recovery and Reinvestment Act (ARRA) (75 FR 
40193).
    The following is a summary of the comments received on the proposed 
electronic submission of these 22 measures.
    Comment: Commenters were pleased that we proposed the addition of 
new measures for EHR-based reporting as this will permit additional 
physician specialties to participate using this reporting mechanism. We 
specifically received support for the following proposed measures for 
EHR-based reporting:
    <bullet> Measure <greek-i>1: Diabetes Mellitus: Hemoglobin A1c Poor 
Control in Diabetes Mellitus;
    <bullet> Measure <greek-i>2: Diabetes Mellitus: Low Density 
Lipoprotein (LDL-C) Control in Diabetes Mellitus;
    <bullet> Measure <greek-i>3: Diabetes Mellitus: High Blood Pressure 
Control in Diabetes Mellitus;
    <bullet> Measure <greek-i>5: Heart Failure: Angiotensin-Converting 
Enzyme (ACE) Inhibitor or Angiotensin Receptor Blocker (ARB) Therapy 
for Left Ventricular Systolic Dysfunction (LVSD);
    <bullet> Measure <greek-i>7: Coronary Artery Disease (CAD): Beta-
Blocker Therapy for CAD Patients with Prior Myocardial Infarction (MI);
    <bullet> Measure <greek-i>110: Preventive Care and Screening: 
Influenza Immunization for Patients >=50 Years Old;
    <bullet> Measure <greek-i>111: Preventive Care and Screening: 
Pneumonia Vaccination for Patients 65 Years and Older;
    <bullet> Measure <greek-i>128: Preventive Care and Screening: Body 
Mass Index (BMI) Screening and Follow-Up;

[[Page 73527]]

    <bullet> Measure <greek-i>173: Preventive Care & Screening: 
Unhealthy Alcohol Use--Screening;
    <bullet> Measure <greek-i>TBD: Hypertension (HTN): Blood Pressure 
Measurement;
    <bullet> Measure <greek-i>TBD: Preventive Care and Screening: 
Tobacco Use: Screening and Cessation Intervention;
    <bullet> Measure <greek-i>TBD: Body Mass Index (BMI) 2 Through 18 
Years of Age.
    Response: We appreciate the commenters' support of our proposal to 
expand the number of measures available for EHR reporting and for the 
measures previously listed. We are finalizing our proposal to have all 
of the measures previously listed available for 2011 Physician Quality 
Reporting System EHR reporting.
    Comment: One commenter was concerned by the limited number of 
quality measures available for EHR reporting. The commenter stated that 
the current list of quality measures for reporting via EHR does not 
facilitate widespread participation because the 22 measures proposed 
for EHR reporting will restrict the number and type of eligible 
professionals able to report with their EHR system. This commenter 
believed the future requirements to align the Physician Quality 
Reporting System and EHR incentive programs highlight the importance of 
expanding this list.
    Response: We agree with the commenter and are working to expand the 
list of electronically specified measures for future years. However, 
EHR-derived measures data will be accepted for the Physician Quality 
Reporting System directly from a qualified EHR for the first time in 
early 2011 (with 2010 Physician Quality Reporting System data). For 
this reason, we believe that a limited set of measures this early in 
the process will increase the program's chance of being successful in 
accepting this quality data.
    Comment: A few commenters noted that many current measures are not 
specified for electronic reporting and that additional resources are 
needed to work with measure developers to re-specify or ``retool'' 
measures to be effectively collected via EHRs. One commenter noted that 
a hybrid approach of data collected via EHR and manual abstraction may 
potentially be needed.
    Response: As noted previously, we are planning to continue to 
electronically specify measures to add to the list of those measures 
that are currently electronically specified for future years.
    Comment: Because the following measures were not included in the 
Final Rule for Stage 1 of the EHR Incentive Program, one commenter 
suggested that they be removed from the list of 2011 EHR-based measures 
in favor of measures that are included in the EHR Incentive Program: 
Measures <greek-i>39, 41, 47, 48, 142, 173, and Drugs to Be Avoided in 
the Elderly.
    Response: While we are required to develop a plan to integrate the 
reporting of quality measures under the Physician Quality Reporting 
System with reporting under the EHR Incentive Program, they are two 
distinct programs. Therefore, we believe that it may be appropriate to 
have different measures in each of them and are retaining such measures 
in the Physician Quality Reporting System for 2011. However, we note 
that we are not finalizing our proposal to have Physician Quality 
Reporting System Measures <greek-i>41 and <greek-i>142 available for 
2011 Physician Quality Reporting System EHR reporting. The electronic 
specifications and Quality Reporting Document Architecture (QRDA) for 
submitting these measures electronically were not fully developed.
    Based on the reasons discussed previously and upon consideration of 
the comments received, we are finalizing the option of accepting 
clinical quality data extracted from qualified EHRs on 20 of the 22 
proposed 2011 Physician Quality Reporting System quality measures 
identified in Tables 81 and 82 of the proposed rule. We are not 
finalizing our proposal to have Physician Quality Reporting System 
Measures <greek-i>41 and <greek-i>142 available for 2011 Physician 
Quality Reporting System EHR reporting because the specifications for 
submitting these measures electronically are not ready. The final 2011 
measures available for EHR-based reporting are identified in Tables 81 
and 82 of this final rule with comment period.

     Table 81--2011 Measures Available for EHR-Based Reporting From 2010 Physician Quality Reporting System
----------------------------------------------------------------------------------------------------------------
Physician Quality  Reporting System         Measure title           Measure developer        NQF Measure No.
----------------------------------------------------------------------------------------------------------------
1..................................  *** Diabetes Mellitus:       NCQA.................  0059
                                      Hemoglobin A1c Poor
                                      Control in Diabetes
                                      Mellitus.
2..................................  *** Diabetes Mellitus: Low   NCQA.................  0064
                                      Density Lipoprotein (LDL-
                                      C) Control in Diabetes
                                      Mellitus.
3..................................  *** Diabetes Mellitus: High  NCQA.................  0061
                                      Blood Pressure Control in
                                      Diabetes Mellitus.
5..................................  *** Heart Failure:           AMA-PCPI.............  0081
                                      Angiotensin-Converting
                                      Enzyme (ACE) Inhibitor or
                                      Angiotensin Receptor
                                      Blocker (ARB) Therapy for
                                      Left Ventricular Systolic
                                      Dysfunction (LVSD).
7..................................  *** Coronary Artery Disease  AMA-PCPI.............  0070
                                      (CAD): Beta-Blocker
                                      Therapy for CAD Patients
                                      with Prior Myocardial
                                      Infarction (MI).
110................................  ** Preventive Care and       AMA-PCPI.............  0041
                                      Screening: Influenza
                                      Immunization for Patients
                                      >= 50 Years Old.
111................................  *** Preventive Care and      NCQA.................  0043
                                      Screening: Pneumonia
                                      Vaccination for Patients
                                      65 Years and Older.
112................................  *** Preventive Care and      NCQA.................  0031
                                      Screening: Screening
                                      Mammography.
113................................  *** Preventive Care and      NCQA.................  0034
                                      Screening: Colorectal
                                      Cancer Screening.
124................................  Health Information           CMS/QIP..............  0488
                                      Technology (HIT): Adoption/
                                      Use of Electronic Health
                                      Records (EHR).
----------------------------------------------------------------------------------------------------------------
\*\ This measure is a Core clinical quality measure for the Electronic Health Record Incentive Program under the
  ARRA HITECH regulation for program years 2011-2012. The electronic specifications for measures that are
  included in the PQRI and Electronic Health Record Incentive Program may be different. Eligible professionals
  should refer to the measure specifications for the appropriate program.
\**\ This measure is an Alternate Core clinical quality measure for the Electronic Health Record Incentive
  Program under the ARRA HITECH regulation for program years 2011-2012. The electronic specifications for
  measures that are included in the PQRI and Electronic Health Record Incentive Program may be different.
  Eligible professionals should refer to the measure specifications for the appropriate program.

[[Page 73528]]

 
\***\ This measure is included in the Electronic Health Record Incentive Program under the ARRA HITECH
  regulation for program years 2011-2012. The electronic specifications for measures that are included in the
  PQRI and Electronic Health Record Incentive Program may be different. Eligible professionals should refer to
  the measure specifications for the appropriate program.


                     Table 82--Additional Measures Available for EHR-Based Reporting in 2011
----------------------------------------------------------------------------------------------------------------
 Physician Quality Reporting System         Measure title           Measure developer        NQF Measure No.
----------------------------------------------------------------------------------------------------------------
39.................................  Screening or Therapy for     AMA-PCPI/NCQA........  0046
                                      Osteoporosis for Women
                                      Aged 65 Years and Older.
47.................................  Advance Care Plan..........  AMA-PCPI/NCQA........  0326
48.................................  Urinary Incontinence:        AMA-PCPI/NCQA........  0098
                                      Assessment of Presence or
                                      Absence of Urinary
                                      Incontinence in Women Aged
                                      65 Years and Older.
128................................  * Preventive Care and        CMS/Quality Insights   0421
                                      Screening: Body Mass Index   of Pennsylvania.
                                      (BMI) Screening and Follow-
                                      up.
173................................  Preventive Care and          AMA-PCPI.............  AQA Adopted
                                      Screening: Unhealthy
                                      Alcohol Use--Screening.
TBD................................  * Hypertension (HTN): Blood  AMA-PCPI.............  0013
                                      Pressure Measurement.
TBD................................  Drugs to be Avoided in the   NCQA.................  0022
                                      Elderly.
TBD................................  ** Weight Assessment and     NCQA.................  0024
                                      Counseling for Children
                                      and Adolescents.
TBD................................  * Preventive Care and        AMA-PCPI.............  0028
                                      Screening: Tobacco Use:
                                      Screening and Cessation
                                      Intervention.
TBD................................  ** Childhood Immunization    NCQA.................  0038
                                      Status.
----------------------------------------------------------------------------------------------------------------
* This measure is a Core clinical quality measure for the Electronic Health Record Incentive Program under the
  ARRA HITECH regulation for program years 2011-2012. The electronic specifications for measures that are
  included in the PQRI and Electronic Health Record Incentive Program may be different. Eligible professionals
  should refer to the measure specifications for the appropriate program.
** This measure is an Alternate Core clinical quality measure for the Electronic Health Record Incentive Program
  under the ARRA HITECH regulation for program years 2011-2012. The electronic specifications for measures that
  are included in the PQRI and Electronic Health Record Incentive Program may be different. Eligible
  professionals should refer to the measure specifications for the appropriate program.
*** This measure is included in the Electronic Health Record Incentive Program under the ARRA HITECH regulation
  for program years 2011-2012. The electronic specifications for measures that are included in the PQRI and
  Electronic Health Record Incentive Program may be different. Eligible professionals should refer to the
  measure specifications for the appropriate program.

(5) Measures Proposed for Inclusion in 2011 Measures Groups
    We proposed to retain the following 13 2010 Physician Quality 
Reporting System measures groups for the 2011 Physician Quality 
Reporting System: (1) Diabetes Mellitus; (2) CKD; (3) Preventive Care; 
(4) CABG; (5) Rheumatoid Arthritis; (6) Perioperative Care; (7) Back 
Pain; (8) CAD; (9) Heart Failure; (10) IVD; (11) Hepatitis C; (12) HIV/
AIDS; and (13) CAP. For 2011, we proposed that the CABG, CAD, Heart 
Failure, and HIV/AIDS measures groups continue to be reportable through 
the registry-based reporting mechanism only, while the remaining 
Diabetes Mellitus, CKD, Preventive Care, Rheumatoid Arthritis, 
Perioperative Care, Back Pain, IVD, Hepatitis C, and CAP measures 
groups will continue to be reportable through either claims-based 
reporting or registry-based reporting for the 2011 Physician Quality 
Reporting System (75 FR 40193).
    In addition to the 13 measures groups that we proposed to retain 
from the 2010 Physician Quality Reporting System, we proposed 1 new 
Asthma Measures Group, which could be reported through either claims-
based reporting or registry-based reporting.
    Finally, as in previous program years, for 2011, we proposed that 
the measures included in any proposed 2011 measures group be reportable 
either as individual measures or as part of a measures group, except 
for the Back Pain measures group, which will continue to be reportable 
only as part of a measures group and not as individual measures in 2011 
(75 FR 40193 through 40197).
    As with measures group reporting in the 2008, 2009, and 2010 
Physician Quality Reporting System, we proposed that each eligible 
professional electing to report a group of measures for 2011 must 
report all measures in the group that are applicable to each patient or 
encounter to which the measures group applies at least up to the 
minimum number of patients required by the applicable reporting 
criteria. The following is a summary of the comments received on the 
proposed 2011 measures groups.
    Comment: One commenter expressed support for the movement to 
greater use of measures groups as a method of Physician Quality 
Reporting System participation, as they are easier to manage and 
monitor.
    Response: We appreciate the commenter's positive feedback and 
continue to encourage eligible professionals to report on measures 
groups. As we have stated in prior years, we believe that measures 
groups can present a more complete picture of the quality of care 
provided clinical condition or clinical focus than individual measures 
reporting.
    Comment: We received favorable support for the proposed inclusion 
of the following measures groups:
    <bullet> Asthma.
    <bullet> Back Pain.
    <bullet> CAD.
    <bullet> CAP.
    <bullet> CABG.
    <bullet> Diabetes Mellitus.
    <bullet> Heart failure.
    Some of the reasons stated by commenters include that these are 
important chronic conditions and collecting information on the 
treatment of these conditions could lead to improved care and 
treatment, which would result in reduced costs.
    Response: We agree. For these reasons, we are finalizing our 
proposal to include all of these measures groups in the 2011 Physician 
Quality Reporting System.
    Comment: One commenter proposed the removal of Measure 
<greek-i>135, Chronic Kidney Disease (CKD): Influenza Immunization, 
from the CKD Measures Group to ensure maximum satisfactory reporting. 
The commenter noted that Measure <greek-i>135 differs from other 
measures in the CKD Measures Group in its method of reporting. Whereas 
measures in the CKD Measures Group are Patient Process (where the 
measures are reported once per reporting period), Measure <greek-i>135 
is now Patient Periodic (where the measure is reported during certain 
periods of time). The commenter is concerned that this difference in 
reporting methods may be too confusing for satisfactory reporting.
    Response: We agree with the commenter's recommendation and are

[[Page 73529]]

removing Measure <greek-i>135, Influenza, from the CKD Measures Group 
for the reasons cited by the commenter. However, the CKD Influenza 
Measure <greek-i>135 will still be reportable as an individual measure.
    Comment: One commenter supported the proposed retention of the 2010 
HIV/AIDS Physician Quality Reporting System measures group for the 2011 
Physician Quality Reporting System, but encouraged, to the extent 
feasible, HIV/AIDS quality measures that can be reported through the 
claims-based method in addition to the registry-based method.
    Response: We are pleased with the commenter's support for the HIV/
AIDS measures group. Based on the current processing of claims data, it 
was determined that the claims system will not accurately capture these 
measures. Registry reporting provides an intricate process to capture 
these measures accurately.
    Comment: For the 2011 Physician Quality Reporting System measures 
group on preventive care, the addition of a process measure for HIV 
screening of ``high-risk'' patients, as endorsed by the National 
Quality Forum and USPSTF previously (level ``A'' recommendation), be 
added. The commenter urged that this measure be modified if and when 
coverage is expanded to include routine HIV screening, consistent with 
the recommendations of the Centers for Disease Control and Prevention 
(CDC).
    Response: We appreciate the commenter's suggestion to add HIV 
screening of ``high risk'' patients into the Preventive Care Measures 
Group. Measure groups are created based on measures with a particular 
clinical condition or focus. The current Preventive Care Measures Group 
is intended for a more general patient population and would not be 
appropriate for the addition of the HIV measure(s) suggested by the 
commenter. The commenter should consider utilizing the 2012 Call for 
Measures as an avenue for submitting suggestions for possibly creating 
a new measure group for screening ``high risk'' patients. We also urge 
the commenter to direct such suggestions to the appropriate measure 
developer/owner(s) for consideration.
    Based on the reasons discussed previously and upon consideration of 
the comments received, we are finalizing the following proposed 2011 
measures groups: (1) Diabetes Mellitus; (2) Preventive Care; (3) CABG; 
(4) Rheumatoid Arthritis; (5) Perioperative Care; (6) Back Pain; (7) 
CAD; (8) Heart Failure; (9) IVD; (10) Hepatitis C; (11) HIV/AIDS; (12) 
CAP; and (13) Asthma. We are also finalizing the proposed CKD measures 
group for 2011 with one modification. As stated previously, we are 
removing Measure <greek-i>135: Chronic Kidney Disease (CKD): Influenza 
Immunization from the CKD measures group for 2011 because the reporting 
requirements for this measure are different from the reporting 
requirements for the other measures in this measures group. The 
following 4 measures groups are reportable through the registry-based 
reporting mechanism only: (1) CABG; (2) CAD; (3) Heart Failure; and (4) 
HIV/AIDS.
    The measures selected for inclusion in each of the 2011 measures 
groups are identified in Tables 83 through 96 of this final rule with 
comment period. Some measures selected for inclusion in these 14 
measures groups are current 2010 individual Physician Quality Reporting 
System measures. The title of each such measure is preceded with its 
Physician Quality Reporting System Measure Number in Tables 83 through 
96. As stated previously, the Physician Quality Reporting System 
Measure Number is a unique identifier assigned by CMS to all measures 
in the Physician Quality Reporting System measure set. Once a Physician 
Quality Reporting System Measure Number is assigned to a measure, it 
will not be used again, even if the measure is subsequently retired 
from the Physician Quality Reporting System measure set. Measures that 
are not preceded by a number (in other words, those preceded by 
``TBD'') in Tables 83 through 96 were never part of a Physician Quality 
Reporting System measure set prior to 2011. A number will be assigned 
to such measures for 2011.
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    As with measures group reporting in the 2008, 2009, and 2010 
Physician Quality Reporting System, each eligible professional electing 
to report a group of measures for 2011 must report all measures in the 
group that are applicable to each patient or encounter to which the 
measures group applies at least up to the minimum number of patients 
required by the applicable reporting criteria. The measures selected 
for the Back Pain Measures Group continue to be reportable only as part 
of a measures group and not as individual measures for the 2011 
Physician Quality Reporting System. Measures selected for inclusion in 
all other 2011 Physician Quality Reporting System measures groups are 
reportable either as individual measures or as part of a measures 
group.
    We note that the specifications for measures groups do not 
necessarily contain all the specification elements of each individual 
measure making up the measures group. This is based on the need for a 
common set of denominator specifications for all the measures making up 
a measures group in order to define the applicability of the measures 
group. Therefore, the specifications and instructions for measures 
groups will be provided separately from the specifications and 
instructions for the individual 2011 Physician Quality Reporting System 
measures. We will post the detailed specifications and specific 
instructions for reporting measures groups on the Physician Quality 
Reporting System section of the CMS Web site at http://www.cms.hhs.gov/PQRI by no later than December 31, 2010.
    Additionally, the detailed measure specifications and instructions 
for submitting data on those 2011 measures groups that were also 
included as 2010 Physician Quality Reporting System measures groups may 
be updated or modified prior to 2011.
    Therefore, the 2011 Physician Quality Reporting System measure 
specifications for any given measures group could be different from 
specifications and submission instructions for the same measures group 
used for 2010. These measure specification changes do not materially 
impact the intended meaning of the measures or the strength of the 
measures.
j. 2011 Physician Quality Reporting System Quality Measures for Group 
Practices Selected To Participate in the Group Practice Reporting 
Option (GPRO I)
    For 2011, we proposed that group practices selected to participate 
in the 2011 Physician Quality Reporting System GPRO I would be required 
to report on 26 proposed measures listed in Table 97 of the proposed 
rule (75 FR 40197 through 40198). We proposed these measures because 
they are NQF-endorsed measures currently collected as part of the PGP 
and/or MCMP demonstrations and in the 2010 Physician Quality Reporting 
System GPRO.
    The following is a summary of the comments received on the proposed 
2011 Physician Quality Reporting System quality measures for group 
practices selected to participate in the group practice reporting 
option (GPRO I).
    Comment: We received a comment noting general support for the 26 
proposed GPRO I measures. Another commenter expressed specific support 
for the diabetes measures proposed for the Group Practice Reporting 
Option (GPRO), ``Diabetes Mellitus: Hemoglobin A1c Testing'' and 
``Diabetes Mellitus: Lipid Profile.''
    Response: We appreciate the positive feedback and are finalizing 
the 26 GPRO I measures as proposed. We believe these measures target 
high-cost chronic conditions and preventive care.
    Comment: A couple of commenters encouraged us to expand the list of 
GPRO I measures and/or develop different measure sets to address the 
care delivered in different group practices. One commenter encouraged 
us to adopt additional diabetes measures into the GPRO to ensure the

[[Page 73536]]

most comprehensive evidence-based assessment of diabetes care.
    Response: We agree that in order to make GPRO I more broadly 
applicable we would need to expand the list of GPRO I measures and/or 
develop different measures to address the care delivered in different 
group practices. As we stated in the proposed rule (75 FR 40180), we 
hosted a listening session on February 2, 2010, to solicit input on a 
number of aspects of the Physician Quality Reporting System, including 
the measures for the 2011 Physician Quality Reporting System GPRO. We 
did not, however, receive any suggestions for additional disease 
modules for GPRO I. Therefore, we encourage commenters to use the 2012 
Call for Measures as an avenue to submit specific measures for us to 
consider for future expansion of the GPRO I measure set. As stated 
previously, additional measures recommended for selection for the 2011 
Physician Quality Reporting System via comments to the proposed rule 
cannot be included in the 2011 Physician Quality Reporting System 
measure set.
    Comment: With regard to the 26 GPRO measures, one commenter asked 
us to consider whether some of the testing and patient education 
measures are sufficiently proximate to the desired clinical outcome to 
justify the effort of data collection, analysis, and comparative 
reporting.
    Response: We value the commenter's thoughtful input and agree that 
as we expand the Physician Quality Reporting System measure set, 
including the GPRO I measure set, in future years we may want to 
consider whether the measures lead to the desired outcomes.
    Based on the reasons discussed previously and after considering the 
comments, for the 2011 Physician Quality Reporting System, group 
practices selected to participate in the Physician Quality Reporting 
System GPRO I will be required to report on all measures listed in 
Table 97.
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    A separate measures specifications manual and other supporting 
documents will be available for group practices participating in the 
2011 Physician Quality Reporting System GPRO I. We anticipate that the 
group practice measures specifications manual will be available by 
November 15, 2010 or shortly thereafter on the Physician Quality 
Reporting System section of the CMS Web site at http://www.cms.hhs.gov/PQRI.
k. Public Reporting of Physician Quality Reporting System Data
    Section 1848(m)(5)(G) of the Act requires the Secretary to post on 
the CMS Web site, in an easily understandable format, a list of the 
names of eligible professionals (or group practices) who satisfactorily 
submitted data on quality measures for the Physician Quality Reporting 
System and the names of the eligible professionals (or group practices) 
who are successful electronic prescribers. In addition, section 
10331(a)(1) of the ACA, requires the Secretary to develop a Physician 
Compare Internet Web site by January 1, 2011, on which information on 
physicians enrolled in the Medicare program and other eligible 
professionals who participate in the Physician Quality Reporting System 
would be posted.
    In accordance with section 1848(m)(5)(G) of the Act, we proposed to 
continue to make public the names of eligible professionals and group 
practices that satisfactorily submit quality data for the 2011 
Physician Quality Reporting System. Previously, we intended to post 
such information on the Healthcare Provider Directory. To meet the ACA 
deadline of January 1, 2011, we proposed to use the current Healthcare 
Provider Directory (previously known as the Physician and Other Health 
Care Professional Directory) as a foundation for the Physician Compare 
Web site. Therefore, we proposed to post the names of the 2011 
Physician Quality Reporting System satisfactory reporters on the 
Physician Compare Web site that must be developed by January 1, 2011.
    Specifically, we proposed to post the names of eligible 
professionals who: (1) Submit data on the 2011 Physician Quality 
Reporting System quality measures through one of the reporting 
mechanisms available for the 2011 Physician Quality Reporting System; 
(2) meet one of the proposed satisfactory reporting criteria of 
individual measures or measures groups for the 2011 Physician Quality 
Reporting System as previously described; and (3) qualify to earn a 
Physician Quality Reporting System incentive payment for covered 
professional services furnished during the applicable 2011 Physician 
Quality Reporting System reporting period, for purposes of satisfying 
the requirements under section 1848(m)(5)(G)(i) of the Act, on the 
Physician Compare Web site (75 FR 40198). Similarly, for purposes of 
publicly reporting the names of group practices, on the Physician 
Compare Web site, for 2011, we proposed to post the names of group 
practices that: (1) Submit data on the 2011 Physician Quality Reporting 
System quality measures through one of the proposed group practice 
reporting options; (2) meet the proposed criteria for satisfactory 
reporting under the respective group practice reporting option; and (3) 
qualify to earn a Physician Quality Reporting System incentive payment 
for covered professional services furnished during the applicable 2011 
Physician Quality Reporting System reporting period for purposes of 
satisfying the requirements under section 1848(m)(5)(G)(i) of the Act.
    We did not propose to make performance information publicly 
available at either the group practice or individual level for 2011 
Physician Quality Reporting System. However, we note that section 10331 
of the ACA requires that not later than January 1, 2013, and with 
respect to reporting periods that begin no earlier than January 1, 
2012, we implement a plan for making publicly available through 
Physician Compare, information on physician performance, including 
measures collected under the Physician Quality Reporting System. 
Consistent with section 10331 of the ACA, we expect, in the future, to 
publicly report performance information based on the Physician Quality 
Reporting System.
    The following is a summary of the comments we received regarding 
the public reporting of Physician Quality Reporting System data 
required under section 1848(m)(5)(G)(i) of the Act and Physician 
Compare Web site required under section 10331 of the ACA.
    Comment: Many commenters supported the development of a Physician 
Compare Web site. Some commenters supported public reporting of the 
names of eligible professionals who satisfactorily report Physician 
Quality Reporting System measures and/or who are successful e-
prescribers, noting that this is an appropriate first step in CMS' 
efforts to further transparency. Another commenter supported public 
reporting of the names of eligible professionals who participate in the 
Physician Quality Reporting System or Maintenance of Certification 
Programs as a way to enhance informed consumer choice based on quality 
and outcomes.
    Response: We appreciate the commenters' support. We note, however, 
that we did not propose to publicly report the names of eligible 
professionals who participate in the Physician Quality Reporting System 
or Maintenance of Certification Programs. Instead, we proposed to 
publicly report the names of eligible professionals who satisfactorily 
report 2011 Physician Quality Reporting System measures and are 
finalizing our proposal to post the names of eligible professionals who 
satisfactorily report 2011 Physician Quality Reporting System measures 
on the Physician Compare Web site.
    Comment: Some commenters agreed with CMS' decision to not publicly 
report individual or group level Physician Quality Reporting System 
performance results at this time. Many

[[Page 73539]]

of the commenters believe that it would be premature to do so. One 
commenter believed that CMS' decision to not post 2011 Physician 
Quality Reporting System performance data will allow eligible 
professionals to analyze their 2010 data and resolve any identified 
concerns with the GPRO reporting and analysis process. Another 
commenter noted that a different level of scrutiny is required to 
report performance rates. A commenter generally opposes the use of 
quality data for the purpose of physician profiling because it could 
exacerbate gaps in quality and access through risk avoidance and by 
inhibiting collaborative efforts by the profession to improve care for 
all patients.
    Response: Although we are not planning to post 2011 Physician 
Quality Reporting System performance results, we note that section 
10331 of the ACA requires that not later than January 1, 2013, and with 
respect to reporting periods that begin no earlier than January 1, 
2012, we implement a plan for making publicly available through 
Physician Compare, information on physician performance, including 
measures collected under the Physician Quality Reporting System. 
Therefore, consistent with section 10331 of the ACA, we expect, in the 
future, to publicly report performance information based on the 
Physician Quality Reporting System. It is conceivable that we could 
begin publicly reporting performance information based on the Physician 
Quality Reporting System starting with 2012 Physician Quality Reporting 
System performance results. If and when we move towards public 
reporting of physician performance information, as contemplated under 
section 10331 of the ACA, we will need to consider and address the 
commenters' concerns.
    Comment: As we move towards posting performance information, one 
commenter urged us to start with posting measure results on group 
practices only until there is sufficient experience and data to 
determine which, if any, measures can be reported at the individual 
practitioner level with relative certainty that the information 
portrayed is accurate. Specifically, we should monitor the group 
practice level reporting for unintended consequences before reporting 
performance information at the individual practitioner level.
    Response: We appreciate the commenter's valuable input. We are 
committed to taking steps to ensure that the information portrayed is 
accurate. As we develop our plans for posting performance information 
on the Physician Compare Web site, we may consider initially limiting 
the performance information to measure results at the group practice 
level as suggested by the commenter. As stated previously, we will 
discuss our plans for posting performance information in more detail in 
future notice and comment rulemaking.
    Comment: Some commenters suggested that we work with stakeholders 
to--
    <bullet> Identify how best to relay this information in a user-
friendly manner to the public;
    <bullet> Develop reliable, comparable benchmarks, with a sufficient 
sample size to ensure validity;
    <bullet> Ensure that specific reporting and performance results are 
indeed quality indicators;
    <bullet> Ensure that the site accurately represents physician 
performance and facilitates consumer decision-making;
    <bullet> Provide an opportunity for physicians, other eligible 
professionals, and group practices to review their data before it is 
made public. As with Hospital Compare, eligible professionals should 
have the right to suppress any data that are inaccurate; and
    <bullet> Establish a method for ensuring that any publicly reported 
information is--
    ++ Correctly attributed to those involved in the care;
    ++ Appropriately risk-adjusted; and
    ++ Accurate, user-friendly, relevant and helpful to the consumer/
patient. CMS must educate consumers/patients about the publicly 
reported performance measures and corresponding benchmarks.
    Response: We agree with commenters on the importance of receiving 
stakeholder input on the Physician Compare Web site. We are required, 
by section 10331(d) of the ACA to take into consideration input 
provided by multi-stakeholder groups, consistent with section 
1890(b)(7) and 1890(A) of the Act, as added by section 3014 of the ACA, 
in selecting quality measures for the Physician Compare Web site. In 
addition, on October 27, 2010, we held a Town Hall Meeting to solicit 
input from stakeholders on the further expansion of the Physician 
Compare Web site (75 FR 58411 and 58412). Finally, as we stated in the 
CY 2011 PFS proposed rule, we will be working on a plan to expand the 
information that is publicly reported on the Physician Compare in 
future years, which will be described in future rulemaking. 
Stakeholders would have an opportunity to comment on any plans 
described in future rulemaking as well.
    Comment: One commenter voiced concerns about various issues and 
challenges that need to be resolved before any performance information 
is made public. Specific issues include measure gaps, challenges 
associated with risk adjustment and attribution, accuracy of the data, 
and eligible professionals' ability to control the factors that 
influence their performance.
    Response: We agree that these issues will need to be addressed as 
we move towards public reporting of performance information on 
individual eligible professionals. We look forward to receiving input 
from stakeholders on these and other important methodological 
considerations as we develop our plans for the expansion of the 
Physician Compare Web site to include performance information.
    Comment: A few commenters suggested that physicians be given an 
opportunity to review and appeal any data that will be made public 
prior to the data being made public. Commenters stated that physicians 
also should be given an opportunity to comment and make changes to the 
data on the Physician Compare Web site should the information be 
incorrect.
    Response: With respect to the development and implementation of a 
plan for making physician performance information publicly available on 
the Physician Compare Web site, section 10331(b) of the ACA 
specifically requires the Secretary, to the extent practicable, to 
include processes by which a physician or other eligible professional 
whose performance measures is being publicly reported has a reasonable 
opportunity, as determined by the Secretary, to review his or her 
individual results before they are made public. Thus, as we describe 
our plans for making physician performance information publicly 
available on the Physician Compare Web site in future notice and 
comment rulemaking, we anticipate addressing the commenter's 
suggestions in further detail.
    Comment: Some commenters had concerns about the posting of the 
names of eligible professionals and group practices who satisfactorily 
report Physician Quality Reporting System measures. Some commenters 
requested that CMS delay posting this information until problems with 
the Physician Quality Reporting System are addressed and both success 
rates and participation rates improve significantly. Commenters were 
concerned that this information could be misinterpreted or misperceived 
by the public. Some commenters noted that successful reporting of the 
mostly process measures that comprise the Physician Quality Reporting 
System would not be a valid surrogate for patients to evaluate the 
actual quality of

[[Page 73540]]

care or quality of service provided by an individual practitioner. 
Furthermore, consumers already face a challenge when attempting to 
evaluate providers. The commenter thinks it will be even more confusing 
for consumers to understand the difference between claims-based or 
registry reporting and which is more accurate or reflects actual 
quality of care. Commenters stressed the importance of educating 
consumers about why eligible professionals may choose not to 
participate in the Physician Quality Reporting System. Another 
commenter noted that consumers must be made aware that non-
participation in the Physician Quality Reporting System is not an 
indication that an eligible professional or group practice provides low 
quality care. Finally, a commenter also suggested that this information 
be accompanied with explanatory language regarding the limitations of 
posting this data.
    Response: While we understand the commenters' concerns, section 
1848(m)(5)(G)(i) of the Act requires us to post on a CMS Web site the 
names of eligible professionals and group practices that satisfactorily 
submit data on quality measures under the Physician Quality Reporting 
System. We intend to provide explanatory language on the Web site that 
would address many of the commenters' concerns, including information 
about the intended uses and/or limitations of the information being 
presented in the form of a disclaimer.
    Comment: One commenter urged CMS to consider how the appeals 
process will be connected to the Physician Compare Web site. The 
commenter questioned whether the Web site would be updated if 
professionals are successful during the appeals process.
    Response: We are assuming that the commenter is referring to the 
informal appeals process required under section 1848(m)(5)(I) of the 
Act and discussed in section VII.F.1.e. of this final rule with comment 
period. To the extent that an eligible professional seeks a review of 
our determination that he or she did not satisfactorily report and our 
review results in a determination that the professional did 
satisfactorily report, we anticipate that we would update the Physician 
Compare Web site to indicate that the professional satisfactorily 
reported Physician Quality Reporting System quality measures.
    Comment: We received a few comments related to public reporting and 
maintenance of certification. One commenter offered to work with us to 
provide information on Maintenance of Certification Program status for 
posting on the Physician Compare Web site and the value as it relates 
to quality, safety, efficiency, and patient experiences of physician 
care. The commenter would also like the Physician Compare Web site to 
include a link to ABMS. Another commenter urged us to make available 
information on whether a physician received an additional bonus for 
successfully meeting Maintenance of Certification Program requirements. 
A third commenter was concerned that public reporting of physicians who 
satisfy the Physician Quality Reporting System requirements through the 
Maintenance of Certification Program Part IV pathway could 
inadvertently lead to confusion about whether those same physicians 
have satisfied all of the requirements of the Boards' Maintenance of 
Certification Program programs.
    Response: We agree that it may be valuable to consumers to have 
information on an eligible professional's Maintenance of Certification 
Program status and would be interested in exploring the feasibility of 
posting this information on the Physician Compare Web site in the 
future. We could also explore posting information on whether a 
physician or other eligible professional received the additional 0.5 
percent incentive associated with participation in a Maintenance of 
Certification Program. However, as noted by one of the commenters, we 
feel that this information could be misinterpreted and would not be as 
valuable as information on an eligible professional's Maintenance of 
Certification Program status. As we describe in section VII.F.1.l.(1) 
of this final rule with comment period, in order for an eligible 
professional to qualify for this additional 0.5 percent incentive, not 
only does he or she have to satisfactorily participate in the Physician 
Quality Reporting System, participate in a qualified Maintenance of 
Certification Program, and successfully complete a Maintenance of 
Certification Program practice assessment, but he or she must 
participate in the qualified Maintenance of Certification Program and 
successfully complete a Maintenance of Certification Program practice 
assessment more frequently than is required to qualify for or maintain 
board certification status.
    After considering the comments, we intend to post the names of 
eligible professionals who: (1) Submit data on the 2011 Physician 
Quality Reporting System quality measures through one of the reporting 
mechanisms available for the 2011 Physician Quality Reporting System; 
(2) meet one of the satisfactory reporting criteria of individual 
measures or measures groups for the 2011 Physician Quality Reporting 
System; and (3) qualify to earn a Physician Quality Reporting System 
incentive payment for covered professional services furnished during 
the applicable 2011 Physician Quality Reporting System reporting period 
for purposes of satisfying the requirements under section 
1848(m)(5)(G)(i) of the Act, on the Physician Compare Web site that 
will be developed by January 1, 2011.
    Similarly, for purposes of satisfying the requirements under 
section 1848(m)(5)(G)(i) of the Act with respect to group practices, on 
the Physician Compare Web site, we intend to post the names of group 
practices that: (1) Submit data on the 2011 Physician Quality Reporting 
System quality measures through GPRO I or GPRO II; (2) meet the 
criteria for satisfactory reporting under the GPRO I or GPRO II; and 
(3) qualify to earn a Physician Quality Reporting System incentive 
payment for covered professional services furnished during the 
applicable 2011 Physician Quality Reporting System reporting period for 
group practices.
    We will discuss our plans for further expansion of the Physician 
Compare Web site in future notice and comment rulemaking.
l. Other Relevant ACA Provisions
(1) Section 3002(b)--Incentive Payment Adjustment for Quality Reporting
    Beginning 2015, a payment adjustment will apply under the Physician 
Quality Reporting System. Specifically, under section 1848(a)(8) of the 
Act, as added by section 3002(b) of the ACA, with respect to covered 
professional services furnished by an eligible professional during 2015 
or any subsequent year, if the eligible professional does not 
satisfactorily submit data on quality measures for covered professional 
services for the quality reporting period for the year, the fee 
schedule amount for services furnished by such professionals during the 
year shall be equal to the applicable percent of the fee schedule 
amount that would otherwise apply to such services. The applicable 
percent for 2015 is 98.5 percent and for 2016 and each subsequent year 
it is 98.0 percent. In the proposed rule, we stated that we will 
address this provision of the ACA in future notice and comment 
rulemaking (75 FR 40199).
    The following is a summary of comments received regarding the 
incentive payment adjustment for

[[Page 73541]]

quality reporting required under section 3002(b) of the ACA.
    Comment: Some commenters expressed opposition to the use of payment 
adjustments under the Physician Quality Reporting System program. One 
commenter believes participation should remain voluntary as the 
Physician Quality Reporting System has not yet been shown to improve 
patient outcomes and therefore does not warrant penalties for 
nonparticipating eligible professionals. Other commenters stated that, 
to be successful, performance measurement should be nonpunitive and 
transparent.
    Response: While we acknowledge the commenters' concerns, we note 
that section 1848(a)(8) of the Act, as added by the ACA, requires us to 
implement a payment adjustment for eligible professionals who do not 
satisfactorily report Physician Quality Reporting System measures 
beginning in 2015. In the meantime, we will continue to assess whether 
we can make additional improvements to the Physician Quality Reporting 
System to facilitate satisfactory reporting and to encourage greater 
participation prior to implementation of the payment adjustments 
required under section 1848(a)(8) of the Act beginning for 2015. We 
will address our plans for implementing the payment adjustment that 
begins in 2015 in future notice and comment rulemaking.
(2) Section 3002(c)--Maintenance of Certification Programs and Section 
10327 Improvements to the Physician Quality Reporting System
    Section 3002(c) of the ACA amends section 1848(k)(4) of the Act to 
require a mechanism whereby an eligible professional may provide data 
on quality measures through a maintenance of certification program 
(Maintenance of Certification Program) operated by a specialty body of 
the American Board of Medical Specialties (ABMS). In addition, section 
1848(m)(7) of the Act (``Additional Incentive Payment''), as added by 
section 10327(a) of the ACA, provides for an additional 0.5 percent 
incentive payment for years 2011 through 2014 if certain requirements 
are met. In accordance with section 1848(m)(7)(B) of the Act, in order 
to qualify for the additional incentive payment, an eligible 
professional must--
    <bullet> Satisfactorily submit data on quality measures under the 
Physician Quality Reporting System for a year and have such data 
submitted--
    ++ On their behalf through a Maintenance of Certification Program 
that meets the criteria for a registry under the Physician Quality 
Reporting System; or
    ++ In an alternative form and manner determined appropriate by the 
Secretary; and
    <bullet> More frequently than is required to qualify for or 
maintain board certification status:
    ++ Participate in such a Maintenance of Certification Program for a 
year and
    ++ Successfully completes a qualified Maintenance of Certification 
Program practice assessment for such year.
    Section 1848(m)(7)(C)(i) of the Act defines ``Maintenance of 
Certification Program'' as a continuous assessment program, such as a 
qualified ABMS Maintenance of Certification Program, or an equivalent 
program (as determined by the Secretary), that advances quality and the 
lifelong learning and self-assessment of board certified specialty 
physicians by focusing on the competencies of patient care, medical 
knowledge, practice-based learning, interpersonal and communications 
skills and professionalism. Such a program shall require a physician to 
do the following:
    (1) Maintain a valid, unrestricted medical license in the United 
States;
    (2) Participate in educational and self-assessment programs that 
require an assessment of what was learned;
    (3) Demonstrate, through a formalized, secure examination, that the 
physician has the fundamental diagnostic skills, medical knowledge, and 
clinical judgment to provide quality care in their respective 
specialty;
    (4) Successful completion of a qualified Maintenance of 
Certification Program practice assessment.
    As defined in section 1848(m)(7)(C)(ii) of the Act, a ``qualified 
Maintenance of Certification Program practice assessment'' means an 
assessment of a physician's practice that--
    (1) Includes an initial assessment of an eligible professional's 
practice that is designed to demonstrate the physician's use of 
evidence-based medicine;
    (2) Includes a survey of patient experience with care; and
    (3) Requires a physician to implement a quality improvement 
intervention to address a practice weakness identified in the initial 
assessment and then to remeasure to assess performance after such 
intervention.
    To qualify for the additional incentive payment, section 
1848(m)(7)(B)(iii) of the Act also requires the Maintenance of 
Certification Program to submit to CMS, on behalf of the eligible 
professional, information:
    (1) In a form and manner specified by the Secretary, that the 
eligible professional more frequently than is required to qualify for 
or maintain board certification status, participates in the Maintenance 
of Certification Program for a year and successfully completes a 
qualified Maintenance of Certification Program practice assessment for 
such year;
    (2) If requested by the Secretary, information on the survey of 
patient experience with care; and
    (3) As the Secretary may require, on the methods, measures, and 
data used under the Maintenance of Certification Program and the 
qualified Maintenance of Certification Program practice assessment.
    Section 1848(m)(7) of the Act (``Additional Incentive Payment'') 
further specifies that the additional 0.5 percent incentive payment is 
available only for years 2011, 2012, 2013, and 2014. For years after 
2014, if the Secretary determines it to be appropriate, the Secretary 
may incorporate participation in a Maintenance of Certification Program 
and successful completion of a qualified Maintenance of Certification 
Program practice assessment into the composite of measures of quality 
for care furnished pursuant to the physician fee schedule payment 
modifier.
    To implement the provisions under sections 1848(k)(4) and 
1848(m)(7) of the Act (``Additional Incentive Payment''), we proposed 
for 2011 to require the following (75 FR 40199 and 40200):
    <bullet> An eligible professional wishing to be eligible for the 
additional Physician Quality Reporting System incentive payment of 0.5 
percent must meet the proposed requirements for satisfactory Physician 
Quality Reporting System reporting, for program year 2011, based on the 
12-month reporting period, due to the statutory language that the 
eligible professional must satisfactorily report ``for a year.'' For 
purposes of satisfactory reporting under the Physician Quality 
Reporting System, we proposed that the eligible professional may 
participate as an individual eligible professional using either 
individual Physician Quality Reporting System measures or measures 
groups and submitting the Physician Quality Reporting System data via 
claims, a registry, or an EHR or participate under one of the GPRO 
options (I or II). Alternatively, eligible professionals may 
satisfactorily report under the Physician Quality Reporting System 
based on submission of Physician Quality Reporting System data by a 
Maintenance of Certification Program, provided that the Maintenance of 
Certification Program has qualified as a

[[Page 73542]]

Physician Quality Reporting System registry for 2011. As indicated 
previously, an eligible professional would not necessarily have to 
qualify for the Physician Quality Reporting System through a 
Maintenance of Certification Program serving as a registry. Rather, we 
proposed that an eligible professional may qualify for the additional 
incentive, without regard to the method by which the eligible 
professional has met the basic requirement of satisfactory reporting 
under the Physician Quality Reporting System.
    <bullet> In addition to meeting the proposed requirements for 
satisfactory reporting for the Physician Quality Reporting System for 
program year 2011, the eligible professional must have data submitted 
on his or her behalf through a Maintenance of Certification Program, 
for the Maintenance of Certification Program in which the eligible 
professional participates. Although the Maintenance of Certification 
Program need not become a qualified registry for data submission for 
Physician Quality Reporting System purposes, the Maintenance of 
Certification Program must meet the criteria for a registry for 
submission of the Maintenance of Certification Program data as 
specified below.
    <bullet> An eligible professional must, more frequently than is 
required to qualify for or maintain board certification, participate in 
a Maintenance of Certification Program for a year and successfully 
complete a qualified Maintenance of Certification Program practice 
assessment for such year. We believe that the ``more frequently'' 
requirement applies both to the elements of the Maintenance of 
Certification Program itself and the requirement to successfully 
complete a qualified Maintenance of Certification Program practice 
assessment. With regard to the elements other than completing a 
qualified Maintenance of Certification Program practice assessment, we 
proposed to require that the Maintenance of Certification Program 
certify that the eligible professional has ``more frequently'' than is 
required to qualify for or maintain board certification ``participated 
in a Maintenance of Certification Program for a year'' as required by 
section 10327 of the ACA. We did not propose to specify with respect to 
participation how an eligible professional must meet the ``more 
frequently'' requirement, but rather that the Maintenance of 
Certification Program so certify that the eligible professional has met 
this requirement. We noted that we did not believe that the ``more 
frequently'' requirement is applicable to the licensure requirement, 
given that one cannot be licensed ``more frequently'' than is required. 
However, we stated that the eligible professional must ``more 
frequently'' than is required to qualify for or maintain board 
certification, participate in educational and self-assessment programs 
that require an assessment of what was learned; demonstrate, through a 
formalized, secure examination, that the physician has the fundamental 
diagnostic skills, medical knowledge, and clinical judgment to provide 
quality care in their respective specialty; and successfully complete a 
qualified Maintenance of Certification Program practice assessment.
    With respect to the Maintenance of Certification Program practice 
assessment, which is specifically delineated in section 
1848(m)(7)(B)(ii) of the Act as being required more often than is 
necessary to qualify for or maintain board certification, we stated 
that we believe we needed to be more specific regarding our 
interpretation of the phrase ``more frequently'' (75 FR 40200). 
Additionally, we stated that we were aware that some specialty boards 
have varying Maintenance of Certification Program requirements for 
physicians to maintain board certification, based on the date of 
original certification. Some, we believe, may not be required to 
participate in a Maintenance of Certification Program at all in order 
to maintain board certification. Accordingly, we recognize that ``more 
often'' may vary among physicians certified by the same specialty 
board. We interpreted the statutory provisions as requiring 
participation in and successful completion of at least one Maintenance 
of Certification Program practice assessment. Therefore, we proposed, 
as a basic requirement, participation in and successful completion in 
at least one Maintenance of Certification Program practice assessment. 
For physicians who are not required to participate in a Maintenance of 
Certification Program to maintain board certification, ``more often'' 
would be more than 0, and therefore only once. For physicians, however, 
who are otherwise required by the specialty board to participate in a 
Maintenance of Certification Program to maintain board certification 
status, these physicians would need to complete the Maintenance of 
Certification Program practice assessment a second time in order to 
qualify for the additional incentive payment. If a Maintenance of 
Certification Program practice assessment were required more than once 
during a particular cycle, the eligible professional would be required 
to complete the Maintenance of Certification Program practice 
assessment a third time in order to qualify for the additional 
incentive.
    We are also aware that ABMS boards are at various stages in 
implementing the practice assessment modules, and some may not have 
such assessment modules in place. However, inasmuch as we interpret the 
statute to require a Maintenance of Certification Program practice 
assessment at least once as part of the Maintenance of Certification 
Program, eligible professionals who do not have available, through 
their boards or otherwise, a Maintenance of Certification Program 
practice assessment are not eligible for the 0.5 percent incentive.
    We believe that the experience of care survey provides particularly 
valuable information and proposed that a qualified Maintenance of 
Certification Program practice assessment must include a survey of 
patient experience with care. The Secretary may request information on 
the survey of patient experience with care, under section 
1848(m)(7)(B)(iii) of the Act. In view of the importance of this 
information, and the lack of readily available alternative sources, we 
proposed to require that Maintenance of Certification Programs submit 
information as to the survey of patient experience with care for the 
eligible professional regarding whom information is being submitted by 
the Maintenance of Certification Program.
    We proposed that Maintenance of Certification Programs wishing to 
enable their members to be eligible for an additional Physician Quality 
Reporting System incentive payment for the 2011 Physician Quality 
Reporting System will need to go through a self-nomination process by 
January 31, 2011. We proposed the board will need to include all of the 
following information in their self-nomination letter to CMS:
    <bullet> Provide detailed information regarding the Maintenance of 
Certification Program with reference to the statutory requirements for 
such program.
    <bullet> Indicate the organization sponsoring the Maintenance of 
Certification Program, and whether the Maintenance of Certification 
Program is sponsored by an ABMS board. If not an ABMS board, indicate 
whether the program is substantially equivalent to the ABMS Maintenance 
of Certification Program process.
    <bullet> The frequency of a cycle of Maintenance of Certification 
Program for the specific Maintenance of

[[Page 73543]]

Certification Program of the sponsoring organization; including what 
constitutes ``more frequently'' for the Maintenance of Certification 
Program practice assessment for the specific Maintenance of 
Certification Program of the sponsoring organization.
    <bullet> What was, is, or will be the first year of availability of 
the Maintenance of Certification Program practice assessment for 
completion by an eligible professional.
    <bullet> What data is collected under the patient experience of 
care survey and how this information would be provided to CMS.
    <bullet> How the Maintenance of Certification Program monitors that 
an eligible professional has implemented a quality improvement process 
for their practice.
    <bullet> Describe the methods, and data used under the Maintenance 
of Certification Program, and provide a list of all measures used in 
the Maintenance of Certification Program for 2010 and to be used for 
2011, including the title and descriptions of each measure, the owner 
of the measure, whether the measure is NQF endorsed, and a link to a 
Web site containing the detailed specifications of the measures, or an 
electronic file containing the detailed specifications of the measures.
    We proposed that sponsoring organizations who desire to participate 
as a Maintenance of Certification Program will need to be able to 
provide CMS the following information in a CMS-specified file format by 
no later than the end of the first quarter of 2012:
    <bullet> The name, NPI and applicable TIN(s) of the eligible 
professional who would like to participate in this process;
    <bullet> Attestation from the board that the information provided 
to CMS is accurate and complete;
    <bullet> The board has signed documentation from the eligible 
professional that the eligible professional wishes to have the 
information released to CMS;
    <bullet> Information from the experience of care survey;
    <bullet> Information certifying that the eligible professional has 
participated in a Maintenance of Certification Program for a year, more 
frequently than is required to qualify for or maintain board 
certification status, including the year that the physician met the 
board certification requirements for the Maintenance of Certification 
Program, and the year the eligible professional participated in a 
Maintenance of Certification Program ``more frequently'' than is 
required to maintain or qualify for board certification; and
    <bullet> Information certifying that the eligible professional has 
completed the Maintenance of Certification Program practice assessment 
one additional time more than is required to qualify for or maintain 
board certification, including the year of the original Maintenance of 
Certification Program practice assessment or that a Maintenance of 
Certification Program practice assessment is not required for the 
eligible professional, and the year of the additional Maintenance of 
Certification Program practice assessment completion.
    We proposed that specialty boards that also desire to send 
Physician Quality Reporting System information to CMS on behalf of 
eligible professionals should be able to meet the proposed requirements 
for registry data submission and should follow the directions for self-
nomination to become a qualified registry. Boards may also participate 
as registries for Physician Quality Reporting System data provided that 
they meet the registry requirements. As an alternative to requiring 
boards to either operate a qualified Physician Quality Reporting System 
registry or to self-nominate to submit Maintenance of Certification 
Program data to CMS on behalf of their members, we also considered 
having the various boards submit the Maintenance of Certification 
Program data to the ABMS and having ABMS channel the information from 
the various boards to CMS (75 FR 40200).
    The following is a summary of the comments received on the proposed 
requirements for qualifying for the additional 0.5 percent incentive 
for 2011, the proposed mechanism for receiving Maintenance of 
Certification Program data from the specialty boards, as well as on the 
alternative mechanism that we considered.
    Comment: Commenters raised concerns as to whether the CY 2011 PFS 
proposed rule uses the term ``Maintenance of Certification Program'' in 
a manner that may be confusing to the public and unnecessarily raises 
trademark concerns. Specifically, the commenter recommended changes 
related to the use of the acronym ``MOCP,'' such as referring to 
``maintenance of certification program'' (all lower-case letters) or 
using different letters for the acronym.
    Response: We appreciate the commenter's input. We will not use any 
acronym, including ``MOCP.'' Instead, we will spell out the term 
``Maintenance of Certification Program'' using capital letters as it is 
done in section 1848(m)(7) of the Act (``Additional Incentive 
Payment'').
    Comment: Several commenters provided positive feedback regarding 
the availability of an additional 0.5 percent incentive payment for 
meeting specific maintenance of certification requirements, including 
support for the inclusion of patient experience of care surveys as a 
required element of the Maintenance of Certification Program practice 
assessment component.
    Response: We appreciate the commenter's support of the additional 
Maintenance of Certification Program incentive for eligible 
professionals participating in the 2011 Physician Quality Reporting 
System, authorized by the ACA.
    Comment: One commenter believes that the ``maintenance of 
certification'' reporting option is premature. The commenter noted that 
the state of New Jersey may not currently have operational and tested 
``practice assessment'' capability and funding for this program may not 
be available.
    Response: While we recognize that this option may not be a feasible 
option for all eligible professionals, we are required to have this 
option available for the 2011 Physician Quality Reporting System under 
section 1848(m)(7) of the Act (``Additional Incentive Payment''). We 
note that participation in this option is voluntary and is not required 
to participate in the Physician Quality Reporting System or earn the 
Physician Quality Reporting System incentive. Therefore, eligible 
professionals who do not have the ability to participate in a 
maintenance of certification program can still participate in the 
Physician Quality Reporting System for 2011 and potentially qualify for 
a 1 percent incentive payment by satisfactorily reporting 2011 
Physician Quality Reporting System measures. Participation in a 
maintenance of certification program provides eligible professionals an 
opportunity to earn an additional 0.5 percent incentive above and 
beyond what they could earn by satisfactorily reporting Physician 
Quality Reporting System measures.
    Comment: One commenter urged us to implement regulations that would 
ensure that all eligible professionals have access to the additional 
0.5 percent incentive.
    Response: While we appreciate the commenter's support for the 
additional 0.5 percent incentive, we note that section 1848(m)(7) of 
the Act (``Additional Incentive Payment'') explicitly ties the 
additional 0.5 percent incentive to participation in a Maintenance of 
Certification Program. Section 1848(m)(7)(C)(i) of the Act specifies 
that the term ``Maintenance of

[[Page 73544]]

Certification Program'' means ``a continuous assessment program * * * 
that advances quality and the lifelong learning and self-assessment of 
board certified specialty physicians * * *.'' This suggests that 
Maintenance of Certification Programs apply only to physicians and only 
physicians can participate in a Maintenance of Certification Program 
and qualify for this additional 0.5 percent incentive payment. We do 
not believe we have the authority to broaden the applicability of this 
additional 0.5 percent incentive payment.
    Comment: One commenter recommended that we allow eligible 
professionals who complete a Part IV Maintenance of Certification 
practice assessment be eligible for an additional 0.5 percent bonus if 
they are also satisfactorily report Physician Quality Reporting System 
measures, regardless of whether they satisfactorily reported through 
claims or another registry method. In contrast, other commenters 
believe the requirements for receiving a Maintenance of Certification 
Program payment are too onerous for both eligible professionals and 
Maintenance of Certification Program boards and should not be tied to 
satisfactorily reporting Physician Quality Reporting System measures.
    Response: Section 1848(m)(7)(B)(i)(I) of the Act specifically 
requires that ``* * * in order to qualify for the additional incentive 
payment* * *, an eligible professional shall* * *satisfactorily submit 
data on quality measures for [the Physician Quality Reporting System] 
for a year.'' As stated in the proposed rule (75 FR 40199), we proposed 
that an eligible professional ``* * * may participate as an individual 
eligible professional using either individual Physician Quality 
Reporting System measures or measures groups and submitting the 
Physician Quality Reporting System data via claims, a registry, or an 
EHR or participate under one of the GPRO options (I or II).'' We also 
proposed that an eligible professional ``may qualify for the additional 
incentive, without regard to the method by which the [eligible 
professional] has met the basic requirement of satisfactorily reporting 
under the PQRI [that is, the Physician Quality Reporting System].'' 
Therefore, eligible professionals wishing to qualify for the additional 
0.5 percent incentive payment can satisfactorily report Physician 
Quality Reporting System measures using any available Physician Quality 
Reporting System method and are not limited to a specific one.
    Comment: Although the ABMS has issued guidelines for Maintenance of 
Certification Program, one commenter believes that the individual 
boards have a fair amount of latitude in how they implement those 
guidelines. As a result, the commenter favors the plan to have 
individual specialty boards meet the CMS criteria if they wish to be 
deemed to verify individual eligible professional qualification for 
Physician Quality Reporting System incentives.
    Response: We recognize the variability in the boards' maintenance 
of certification program requirements and appreciate the commenter's 
support of our proposal to allow individual boards to verify that their 
eligible professionals have met the appropriate maintenance of 
certification program requirements for the additional 0.5 percent 
incentive. Accordingly, we are finalizing the requirement to have the 
various boards submit information to us on eligible professionals' 
behalf attesting that an eligible professional has more frequently than 
is required to qualify for or maintain board certification status, 
participated in a maintenance of certification program for a year and 
successfully completed a qualified Maintenance of Certification Program 
practice assessment for such year.
    Comment: Some commenters requested additional clarification on the 
requirements for qualifying for the additional 0.5 percent incentive so 
that eligible professionals can understand the necessary processes 
needed to qualify. One commenter requested more information on how 
Maintenance of Certification Program would work for specialty boards, 
such as the American Board of Internal Medicine (ABIM), that oversee 
the maintenance of certification processes for multiple subspecialties.
    Response: As discussed previously, we recognize that there is 
variability in the boards' maintenance of certification program 
requirements. Therefore, eligible professionals will need to work with 
their specific Maintenance of Certification Program for information as 
to the processes of that program as it relates to qualifying for the 
additional 0.5 percent incentive.
    We did not propose any requirements for self-nomination of each 
subspecialty of a board. Rather the board would have to provide 
information to CMS on each Maintenance of Certification Program that 
the board sponsors, where it sponsors more than one.
    Comment: In response to the request in the proposed rule for input 
on an alternative to requiring Boards to either operate a qualified 
Physician Quality Reporting System registry or to self-nominate to 
submit Maintenance of Certification Program data to CMS on behalf of 
their members (75 FR 40201), one commenter noted that many of the ABMS 
member boards do not have the capacity to develop and implement CMS-
approved registries to support their diplomates' participation in the 
Maintenance of Certification Program pathway for Physician Quality 
Reporting System reporting. The commenter suggested that developing a 
registry that can be shared across multiple Boards will allow for an 
efficient and cost-effective approach to facilitate participation in 
Physician Quality Reporting System reporting for their diplomates. Such 
a registry could collect and submit physician quality improvement data, 
provide attestation that the quality improvement data was collected as 
part of a qualified ABMS MOC[supreg] Part IV activity, and also serve 
as an intermediary in transmitting successful maintenance of 
certification participation in the Physician Quality Reporting System 
to CMS. Depending upon the vendor(s) identified to support the registry 
function, the commenter felt that this may also provide a mechanism for 
submission of patient experience of care surveys.
    Response: We note that we did not propose to require boards to 
implement Physician Quality Reporting System qualified registries to 
support their diplomates' participation in the Maintenance of 
Certification Program pathway for Physician Quality Reporting System 
reporting. We merely highlighted that boards may wish to self-nominate 
to become a qualified Physician Quality Reporting System registry to 
facilitate eligible professionals' reporting of Physician Quality 
Reporting System data, as well as participation in the Maintenance of 
Certification Pathway. To the extent that a board or other entity 
wishes to become a qualified registry for the purposes of Physician 
Quality Reporting System data submission, the board or other entity 
must self-nominate to do so and meet all of the registry qualification 
requirements described in section VII.F.1.(4). of this final rule with 
comment period. In addition, to the extent an entity wishes to submit 
Physician Quality Reporting System data and/or data regarding 
participation in Maintenance of Certification Program(s) on behalf 
multiple boards, the entity will need to comply with the appropriate 
registry and/or Maintenance of Certification Program qualification 
requirements. More specifically, in order to submit data on 
participation in the Maintenance of Certification Pathway for multiple 
boards, the entity, must include the following information for each 
Maintenance of Certification

[[Page 73545]]

Program that it wishes to submit data on in their self-nomination 
letter to CMS:
    <bullet> Provide detailed information regarding the Maintenance of 
Certification Program with reference to the statutory requirements for 
such program.
    <bullet> Indicate the organization sponsoring the Maintenance of 
Certification Program, and whether the Maintenance of Certification 
Program is sponsored by an ABMS board. If not an ABMS board, indicate 
whether the program is substantially equivalent to the ABMS Maintenance 
of Certification Program process.
    <bullet> The frequency and cycle of Maintenance of Certification 
for the specific Maintenance of Certification Program of the sponsoring 
organization; including what constitutes ``more frequently'' for the 
Maintenance of Certification Program practice assessment for the 
specific Maintenance of Certification Program of the organization.
    <bullet> What was, is, or will be the first year of availability of 
the Maintenance of Certification Program practice assessment for 
completion by an eligible professional.
    <bullet> What data is collected under the patient experience of 
care survey and how information on the survey would be provided to CMS.
    <bullet> How the Maintenance of Certification Program monitors that 
an eligible professional has implemented a quality improvement process 
for their practice.
    <bullet> Describe the methods, and data used under the Maintenance 
of Certification Program, and provide a list of all measures used in 
the Maintenance of Certification Program for 2010 and to be used in 
2011, including the title and descriptions of each measure, the owner 
of the measure, whether the measure is NQF-endorsed, and a link to a 
Web site containing the detailed specifications of the measures, or an 
electronic file containing the detailed specifications of the measures.
    With respect to submitting data on Maintenance of Certification 
Program participation, the qualified entity must submit:
    <bullet> The name, NPI, and applicable TIN(s) of the eligible 
professional who would like to participate in this process;
    <bullet> Attestation from each board that the information provided 
to CMS is accurate and complete;
    <bullet> Signed documentation from the eligible professional that 
the eligible professional wishes to have their information released to 
CMS;
    <bullet> Information on the patient experience of care survey;
    <bullet> Information from the appropriate board attesting that the 
eligible professional has participated in a Maintenance of 
Certification Program for a year, more frequently than is required to 
qualify for or maintain board certification status, including the year 
that the physician met the board certification requirements for the 
Maintenance of Certification Program and the year the eligible 
professional participated in a Maintenance of Certification Program 
``more frequently'' than is required to qualify for board 
certification; and
    <bullet> Information from the appropriate board certifying that the 
eligible professional has completed the Maintenance of Certification 
Program practice assessment one additional time more than is required 
to qualify or maintain board certification, including the year of the 
original Maintenance of Certification Program practice assessment or 
that a Maintenance of Certification Program practice assessment is not 
required for the eligible professional, and the year of the additional 
Maintenance of Certification Program practice assessment completion.
    Comment: Several comments indicated that we misinterpreted the 
intent of the ``more frequently'' requirement under section 
1848(m)(7)(B)(ii) of the Act. Specifically, some commenters believe the 
intent of the ``more frequently'' requirement applies specifically to 
the Maintenance of Certification Program Part IV, practice assessment, 
requirement only and not to Parts II or III of the Maintenance of 
Certification Program (that is, the educational and self-assessment 
programs and the formalized, secure examination portion of the 
Maintenance of Certification Program). To that end, commenters 
requested the final rule provide additional clarification regarding the 
implementation of the ``more frequently'' requirement. One commenter 
also requested that we work closely with the ABMS to determine a means 
for implementing this provision which would be the least disruptive to 
existing maintenance of certification programs. One commenter noted 
that adding a requirement to participate in a maintenance of 
certification program ``more frequently'' than is required by the 
specialty board undermines the boards' standards and their expertise.
    Response: As discussed in the proposed rule (75 FR 40199 through 
40201), we believe that, as constructed, sections 1848(m)(7)(C)(i)(II) 
and 1848(m)(7)(C)(i)(III) of the Act applies the ``more frequently'' 
requirement to both the Maintenance of Certification Program itself and 
the successful completion of a Maintenance of Certification Program 
practice assessment. While we understand the commenter's question of 
this interpretation, we do not interpret the legislation as applying 
the ``more frequently'' requirement simply to the practice assessment 
activity. Rather we interpret the legislation as providing an 
additional incentive for eligible professionals who are actively 
pursuing activities involved in a continuous assessment program, such 
as a qualified ABMS Maintenance of Certification Program or an 
equivalent program. However, with respect to the ``more frequently'' 
requirement as it relates to the Maintenance of Certification Program 
itself, as opposed to the ``more frequently'' requirement for the 
practice assessment, we do not specify how an eligible professional 
must meet the more frequently requirement. Rather, we require only that 
the Maintenance of Certification Program indicate that the eligible 
professional has met the requirement.
    Comment: A few comments opposed linking payers to the Maintenance 
of Certification Program.
    Response: We are unclear what the commenters mean with respect to 
linking Medicare to the Maintenance of Certification Program. As we 
noted previously, participation in a Maintenance of Certification 
Program is not required for an eligible professional to earn a 
Physician Quality Reporting System incentive. Rather, participation in 
a Maintenance of Certification Program provides eligible professionals 
an opportunity to earn an additional 0.5 percent incentive above and 
beyond what they could earn under the Physician Quality Reporting 
System.
    Comment: Several commenters suggested the ``more frequently'' 
requirement be based on the March 2009 ABMS MOC[supreg] Standards 
adopted by the ABMS, which applies to the 24 ABMS member boards. Under 
these standards, ``more frequently'' would mean that a Part IV activity 
must be completed every 1 to 4 years, by physicians who voluntarily 
decide to participate in the Maintenance of Certification Program 
Physician Quality Reporting System pathway. One of the commenters 
believes that diplomates should not be expected to participate more 
frequently than once a year in a process of collecting and reporting 
performance data and then acting on those results.
    Response: With regard to the commenters' suggestion to adopt the 
standards adopted by ABMS in 2009,

[[Page 73546]]

we believe that by requiring the Maintenance of Certification Program 
to confirm that their eligible professionals meet the requirements 
``more frequently'' than required will allow flexibility for the 
Maintenance of Certification Programs that have differing cycles of 
completion. Since we are looking to see that both the Maintenance of 
Certification Program itself and the practice assessment completed once 
more than required, we feel that a broader interpretation rather than 
an exact instance provides a greater opportunity for participation. For 
example, if an eligible professional's cycle states that they must 
complete one practice assessment activity every two to five years, more 
frequently would be completion of an additional activity within that 
cycle. If an eligible professional's cycle states they must complete 
two practice assessment activities during a cycle (for example, every 
two to five years), they would have to complete an additional activity 
(total of three) within their cycle.
    Comment: Although several commenters favor measuring patients' 
experience with care, some suggested that we waive the requirement for 
reporting patient experience until 2012, once a definitive ABMS 
standard has been adopted. One commenter suggested that we work with 
the Boards to monitor the adoption of accurate and applicable patient 
experience methodologies. Another commenter requested clarification on 
why the patient experience is required for the Physician Quality 
Reporting System Maintenance of Certification Program practice 
assessment when many specialty boards do not require a survey of 
patient experience to satisfy practice assessment or maintenance of 
certification requirements.
    Response: We agree that the survey of patient experience is an 
important mechanism for improving quality of care. While we appreciate 
the intent of the comments of ensuring a standard is available under 
ABMS Maintenance of Certification Programs, this additional 0.5 percent 
incentive is also available to non-ABMS boards as long as the process 
is substantially similar to the ABMS Maintenance of Certification 
Program process. The survey of patient experience with care is a 
required part of the practice assessment as defined under section 
1848(m)(7)(B)(iii) of the Act. Therefore, we will finalize this 
requirement of a survey of patient experience with care as a required 
element of the practice assessment.
    Comment: One commenter requested that we provide CRNAs with the 
opportunity to report quality measures through a nursing maintenance of 
certification program mechanism. Conversely, other commenters expressed 
that the rule should clearly state that physicians who are not 
participating in the ABMS MOC[supreg] are not eligible for the 
additional 0.5 percent incentive via the Maintenance of Certification 
pathway. One commenter specifically objected to the proposed rule 
language that, if not an ABMS Board, a program that is ``substantially 
equivalent'' to the ABMS Maintenance of Certification Program process 
may participate. The commenter noted that to be ``substantially 
equivalent'' to the ABMS Maintenance of Certification Program, any 
other program would have to first assure that its physicians had (1) 
successfully completed an Accreditation Council for Graduate Medical 
Education (ACGME)-approved training in their specialty, (2) 
successfully completed all the requirements of the ABMS Member Board to 
be certified, and (3) engaged in the ABMS Maintenance of 
Certification[supreg] program that is sponsored by the relevant Member 
Board. Items one and two are essential and should be included in any 
reference to the concept of ``substantially equivalent.''
    Response: Under section 1848(m)(7)(C)(i) of the Act, a Maintenance 
of Certification Program is ``a continuous assessment program such as a 
qualified American Board of Medical Specialties Maintenance of 
Certification Program or an equivalent program (as determined by the 
Secretary).'' Therefore, eligible professionals participating in an 
equivalent program (that is, one that satisfies the definition of 
``Maintenance of Certification Program'' under section 1848(m)(7)(C)(i) 
of the Act and Sec.  414.90(b), that has a ``qualified Maintenance of 
Certification Program practice assessment'' as defined under section 
1848(m)(7)(ii) of the Act and Sec.  414.90(b), and meets the self-
nomination process as proposed and previously described) will be able 
to submit Maintenance of Certification Program data on behalf of 
eligible professionals for purposes of the eligible professional 
qualifying for the additional 0.5 percent incentive. This additional 
0.5 percent incentive payment is not limited to only those eligible 
professionals who participate in an ABMS MOC[supreg]. However, as 
previously stated, we believe that the definition of the term 
``Maintenance of Certification Program'' under section 1848(m)(7)(C)(i) 
of the Act limits applicability of Maintenance of Certification 
Programs to physicians. Therefore, this additional 0.5 percent 
incentive would not apply to other eligible professionals, such as 
CRNAs.
    Comment: One commenter supports creation of a mechanism whereby an 
eligible professional may provide data on quality measures through a 
Maintenance of Certification Program operated by a member specialty 
body of the American Board of Medical Specialties or American 
Osteopathic Association. Specifically, the commenter expressed support 
for the American Board of Radiology (ABR) and American Osteopathic 
Board of Radiology (AOBR) Maintenance of Certification Programs.
    Response: We appreciate the commenter's support of the additional 
0.5 incentive for eligible professionals participating in the 2011 
Physician Quality Reporting System, authorized by the ACA. With respect 
to the specific Maintenance of Certification Programs that the 
commenter is in support of, these entities must follow the self-
nomination process finalized in this final rule with comment period.
    After considering the comments received and for the reasons we 
previously articulated, we are implementing the requirements that an 
eligible professional must meet to qualify for the additional 0.5 
percent incentive authorized by section 1848(m)(7) of the Act 
(``Additional Incentive Payment''), previously described. We are also 
implementing the requirements for entities to self-nominate to submit 
Maintenance of Certification Program data on behalf of eligible 
professionals as proposed and previously described. We do not 
anticipate completing the qualification process until mid-2011. We will 
conditionally qualify entities until we complete testing of the 
entities' ability to submit Maintenance of Certification Program data 
to us in the specified manner. We anticipate posting the names of these 
conditionally qualified entities on the Physician Quality Reporting 
System section of the CMS Web site in Spring 2011 and we will update 
this list with the entities qualified for 2011 as soon as we finish 
testing the entities' ability to submit Maintenance of Certification 
Program data to us in the specified manner.
    To the extent an eligible professional participates in multiple 
Maintenance of Certification Programs and meets the requirements under 
section 1848(m)(7) of the Act (Additional Incentive Payment) under 
multiple programs, the eligible professional can qualify for only one 
additional 0.5 percent incentive per year.

[[Page 73547]]

(3) Section 3002(d)--Integration of Physician Quality Reporting and EHR 
Reporting
    Section 1848(m)(7) of the Act (``Integration of Physician Quality 
Reporting and EHR Reporting''), as added by section 3002(d) of the ACA 
requires us to move towards the integration of EHR measures with 
respect to the Physician Quality Reporting System. Section 1848(m)(7) 
of the Act specifies that by no later than January 1, 2012, the 
Secretary shall develop a plan to integrate reporting on quality 
measures under the Physician Quality Reporting System with reporting 
requirements under subsection (o) relating to the meaningful use of 
EHRs. Such integration shall consist of the following:
    (A) The selection of measures, the reporting of which would both 
demonstrate--
    (i) Meaningful use of an EHR for purposes of the EHR incentive 
program; and
    (ii) Quality of care furnished to an individual; and
    (B) Such other activities as specified by the Secretary.
    In an effort to align the Physician Quality Reporting System with 
the EHR Incentive Program, we proposed and finalized many ARRA core 
clinical quality measures for inclusion in the 2011 Physician Quality 
Reporting System (see section VII.F.1.i.(4)) of this final rule with 
comment period), to demonstrate meaningful use of EHR and quality of 
care furnished to individuals. We are working towards a plan to 
integrate reporting on quality measures to make available by January 1, 
2012.
    The following is a summary of comments received regarding the 
integration of Physician Quality Reporting System and EHR reporting.
    Comment: With respect to the integration of the Physician Quality 
Reporting System and the EHR Incentive Program, one commenter requested 
clarification on how we will deal with eligible professionals excluded 
from one program or the other in the alignment process. The commenter 
noted that we have not provided a feasible way for physicians excluded 
from the EHR Incentive Program to be able to participate in a program 
that combines these two initiatives. For example, pathologists employed 
at independent laboratories may be eligible for the EHR incentive but 
cannot participate in the Physician Quality Reporting System because of 
the billing mechanism they use.
    Response: While we appreciate the commenter's interest in 
participating in both the Physician Quality Reporting System and the 
EHR Incentive Program, we note that these are two different, distinct 
programs. In addition, the term ``eligible professional'' is defined 
differently under these programs. We understand that, as a consequence, 
professionals may be eligible for one program but not the other. While 
we encourage participation in both the Physician Quality Reporting 
System and the EHR Incentive Program, we are not able to change the 
criteria for participation eligibility in each program in order to 
accommodate professionals who would like to participate in both 
programs, but do not meet the eligibility requirements for both.
    Regarding the specific concern that pathologists who bill through 
independent laboratories are unable to participate in the Physician 
Quality Reporting System, independent laboratories are suppliers and do 
not fit into the Physician Quality Reporting System definition of 
``eligible professional'' under section 1848(k)(3)(B) of the Act. 
Pathologists who bill directly to Medicare, however, are eligible to 
participate in the Physician Quality Reporting System.
    Comment: Many commenters expressed support for linking the 
Physician Quality Reporting System with the EHR Incentive Program as it 
will reduce the burden and variability of reporting and streamline 
administrative processes for health care providers and for CMS and 
offered suggestions for us to consider as we develop our plan to 
integrate quality measures reporting under the two programs. One 
commenter, while favoring alignment of measures between the Physician 
Quality Reporting System and EHR Incentive Program, points out that the 
purpose of each is different, which will make it difficult to achieve 
this integration. The commenter stated that quality reporting is only 
one of the meaningful use features, so Physician Quality Reporting 
System measures should qualify for that objective. Commenters stated 
that Physician Quality Reporting System incentives should not require 
participation in meaningful use, and meaningful use incentives should 
not specifically require participation in the Physician Quality 
Reporting System. Commenters particularly supported alignment of the 
quality measures, noting that the degree to which any of the measures 
could share a dual purpose would be an added advantage for those who 
are trying to implement these programs. Another commenter suggested 
that we consult with specialty societies on a phased-in approach for 
integrating Physician Quality Reporting System and meaningful use 
measures that allow attestation in 2012 followed by incremental 
targeted percentage requirements would promote a smooth transition to 
full integration of Physician Quality Reporting System and meaningful 
use measures. Another commenter requested that we make it clear how we 
plan to update the outpatient measures required for meaningful use 
based on any changes implemented in the Physician Quality Reporting 
System.
    Response: We appreciate the commenters' valuable input and will 
take the opinion offered by the commenters into consideration as we 
work towards making a plan to integrate reporting on quality measures 
available by January 1, 2012.
    Comment: One commenter expressed concern that if we use the same 
proposed methodology for excluding measures with a zero percent 
performance rate in the Physician Quality Reporting System program that 
it does for assessing compliance with HITECH Meaningful Use measures 
then many physicians will be deemed ``not capable'' when attempting to 
demonstrate reporting capability of quality data. This is because 
eligible professionals are allowed the flexibility to demonstrate 
compliance with meaningful use capability when reporting clinical 
quality measures by reporting a zero denominator.
    Response: A zero percent performance rate indicates that the 
eligible professional is reporting on a measure that is not clinically 
relevant to their practice. We do not preclude practices from doing 
this. However, since the Physician Quality Reporting System does not 
mandate a certain core set of measures and eligible professionals can 
select which measures apply to them, eligible professionals should be 
able to find 3 measures which pertain to their practice. We do 
recognize that eligible professionals may be somewhat limited for 2011 
as there are only 20 measures available for Physician Quality Reporting 
System EHR reporting and those eligible professionals who wish to 
report measures without electronic specifications for the Physician 
Quality Reporting System will need to do so using a qualified registry 
or through claims (if claims-based reporting is permitted for the 
selected measure). We intend to discuss our plan to integrate reporting 
on quality measures under the Physician Quality Reporting System with 
reporting requirements under the EHR Incentive Program in future notice 
and comment rulemaking prior to implementation of the plan.

[[Page 73548]]

(4) Section 3002(e)--Feedback
    Section 3002(e) of the ACA amends section 1848(m)(5) of the Act by 
adding subparagraph (H), which requires the Secretary to provide timely 
feedback to eligible professionals on the performance of the eligible 
professional with respect to satisfactorily submitting data on quality 
measures. Since the inception of the program in 2007, the Physician 
Quality Reporting System has provided eligible professionals who have 
reported Physician Quality Reporting System data on quality measures 
feedback reports at the TIN/NPI level detailing participation in the 
Physician Quality Reporting System, including reporting rate and 
performance rate information. For 2008, we improved the format and 
content of feedback reports based on stakeholder input. We also 
developed an alternate report distribution method whereby each eligible 
professional can directly request and receive a feedback report. We 
will continue to provide feedback reports to individuals and group 
practices that satisfactorily submit Physician Quality Reporting System 
quality measure and thus qualify to earn a Physician Quality Reporting 
System incentive.
    We believe that the requirements under section 1848(m)(5)(H) of the 
Act, as added by section 3002(e) of the ACA, for ``timely'' feedback 
reports is met by providing the feedback reports on or about the time 
of issuance of the incentive payments. Thus, we proposed to provide 
2011 feedback reports on or about the time of issuance of the 2011 
incentive payments in 2012, consistent with our current practice. In 
addition, we proposed to provide interim feedback reports for eligible 
professionals reporting 2011 measures groups through the claims-based 
reporting mechanism. These reports would be similar in content and 
format to the reports that we currently provide for such eligible 
professionals using claims for dates of service between January 1, 2011 
and February 28, 2011. We indicated that we expected that we would be 
able to make these interim feedback reports available to eligible 
professionals in June 2011. We stated that we believe interim feedback 
reports would be particularly valuable to eligible professionals 
reporting measures groups, because it would let an eligible 
professional know how many more cases he or she needs to report to 
satisfy the criteria for satisfactory reporting for claims-based 
reporting of measures groups. We also indicated that we intend to 
continue to explore methods to facilitate Physician Quality Reporting 
System feedback report distribution, as discussed in the proposed rule 
(75 FR 40201).
    The following is a summary of comments received regarding our 
proposal to provide timely feedback reports for the Physician Quality 
Reporting System.
    Comment: We received some positive comments regarding our proposal 
to provide timely feedback. One commenter stated that eligible 
professionals will benefit from timely feedback reports on whether they 
are satisfactorily submitting data on quality measures. While some 
commenters supported our proposal to provide interim feedback reports 
for those who are reporting measures groups via claims, other 
commenters urged us to focus our efforts on providing other options for 
interim feedback. One commenter stated that the timeframe for feedback 
should be revised to a point during the reporting period so that 
eligible providers can act on the information they receive and that 
this was the legislation's intention. Commenters indicated that 
providing feedback after the close of the reporting period or just 
ahead of incentive payments is of minimal value since eligible 
professionals are not able to assess their reporting status and revise 
their reporting practices as needed. Commenters specifically 
recommended receiving quarterly or monthly feedback reports or upon 
request.
    Response: We appreciate the commenters' suggestions to provide more 
interim feedback reports in a timely manner. Although section 
1848(m)(5) of the Act requires us to provide ``timely feedback'' to 
eligible professionals on satisfactorily submitting data on quality 
measures, it is not a requirement to distribute ``interim'' feedback 
reports. While we agree that eligible professionals would benefit from 
timely, interim feedback, we have determined that we will not be able 
to complete the programming and development work necessary to provide 
the proposed interim feedback reports for eligible professionals who 
report 2011 measures groups using the claims-based reporting mechanism 
in the time frame that we proposed for the 2011 Physician Quality 
Reporting System. If we were to provide these interim feedback reports 
for 2011, they would more than likely not be available until late 2011. 
Since receiving interim feedback this late in the reporting period 
would be of little utility to eligible professionals, we are not 
finalizing our proposal to provide eligible professionals who report 
measures groups using the claims-based reporting mechanism with interim 
feedback reports for 2011. We intend, instead, to provide these interim 
feedback reports for 2012. In addition, as discussed further in section 
VII.F.2 of this final rule, we plan to provide an interim eRx report in 
the fall of 2011, which will include 2012 eRx payment adjustment 
information. We also will continue to provide timely annual feedback 
reports and anticipate providing additional interim reports for 2012. 
Furthermore, we are working internally to improve eligible 
professionals' electronic access to Physician Quality Reporting System 
and eRx reports by report type, program, and year for 2011.
    Comment: Several commenters were disappointed by our proposal and 
suggested that it does not meet the statutory requirements and 
requested that we revise our proposal to increase the timeliness and 
frequency of the reports. One commenter suggested we revise the 
feedback report proposal to expedite the reports and ensure that the 
process improves successful participation in the Physician Quality 
Reporting System. Several comments specifically recommended that 
interim feedback reports be provided to all Physician Quality Reporting 
System participants, regardless of reporting mechanism used, rather 
than only to those reporting measures groups via claims-based 
reporting, as proposed. Other commenters specifically requested that 
interim feedback reports be provided to those reporting individual 
quality measures. Other commenters recommended we provide more 
frequent, or real-time, feedback reports to ensure that this process 
improves successful participation in the Physician Quality Reporting 
System. One commenter specifically encouraged CMS to provide feedback 
reports throughout the process, so that participants are aware of their 
progress in the program. Another commenter recommended that the system 
be redesigned to automatically generate a report as soon as the 
requirements for an individual eligible professional have been 
satisfied, much like what most of the registry systems do and why they 
have such a high level of successful completion. Another commenter 
suggested including the most recent Physician Quality Reporting System 
data available in the confidential feedback reports. Issuing the 
reports at the time of the incentive payment, as proposed, may 
discourage many from participating in the program the following year 
given that they are not certain whether or not they were

[[Page 73549]]

successful the previous year and renders the reports not useful for 
quality improvement. The commenters believe the lack of timeliness of 
feedback reports is one of the major reasons for dissatisfaction with 
the Physician Quality Reporting System.
    Response: Section 1848(m)(5)(HH) of the Act requires that we 
provide timely feedback to eligible professionals on the performance of 
the eligible professional with respect to satisfactorily submitting 
data on Physician Quality Reporting System measures but does not define 
the term ``timely'' or specify a deadline for providing feedback. As we 
stated in the proposed rule (75 FR 40201), we believe that this 
requirement is met by providing a timely, annual feedback report at or 
about the time of issuance of the incentive payments. In addition to 
providing an annual feedback report, we also proposed to provide an 
interim feedback report for eligible professionals who submit measures 
groups via claims. Although, for the reasons discussed previously, we 
are not finalizing our proposal to provide this interim feedback report 
for 2011, we intend to do so for 2012. The processing of claims data 
from the NCH file, along with the necessary programming required to 
produce reports and subsequently distribute to eligible professionals 
is time intensive. We are actively working to facilitate this process 
so that the interim feedback reports for claims-based reporting of 
measures groups and other interim feedback reports can be available for 
the 2012 Physician Quality Reporting System. We are continuing to work 
on ways to provide eligible professionals with timely and accurate 
feedback reports while working with the limitations of the claims-based 
reporting method. We also intend to work with registries and EHR 
vendors to explore ways in which we can leverage these alternative 
reporting mechanisms to provide interim feedback reports.
    Comment: One commenter suggested that the interim feedback reports 
be provided for the first quarter of data instead of 2 months of data 
as proposed.
    Response: While we agree that interim feedback reports for the 
first quarter of data would be valuable, we do not, for the reasons 
stated previously, have the technical ability to make interim feedback 
reports based on just the first 2 months of data available before July 
1, 2011. We agree with commenters that interim feedback reports need to 
be issued at a point during the reporting period that eligible 
professionals can act upon the information to increase their chances of 
reporting satisfactorily, especially when they are required to report 
on percentage of applicable cases or patients. As stated previously, 
since the utility of receiving feedback reports in late 2011, (at the 
earliest) is minimal, we are not finalizing our proposal to provide 
eligible professionals who report measures groups using the claims-
based reporting mechanism with interim feedback reports for 2011.
    Comment: While we received favorable comments regarding our efforts 
to streamline and simplify distribution of Physician Quality Reporting 
System feedback reports, some commenters suggested that we continue to 
improve access to the feedback reports. Commenters noted that many 
individual eligible professionals and small practices still have 
difficulty obtaining their feedback reports. Commenters noted the 
numerous problems and issues using the Physician Quality Reporting 
System portal to download these reports. One commenter suggested that 
the feedback reports should be published for all eligible professionals 
without requiring them to submit a request.
    Response: We are preparing, in the near future, to launch tools to 
provide eligible professionals access to all reporting years and report 
types via the CMS portal. We anticipate this level of access to be 
ready in mid- to late 2011. CMS security system access requirements are 
mandated by the information systems and security component of CMS and 
unfortunately cannot be changed by the Physician Quality Reporting 
System or eRx program requirements. A quick reference guide on IACS 
accounts, which is the current identity management system required for 
accessing feedback reports, is currently under development to assist 
eligible professionals with accessing their feedback reports.
    Comment: One commenter recommended providing aggregate data to 
specialty societies so that they can assist in educating members on the 
program and potential issues. Another commenter suggested that we 
improve upon the aggregate quality data error reports by individual 
measures, currently distributed 4 times per year, by increasing their 
frequency to monthly.
    Response: We appreciate the commenter's valuable input. As we 
explore ways to provide more timely feedback, we will also evaluate 
commenter's suggestion and explore its feasibility.
    Comment: One commenter requested clarification as to whether 
eligible professionals could utilize the informal appeals process to 
dispute data contained in the interim feedback reports.
    Response: We would expect that initial questions arising from the 
interim reports would be addressed by the QualityNet Help Desk, as is 
done today with the annual feedback reports. As discussed below, the 
main difference between the current inquiry process via the QualityNet 
Help Desk and the informal appeals process is that we have established 
timeframes around when requests for an informal review must be 
submitted and when a response must be provided.
    Upon consideration of the comments and for the reasons we discussed 
previously, we are finalizing our proposal to provide feedback reports 
to all Physician Quality Reporting System participants on or about the 
time of issuance of the incentive payments. We also finalize our 
proposal to provide interim feedback reports for eligible professionals 
reporting measures groups through the claims-based reporting mechanism. 
For the 2011 Physician Quality Reporting System, however, we do not 
believe that we will have the technical capability needed to issue 
these interim feedback reports until the second half of the year. Since 
we do not believe that these interim feedback reports would be of much 
value at that point, we do not anticipate generating interim feedback 
reports for eligible professionals reporting measures groups until the 
2012 Physician Quality Reporting System. For 2012, we also anticipate 
being able to provide additional interim feedback reports.
(5) Section 3002(f)--Appeals
    Section 1848(m)(5)(I) of the Act, as amended and added by section 
3002(f)(2) of the ACA, requires that the Secretary establish and have 
in place, no later than January 1, 2011, an informal process for 
eligible professionals to seek a review of the determination that an 
eligible professional did not satisfactorily submit data on quality 
measures under the Physician Quality Reporting System. We note that 
except as provided under the informal process under section 
1848(m)(5)(I) of the Act, section 1848(m)(5)(E) of the Act, as amended 
by section 3002(f) of the ACA, specifies that, with respect to the 
Physician Quality Reporting System, there shall be no administrative or 
judicial review under section 1869, section 1878, or otherwise, of--
    (1) The determination of measures applicable to services furnished 
by eligible professionals under the Physician Quality Reporting System;

[[Page 73550]]

    (2) The determination of satisfactory reporting under the Physician 
Quality Reporting System; and
    (3) The determination of any Physician Quality Reporting System 
incentive payment and Physician Quality Reporting System payment 
adjustment.
    We proposed to base the informal process on our current inquiry 
process whereby an eligible professional can contact the Quality Net 
Help Desk (via phone or e-mail) for general Physician Quality Reporting 
System and eRx Incentive Program information, information on Physician 
Quality Reporting System feedback report availability and access, and/
or information on Physician Quality Reporting System Portal password 
issues (75 FR 40201). For purposes of the informal process required 
under section 1848(m)(5)(E) of the Act, we proposed the following 
inquiry process:
    <bullet> An eligible professional electing to utilize the informal 
process must request an informal review within 90 days of the release 
of his or her feedback report.
    <bullet> An eligible professional can request the informal review 
by notifying the Quality Net Help Desk via e-mail at 
<a href="/cdn-cgi/l/email-protection#e3928d8697909693938c9197a390879390cd8c9184"><span class="__cf_email__" data-cfemail="364758534245434646594442764552464518594451">[email protected]</span></a>. The e-mail requesting the initiation of the 
informal review process should summarize the concern(s) of the eligible 
professional and the reason(s) for requesting an informal review.
    <bullet> We proposed to provide the eligible professional with a 
response to his or her request for an informal review within 60 days of 
receiving the original request.
    <bullet> As this process is informal and the statute does not 
require a formal appeals process, we will not include a hearing or 
evidence submission process, although the eligible professional may 
submit information to assist in the review.
    <bullet> Based on our informal review, we will provide a written 
response. Where we find that the eligible professional did 
satisfactorily report, we proposed to provide the applicable incentive 
payment.
    <bullet> Given that this is an informal review process and given 
the limitations on review under section 1848(m)(5)(E) of the Act, 
decisions based on the informal review will be final, and there will be 
no further review or appeal.
    The following is a summary of comments received on the proposed 
informal appeals process and our responses.
    Comment: Several comments expressed support for the establishment 
of an informal appeals process, believing that eligible professionals' 
ability to challenge the results of the program is a necessary step to 
encouraging participation in the program and in promoting transparency. 
One commenter specifically indicated that having 90 days to 
electronically file an ``informal appeal'' is a sufficient amount of 
time and that having the ability to electronically submit these 
requests will help to ensure a timely, streamlined process. Another 
commented that the current lack of recourse for eligible professionals 
has contributed to a lack of interest in, and even skepticism, about 
the Physician Quality Reporting System.
    Response: We appreciate the commenters' support of the informal 
appeals process and are hopeful that providing eligible professionals 
with an avenue to request an informal review of the determination that 
they did not satisfactorily report will encourage greater participation 
in the Physician Quality Reporting System.
    Comment: Some commenters felt the period for requesting an informal 
review should be extended. One commenter suggested extending the 
timeframe to file an appeal through the end of the following year. 
Another commenter recommended extending the timeframe to the end of the 
reporting year, as those in large practices may not see their Physician 
Quality Reporting System report for a month or two after CMS sends it. 
Some commenters suggested that any results that are successfully 
appealed should be incorporated in public reporting of physician 
performance.
    Response: While we understand the commenters' desire to extend the 
timeframe for submitting a request for an informal review, doing so 
could potentially impact the timeliness of future years' Physician 
Quality Reporting System incentive payments, because we would not be 
able to start analyzing the next year's data until we have completed 
our analysis of the current year's data. Therefore, we are requiring 
eligible professionals to submit their requests for an informal review 
within 90 days of the feedback reports becoming available, as proposed.
    Comment: One commenter indicated that eligible professionals who 
successfully obtain an incentive payment are unlikely to a request a 
review. The commenter believes the review for those who are 
unsuccessful is unlikely to overturn the initial adjudication, since it 
can only be based on data present in the CMS system as there is no 
opportunity for evidence submission. The commenter feels that eligible 
professionals submitting data could easily be given feedback 
immediately about whether the data set was complete or not, both in 
terms of the individual data points and the number of eligible 
patients.
    Response: We agree with the commenter's assertion that eligible 
professionals who are successful in obtaining a Physician Quality 
Reporting System incentive are unlikely to request an informal review. 
With respect to the claim that the ``review for those who are 
unsuccessful is unlikely to overturn the initial adjudication, since it 
can only be based on data present in the CMS system as there is no 
opportunity for evidence submission,'' we disagree. CMS strives to 
ensure the accuracy of our initial determinations. However, recognizing 
errors may arise, CMS implemented the informal review process whereby 
Physician Quality Reporting System participants may request via the 
Quality Net Help Desk a review of the determination that the eligible 
professional did not satisfactorily submit data. In prior program 
years, the informal review method has resulted in supplemental payments 
for some eligible professionals despite the restriction on submitting 
additional evidence. This informal process has proven to be successful 
in finding errors in prior years, and we believe it will continue to do 
so. While we agree that it would be ideal to be able to provide 
immediate feedback as to whether the data set was complete or not both 
in terms of the individual data points and the number of eligible 
patients, this would not be technically feasible under the current 
claims processing system. However, we do intend to provide interim 
feedback reports as previously described.
    Comment: In support of implementing a successful informal review 
process, some commenters recommended that the Quality Net Help Desk be 
expanded with additional telephone lines and more trained, experienced, 
and qualified staff. Commenters reported that some eligible 
professionals have faced challenges getting through to a CMS staff 
person and/or accessing the information they need through the existing 
Quality Net Help Desk. Another commenter stated that they believe the 
Quality Net Help Desk should be able to help eligible professionals and 
their staff immediately.
    Response: We agree that in implementing an informal review process 
that utilizes the existing inquiry support framework additional 
resources will be needed and anticipate putting additional resources 
towards the Quality Net Help Desk.

[[Page 73551]]

    Comment: Some commenters felt the proposed process was too informal 
to provide a fair and appropriate appeal. One commenter suggested the 
agency consider basing the informal process on the current inquiry 
process as merely a starting point and plan to expand the process in 
the future. Similarly, other commenters indicated that the appeals 
process needs to be a structured, transparent, and user-friendly 
appeals process so that eligible professionals have an avenue to 
quickly remedy erroneous determinations.
    Response: We note that section 1848(m)(5)(I) of the Act does not 
require a formal appeals process; rather, it only requires an informal 
process for eligible professionals to seek a review of the 
determination that an eligible professional did not satisfactorily 
submit data on quality measures under the Physician Quality Reporting 
System. We believe that the process that we proposed and are finalizing 
adequately allows an eligible professional to seek an informal review 
of the determination that the professional did not satisfactorily 
report. However, we agree that a timely response to eligible 
professionals who are questioning the outcome of their Physician 
Quality Reporting System reporting rate calculation will benefit the 
eligible professional. We plan to communicate the informal review 
process to eligible professionals through education and outreach. We 
also agree that the process needs to be user friendly and are using the 
lessons learned from inquiries received related to previous program 
years in determining the most timely and user-friendly method for the 
informal appeals process.
    Comment: Another commenter suggested as payment adjustments begin 
to apply in 2015, we work with Congress to implement a more formal 
appeals process that includes standardized and transparent rules for 
submitting and reviewing evidence.
    Response: For the 2011 Physician Quality Reporting System, we plan 
to implement the informal review process as described previously and 
required under section 1848(m)(5)(I) of the act. We plan to use any 
lessons learned from this process to make further enhancements to the 
process in future years.
    Upon consideration of the comments, we are finalizing the informal 
review process as proposed and previously described. As stated in the 
proposed rule, we anticipate posting, by December 31, 2011 (75 FR 
40202) on the CMS Physician Quality Reporting System Web site, further 
information regarding the operational aspects of the informal review 
process for the 2011 Physician Quality Reporting System. As we are 
implementing this informal review process beginning with the 2011 
Physician Quality Reporting System and our expectation that we will be 
unable to generate 2011 Physician Quality Reporting System interim 
feedback reports prior to the start of the July 1, 2011 reporting 
period, we anticipate that eligible professionals will first have an 
opportunity to avail themselves of this informal process when the 2011 
Physician Quality Reporting System feedback reports are made available 
in 2012.
2. Section 132: Incentives for Electronic Prescribing (eRx)--The 
Electronic Prescribing Incentive Program
a. Program Background and Statutory Authority
    As described in the CY 2011 PFS proposed rule (75 FR 40202 through 
40203), Electronic Prescribing (eRx) is the transmission using 
electronic media, of prescription or prescription-related information 
between prescriber, dispenser, pharmacy benefit manager (PBM), or 
health plan, either directly or through an intermediary, including an 
eRx network. The intention of the 2011 eRx Incentive Program, which is 
separate from, and in addition to, incentive payments that eligible 
professionals may earn through the Physician Quality Reporting System, 
is to continue to encourage significant expansion of the use of 
electronic prescribing by authorizing a combination of financial 
incentives and payment adjustments. Individual eligible professionals 
do not have to participate in the Physician Quality Reporting System in 
order to participate in the eRx Incentive Program (and vice versa). We 
proposed to add Sec.  414.92 to title 42 of the Code of Federal 
Regulations to implement and codify the provisions of the eRx Incentive 
Program.
    For 2011, which is the third year of the eRx Incentive Program, the 
Secretary is authorized to provide eligible professionals who are 
successful electronic prescribers an incentive payment equal to 1.0 
percent of the total estimated Medicare Part B PFS allowed charges 
(based on claims submitted not later than 2 months after the end of the 
reporting period) for all covered professional services furnished by 
the eligible professional during the 2011 reporting period. The 
applicable electronic prescribing percent (1.0 percent) authorized for 
the 2011 eRx Incentive Program is different from that (2.0 percent) 
authorized for the 2009 and 2010 eRx Incentive Program. Under section 
1848(m)(2)(C) of the Act, the incentive payments for successful 
electronic prescribers for future years are authorized as follows:
    <bullet> 1.0 percent for 2012.
    <bullet> 0.5 percent for 2013.
    In addition, section 1848(m)(2)(D) of the Act, as added by section 
4101(f)(2)(B) of Title IV of Division B of the American Recovery and 
Reinvestment Act of 2009 (Pub. L. 111-5) (ARRA-HITECH) which authorized 
the Medicare EHR Incentive Program, specifies that the eRx incentive 
does not apply to an eligible professional (or group practice), if, for 
the EHR reporting period, the eligible professional (or group practice) 
earns an incentive payment under the Medicare EHR Incentive Program 
beginning in 2011.
    For the eRx Incentive Program, when reporting the G-codes for 
purposes of qualifying for the incentive payment for electronic 
prescribing in 2011, we proposed that the eligible professional must 
have and regularly use a ``qualified'' electronic prescribing system, 
as defined in the electronic prescribing measure specifications.
    In addition, under section 1848(a)(5)(A) of the Act, a PFS payment 
adjustment applies beginning in 2012 to those professionals who are not 
successful electronic prescribers. Specifically, for 2012, 2013, and 
2014, if the eligible professional is not a successful electronic 
prescriber for the reporting period for the year, the PFS amount for 
covered professional services furnished by such professionals during 
the year as previously referenced shall be less than the PFS amount 
that would otherwise apply over the next several years by--
    <bullet> 1.0 percent for 2012.
    <bullet> 1.5 percent for 2013.
    <bullet> 2.0 percent for 2014.
    We believe that the criteria for determination of successful 
electronic prescriber for the eRx incentive payment are not required to 
be identical to the criteria that will be used to determine the 
applicability of the payment adjustment that begins in 2012. In 
general, we believe that an incentive should be broadly available to 
encourage the widest possible adoption of eRx, even for low volume 
prescribers. On the other hand, we believe that a payment adjustment 
should be applied primarily to assure that those who have a large 
volume of prescribing do so electronically, without penalizing those 
for whom the adoption and use of an electronic prescribing system may 
be impractical given the low volume of prescribing. Under section 
1848(m)(6)(A) of the Act, the definition

[[Page 73552]]

of ``eligible professional'' for purposes of eligibility for the eRx 
Incentive Program is identical to that for the Physician Quality 
Reporting System under section 1848(k)(3)(B) of the Act. Eligible 
professionals include physicians, other practitioners, physical and 
occupational therapists, qualified speech-language pathologists, and 
qualified audiologists. However, as we have noted in prior years, for 
purposes of the eRx Incentive Program, eligibility is further 
restricted by scope of practice to those professionals who have 
prescribing authority. Detailed information about the types of 
professionals that are eligible to participate in the eRx Incentive 
Program is available on the eRx Incentive Program section of the CMS 
Web site at http://www.cms.gov/ERXIncentive.
    As in the 2010 eRx Incentive Program, we proposed for 2011 that the 
eRx Incentive Program continue to be an incentive program in which 
determination of whether an eligible professional is a successful 
electronic prescriber will be made at the individual professional 
level, based on the NPI. Inasmuch as some individuals (identified by 
NPIs) may be associated with more than one practice or TIN, the 
determination of whether an eligible professional is a successful 
electronic prescriber will be made to the holder of each unique TIN/NPI 
combination (75 FR 40202). Then, as in previous years, payment will be 
made to the applicable holder of the TIN. For 2011, the determination 
of whether an eligible professional is a successful electronic 
prescriber will continue to be made for each unique TIN/NPI 
combination. However, section 1848(m)(3)(C) of the Act required the 
Secretary by January 1, 2010 to establish and have in place a process 
under which eligible professionals in a group practice (as defined by 
the Secretary) would be treated as meeting the requirements for 
submitting data on electronic prescribing quality measures for covered 
professional services for a reporting period (or, for purposes of the 
payment adjustment under section 1848(a)(5) of the Act, for a reporting 
period for a year) if, in lieu of reporting the electronic prescribing 
measure, the group practice reports measures determined appropriate by 
the Secretary, such as measures that target high-cost chronic 
conditions and preventive care, in a form and manner, and at a time 
specified by the Secretary. Therefore, in addition to making incentive 
payments for 2011 to individual eligible professionals based on 
separately analyzing whether the individual eligible professionals are 
successful electronic prescribers, we proposed to also make incentive 
payments to group practices based on the determination that the group 
practice, as a whole, is a successful electronic prescriber in 
accordance with section 1848(m)(3)(C) of the Act (75 FR 40203).
    The following is a summary of the general comments received on the 
CY 2011 PFS proposed rule related to the eRx Incentive Program and our 
responses.
    Comment: Some commenters provided overall support for the eRx 
Incentive Program. Specific aspects of the program for which the 
commenters voiced support include the numerator and denominator codes, 
the reporting mechanisms, what constitutes a ``qualified'' electronic 
prescribing system, the criteria for being a successful electronic 
prescriber for purposes of the 2011 incentive payment, and the 10 
percent limitation under section 1848(m)(2)(B) of the Act.
    Response: We appreciate the commenters' positive feedback.
    Comment: A couple of commenters highlighted the importance of 
providing eligible professionals feedback on whether they have 
successfully completed all requirements for this program and 
establishing an appeals process to allow eligible professionals to 
appeal decisions that affect their eligibility to take part in the eRx 
Incentive Program or that affect their ability to get eRx incentives.
    Response: We agree with the commenters on the importance of 
feedback to eligible professionals. In addition to providing an annual 
feedback report, we anticipate making interim feedback reports for the 
program available to any eligible professional who bills for a 
denominator-eligible case during the first half of 2011. We anticipate 
that interim feedback reports will be available in the fall of 2011 and 
will include information related to the 2012 eRx payment adjustment. 
Although there is a required informal review process for the Physician 
Quality Reporting System, we are not establishing such a process for 
the eRx Incentive Program (nor are we required to do so). We expect 
that any questions arising from the interim feedback reports or the 
eligibility for an eRx incentive will be addressed by the Quality Net 
Help Desk as is currently done.
    Comment: One commenter urged us to make available to individual 
eligible professionals the percentage of their prior year's Medicare 
charges that resulted from the outpatient CPT codes included in the 
electronic prescribing measure's specifications.
    Response: Unfortunately, we do not have resources to calculate and 
provide feedback to eligible professionals regarding the composition of 
their charges. Most electronic billing systems, however, will have this 
functionality and should be able to provide eligible professional who 
use such billing systems with this information. In addition, eligible 
professionals who participate in the eRx Incentive Program will receive 
feedback reports with information on the percentage of an eligible 
professional's charges that resulted from the denominator codes 
included in the electronic prescribing's specifications.
    Comment: One commenter sought guidance for physicians whose 
patients participate in the Medicaid PACE program and use a contracted 
pharmacy that may not be able to receive electronic prescriptions. The 
commenter asked whether these visits would be excluded from the 
requirements of the eRx Incentive Program.
    Response: The eRx Incentive Program requires that an eligible 
professional use a qualified eRx system to electronically prescribe 
during the office visit. Hence, if the qualified system used by the 
eligible professional meets the requirements for a qualified eRx 
system, as described below and listed on the CMS eRx Incentive Web site 
at http://www.cms.gov/erxincentive, and the prescription is sent 
electronically, then the eligible professional will be able to report 
the electronic prescribing event even if the pharmacy was not able to 
receive the prescription electronically. The use of a pharmacy that 
cannot receive an electronic prescription does not invalidate the 
electronic prescribing event and the eligible professional would still 
get credit for electronically prescribing as long as he or she reports 
this event for a denominator-eligible visit.
    Upon consideration of the comments, we are finalizing our proposal 
to add Sec.  414.92 to title 42 of the Code of Federal Regulations to 
implement and codify the provisions of the eRx Incentive Program. 
Details regarding the specific aspects of the eRx Incentive Program 
that are being finalized, including our rationale, are described below. 
We have made some technical changes to the regulations at Sec.  414.92, 
such as eliminating the unnecessary use of acronyms and inserting or 
revising cross-references as needed.

[[Page 73553]]

b. The 2011 eRx Incentive
(1) The 2011 Reporting Period for the eRx Incentive Program
    Section 1848(m)(6)(C)(i)(II) of the Act defines ``reporting 
period'' for the 2011 eRx Incentive Program to be the entire year. 
Section 1848(m)(6)(C)(ii) of the Act, however, authorizes the Secretary 
to revise the reporting period if the Secretary determines such 
revision is appropriate, produces valid results on measures reported, 
and is consistent with the goals of maximizing scientific validity and 
reducing administrative burden. We proposed the 2011 eRx Incentive 
Program reporting period for purposes of the 2011 incentive payment to 
be the entire calendar year (January 1, 2011 through December 31, 2011) 
based on the definition of ``reporting period'' specified under section 
1848(m)(6)(C)(i)(II) of the Act. We proposed that successful electronic 
prescribers would be eligible to receive an incentive payment equal to 
1.0 percent of the total estimated allowed Medicare Part B charges 
(based on claims submitted by no later than February 28, 2012) for all 
covered professional services furnished January 1, 2011 through 
December 31, 2011.
    We did not receive any comments related to the proposed reporting 
period for the 2011 eRx incentive. Therefore, the reporting period for 
the 2011 eRx incentive will be the entire 2011 calendar year, or 
January 1, 2011 through December 31, 2011.
(2) Criteria for Determination of Successful Electronic Prescriber for 
Eligible Professionals
    Under section 1848(m)(3)(B) of the Act, in order to qualify for the 
incentive payment, an eligible professional must be a ``successful 
electronic prescriber,'' which the Secretary is authorized to identify 
using 1 of 2 possible criteria. One criterion, under section 
1848(m)(3)(B)(ii) of the Act, is based on the eligible professional's 
reporting, in at least 50 percent of the reportable cases, on any 
electronic prescribing quality measures that have been established 
under the physician reporting system, under subsection 1848(k) of the 
Act and are applicable to services furnished by the eligible 
professional during a reporting period. We applied this criterion in 
2009. However, for years after 2009, section 1848(m)(3)(D) of the Act 
permits the Secretary in consultation with stakeholders and experts to 
revise the criteria for submitting data on electronic prescribing 
measures under section 1848(m)(3)(B)(ii) of the Act.
    The second criterion, under section 1848(m)(3)(B)(iii) of the Act, 
is based on the electronic submission by the eligible professional of a 
sufficient number (as determined by the Secretary) of prescriptions 
under Part D during the reporting period. If the Secretary decides to 
use the latter standard, then, in accordance with section 
1848(m)(3)(B)(iv) of the Act, the Secretary is authorized to use Part D 
drug claims data to assess whether a ``sufficient'' number of 
prescriptions have been submitted by eligible professionals. However, 
under section 1848(m)(3)(B)(i) of the Act, if the standard based on a 
sufficient number (as determined by the Secretary) of electronic Part D 
prescriptions is applied for a particular reporting period, then the 
standard based on the reporting on electronic prescribing measures 
would no longer apply.
    For 2011, we proposed to continue to require eligible professionals 
to report on the electronic prescribing measure used in the 2009 and 
2010 eRx Incentive Program to determine whether an eligible 
professional is a successful electronic prescriber, but we also 
proposed to again use modified measure specifications and to use 
modified reporting criteria based on the authority provided under 
section 1848(m)(3)(D) of Act, as discussed below (75 FR 40203).
(A) Reporting the Electronic Prescribing Measure
    We proposed, for purposes of the 2011 incentive payment and 2012 
and 2013 payment adjustments, to retain the 3 reporting mechanisms 
available to individual eligible professionals to report the electronic 
prescribing measure in 2010 to maintain program stability. First, we 
proposed to again retain the claims-based reporting mechanism that is 
used in the 2009 and 2010 eRx Incentive Program. In addition, similar 
to the Physician Quality Reporting System, for the eRx Incentive 
Program, we proposed to continue the registry-based reporting mechanism 
and, we also proposed that the EHR-based reporting mechanism be 
available for the electronic prescribing measure for 2011 (75 FR 
40203).
    We proposed that only registries qualified to submit quality 
measure results and numerator and denominator data on quality measures 
on behalf of eligible professionals for the 2011 Physician Quality 
Reporting System would be qualified to submit measure results and 
numerator and denominator data on the electronic prescribing measure on 
behalf of eligible professionals for the 2011 eRx Incentive Program (75 
FR 40204).
    We proposed that qualified registries would need to submit the 
electronic prescribing measure for the 2011 eRx Incentive Program to 
CMS in two separate transmissions. Such qualified registries would 
first need to submit 2011 data on the electronic prescribing measure 
between July 1, 2011 and August 19, 2011, following the end of the 2012 
payment adjustment reporting period (which is the first 6 months of 
2011), for purposes of the eRx payment adjustment described in section 
VII.F.2.c. of this final rule with comment period. The second 
submission for purposes of the 2011 incentive would occur following the 
end of the 2011 incentive payment reporting period (which is the whole 
calendar year of 2011).
    Similarly, we proposed that only EHR products ``qualified'' to 
potentially be able to submit clinical quality data extracted from the 
EHR to CMS for the 2011 Physician Quality Reporting System would be 
considered ``qualified'' for the purpose of an eligible professional 
potentially being able to submit data on the electronic prescribing 
measure for the 2011 eRx Incentive Program (75 FR 40204). The self-
nomination process and requirements for EHR vendors for the Physician 
Quality Reporting System would continue to apply to the EHR vendors for 
the 2011 eRx Incentive Program.
    We proposed that eligible professionals who want to use a qualified 
EHR to submit the electronic prescribing measure for the 2011 eRx 
Incentive Program would be required to transmit 2011 electronic 
prescribing measure data to CMS in two separate transmissions. Such 
eligible professionals would first need to submit 2011 data on the 
electronic prescribing measure between July 1, 2011 and August 19, 
2011, following the end of the 2012 payment adjustment reporting 
period, for purposes of the eRx payment adjustment described in section 
VII.F.2.c. of this final rule with comment period. The second 
submission for purposes of the 2011 incentive would occur following the 
end of the 2011 incentive payment reporting period.
    The following is a summary of the comments received regarding the 
proposed mechanisms for reporting the electronic prescribing measure in 
2011 for purposes of the 2011 incentive payment, and for purposes of 
the 2012 and 2013 payment adjustments described in sections VII.F.2.c. 
and d. of this final rule with comment period.
    Comment: Some commenters agreed with retaining the same reporting

[[Page 73554]]

mechanisms for 2011 that were in place for 2010, particularly our 
decision to continue offering claims-based reporting and the inclusion 
of an EHR-based reporting mechanism.
    Response: We appreciate the commenters' positive feedback and are 
finalizing our proposal to include a claims, registry, and EHR 
reporting for the 2011 eRx incentive.
    Comment: One commenter thinks the requirement to submit electronic 
prescribing measure data in two submissions is burdensome for eligible 
professionals and suggests exploring alternatives where only one 
submission is required.
    Response: We proposed two data submissions during 2011 for EHR-
based reporting and registry-based reporting for different purposes. 
One was a submission between July 1, 2011 and August 19, 2011, that was 
intended to be solely for purposes of the 2012 payment adjustment. The 
second submission, which was to occur following the end of the 2011 
incentive payment reporting period, was solely for purposes of the 2011 
incentive payment. For purposes of the 2012 payment adjustment, we will 
not be able to finalize the registry and EHR-based reporting mechanisms 
because it will not be operationally feasible for us to accept the data 
submissions from the EHRs and registries in the timeframe needed for us 
to be able to have sufficient time to be analyze the data and make the 
determination whether an eligible professional is subject to the 2012 
payment adjustment prior to January 1, 2012. Therefore, there will not 
be two submissions of electronic prescribing measure data from 
registries and EHRs during 2011.
    Eligible professionals who intend to use the EHR-based reporting 
mechanism to submit data on the electronic prescribing measure for 
purposes of the 2011 incentive payment will need to submit the 
electronic prescribing measure data via their EHR following the end of 
the 2011 incentive payment reporting period. Similarly, registries that 
are submitting electronic prescribing data on behalf of eligible 
professionals or group practices for purposes of the 2011 incentive 
payment will need to do so following the end of the 2011 incentive 
reporting period. If an eligible professional chooses to use a 
qualified registry or qualified EHR for purposes of submitting 
electronic prescribing measure data for the 2011 incentive, we will not 
combine data from multiple reporting mechanisms. Therefore, an eligible 
professional must make sure that the required number of eRx events for 
purposes of the 2011 incentive payment is reported to us via a single 
reporting mechanism.
    After considering the comments and for the reasons previously 
explained, we are finalizing our proposal to provide a claims, 
registry, and EHR reporting mechanism for the 2011 eRx incentive. As in 
2010, not all registries qualified to submit quality measures on behalf 
of eligible professionals for the 2011 Physician Quality Reporting 
System will be qualified to submit quality measures results and 
numerator and denominator data on the electronic prescribing measure 
under the eRx Incentive Program. The electronic prescribing measure is 
reportable by an eligible professional any time he or she bills for one 
of the procedure codes for Part B services included in the measure's 
denominator. Some registries that self-nominate to become a qualified 
registry for the Physician Quality Reporting System may not choose to 
self-nominate to become a qualified registry for submitting electronic 
prescribing measures that require reporting at each eligible visit, 
such as the electronic prescribing measure. Registries need to indicate 
their desire to qualify to submit measure results and numerator and 
denominator data on the electronic prescribing measure for the 2011 eRx 
Incentive program at the time that they submit their self-nomination 
letter for the 2011 Physician Quality Reporting System. The self-
nomination process and requirements for registries for the Physician 
Quality Reporting System, which also will apply to the registries for 
the 2011 eRx Incentive Program, are discussed in section VII.F.1. of 
this final rule with comment period. We will post a final list of 
qualified registries for the 2011 eRx Incentive Program on the eRx 
Incentive Program section of the CMS Web site at http://www.cms.gov/ERXIncentive when we post the final list of qualified registries for 
the 2011 Physician Quality Reporting System on the Physician Quality 
Reporting System section of the CMS Web site.
    Similarly, EHR vendors are required to indicate their desire to 
have one or more of their EHR products qualified for the purpose of an 
eligible professional potentially being able to submit data on the 
electronic prescribing measure for the 2011 eRx Incentive Program at 
the time when they submit their self-nomination letter for the 2011 
Physician Quality Reporting System. A list of qualified EHR vendors and 
their products (including the version that is qualified) for the 2011 
eRx Incentive Program will be posted on the eRx Incentive Program 
section of the CMS Web site at http://www.cms.gov/ERXIncentive when we 
post the list of qualified EHR products for the 2011 Physician Quality 
Reporting System on the Physician Quality Reporting System section of 
the CMS Web site.
    Although we are finalizing three reporting mechanisms for use by 
eligible professionals for the 2011 eRx incentive, for purposes of the 
2012 eRx payment adjustment, we are finalizing only the claims-based 
reporting mechanism given that, for operational reasons, we will not 
have the ability to accept registry and EHR data in the timeframe that 
we need to be able to complete our analysis of the data and make the 
determination of whether an eligible professional is subject to the 
2012 payment adjustment prior to January 1, 2012. As discussed in the 
proposed rule (75 FR 40208), all claims for services furnished between 
January 1, 2011 and June 30, 2011, must be processed by no later than 
one month after the reporting period to be included in our analysis for 
purposes of the 2012 payment adjustment. Accordingly, to the extent an 
eligible professional intends to use a registry or EHR to submit 
electronic prescribing measure data for purposes of qualifying for the 
2011 incentive, the eligible professional would still need to submit 
electronic prescribing measure data on claims for services furnished 
between January 1, 2011 and June 30, 2011, in order to avoid the 2012 
payment adjustment.
(B) The Reporting Denominator for the Electronic Prescribing Measure
    The electronic prescribing measure, similar to the Physician 
Quality Reporting System measures, has two basic elements, which 
include: (1) a reporting denominator that defines the circumstances 
when the measure is reportable; and (2) a reporting numerator.
    The denominator for the electronic prescribing measure consists of 
specific billing codes for covered professional services. The measure 
becomes reportable when any one of these procedure codes is billed by 
an eligible professional for Part B covered professional services. As 
initially required under section 1848(k)(2)(A)(ii) of the Act, and 
further established through rulemaking and under section 1848(m)(2)(B) 
of the Act, we may modify the codes making up the denominator of the 
electronic prescribing measure. As such, we expanded the scope of the 
denominator codes for 2010 to covered professional services outside the 
professional office and outpatient setting, such as professional 
services furnished in

[[Page 73555]]

skilled nursing facilities or the home care setting.
    For 2011, we proposed to retain the 2010 electronic prescribing 
measure's denominator codes. The following is a summary of the comments 
received regarding the proposed denominator codes for the 2011 
electronic prescribing measure.
    Comment: A couple of commenters supported our proposal to retain 
the denominator codes from denominator of the 2010 electronic 
prescribing measure denominator. Conversely, other commenters opposed 
retaining the 2010 electronic prescribing denominator codes because 
they do not allow for surgeons to effectively participate in the eRx 
Incentive Program. The commenters did not suggest additional codes for 
inclusion in the electronic prescribing measure's denominator though.
    Response: With respect to the commenters' suggestions to add other 
denominator codes that were not proposed, we are not able to do so 
since the public would not have had an opportunity to comment on these 
additional codes. We welcome, however, specific suggestions for 
additional codes for consideration for the 2012 electronic prescribing 
measure. We believe that the existing denominator codes are 
representative of the types of services in which prescriptions are most 
often generated.
    Comment: Another commenter was concerned that we have unnecessarily 
restricted the electronic prescribing's denominator by associating a 
prescription with a patient visit. The commenter noted that a vast 
majority of prescriptions in an internal medicine or family practice 
office are generated outside of a patient visit through the 
prescription renewal workflow while new prescriptions--the minority--
are often coincident with the patient visit. The commenter believes 
that this sets up a cascade of filters that may prevent many otherwise 
successful providers from meeting the denominator criteria. The 
commenter stated that pharmacies either have, or can easily acquire, 
the capability to report the manner in which the prescription was 
received and CMS should consider a determined number of pharmacy claims 
of electronic prescriptions for Medicare beneficiaries, where the 
prescriber and manner of prescription delivery are clearly defined, as 
acceptable minimum criteria to determine a successful electronic 
prescriber. The commenter believes that the infrastructure to support 
this is laid in the requirements that Medicare D claims be submitted 
electronically to CMS and would allow CMS to identify successful 
electronic prescribers independent of the office-generated claims.
    Response: As we stated in the proposed rule (75 FR 40203), we 
believe that the completeness and accuracy of the Part D data with 
respect to whether a prescription was submitted electronically is 
unknown, which is why we are continuing to require reporting on an 
electronic prescribing measure. As stated previously, we welcome 
suggestions for additional denominator codes for use in future years 
but believe that the existing denominator codes are generally 
representative of the types of services in which prescriptions are 
often generated.
    Comment: One commenter supported the proposal to ``expand the scope 
of the denominator codes for 2010 to professional services outside the 
professional office and outpatient setting, such as professional 
services furnished in skilled nursing facilities or the home-care 
setting.''
    Response: We are unclear why the commenter is providing feedback on 
the 2010 denominator codes as the scope of the rule is limited to the 
2011 electronic prescribing measure. The 2010 denominator codes were 
finalized in the 2010 PFS final rule with comment period (74 FR 61852). 
Since the 2010 denominator codes already reflected our desire to 
include some professional services outside the professional office and 
outpatient setting, for 2011, we did not propose any changes to the 
denominator codes. Therefore, for 2011, we are retaining the 2010 
denominator codes for the reasons listed by the commenter. Accordingly, 
after considering the comments, we are finalizing the following CPT 
codes in the denominator of the electronic prescribing measure for 
2011: 90801, 90802, 90804, 90805, 90806, 90807, 90808, 90809, 90862, 
92002, 92004, 92012, 92014, 96150, 96151, 96152, 99201, 99202, 99203, 
99204, 99205, 99211, 99212, 99213, 99214, 99215, 99304, 99305, 99306, 
99307, 99308, 99309, 99310, 99315, 99316, 99324, 99325, 99326, 99327, 
99328, 99334, 99335, 99336, 99337, 99341, 99342, 99343, 99344, 99345, 
99347, 99348, 99349, 99350, G0101, G0108, G0109. We believe these codes 
represent the types of services for which prescriptions are likely to 
be generated.
    There are no diagnosis codes in the measure's denominator and there 
are no age/gender requirements in order for a patient to be included in 
the measure's denominator (that is, reporting of the electronic 
prescribing measure is not further limited to certain ages or a 
specific gender). For purposes of both the incentive payment and 
payment adjustments discussed in sections VII.F.2.c. and d. of this 
final rule with comment period, eligible professionals who do not bill 
for one of the procedure codes for Part B covered professional services 
included in the measure's denominator will have no occasion to report 
the electronic prescribing measure. In other words, the measure is not 
applicable unless the professional bills for one of the codes included 
in the measure's denominator. In addition, in order to qualify for an 
incentive or avoid the payment adjustment, eligible professionals are 
not required to report this measure in all cases in which the measure 
is applicable. There are specific reporting thresholds, or reported 
electronic prescribing events, that an eligible professional must meet 
in order to be considered a ``successful electronic prescriber'' for 
purposes of the 2011 incentive payments, which are described in section 
VII.F.2.b.(2).(E). of this final rule with comment period. In addition, 
there are specific reporting thresholds that an eligible professional 
must meet in order to be considered a ``successful electronic 
prescriber'' for purposes of the 2012 and 2013 payment adjustments, 
which are described in sections VII.F.2.c. and d. of this final rule 
with comment period, respectively.
    By no later than December 31, 2010, we will post the final 
specifications of the measure on the ``eRx Measure'' page of the eRx 
Incentive Program section of the CMS Web site at http://www.cms.gov/ERXIncentive.
(C) Qualified Electronic Prescribing System--Required Functionalities 
and Part D eRx Standards
    To report the electronic prescribing measure in 2011, we again 
proposed that the eligible professional must report one of the 
measure's numerator G-codes, as discussed below. However, when 
reporting any of the G-codes in 2011, we proposed that the professional 
must have and regularly use a ``qualified'' electronic prescribing 
system, as defined in the electronic prescribing measure 
specifications. If the professional does not have general access to an 
eRx system in the practice setting, then the eligible professional does 
not have any data to report for purposes of the incentive payment. For 
2011, we proposed to retain what constitutes a ``qualified'' electronic 
prescribing system as a system based upon certain required 
functionalities that the system can perform. We proposed to retain the 
same functionalities that were required in 2010.
    In addition, section 1848(m)(3)(B)(v) of the Act specifies that to 
the extent

[[Page 73556]]

practicable, in determining whether an eligible professional is a 
successful electronic prescriber, ``the Secretary shall ensure that 
eligible professionals utilize electronic prescribing systems in 
compliance with standards established for such systems pursuant to the 
Part D Electronic Prescribing Program under section 1860D-4(e).'' The 
Part D standards for electronic prescribing systems establish which 
electronic standards Part D sponsors, providers, and dispensers must 
use when they electronically transmit prescriptions and certain 
prescription related information for Part D covered drugs that are 
prescribed for Part D eligible individuals. For 2011, we proposed that 
to be a qualified electronic prescribing system, electronic systems 
must convey the information for the required functionalities using the 
standards currently in effect for the Part D electronic prescribing 
program.
    We did not receive any comments on the proposed required 
functionalities or Part D eRx standards. For this reason, we are 
finalizing the required functionalities and Part D eRx standards as 
described below.
Required Functionalities for a ``Qualified'' Electronic Prescriber 
System
    For 2011, a ``qualified'' electronic prescribing system is one that 
can do the following:
    (a) Generate a complete active medication list incorporating 
electronic data received from applicable pharmacies and PBMs, if 
available.
    (b) Allow eligible professionals to select medications, print 
prescriptions, electronically transmit prescriptions, and conduct 
alerts (written or acoustic signals to warn the prescriber of possible 
undesirable or unsafe situations including potentially inappropriate 
dose or route of administration of a drug, drug-drug interactions, 
allergy concerns, or warnings and cautions). This functionality must be 
enabled.
    (c) Provide information related to lower cost, therapeutically 
appropriate alternatives (if any). The ability of an electronic 
prescribing system to receive tiered formulary information, if 
available, would again suffice for this requirement for 2011 and until 
this function is more widely available in the marketplace.
    (d) Provide information on formulary or tiered formulary 
medications, patient eligibility, and authorization requirements 
received electronically from the patient's drug plan (if available).
Part D Electronic Prescribing Standards.
    To be a qualified electronic prescribing system under the 2011 eRx 
Incentive Program, electronic systems must convey the information 
listed previously under (a) through (d) using the standards currently 
in effect for the Part D electronic prescribing program. Additional 
Part D electronic prescribing standards were implemented April 1, 2009. 
These latest Part D electronic prescribing standards, and those that 
had previously been adopted, can be found on the CMS Web site at http://www.cms.gov/eprescribing.
    To ensure that eligible professionals utilize electronic 
prescribing systems that meet these requirements, the electronic 
prescribing measure requires that those functionalities required for a 
``qualified'' electronic prescribing system utilize the adopted Part D 
electronic prescribing standards. The Part D electronic prescribing 
standards relevant to the four functionalities for a ``qualified'' 
system in the electronic prescribing measure described previously and 
listed as (a), (b), (c), and (d), currently are as follows:
    (a) Generate medication list--Use the National Council for 
Prescription Drug Programs (NCPDP) Prescriber/Pharmacist Interface 
SCRIPT Standard, Implementation Guide, Version 8, Release 1, October 
2005 (hereinafter ``NCPDP SCRIPT 8.1'') Medication History Standard;
    (b) Transmit prescriptions electronically--Use the NCPDP SCRIPT 8.1 
for the transactions listed at Sec.  423.160(b)(2);
    (c) Provide information on lower cost alternatives--Use the NCPDP 
Formulary and Benefits Standard, Implementation Guide, Version 1, 
Release 0 (Version 1.0), October 2005 (hereinafter ``NCPDP Formulary 
and Benefits 1.0'');
    (d) Provide information on formulary or tiered formulary 
medications, patient eligibility, and authorization requirements 
received electronically from the patient's drug plan--use--
    (1) NCPDP Formulary and Benefits 1.0 for communicating formulary 
and benefits information between prescribers and plans;
    (2) Accredited Standards Committee (ASC) X12N 270/271-Health Care 
Eligibility Benefit Inquiry and Response, Version 4010, May 2000, 
Washington Publishing Company, 004010X092 and Addenda to Health Care 
Eligibility Benefit Inquiry and Response, Version 4010A1, October 2002, 
Washington Publishing Company, 004010X092A1 for communicating 
eligibility information between the plan and prescribers; and
    (3) NCPDP Telecommunication Standard Specification, Version 5, 
Release 1 (Version 5.1), September 1999, and equivalent NCPDP Batch 
Standard Batch Implementation Guide, Version 1, Release 1 (Version 
1.1), January 2000 for communicating eligibility information between 
the plan and dispensers.
    However, there are Part D electronic prescribing standards that are 
in effect for functionalities that are not commonly utilized at this 
time. One example is Rx Fill Notification, which is discussed in the 
Part D electronic prescribing final rule (73 FR 18926). For purposes of 
the 2011 Electronic Prescribing Program, we again are not requiring 
that an electronic prescribing system contain all functionalities for 
which there are available Part D electronic prescribing standards since 
many of these functionalities are not commonly available. For those 
required functionalities previously described, a ``qualified'' system 
must use the adopted Part D electronic prescribing standards for 
electronic messaging.
    There are other aspects of the functionalities for a ``qualified'' 
system that are not dependent on electronic messaging and are part of 
the software of the electronic prescribing system, for which Part D 
standards for electronic prescribing do not pertain and are not 
required for purposes of the eRx Incentive Program. For example, the 
requirements in qualification (b) that require the system to allow 
professionals to select medications, print prescriptions, and conduct 
alerts are functions included in the particular software, for which 
Part D standards for electronic messaging do not apply.
    We are aware that there are significant numbers of eligible 
professionals who are interested in participating in the eRx Incentive 
Program but currently do not have an electronic prescribing system. The 
electronic prescribing measure does not require the use of any 
particular system or transmission network; only that the system be a 
``qualified'' system having the functionalities previously described 
based on Part D electronic prescribing standards. If the professional 
does not have general access to an electronic prescribing system in the 
practice setting, the eligible professional would not be able to report 
the 2011 electronic prescribing measure. In addition to not being 
eligible for a 2011 incentive payment, an eligible professional who 
does not report the electronic prescribing measure for 2011 may be 
subject to the 2012 eRx payment adjustment discussed in section 
VII.F.2.c. of this final rule with comment period.

[[Page 73557]]

(D) The Reporting Numerator for the Electronic Prescribing Measure
    The proposed criteria for reporting for purposes of being a 2011 
successful electronic prescriber are designed to reward those eligible 
professionals who demonstrate that they have adopted a qualified 
electronic prescribing system and used the system in a substantial way 
to electronically prescribe. Accordingly, for the 2011 electronic 
prescribing measure, we proposed to retain the following numerator G-
code from the 2010 electronic prescribing measure's numerator: G8553 
(At least 1 prescription created during the encounter was generated and 
transmitted electronically using a qualified electronic prescribing 
system) (75 FR 40206).
    We did not receive any comments related to the proposed electronic 
prescribing measure numerator G-code for 2011. Therefore, we are 
finalizing G-code G8553 for the 2011 electronic prescribing measure's 
numerator.
    We intend to post the final 2011 electronic prescribing measure 
specifications on the ``eRx Measure'' page of the eRx Incentive Program 
section of the CMS Web site at http://www.cms.gov/ERXIncentive by no 
later than December 31, 2010.
    Because the electronic prescribing quality measure will apply only 
when an eligible professional furnishes services indicated by one of 
the codes included in the measure's denominator, for claims-based 
reporting, for example, it will not be necessary for an eligible 
professional to report G-codes for the electronic prescribing measure 
on claims not containing one of the denominator codes. However, if 
reporting a G-code, the G-code data submission will only be considered 
valid if it appears on the same Medicare Part B claim containing one of 
the electronic prescribing quality measure's denominator codes.
    In addition, if the eligible professional submits a Medicare Part B 
claim containing one of the electronic prescribing measure's 
denominator codes, he or she can report the numerator G-code only when 
the eligible professional furnishes services indicated by the G-code 
included in the measure's numerator. That is, only when at least 1 
prescription created during the encounter is generated and transmitted 
electronically using a qualified electronic prescribing system.
(E) Criteria for Successful Reporting of the Electronic Prescribing 
Measure
    As discussed previously, section 1848(m)(3)(D) of the Act 
authorizes the Secretary to revise the criteria for submitting data on 
the electronic prescribing measure from the criteria specified under 
section 1848(m)(3)(B)(ii) of the Act, which requires the measure to be 
reported in at least 50 percent of the cases in which the measure is 
reportable. For the 2010 eRx incentive, we revised the criteria for 
successful electronic prescriber such that an eligible professional 
shall be treated as a successful electronic prescriber for a reporting 
period based on the eligible professional's reporting of the electronic 
prescribing measure which counts the generation and reporting of one or 
more prescriptions associated with a patient visit electronically for a 
minimum of 25 unique visits per year of applicable cases in the 
denominator of the electronic prescribing for 2010. For 2011, we again 
proposed to make the determination of whether an eligible professional 
is a successful electronic prescriber for purposes of the eRx incentive 
based on a count of the number of times (minimum threshold of 25) an 
eligible professional reports that at least one prescription created 
during the encounter is generated using a qualified electronic 
prescribing system (that is, reports the G8553 code).
    The following is a summary of comments received regarding the 
criteria for the determination of a successful electronic prescriber 
for eligible professionals for the 2011 eRx incentive payment.
    Comment: One commenter requested that we define and share for 
public comment the actual number of Part D prescriptions that would 
suffice to document successful electronic prescribing.
    Response: We did not propose to use Part D prescriptions as the 
standard to determine whether an eligible professional is a successful 
e-prescriber for purposes of the 2011 eRx incentive payment. As stated 
in the proposed rule (75 FR 40203), we may consider doing so in the 
future. At such time, we would define the actual number of Part D 
prescriptions that would be required to be prescribed electronically 
via notice and comment rulemaking.
    Comment: Several commenters supported the electronic prescribing 
measure reporting threshold of 25, while others stated that they 
support our plan to reduce the electronic prescribing measure reporting 
burden from 50 percent of all applicable services to reporting just 25 
times.
    Response: We appreciate the commenters' feedback regarding the 
proposed electronic prescribing measure reporting threshold for 
purposes of the 2011 eRx incentive payment. For 2011, we are finalizing 
our proposal to require that professionals report on 25 unique 
electronic prescribing events in order to be considered a successful e-
prescriber for the purpose of qualifying for a 2011 eRx incentive 
payment. We believe that this reporting threshold simplifies the 
reporting burden and encourages participation.
    Comment: Some commenters expressed concern that the reporting 
threshold of 25 unique visits is too low a standard for incentive 
payments as it is unclear how this threshold will drive improvements 
for all Medicare beneficiaries. A more robust standard was recommended. 
One commenter specifically recommended a reporting threshold of between 
250-500 prescriptions per year per eligible professional and 25,000-
50,000 per year per GPRO I group practice. Another commenter 
recommended that we require eligible professionals to transmit more 
than 40 percent of written prescriptions electronically, which is in 
line with the EHR Incentive Program.
    Response: We appreciate the commenters' valuable input. We have 
reviewed several eRx Incentive Program management reports in order to 
determine the feasibility of using the ``25'' visit threshold and we 
believe that this threshold simplifies the eRx reporting burden. In 
establishing this threshold we also took into account the many valid 
circumstances that would prevent eligible professionals who have 
adopted a qualified electronic prescribing system from having 25 unique 
electronic prescribing events during the calendar year and variations 
in practice characteristics. Our goal is to increase participation in 
the eRx Incentive Program and, more importantly, to encourage the 
continued adoption and use of electronic prescribing systems.
    After considering the comments received and for the reasons 
previously explained, we are finalizing our proposal to make the 
determination of whether an eligible professional is a successful 
electronic prescriber for purposes of the CY 2011 incentive payment 
based on a count of the number of times (minimum threshold of 25) an 
eligible professional reports that at least one prescription created 
during the encounter is generated using a qualified electronic 
prescribing system (that is, reports the G8553 code) during the 2011 
reporting period (that is, January 1, 2011 through December 31, 2011).

[[Page 73558]]

(3) Determination of the 2011 Incentive Payment Amount for Individual 
Eligible Professionals Who Are Successful Electronic Prescribers
    Section 1848(m)(2)(B) of the Act imposes a limitation on the 
electronic prescribing incentive payment. The Secretary is authorized 
to choose 1 of 2 possible criteria for determining whether or not the 
limitation applies to a successful electronic prescriber. The first 
criterion is based upon whether the Medicare Part B allowed charges for 
covered professional services to which the electronic prescribing 
quality measure applies are less than 10 percent of the total Medicare 
Part B PFS allowed charges for all covered professional services 
furnished by the eligible professional during the reporting period. The 
second criterion is based on whether the eligible professional submits 
(both electronically and non-electronically) a sufficient number (as 
determined by the Secretary) of prescriptions under Part D (which can, 
again, be assessed using Part D drug claims data). If the Secretary 
decides to use the latter criterion, then, in accordance with section 
1848(m)(2)(B) of the Act, the criterion based on the reporting on 
electronic prescribing measures would no longer apply. The statutory 
limitation also applies with regard to the application of the payment 
adjustment. Based on our proposal to make the determination of whether 
an eligible professional is a ``successful electronic prescriber'' 
based on submission of the electronic prescribing measure, we proposed 
to apply the criterion under section 1848(m)(2)(B)(i) of the Act for 
the limitation for both the 2011 incentive payment and the 2012 payment 
adjustment (the application of the limitation with regard to the 2012 
eRx payment adjustment is discussed in section VII.F.2.c.(3). of this 
final rule with comment period).
    Since, as discussed previously, we proposed for 2011 to make the 
determination of whether an eligible professional is a ``successful 
electronic prescriber'' based on submission of the electronic 
prescribing measure, we also proposed to retain the requirement to 
analyze the claims submitted by the eligible professional at the TIN/
NPI level to determine whether the 10 percent threshold is met in 
determining the receipt of an electronic prescribing incentive payment 
for 2011 by an eligible professional (75 FR 40206). For purposes of the 
2011 eRx incentive payment, this calculation is expected to take place 
in the first quarter of 2012 and will be performed by dividing the 
eligible professional's total 2011 Medicare Part B PFS allowed charges 
for all such covered professional services submitted for the measure's 
denominator codes by the eligible professional's total Medicare Part B 
PFS allowed charges for all covered professional services (as assessed 
at the TIN/NPI level). If the result is 10 percent or more, then the 
statutory limitation will not apply and a successful electronic 
prescriber will qualify to earn the electronic prescribing incentive 
payment. If the result is less than 10 percent, then the statutory 
limitation will apply and the eligible professional will not earn an 
electronic prescribing incentive payment even if he or she 
electronically prescribes and reports a G-code indicating that he or 
she generated and transmitted a prescription electronically at least 25 
times for those eligible cases that occur during the 2011 reporting 
period. Although an individual eligible professional may decide to 
conduct his or her own assessment of how likely this statutory 
limitation is expected to apply to him or her before deciding whether 
or not to report the electronic prescribing measure, an individual 
eligible professional may report the electronic prescribing measure 
without regard to the statutory limitation for the incentive payment.
    The following is a summary of the comments received on the 
determination of the 2011 incentive payment amount for individual 
eligible professionals who are successful electronic prescribers.
    Comment: Several commenters felt we should allow eligible 
professionals to earn an incentive both for the eRx Incentive Program 
as well as for the Medicare EHR Incentive Program. The commenters did 
not think these incentives should be mutually exclusive, claiming that 
the eRx payment adjustment applies even if the eligible professional is 
participating in both programs.
    Response: We do not have the authority to allow eligible 
professionals to earn an incentive under the eRx Incentive Program and 
the Medicare EHR Incentive Program. Section 1848(m)(2)(D) of the Act 
specifies that the incentive under the eRx Incentive Program shall not 
apply to an eligible professional (or, in the case of a group practice) 
if, for the EHR reporting period the eligible professional (or group 
practice) receives an incentive payment under the EHR Incentive Program 
with respect to a certified EHR technology that has the capability of 
electronic prescribing.
    We will, however, be developing a plan, as described under section 
1848(m)(7) of the Act (``Integration of Physician Quality Reporting and 
EHR Reporting''), to integrate measure reporting requirements under the 
Physician Quality Reporting System, eRx Incentive Program, and the EHR 
Incentive Program, with respect to selection of measures to demonstrate 
meaningful use under the EHR Incentive Program, quality of care 
furnished to an individual, and such other activities as specified by 
the Secretary.
    With regards to the commenters' statement that the eRx payment 
adjustment still applies even if an eligible professional participates 
in both programs, this is not accurate. The eRx payment adjustment 
applies only to the extent that the eligible professional is not a 
successful electronic prescriber. We would also like to clarify that 
the limitation under section 1848(m)(2)(D) of the Act with respect to 
EHR incentive payments does not preclude the 10 percent limitation 
under section 1848(m)(2)(B)(i) of the Act from applying with regard to 
the eRx payment adjustment to an eligible professional who earns an EHR 
incentive.
    Comment: One commenter requested that we clarify the way in which 
we intend to calculate the group eRx incentives if individual members 
of the group have received Medicare EHR incentives.
    Response: We will assess the group practice's data first to 
determine eRx incentive eligibility. If the group practice is eligible 
for an eRx incentive, then we will filter out the allowed charges for 
all NPIs who earn an EHR incentive before calculating the group's 
incentive amount.
    Comment: We also received feedback pertaining to the eRx Incentive 
Program and EHR Incentive Program having different threshold criteria. 
Specifically, the commenter was concerned that the in order to qualify 
for the EHR incentive, eligible professionals must use a qualified EHR 
to generate and transmit 40 percent of all permissible prescriptions 
electronically but for the eRx Incentive Program, the threshold is 25 
successful electronic prescriptions during the reporting period for 
purposes of the incentive payment. Since eligible professionals must 
still participate in the eRx Incentive Program to avoid the 2012 
payment adjustment, a commenter stated that having different threshold 
criteria for the two programs causes confusion and recommended the 
establishment of a consistent threshold for electronic prescriptions. 
Another commenter felt that different thresholds are appropriate given 
that the EHR Incentive Program is voluntary and the

[[Page 73559]]

eRx Incentive Program is mandatory to maintain full payment.
    Response: We note that the EHR Incentive Program and the eRx 
Incentive Program are two separate, distinct programs with different 
purposes and underlying statutory provisions. Professionals eligible 
for the eRx Incentive Program are encouraged to be successful 
electronic prescribers using qualified electronic prescribing systems. 
The Medicare EHR Incentive Program will provide incentive payments to 
eligible professionals (EPs), eligible hospitals, and critical access 
hospitals (CAHs) that are meaningful users of certified EHR technology. 
Electronic prescribing is merely one component of the EHR Incentive 
Program.
    As such, we believe, at this time that it is appropriate to have 
different reporting thresholds. However, as noted previously, we will 
be developing a plan, as described under section 1848(m)(7) of the Act 
(``Integration of Physician Quality Reporting and EHR Reporting''), to 
integrate measure reporting requirements under the Physician Quality 
Reporting System, eRx Incentive Program, and the EHR Incentive Program. 
In the plan, we will study potential ways to address the commenters' 
concerns.
(4) Reporting Option for Satisfactory Reporting of the Electronic 
Prescribing Measure by Group Practices
    Section 1848(m)(3)(C) of the Act required that we establish and 
have in place a process under which eligible professionals in a group 
practice shall be treated as a successful electronic prescriber. In 
addition, we are prohibited from making double payments under section 
1848(m)(3)(C)(iii) of the Act, which requires that payments to a group 
practice shall be in lieu of the payments that would otherwise be made 
under the eRx Incentive Program to eligible professionals in the group 
practice for being a successful electronic prescriber. For 2011, we 
proposed to make incentive payments to group practices based on the 
determination that the group practice, as a whole, is a successful 
electronic prescriber for 2011 (75 FR 40207). An individual eligible 
professional who is affiliated with a group practice participating in 
the group practice reporting option that successfully meets the 
requirements for group practices would not be eligible to earn a 
separate eRx incentive payment for 2011 on the basis of his or her 
successfully reporting the electronic prescribing measure at the 
individual level.
    The following is a summary of the comments received regarding the 
two group practice options for reporting the electronic prescribing 
measure in 2011.
    Comment: One commenter supports the proposed eRx GPRO II, including 
the proposed reporting criteria for GPRO II groups.
    Response: We appreciate the commenter's positive feedback and are 
finalizing the eRx GPRO II as proposed. We believe that the eRx GPRO II 
will expand opportunities for group practices to participate in the eRx 
Incentive Program.
    Comment: One commenter appreciated that we have recognized the 
burden of claims-based reporting for the Physician Quality Reporting 
System and the eRx Incentive Program but the commenter was 
``disappointed that a GPRO-specific alternative for the eRx Incentive 
Program was not proposed. Most groups using [electronic prescribing 
technology] can readily obtain detailed information on physician 
utilization of the system.'' The commenter felt that this data could be 
easily reported, in detail, on the GPRO I data collection tool and 
urges CMS to consider this alternative for 2011 reporting.
    Response: We assume that the ``GPRO-specific alternative'' that the 
commenter is referring to is the addition of the electronic prescribing 
measure to the GPRO I data collection tool so that the groups 
participating in GPRO I can use this data collection tool to submit 
quality measures data for both the Physician Quality Reporting System 
and the eRx Incentive Program. Similar suggestions have been considered 
in the past but were not implemented due to fiscal concerns and 
concerns about the timing of when an updated GPRO I data collection 
tool could be available. We will continue to explore the feasibility of 
adding the electronic prescribing measure to the GPRO I data collection 
tool so that practices can use the data collection tool to submit the 
electronic prescribing measure instead of claims, a qualified registry, 
or a qualified EHR.
    Based on these comments, we are finalizing two group practice 
reporting options for the eRx Incentive Program for 2011--GPRO I and 
GPRO II. GPRO I is the reporting option for large group practices with 
200 or more eligible professionals and GPRO II is the reporting option 
for group practices with fewer than 200 eligible professionals. The 
reporting criteria under these 2 options differ depending on the size 
of the group practice. Eligibility and reporting requirements for the 
2011 eRx GPRO I and GPRO II are described below. We believe that these 
2 options will encourage greater participation in the eRx Incentive 
Program by reducing overall reporting burden for eligible professionals 
who are part of a group practice.
(A) Definition of ``Group Practice''
    Section 1848(m)(3)(C)(i) of the Act authorizes the Secretary to 
define ``group practice.'' For purposes of determining whether a group 
practice is a successful electronic prescriber for 2011, we proposed 
that consistent with the definition of group practice proposed for the 
Physician Quality Reporting System group practice reporting option 
(GPRO), a ``group practice'' would be defined as a single Taxpayer 
Identification Number (TIN) with 2 or more eligible professionals, as 
identified by their individual National Provider Identifier (NPI), who 
have reassigned their Medicare billing rights to the TIN. ``Group 
practice'' would also include group practices participating in Medicare 
demonstration projects approved by the Secretary (75 FR 40207).
    In addition, we proposed to restrict participation in the 2011 eRx 
GPRO to group practices participating in the 2011 Physician Quality 
Reporting System GPRO (either through GPRO I or GPRO II) or group 
practices that are deemed to be participating in the 2011 Physician 
Quality Reporting System GPRO (that is, group practices participating 
in a CMS-approved Medicare demonstration) that have indicated their 
desire to participate in the 2011 eRx GPRO (75 FR 40207).
    We also proposed that a group practice that wishes to participate 
in the 2011 eRx Incentive Program under the group practice reporting 
option will have to indicate how the group practice intends to report 
the electronic prescribing measure. That is, the group practice will 
need to indicate in its self-nomination letter which reporting 
mechanism (that is, claims, registries or EHRs) the group practice 
intends to use for purposes of participating in the 2011 eRx Incentive 
Program group practice reporting option.
    We did not receive any comments related to the proposed definition 
of ``group practice'' for purposes of the eRx Incentive Program. For 
this reason, we are finalizing our proposal as previously described.
    Unlike individual eligible professionals who may choose not to 
participate in the Physician Quality Reporting System, to be eligible 
to earn an electronic prescribing incentive in 2011, group practices 
that wish to participate in the electronic prescribing group practice 
reporting option will be required to participate in the Physician

[[Page 73560]]

Quality Reporting System group practice reporting option or be deemed 
to be participating in the Physician Quality Reporting System group 
practice reporting option based on the practice's participation in an 
approved Medicare demonstration project. Participation in the eRx 
Incentive Program, including participation in the electronic 
prescribing group practice reporting option is, however, optional for 
group practices that are participating in the Physician Quality 
Reporting System under the group practice reporting option. If a group 
practice wishes to participate in the 2011 eRx Incentive Program under 
the group practice reporting option, the group practice must indicate 
its desire to do so at the time that the group practice self-nominates 
to participate in the 2011 Physician Quality Reporting System group 
practice reporting option. However, group practices are not required to 
indicate their intent to participate in the 2011 eRx Incentive Program 
as individual eligible professionals, when the group practice self-
nominates to participate in the 2011 Physician Quality Reporting System 
group practice reporting option.
    As discussed in section VII.F.1.g. of this final rule with comment 
period, group practices interested in participating in the 2011 
Physician Quality Reporting System through the group practice reporting 
option will be required to submit a self-nomination letter to CMS, 
requesting to participate in the 2011 Physician Quality Reporting 
System group practice reporting option. Instructions for submitting the 
self-nomination letter will be posted on the Physician Quality 
Reporting System section of the CMS Web site by November 15, 2010. A 
group practice that had indicated their desire to participate in the 
eRx Incentive Program group practice reporting option when they self-
nominated to participate in the 2011 Physician Quality Reporting System 
group practice reporting option will be notified of the selection 
decision with respect to participation in the eRx Incentive Program at 
the same time that it is notified of the selection decision for the 
Physician Quality Reporting System group practice reporting option.
(B) Process for Group Practices To Participate as Group Practices and 
Criteria for Successful Reporting of the Electronic Prescribing Measure 
by Group Practices
    For group practices selected to participate in the electronic 
prescribing group practice reporting option for purposes of the 2011 
eRx incentive payment, we proposed that the reporting period would be 
January 1, 2011 to December 31, 2011 (75 FR 40207). We proposed that 
group practices selected to participate in the 2011 eRx Incentive 
Program and qualify for the eRx incentive payment through the group 
practice reporting option would be able to choose to report the 
electronic prescribing measure through the claims-based, the registry-
based, or, the EHR-based reporting mechanism.
    In order for a group practice participating in the Physician 
Quality Reporting System GPRO I to be considered a successful 
electronic prescriber for purposes of the 2011 eRx incentive, we 
proposed that the group practice would have to report that at least 1 
prescription during an encounter was generated and transmitted 
electronically using a qualified electronic prescribing system in at 
least 2,500 instances during the reporting period. In order for a group 
practice participating in the Physician Quality Reporting System GPRO 
II to be considered a successful electronic prescriber, we proposed 
that the group practice would have to report that at least 1 
prescription during an encounter was generated and transmitted 
electronically using a qualified electronic prescribing system for 75-
1,875 instances, based on the group's size (75 FR 40208).
    Section 1848(m)(2)(B) of the Act specifies that the 10 percent 
threshold limitation on the applicability of the electronic prescribing 
incentive applies to group practices as well as individual eligible 
professionals. Therefore, in determining whether a group practice will 
receive an electronic prescribing incentive payment for 2011 by meeting 
the proposed reporting criteria previously described, we would 
determine based on the claims, whether 10 percent of a group practice's 
charges comprised of codes in the denominator of the electronic 
prescribing measure.
    We did not receive any comments related to the proposed process for 
group practices to participate as group practices and the proposed 
criteria for successful reporting of the electronic prescribing measure 
by group practices for purposes of the 2011 eRx Incentive. Therefore, 
for purposes of the 2011 eRx incentive, we are finalizing our proposal 
to require GPRO I practices to report the electronic prescribing 
measure for 2,500 instances during the January 1, 2011 through December 
31, 2011. We are also finalizing our proposal to require GPRO II 
practices to report the electronic prescribing measure for the number 
of instances specified in Table 76 (see section VII.F.1.g.(3).(B). of 
this final rule with comment period) during the January 1, 2011 through 
December 31, 2011 reporting period. We believe these are reasonable 
thresholds to demonstrate use of electronic prescribing technology.
    In addition, we are finalizing our proposal to allow group 
practices participating in the 2011 eRx Incentive Program under GPRO I 
and GPRO II to submit data on the electronic prescribing measure using 
claims, a qualified registry, or a qualified EHR for purposes of 
qualifying for the 2011 eRx incentive payment. In addition, for 
purposes of the 2011 eRx incentive, we will not combine data on the 
electronic prescribing submitted via multiple reporting mechanisms. 
That is, a group practice must meet the relevant 2011 GPRO reporting 
criteria for the 2011 incentive using a single reporting mechanism. 
Combining data received via multiple reporting mechanisms would add 
significant complexity to our analytics and potentially delay incentive 
payments.
c. The 2012 eRx Payment Adjustment
    Section 1848(a)(5) of the Act requires that with respect to covered 
professional services furnished by an eligible professional in 2012, if 
the eligible professional is not a successful electronic prescriber for 
the reporting period for the year, the fee schedule amount for such 
services furnished by such professional during 2012 shall be equal to 
99 percent of the fee schedule amount that would otherwise apply to 
such PFS services.
    The following is a summary of general comments received regarding 
the eRx payment adjustment and our responses.
    Comment: Some commenters were opposed to implementation of the eRx 
payment adjustment because of the eRx Incentive Program is relatively 
new. Commenters noted that we have not released any summary results 
regarding how many eligible professionals are reporting and how many 
are earning incentives, eligible professionals have not received 
feedback reports on their progress for 2009 or 2010, and there is no 
evidence that the program is working. As a result, commenters suggested 
that CMS should ensure that eligible professionals who attempt to 
report but are unsuccessful due to the data submission process are not 
penalized.
    Response: Section 1848(a)(5) of the Act requires us to implement a 
payment adjustment beginning with covered professional services 
furnished by an eligible professional during 2012, if the eligible 
professional is not a successful electronic prescriber. We do not have

[[Page 73561]]

the authority to delay implementation of this payment adjustment.
    Comment: One commenter suggested that we exercise additional 
flexibility in assigning payment adjustments carefully by reviewing 
each eligible professional's circumstances prior to assigning any 
payment adjustments.
    Response: Although we value the commenter's input, this suggestion 
is not technically feasible. Given the short period of time between the 
end of the data submission period for the 2012 eRx payment adjustment 
and when we would have to begin adjusting eligible professional's 2012 
payments, it would not be feasible for us to review every eligible 
professional's circumstances individually. In addition, section 
1848(a)(5) (A)(i) of the Act requires us to apply the payment 
adjustment ``if the eligible professional is not a successful 
electronic prescriber.'' We believe that the criteria for becoming a 
successful electronic prescriber for purposes of the payment adjustment 
that we have proposed and are finalizing below are reasonable in that 
we have limited the number of electronic prescribing events required to 
avoid the payment adjustment. Furthermore, as discussed further in 
section VII.F.2.c.(4). of this final rule with comment period we have 
provided a process whereby eligible professionals can request a 
significant hardship exception on a case-by-case basis under section 
1848(a)(5)(B) of the Act.
    Comment: Several commenters urged us to synchronize the eRx 
Incentive Program and EHR Incentive Program so that eligible 
professionals who receive Medicare EHR incentives will be exempt from 
the eRx payment adjustments. Commenters stated that the EHR Incentive 
Program provides an opportunity and payment adjustment that did not 
exist when the original eRx Incentive Program regulations were put in 
place, and adjustments should be made due to the amount of overlap 
between programs. As it is, the eRx Incentive Program and the EHR 
Incentive Program represent a form of ``double jeopardy'' for 
physicians. For instance, a physician who gets the first year 
``meaningful use'' subsidy via Medicaid could also be penalized for not 
using electronic prescribing. Also, commenters claimed that in some 
cases, in order to avoid the eRx payment adjustment, a physician would 
have to purchase a stand-alone electronic prescribing program and then 
transition to a full EHR once the certification standards are 
determined. Furthermore, the list of ``certified'' EHRs for the EHR 
Incentive Program will not be available until January 2011. Another 
commenter stated that it is unfair to penalize eligible professionals 
who are working in good faith to adopt a comprehensive EHR under the 
EHR Incentive Program. Another commenter suggested that every effort be 
made to align the EHR Incentive Program and the eRx payment adjustment 
to remove the burden from eligible professionals of having to submit 
electronic prescribing measure data more than once.
    Response: We agree with the desire to align the EHR Incentive 
Program and the eRx payment adjustment and understand the commenters' 
concerns. The EHR Incentive Program and the eRx Incentive Program are 
governed by different laws, and have different reporting requirements. 
While section 1848(m)(2)(D) explicitly limits eligible professionals or 
group practices that receive an EHR incentive from qualifying for an 
eRx incentive payment in the same year, there is not a similar 
statutory provision that explicitly limits an eligible professional or 
group practice that receives an EHR incentive from being subject to the 
eRx payment adjustment. At this time an eligible professional who 
wishes to participate in the EHR Incentive Program would also have to 
participate in the eRx Incentive Program during 2011 to avoid an eRx 
payment adjustment in 2012 since the two programs have different 
requirements with respect to electronic prescribing. Eligible 
professionals, however, are not penalized for participating in both 
programs. Rather, an eligible professional who qualifies for an eRx 
incentive and a Medicare EHR incentive cannot earn an eRx incentive for 
the same year. However, we are making the effort to study possible 
methods of aligning the two programs by developing a plan, as described 
under section 1848(m)(7) of the Act (``Integration of Physician Quality 
Reporting and EHR Reporting''), to integrate measure reporting 
requirements under Physician Quality Reporting System, eRx Incentive 
Program and the EHR Incentive Program.
    We note that although section 1848(m)(2) precludes an eligible 
professional who has earned an incentive payment under the EHR 
Incentive Program from also earning an eRx incentive payment, the 
statute does not preclude the eligible professional from being subject 
to the eRx payment adjustment. In order to avoid the eRx payment 
adjustment, an eligible professional participating in the Medicare EHR 
Incentive Program still must meet the relevant eRx payment adjustment 
criteria for being a successful electronic prescriber.
(1) The eRx Payment Adjustment Reporting Period
    For purposes of the 2012 eRx payment adjustment, we proposed to 
make a determination of whether an eligible professional or a group 
practice is a successful electronic prescriber based on the January 1, 
2011 through June 30, 2011 reporting period (75 FR 40208). For eligible 
professionals and group practices using the claims-based reporting 
mechanism, we proposed that all claims for services furnished between 
January 1, 2011 and June 30, 2011 must be processed by no later than 
one month after the reporting period, for the claim to be included in 
our data analysis.
    The following is a summary of comments received on the proposed 
reporting period for the 2012 eRx payment adjustment and our proposal 
to require claims to be submitted by no later than 1 month after the 
reporting period.
    Comment: Several commenters expressed a desire for us to revise or 
delay the 2012 eRx payment adjustment reporting period, asserting that 
basing the 2012 eRx payment adjustment on electronic prescribing 
activity in 2011 conflicts with the law. Although some commenters 
acknowledged the need for time to complete a data analysis to determine 
if an eligible professional was a successful electronic prescriber 
prior to 2012, these commenters expressed opposition to the shorter 
reporting period. Other commenters believed that payment adjustments 
for 2012 should be based on a reporting period in 2012 rather than a 
reporting period in 2011. Commenters preferred that the reporting 
period for the 2012 and 2013 payment adjustments be the full 2012 and 
2013 calendar years, respectively. One commenter requested an April 1 
through September 30, 2011 for the 2012 payment adjustment. One 
commenter noted that some organizations might have planned an 
implementation of a qualified electronic prescribing system prior to 
January 1, 2012, to avoid the 2012 eRx payment adjustment. Such 
organizations would now have to complete that implementation more than 
six months in advance, potentially causing a significant financial 
burden for the organization. Another commenter stated that the 2012 eRx 
payment adjustment may cause some practices to reduce their Medicare 
patient roster (or refuse to accept new Medicare patients) in order to 
reduce the size of the payment adjustment, because they claim they 
would not have adequate time to meet

[[Page 73562]]

the proposed 2011 requirements to avoid the payment adjustment in 2012.
    Response: With respect to commenters' claims that the proposed 
reporting period for purposes of applying the 2012 eRx payment 
adjustment conflicts with the law, section 1848(a)(5) of the Act 
requires that the PFS amount for covered professional services 
furnished by an eligible professional during 2012, be reduced by 1 
percent during 2012, if the eligible professional is not a successful 
electronic prescriber for the reporting period for the year. Under 
section 1848(a)(5)(D) of the Act, we have the discretion to define the 
``reporting period'' for purposes of the payment adjustment with 
respect to a year.
    While we appreciate the commenters' suggestions to use data from 
the entire 2011 calendar year, a later part of 2011, or from 2012 for 
such an assessment for purposes of applying the 2012 eRx payment 
adjustment for services furnished in 2012, we believe it is necessary 
to reduce the PFS amount concurrently with claims submissions in 2012. 
The alternatives to reducing the PFS amount concurrently with claims 
submissions in 2012 would be having to recoup payments after the 
determination is made about whether the payment adjustment applies, 
providing added payments if the claims are paid at the reduced amount 
before the determination is made about whether the payment adjustment 
applies, or holding claims until the determination is made about 
whether the payment adjustment applies. As a result, we need to 
determine whether eligible professionals are successful electronic 
prescribers prior to 2012, based on a reporting period that also takes 
place prior to 2012. We believe that the proposed reporting period of 
the first six months of 2011 will allow sufficient time for eligible 
professionals to report the electronic prescribing measure, allow us to 
collect and analyze the data submitted by eligible professionals, and 
avoid retroactive adjustments of payments in 2012. Avoiding retroactive 
adjustments would not be possible if the determination of a successful 
electronic prescriber for purposes of the 2012 payment adjustment was 
based on reporting for the entire 2011 calendar year or a later portion 
of the 2011 calendar year. After the end of the reporting period, we 
must allow some time for claims for services furnished during the 
reporting period to be submitted and processed before it is available 
for analysis. Once we have completed our analysis we also need time to 
make the necessary system changes to begin applying the payment 
adjustments to the appropriate individuals. All of this must occur 
prior to January 1, 2012.
    Comment: One commenter suggested we be consistent with EHR 
Incentive Program submission guidelines by allowing electronic 
prescribing measure data to be submitted for up to two months after the 
close of the reporting period, rather than the proposed one month.
    Response: As we explained previously, we need sufficient time 
following the close of the 6-month reporting period to determine 
whether an eligible professional is a successful electronic prescriber 
and must do so prior to 2012, when the eRx payment adjustment would be 
assessed (if applicable). Accordingly, we cannot allow claims to be 
submitted for up to two months after the close of the reporting period.
    After considering the comments and for the reasons we explained 
previously, we are finalizing a 6-month reporting period, from January 
1, 2011 through June 30, 2011, for the 2012 eRx payment adjustment.
(2) Criteria for Determining Applicability of the 2012 eRx Payment 
Adjustment to Individual Eligible Professionals
    As we explained previously, section 1848(a)(5) of the Act requires 
a payment adjustment be applied with respect to covered professional 
services furnished by an eligible professional in 2012, if the eligible 
professional is not a successful electronic prescriber for the 
reporting period for the year. Section 1848(m)(3)(B) of the Act sets 
forth the requirements for being a successful electronic prescriber. As 
we discussed in section VII.F.2.b.(2). of this final rule with comment 
period, for the 2011 eRx Incentive Program, we decided to continue to 
require eligible professionals to report on the electronic prescribing 
measure to determine whether an eligible professional is a successful 
electronic prescriber. Details about the electronic prescribing quality 
measure are discussed in section VII.F.2.b.(2).(C) and (D) of this 
final rule with comment period.
    In addition, based on the authority under section 1848(m)(3)(D) of 
the Act to revise the criteria for submitting data on the electronic 
prescribing quality measure, we proposed that the 2012 eRx payment 
adjustment would not apply to the following:
    (1) An eligible professional who is not a physician (includes MDs, 
DOs, and podiatrists), nurse practitioner, or physician assistant as of 
June 30, 2011.
    (2) An eligible professional who does not have at least 100 cases 
(that is, claims for patient services) containing an encounter code 
that falls within the denominator of the electronic prescribing measure 
for dates of service between January 1, 2011 through June 30, 2011.
    (3) An eligible professional who is a successful electronic 
prescriber for the January 1, 2011 through June 30, 2011 reporting 
period. Specifically, we proposed that to be a successful electronic 
prescriber for purposes of avoiding the 2012 eRx payment adjustment, 
the eligible professional must report that at least 1 prescription for 
Medicare Part B FFS patients created during an encounter that is 
represented by 1 of the codes in the denominator of the 2011 electronic 
prescribing measure was generated and transmitted electronically using 
a qualified eRx system at least 10 times during the 2012 eRx payment 
adjustment reporting period (that is, January 1, 2011 through June 30, 
2011). (75 FR 40208).
    The limitation with respect to the electronic prescribing measures 
required under section 1848(m)(2)(B)(i) of the Act also applies to the 
eRx payment adjustment. Therefore, we proposed that if less than 10 
percent of the eligible professional's estimated total allowed charges 
for the January 1, 2011 through June 30, 2011 reporting period are 
comprised of services which appear in the denominator of the 2011 
electronic prescribing measure, then the eligible professional would 
not be subject to the 2012 eRx payment adjustment (75 FR 40209). As 
with the 2011 eRx incentive payment, we proposed that the determination 
of whether an eligible professional is subject to the payment 
adjustment will be made at the individual professional level, based on 
the NPI and for each unique TIN/NPI combination.
    The following is a summary of the comments received on the proposed 
criteria for determining the applicability of the 2012 eRx payment 
adjustment to individual eligible professionals and our responses.
    Comment: A couple of commenters suggested that regardless of the 
payment adjustment exemption criteria, any eligible professional who 
qualifies for the incentive payment should be exempt from the payment 
adjustment. The commenters specifically requested an exemption for 
eligible professionals who are successful electronic prescribers for 
the 2011 eRx incentive.
    Response: As discussed previously, section 1848(a)(5) of the Act 
requires that the PFS amount for covered professional services 
furnished by an

[[Page 73563]]

eligible professional, who is not a successful electronic prescriber, 
must be reduced by 1 percent for services furnished during 2012. With 
regard to applying the required 2012 eRx payment adjustment, we believe 
it is necessary to reduce the PFS amount concurrently with claims 
submissions in 2012, and so we need to determine if the 2012 eRx 
payment adjustment is applicable to eligible professionals prior to 
2012. This assessment would not be possible if the successful 
electronic prescriber determination was based on eRx incentive payment 
eligibility criteria for 2011, given that we cannot determine 
successful electronic prescribers for purposes of the 2011 eRx 
incentive until 2012.
    After considering the comments received, we are finalizing the 
criteria for determining applicability of the 2012 eRx payment 
adjustment to individual eligible professionals as proposed and 
previously described. As stated in the proposed rule (75 FR 40208 and 
40209), we believe that that limiting the application of the payment 
adjustment to those professionals who generally have prescribing 
privileges and who have a sufficient number of denominator-eligible 
cases is appropriate. We also believe that the reporting threshold of 
10 unique electronic prescribing events between January 1, 2011 and 
June 30, 2011 is achievable. As stated previously, although we proposed 
to allow reporting of the electronic prescribing measure via claims, a 
qualified registry, or a qualified EHR, we are finalizing only the 
claims-based reporting mechanism for purposes of the 2012 payment 
adjustment. It is not operationally feasible for us to accept the data 
submissions from the EHRs and registries in the timeframe needed for us 
to be able to have sufficient time to be analyze the data and make the 
determination whether an eligible professional is subject to the 2012 
payment adjustment prior to January 1, 2012.
    For purposes of determining whether an eligible professional is a 
physician (includes MDs, DOs, and podiatrists), nurse practitioner, or 
physician assistant we will use National Plan & Provider Enumeration 
System (NPPES) data. It is an eligible professional's responsibility to 
ensure that his or her primary taxonomy code in NPPES is accurate. 
Since there are concerns about the reliability of the specialty 
information contained in NPPES, we are also establishing a G-code that 
eligible professionals can use to report to us that they do not have 
prescribing privileges. Eligible professionals who do not have 
prescribing privileges must report this G-code on at least one claim 
with dates of service between January 1, 2011 and June 30, 2011, and 
processed by no later than one month after the reporting period.
(3) Criteria for Determining Applicability of the 2012 eRx Payment 
Adjustment to Group Practices
    As required by section 1848(m)(3)(C) of the Act, we are also 
required to establish and have in place a process under which eligible 
professionals in a group practice shall be treated as a successful 
electronic prescriber for purposes of the eRx payment adjustment. Thus, 
we proposed that for purposes of the 2012 eRx payment adjustment, a 
payment adjustment would not be applied to a group practice 
participating in the 2011 eRx GPRO if the group practice is 
participating in either the 2011 Physician Quality Reporting System 
GPRO I or the 2011 Physician Quality Reporting System GPRO II and meets 
the proposed 2011 criteria for successful electronic prescribing for 
the 2011 eRx incentive (75 FR 40209). For purposes of the 2012 eRx 
payment adjustment, however, we proposed that the 2011 eRx incentive 
criteria for successful electronic prescribing would need to be 
satisfied during the 2012 eRx payment adjustment reporting period of 
January 1, 2011 through June 30, 2011, for the same operational reasons 
that we proposed a 6-month reporting period for the payment adjustment 
for individual eligible professionals.
    For purposes of determining whether the eRx payment adjustment 
applies to a group practice, we proposed to analyze each unique TIN/NPI 
combination so as not to disadvantage eligible professionals who may 
have joined the group practice after January 1, 2011 (75 FR 40209).
    In addition, in accordance with the limitation under section 
1848(m)(2)(B)(i) of the Act, we proposed that the 2012 eRx payment 
adjustment would not apply to an eRx GPRO in which less than 10 percent 
of the group practice's estimated total allowed charges for the January 
1, 2011 through June 30, 2011 reporting period are comprised of 
services which appear in the denominator of the 2011 electronic 
prescribing measure. To be consistent with how this limitation is 
applied to group practices for purposes of the incentive, we proposed 
to determine whether this limitation applies to a group practice for 
the payment adjustment at the TIN level.
    For the same reasons that we proposed a 6-month reporting period 
for the 2012 eRx payment adjustment for group practices, we also 
proposed to use only claims processed by no later than 1 month after 
the reporting period in our analysis, consistent with our proposed 
approach for analyzing individual eligible professional claims. 
Similarly, we proposed that registries would need to submit eRx data 
for services furnished January 1, 2011 through June 30, 2011 to CMS 
between July 1, 2011 and August 19, 2011, so that we may include 
registry data in our analysis. We also proposed that group practices 
participating in the eRx group practice reporting option via EHR-based 
reporting would be required to submit eRx data for services furnished 
January 1, 2011 through June 30, 2011 to CMS between July 1, 2011 and 
August 19, 2011 (75 FR 40209).
    The following is a summary of the comments received on the proposed 
criteria for determining applicability of the 2012 eRx payment 
adjustment to group practices, including the proposed criteria for 
successful reporting of the electronic prescribing measure for group 
practices, and our proposed analytical approach.
    Comment: One commenter suggested that we lower the reporting 
criteria for group practices if we finalize our proposal to use the 6-
month reporting period beginning January 1, 2011 to determine whether a 
group practice is subject to the 2012 payment adjustment. The commenter 
noted that in determining the volume for the group incentive payment, 
we assume that not all eligible professionals in the practice would be 
electronically prescribing. The commenter believes that the same 
assumption should be applied for purposes of the payment adjustment 
determination.
    Response: As we stated in the proposed rule (75 FR 40209), we do 
not believe that group practices would be disadvantaged by having to 
satisfy the criteria for being a successful e-prescriber for the 2011 
eRx incentive in 6 months to avoid the 2012 eRx payment adjustment. 
When compared to the criteria for individual eligible professionals 
reporting the electronic prescribing measure for purposes of the 
payment adjustment, the criteria for being a successful electronic 
prescriber for the 2011 eRx payment adjustment for group practices 
enable group practices, on average, to avoid the incentive by 
electronically prescribing a fewer number of prescriptions per eligible 
professionals than what individual eligible professionals are required 
to do. Therefore, we are not lowering the reporting criteria for 
successful electronic prescribers for

[[Page 73564]]

purposes of determining applicability of the 2012 eRx payment 
adjustment to group practices. By having the same reporting criteria 
for purposes of both the payment adjustment and incentive payment, 
group practices have the added advantage of knowing that they have 
successfully electronically prescribed for purposes of the 2011 
incentive payment once they have successfully electronically prescribed 
for purposes of the 2012 payment adjustment, since the reporting 
periods for the 2011 incentive and 2012 payment adjustment overlap.
    After consideration of the comments received and for the reasons we 
discussed previously, we are finalizing the criteria for determining 
applicability of the 2012 eRx payment adjustment to group practices. 
However, for the reasons discussed previously with regard to the 
reporting mechanisms for submitting data on the electronic prescribing 
measure during 2011 for purposes of the 2012 payment adjustment, we are 
finalizing only the claims-based reporting mechanism. Thus, for the 
2012 eRx payment adjustment, we are not finalizing eRx data submission 
by group practices via a qualified registry or qualified EHR.
    In addition, while we had proposed to analyze each unique TIN/NPI 
combination to see whether the payment adjustment applies on an 
individual basis if the group practice fails to satisfy the criteria 
that would exempt the group practice from being subject to the 2012 eRx 
payment adjustment, we are unable to finalize this proposal as this 
would add significant time to our data analyses and could delay our 
ability to determine applicability of the 2012 payment adjustment in a 
timely fashion.
(4) Significant Hardship Exemption
    Section 1848(a)(5)(B) of the Act provides that the Secretary may, 
on a case-by-case basis, exempt an eligible professional from the 
application of the payment adjustment, if the Secretary determines, 
subject to annual renewal, that compliance with the requirement for 
being a successful electronic prescriber would result in a significant 
hardship, such in the case of an eligible professional who practices in 
a rural area without sufficient Internet access. Therefore, we proposed 
that in addition to meeting the criteria for a successful electronic 
prescriber, an eligible professional or group practice may also be 
exempt from application of the 2012 eRx payment adjustment, if, during 
the 2012 eRx payment adjustment reporting period (that is, January 1, 
2011 through June 30, 2011), one of the following circumstances applies 
to the eligible professional or group practice:
    <bullet> The eligible professional or group practice practices in a 
rural area with limited high speed internet access; or
    <bullet> The eligible professional or group practice practices in 
an area with limited available pharmacies for electronic prescribing.
    We proposed to add two additional ``G'' codes to the 2011 
electronic prescribing measure's specifications describing these 2 
circumstances. Eligible professionals or group practices to whom one or 
more of these circumstances apply would be required to report the 
appropriate G-code at least once between January 1, 2011 and June 30, 
2011 using their selected 2011 eRx reporting mechanism. Reporting of 
one of these two G-codes prior to June 30, 2011 will indicate to us 
that the eligible professional or group practice would like to be 
considered for an exemption from the 2012 payment adjustment under the 
significant hardship exception (75 FR 40209).
    The following is a summary on the comments we received regarding 
our proposal for the significant hardship exemption and our responses.
    Comment: One commenter supported the proposed process for the 
significant hardship exemption and did not offer any other 
circumstances that should also be considered a significant hardship.
    Response: We appreciate the commenter's supportive comments.
    Comment: While our acknowledgement of hardship circumstances was 
appreciated, several commenters suggested we add more hardship 
exemption categories, or offered additional hardship circumstances for 
our consideration. Specifically, commenters requested that the 
following hardship circumstances be added to the payment adjustment 
exemption list: (1) Physicians who are nearing the end of their 
careers, (2) physicians who are currently eligible for Social Security 
benefits or will be eligible for Social Security benefits by 2014, (3) 
physicians who plan on participating in the EHR incentive program 
beginning in 2012, 2013, or 2014, (4) DEA e-prescribers, (5) small 
practices (that is, 1 to 2 physicians), (6) practices located in Health 
Professional Shortage Areas (HPSAs), (7) physicians who cannot meet the 
requirements due to patient preference, and (8) hospital-based eligible 
professionals. Commenters stated that physicians nearing retirement age 
or in small practices may find it difficult to justify the cost of 
implementing these systems. Several commenters noted that many 
physicians have postponed purchasing electronic prescribing software in 
order to take advantage of the EHR incentives. Finally, commenters 
argued that physicians who electronically prescribe controlled 
substances should have additional time to comply with the eRx Incentive 
Program requirements as the DEA compliant electronic prescribing 
applications are not yet available.
    Response: We appreciate the commenters' feedback and are actively 
working on G-codes for eligible professionals to report the significant 
hardship categories we proposed for the 2012 eRx payment adjustment. We 
do not believe, however, that any of the suggested additional hardship 
categories constitute a circumstance that limits an eligible 
professional's access to electronic prescribing in the way that the two 
hardship exemptions we proposed do. We also believe that eligible 
professionals who are nearing retirement or are eligible for Social 
Security benefits still have the opportunity to purchase and use 
electronic prescribing technology even though they may not have a 
business case for doing so. With respect to the other hardship 
exemptions specifically requested by commenters (such as, hospital-
based eligible professionals, DEA e-prescribers and physicians who 
cannot meet the requirements due to patient preferences), we believe 
that we have already taken these circumstances into account when we 
established the reporting threshold for the electronic prescribing and 
the other criteria that would subject an eligible professional to the 
eRx payment adjustment. Therefore, we are finalizing the two hardship 
exemption G-codes that we proposed.
    Comment: A couple of commenters requested that we further define 
terms such as ``rural areas,'' areas with ``limited high speed internet 
access,'' and ``limited availability of pharmacies.''
    Response: We are actively working to develop G-codes for eligible 
professionals to report the eRx hardship. Once we finalize the G-codes, 
we will provide additional guidance with regards to the hardship 
exemptions categories associated with the eRx payment adjustment along 
with education and outreach with regard to the 2012 payment adjustment 
under the eRx Incentive Program.
    After considering the comments received, we are finalizing the 
following hardship exemptions for purposes of the 2012 eRx payment 
adjustment:
    <bullet> Eligible professionals who practice in a rural area 
without sufficient high speed internet access; and

[[Page 73565]]

    <bullet> Eligible professionals who practice in an area without 
sufficient available pharmacies for electronic prescribing.
    We are creating G-codes to address these 2 situations. Since the 
hardship exception must be renewed on an annual basis, we have deleted 
the proposed language at Sec.  414.92(c)(2)(ii) that listed specific 
circumstances that constitute a ``significant hardship.'' For future 
years and in future rulemaking, we will address the circumstances that 
will constitute a significant hardship for each year.
    Eligible professionals for whom one or more of these circumstances 
apply must report the appropriate G-code at least once between January 
1, 2011 and June 30, 2011 using claims. Group practices who wish to 
participate in the 2011 eRx GPRO and for whom one or more of these 
circumstances apply must request a hardship exemption at the time they 
self-nominate by indicating the appropriate G-code in their self-
nomination letter to CMS. Reporting of one of these G-codes prior to 
June 30, 2011 will indicate to us that the eligible professional or 
group practice would like to be considered for an exemption from the 
eRx 2012 payment adjustment under the significant hardship exception.
d. The 2013 eRx Payment Adjustment
    Section 1848(a)(5) of the Act also requires that with respect to 
covered professional services furnished by an eligible professional in 
2013, if the eligible professional is not a successful electronic 
prescriber for the reporting period for the year, the fee schedule 
amount for such services furnished by such professional during 2013 
shall be equal to 98.5 percent of the fee schedule amount that would 
otherwise apply to such PFS services. Under section 1848(m)(3)(C) of 
the Act, we are also required to establish and have in place a process 
under which eligible professionals in a group practice shall be treated 
as a successful electronic prescriber for purposes of the eRx payment 
adjustment.
    For purposes of the 2013 eRx payment adjustment, we proposed to use 
the proposed criteria for successful electronic prescriber for the 
proposed 2011 eRx incentive payment to determine whether an eligible 
professional or a group practice is a successful electronic prescriber 
for purposes of the 2013 eRx payment adjustment. In addition, we 
proposed that the reporting period for the 2013 eRx payment adjustment 
would be January 1, 2011 through December 31, 2011 (75 FR 40210). We 
believe that matching the criteria that will be applied for the 2013 
eRx payment adjustment with the criteria that will be applied for the 
2011 eRx incentive payment in an earlier year would be the most 
effective means of encouraging eligible professionals and group 
practices to adopt and use electronic prescribing systems since anyone 
who does not qualify for an incentive in 2011 would be subject to a 
payment adjustment in 2013.
    The following is a summary of the comments received on our proposal 
for the 2013 eRx payment adjustment.
    Comment: We received comments similar to the ones opposing the 
proposed 2012 eRx payment adjustment reporting period, with regard to 
the proposed 2013 eRx payment adjustment reporting period. One 
commenter suggested that the proposed reporting period for purposes of 
the 2013 eRx payment adjustment be changed so the 2012 and 2013 eRx 
payment adjustments do not overlap. Another commenter suggested that 
the 2013 payment adjustment be based on claims reported during the 
first half of 2012 to better reflect expected increases in eRx 
adoption, including increases due to the EHR Incentive Program.
    Response: We understand the commenters' concerns that the reporting 
periods for purposes of the 2012 and 2013 eRx payment adjustments 
overlap. We note that section 1848(a)(5)(C)(D) gives us the authority 
to specify the reporting period with respect to a year. As such, we may 
consider revisiting in the 2012 PFS rulemaking process additional 
reporting periods in 2012 for purposes of the 2013 eRx payment 
adjustment since having multiple reporting periods for purposes of the 
payment adjustment will maximize opportunities for eligible 
professionals to avoid the 2013 payment adjustment.
    After considering the comments received and for the reasons we 
previously explained, we are finalizing our proposal to use the 2011 
eRx incentive payment criteria for successful electronic prescriber as 
described in section VII.F.2.b. of this final rule with comment period 
to determine whether an eligible professional or a group practice is a 
successful electronic prescriber for purposes of the 2013 eRx payment 
adjustment based on the January 1, 2011 through December 31, 2011 
reporting period. However, we may consider revisiting the criteria for 
the 2013 payment adjustment in the context of 2012 reporting periods in 
the 2012 PFS proposed and final rules.
e. Public Reporting of Names of Successful Electronic Prescribers
    Section 1848(m)(5)(G) of the Act requires the Secretary to post on 
the CMS Web site, in an easily understandable format, a list of the 
names of eligible professionals (or group practices) who satisfactorily 
submit data on quality measures for the Physician Quality Reporting 
System and the names of the eligible professionals (or group practices) 
who are successful electronic prescribers. As required by section 
1848(m)(5)(G) of the Act, we proposed to make public the names of 
eligible professionals and group practices who are successful 
electronic prescribers for the 2011 eRx Incentive Program on the 
Physician Compare Web site that we are required to establish by January 
1, 2011 under section 10331 of the ACA.
    The following is a summary of the comments received regarding 
public reporting of successful electronic prescribers.
    Comment: A few commenters expressed concerns about posting the 
names of successful e-prescribers. One commenter was concerned that the 
public would not be able to correctly identify a successful e-
prescriber as a professional who has met the reporting requirements for 
the eRx Incentive Program. One commenter was concerned that individuals 
using this information to make health care decisions may do so without 
fully understanding the methodology and the program requirements. The 
commenters suggested that CMS take appropriate measures to ensure the 
accuracy of the list of successful e-prescribers and to provide the 
appropriate disclaimers for the Web site listing.
    Response: We will make every effort to ensure that the list of 
successful e-prescribers that we will post on the Physician Compare Web 
site is accurate. We also intend to include explanatory language with 
information on the intended uses and/or limitations of this data.
    Based on the comments received, we are finalizing our proposal to 
post the names of eligible professionals and group practices who are 
successful electronic prescribers for purposes of the 2011 eRx 
incentive on the Physician Compare Web site. We anticipate that the 
names of individual eligible professionals and group practices who are 
successful electronic prescribers for the 2011 eRx Incentive Program 
will be available in 2012 after the 2011 incentive payments are paid.
    To comply with section 1848(m)(5)(G) of the Act, we specifically 
intend to post

[[Page 73566]]

the names of individual eligible professionals who report the 
electronic prescribing measure at least 25 times during the 2011 
reporting period for patient encounters included in the measure's 
denominator, without regard to whether the limitation under section 
1848(m)(2)(B) of the Act applies to the eligible professional and 
without regard to whether the eligible professional actually qualifies 
to earn an incentive payment. In addition, since the Physician Quality 
Reporting System and the eRx Incentive Program are two separate 
programs and individual eligible professionals are not required to 
participate in both programs to earn an incentive under either program, 
we point out that it is possible for an eligible professional who 
participates in both incentive programs to be listed both as an 
individual eligible professional who satisfactorily submits data on 
quality measures for the Physician Quality Reporting System and is a 
successful electronic prescriber under the eRx Incentive Program. 
Likewise, if an eligible professional participated in both incentive 
programs but did not meet the respective requirements for both 
programs, he or she may be listed as an individual eligible 
professional who satisfactorily submits data on quality measures for 
the Physician Quality Reporting System only or as a successful 
electronic prescriber under the eRx Incentive Program only.
    Similarly, for purposes of publicly reporting the names of group 
practices, on the Physician Compare Web site, we intend to post the 
names of group practices that report the electronic prescribing measure 
the required number of times during the 2011 reporting period for 
patient encounters included in the measure's denominator without regard 
to whether the limitation under section 1848(m)(2)(B) of the Act 
applies to the group practice or whether the group practice actually 
qualifies to earn an incentive payment. Although any group practice 
participating in the eRx Incentive Program under the group practice 
reporting option would also have to participate in a Physician Quality 
Reporting System group practice reporting option, the criteria for 
satisfactory reporting of Physician Quality Reporting System measures 
for group practices are different from the criteria for successful 
reporting of the electronic prescribing measure by group practices. 
Therefore, it is possible for a group practice to be listed as a group 
practice that satisfactorily submits data on quality measures for the 
Physician Quality Reporting System but not as a successful electronic 
prescriber under the eRx Incentive Program, or vice versa.

G. DMEPOS Provisions

1. Medicare Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies (DMEPOS) Competitive Bidding Program (CBP)
a. Legislative and Regulatory History of DMEPOS CBP
    Medicare pays for most DMEPOS furnished after January 1, 1989 
pursuant to fee schedule methodologies set forth in section 1834 of the 
Act, as added by section 4062 of the Omnibus Budget Reconciliation Act 
of 1987 (OBRA '87) (Pub. L. 100-203). Specifically, sections 
1834(a)(1)(A) and (B), and 1834 (h)(1)(A) of the Act provide that 
Medicare payment for these items is equal to 80 percent of the lesser 
of the actual charge for the item or the fee schedule amount for the 
item. We implemented this payment methodology at 42 CFR Part 414, 
Subpart D of our regulations. Sections 1834(a)(2) through (a)(5) and 
1834(a)(7) of the Act, and implementing regulations at Sec.  414.200 
through Sec.  414.232 (with the exception of Sec.  414.228), set forth 
separate payment categories of durable medical equipment (DME) and 
describe how the fee schedule for each of the following categories is 
established:
    <bullet> Inexpensive or other routinely purchased items (section 
1834(a)(2) of the Act and Sec.  414.220 of the regulations);
    <bullet> Items requiring frequent and substantial servicing 
(sections 1834(a)(3) of the Act and Sec.  414.222 of the regulations);
    <bullet> Customized items (section 1834(a)(4) of the Act and Sec.  
414.224 of the regulations);
    <bullet> Oxygen and oxygen equipment (section 1834(a)(5) of the Act 
and Sec.  414.226 of the regulations);
    <bullet> Other items of DME (section 1834(a)(7) of the Act and 
Sec.  414.229 of the regulations).
    For a detailed discussion of payment for DMEPOS under fee 
schedules, see the final rule published in the April 10, 2007 Federal 
Register (72 FR 17992).
    Blood glucose testing strips or diabetic testing strips are covered 
under the Medicare DME benefit in accordance with section 1861(n) of 
the Act. Other supplies that are necessary for the effective use of DME 
are also covered under the Medicare DME benefit in accordance with 
longstanding program instructions at section 110.3 of chapter 15 of the 
Medicare Benefit Policy Manual.
    Section 1847 of the Act, as amended by section 302(b)(1) of the 
MMA, requires the Secretary to establish and implement a DMEPOS CBP. 
Under the DMEPOS CBP, Medicare sets payment amounts for selected DMEPOS 
items and services furnished to beneficiaries in competitive bidding 
areas (CBAs) based on bids submitted by qualified suppliers and 
accepted by Medicare. For competitively bid items, these new payment 
amounts, referred to as ``single payment amounts (SPA),'' replace the 
fee schedule payment methodology. Section 1847(b)(5) of the Act 
provides that Medicare payment for these competitively bid items and 
services is made on an assignment-related basis equal to 80 percent of 
the applicable SPA, less any unmet Part B deductible described in 
section 1833(b) of the Act. Section 1847(b)(2)(A)(iii) of the Act 
prohibits the awarding of contracts to any entity unless the total 
amounts to be paid to contractors in a CBA are expected to be less than 
the total amounts that would otherwise be paid under the fee schedule 
methodologies set forth in section 1834(a) of the Act. This requirement 
guarantees savings to both the Medicare program and beneficiaries under 
the program. The fee schedule methodologies will continue to set 
payment amounts for noncompetitively bid DMEPOS items and services. The 
program also includes provisions to ensure beneficiary access to 
quality DMEPOS items and services. Section 1847(b)(2)(A) and 
1847(b)(4)(B) of the Act, respectively, limits participation in the 
program to suppliers who have met applicable quality and financial 
standards and requires the Secretary to maintain beneficiary access to 
multiple suppliers.
    When first enacted by the Congress, section 1847(a)(1)(B) of the 
Act required the Secretary to phase in the DMEPOS CBP in a manner so 
that the competition under the program occurred in 10 of the largest 
metropolitan statistical areas (MSAs) in 2007. The program was to be 
expanded into 70 additional MSAs in 2009, and then into additional 
areas after 2009.
    In the May 1, 2006 Federal Register (72 FR 25654), we issued a 
proposed rule that would implement the DMEPOS CBP for certain DMEPOS 
items and services and solicited public comment on our proposals. In 
the April 10, 2007 Federal Register (72 FR 17992), we issued a final 
rule addressing the comments on the proposed rule and establishing the 
regulatory framework for the DMEPOS CBP in accordance with section 1847 
of the Act.
    Consistent with the requirements of section 1847 of the Act and the

[[Page 73567]]

competitive bidding regulations, we began implementation of the program 
by conducting the first round of competition in 10 of the largest MSAs 
in 2007. We limited competition during this first round of the program 
to DMEPOS items and services included in 10 selected product 
categories, including mail order diabetic supplies. The bidding window 
opened on May 15, 2007 and was extended to allow bidders adequate time 
to prepare and submit their bids. We then evaluated each submission and 
awarded contracts consistent with the requirements of section 
1847(b)(2) of the Act and Sec.  414.414. Following the bid evaluation 
process, we awarded over 329 contracts to qualified suppliers.
    The DMEPOS CBP was effective on July 1, 2008. Beginning on that 
date, Medicare coverage for competitively bid DMEPOS items and services 
furnished in the first 10 CBAs was limited to items and services 
furnished by contract suppliers and/or grandfathered suppliers of 
oxygen and oxygen equipment and rented DME, unless an exemption applies 
as stated in the regulation. For further discussion of the DMEPOS CBP 
and the bid evaluation process, see the final rule published in the 
April 10, 2007 Federal Register (72 FR 17992).
    On July 15, 2008, the MIPPA was enacted. Section 154 of the MIPPA 
amended section 1847 of the Act to make certain limited changes to the 
DMEPOS CBP. Section 154(a) of the MIPPA delayed competition under the 
program and amended section 1847(a)(1)(D)(i) of the Act to terminate 
the competitive bidding contracts effective June 30, 2008 and prohibit 
payment based on the contracts.
    Section 154(a) of the MIPPA required the Secretary to conduct a 
second competition to select suppliers for Round 1 in 2009 (``Round 1 
Rebid''). The Round 1 Rebid includes the ``same items and services'' 
and is to be conducted in the ``same areas'' as the 2007 Round 1 
competition, with certain limited exceptions. Specifically, we were 
required to exclude the product category of negative pressure wound 
therapy (NPWT) items and services and the San Juan, Puerto Rico CBA 
from the Round 1 Rebid. In addition, section 154(a) of the MIPPA 
permanently excluded group 3 complex, rehabilitative wheelchairs from 
the DMEPOS CBP by amending the definition of ``items and services'' in 
section 1847(a)(2) of the Act. Section 154(a) of the MIPPA delayed 
competition for Round 2 of the DMEPOS CBP from 2009 to 2011, and 
subsequent competitions under the program to after 2011. Finally, 
section 154(a) of the MIPPA specifically addresses the phase in of a 
competition for national mail order items and services by specifying 
that such competitions may be phased in after 2010.
b. Implementation of a National Mail Order DMEPOS Competitive Bidding 
Program (CBP) for Diabetic Testing Supplies
    Section 1847(a)(2)(A) of the Act mandates competitive bidding 
programs for supplies used in conjunction with durable medical 
equipment, such as blood glucose monitors used by beneficiaries with 
diabetes to test their blood glucose levels. Replacement of supplies 
used with these monitors are referred to under the DMEPOS CBP as 
diabetic supplies or diabetic testing supplies such as blood glucose 
test strips and lancets. In the April 10, 2007 final rule (72 FR 17992) 
implementing the DMEPOS CBP, we established regulations to implement 
competitions on a regional or national level for certain items such as 
diabetic testing supplies that are furnished on a mail order basis. We 
explained our rationale for establishing a national DMEPOS CBP for 
items furnished on a mail order basis in the May 1, 2006 proposed rule 
(71 FR 25669) and April 10, 2007 final rule (72 FR 18018). In the case 
of diabetic supplies and other items furnished by local neighborhood 
pharmacies, establishing a competition for items furnished on a mail 
order basis would exempt local pharmacies from competing with national 
mail order suppliers while preserving the choice of the beneficiary to 
go to any local pharmacy to pick up their diabetic supplies. 
Manufacturers and suppliers have stated to CMS at different meetings on 
numerous occasions that the choice for beneficiaries to obtain diabetic 
supplies from local pharmacies with licensed pharmacists in house who 
can provide instructions and guidance to beneficiaries related to their 
testing needs is important and needs to be preserved.
    In the January 16, 2009 Federal Register (74 FR 2873), we published 
an interim final rule implementing certain changes to the DMEPOS CBP. 
Specifically, the rule implemented certain MIPPA provisions that 
delayed implementation of Round 1 of the program, required CMS to 
conduct a second Round 1 competition in 2009, and mandated certain 
changes for both the Round 1 Rebid and subsequent rounds of the 
program. In the January 16, 2009 interim final rule, we indicated that 
we would be considering alternatives for competition of diabetic 
testing supplies in future notice and comment rulemaking. We explained 
that we believed it was consistent with section 1847(a) to employ 
competitive bidding for diabetic suppliers in both the mail order and 
traditional retail markets, in part due to concerns raised about the 
bifurcation of the method of delivery of diabetic supplies and the 
difficulty in defining what constitutes ``mail order'' for purposes of 
competition.
    In the July 13, 2010, proposed rule (75 FR 40211), we discussed 
alternatives for competition of diabetic testing supplies and proposed 
the implementation of a revised national mail order DMEPOS CBP for 
diabetic testing supplies. Under the proposed mail order DMEPOS CBP, we 
would award contracts to suppliers to furnish these items across the 
nation to beneficiaries who elect to have replacement diabetic testing 
supplies delivered to their residence. Suppliers wishing to furnish 
these items through mail order to Medicare beneficiaries would be 
required to submit bids to participate in the national mail order 
DMEPOS CBP for diabetic testing supplies. In addition, we proposed to 
revise the national mail order program for diabetic testing supplies 
DMEPOS CBP by implementing the following changes:
    <bullet> Revision of Sec.  414.402 to include definitions of: 
``National mail order DMEPOS CBP,'' ``Mail order item,'' and ``Non-mail 
order item.'' We proposed these new definitions to establish a clear 
distinction between mail order items and non-mail order items. These 
revised definitions would apply to all future competitions for mail 
order items and services.
    <bullet> Addition of Sec.  414.411 to implement the special rule 
mandated by section 1847(b)(10)(A) of the Act for competitions for 
diabetic testing strips following the Round 1 Rebid. Section 
1847(b)(10)(A) requires suppliers bidding in competitions to furnish 
diabetic testing strips after the Round 1 Rebid to demonstrate that 
their bid covers at least 50 percent of all types of diabetic testing 
strips furnished by suppliers. If the supplier is not able to satisfy 
this requirement, the Secretary must reject that bid.
    <bullet> Revision of Sec.  414.422 to include an additional term in 
contracts of mail order suppliers of diabetic testing supplies 
following the Round 1 Rebid. The proposed term would prohibit suppliers 
from influencing or incentivizing beneficiaries to change their brand 
of glucose monitor and test strips.

[[Page 73568]]

(1) Future Competitions for Diabetic Testing Supplies
    Section 1847(a)(1)(A) of the Act mandates the establishment of 
DMEPOS CBP for items described in section 1847(a)(2)(A) of the Act, 
including diabetic testing supplies. Section 1847(a)(1)(B)(ii) of the 
Act authorizes the phase in of items and services under these programs 
beginning with the highest cost and highest volume items and services 
or those items and services that are determined to have the largest 
savings potential. Current Medicare claims data from fiscal year 2009 
shows that over 62 percent of beneficiaries currently receive their 
replacement diabetic testing supplies from mail order suppliers. Mail 
order diabetic testing supplies account for approximately one billion 
dollars in allowed charges per year and are therefore high volume 
items. We believe that a national mail order DMEPOS CBP for diabetic 
testing supplies would result in large savings as a result of 
competition between entities that would factor into their bids savings 
from volume discount purchasing of quantities of supplies needed on a 
national rather than local basis. Therefore, we believe that 
implementing a national mail order DMEPOS CBP for diabetic testing 
supplies is the best option for meeting the requirements of the statute 
referenced above as long as certain refinements discussed below are 
made to the program to address concerns about the mail order/non-mail 
order bifurcation.
    We have heard from industry groups and suppliers that furnish 
diabetic testing supplies on a national mail order basis of their 
concerns that national chain pharmacies that furnish diabetic testing 
supplies through both a national mail order business and local retail 
pharmacies will encourage beneficiaries to obtain these items from 
local retail locations by offering certain incentives to Medicare 
beneficiaries for switching from mail order to local retail. Based on 
our experience from Round 1, we believe DMEPOS CBP for mail order 
diabetic testing supplies would be subject to manipulation without a 
clearer definition of what we mean by mail order. We agree with the 
industry groups and suppliers that have indicated that this practice 
will harm businesses that only furnish diabetic testing supplies on a 
mail order basis. In order to address these concerns, we are proposing 
to add to Sec.  414.402 a definition of ``National mail order DMEPOS 
CBP.'' We proposed to define that term as a program whereby contracts 
are awarded to suppliers for the furnishing of mail order items across 
the nation. We believe that implementing a national competitive bidding 
program for diabetic supplies would preserve beneficiary choice to 
purchase testing supplies in person from any local pharmacy that is an 
enrolled Medicare supplier that furnishes diabetic supplies, while 
clarifying the definition of mail order will provide significant 
savings potential for beneficiaries and the program. Savings would be 
generated in the near future from national SPAs for supplies furnished 
on a mail order or home delivery basis and on a long term basis for all 
diabetic supplies as a result of the requirement of section 
1834(a)(1)(F) of the Act (as amended by section 6410(b) of the ACA) to 
either competitively bid in all areas or adjust prices in all areas by 
January 1, 2016. We believe that more beneficiaries will elect to 
choose the mail order/home delivery option, thereby further increasing 
short term savings under the program. Even if this is not the case, and 
the percentage of beneficiaries choosing the mail order/home delivery 
option remains at the current rate of 62 percent, savings for the 
remaining 38 percent must be achieved by no later than January 1, 2016, 
as a result of the requirements of section 1834(a)(1)(F) of the Act.
    We considered other alternatives for establishing DMEPOS CBP for 
diabetic testing supplies that would eliminate the mail order/non-mail 
order bifurcation and associated concerns. These alternatives include 
the following:
    <bullet> A national competition among all types of suppliers for 
all replacement diabetic supplies. Under this alternative, all 
beneficiaries would receive their replacement diabetic supplies from 
contract suppliers responsible for furnishing diabetic supplies 
throughout the nation using any method of delivery as long as the 
supplies are delivered on a timely basis.
    <bullet> Competitions in regional CBAs among all types of suppliers 
for all replacement diabetic supplies. Under this alternative, all 
beneficiaries would receive their replacement diabetic supplies from 
contract suppliers responsible for furnishing diabetic supplies 
throughout a designated region of the country using any method of 
delivery to a beneficiary's home as long as the supplies are delivered 
on a timely basis.
    <bullet> Competitions in local CBAs among all types of suppliers 
for all replacement diabetic supplies. Under this alternative, all 
beneficiaries would receive their replacement diabetic supplies from 
contract suppliers responsible for furnishing diabetic supplies 
throughout the local area using any method of delivery to a 
beneficiary's home as long as the supplies are delivered on a timely 
basis.
    We believe that the first option to bid on a national basis for all 
diabetic supplies, would result in most beneficiaries using mail order 
and might generate more savings than a national competition for 
diabetic supplies furnished on a mail order basis only. However, this 
first option would likely eliminate the beneficiary choice to obtain 
replacement diabetic supplies on a non-mail order basis from any 
enrolled supplier that is a pharmacy or other local supplier storefront 
where a licensed pharmacist is on hand to offer guidance and 
consultation to the beneficiary. We believe the other two options would 
also diminish this choice. In addition, the alternatives of regional or 
local competitions are not likely to result in savings at or above the 
level that can be generated from a national competition for mail order 
supplies. Suppliers participating in a national program may be able to 
obtain volume purchasing discounts for the quantities of supplies 
needed nationwide. Therefore, we did not propose any of these 
alternatives but we solicited public comment on alternatives for 
establishing DMEPOS CBP for diabetic testing supplies.
    In Sec.  414.411, we proposed to establish a national mail order 
DMEPOS CBP with competitions taking place after 2010 for the purpose of 
awarding contracts to suppliers to furnish replacement diabetic testing 
supplies across the nation, with additional program refinements 
described below. We note that the decision to proceed with a national 
mail order competition after 2010 does not prevent us from phasing in 
competitions for non-mail order diabetic supplies or from conducting 
competitions for diabetic supplies in general in the future consistent 
with section 1847(a)(1) of the Act.
    Comment: We received 31 comments in response to our proposed 
regulation to implement a national mail order DMEPOS CBP for diabetic 
testing supplies. There were several commenters that supported the 
proposal made by CMS and a few commenters that were opposed to our 
proposal. The commenters in favor of our proposal stated they wanted 
CMS to preserve the local storefront option for the beneficiary. A few 
commenters specifically stated that CMS should maintain retail 
pharmacies as a necessary safety valve, ensuring that beneficiaries 
will have immediate local

[[Page 73569]]

access to their specific diabetic testing supplies. In addition, 
several commenters who supported our conducting separate auctions 
stated that our proposal to conduct one competition between mail order 
companies and those with a local storefront would not be fair because 
these companies have different business models, different overhead 
costs and different operational structures. Numerous commenters stated 
that beneficiaries get better service from a local storefront than they 
would get from a mail order company because local storefronts preserve 
a face-to-face pharmacy/patient relationship.
    We also received several comments opposed to our proposal to 
conduct separate competitions because they believed that gives the 
local storefronts an unfair advantage because they are paid more than 
mail order companies for the same product. They suggest that CMS should 
conduct a competition for both mail order and non mail order under one 
program.
    Response: We agree with those commenters who stated that we need to 
preserve beneficiary choice and access to local storefronts to get 
their diabetic testing supplies. We believe that our proposal preserves 
the beneficiaries' choice to go to their local pharmacy to pick up 
their diabetic supplies or request that they be sent through the mail 
by a national mail order DMEPOS contract supplier. Also, we believe 
that both mail order suppliers and storefront suppliers are able to 
provide the necessary services and education to their beneficiaries. 
Therefore, we believe our proposal to bid diabetic testing supplies 
when provided through the mail will preserve beneficiaries' choice 
while ensuring they receive quality services. We also agree that to bid 
storefronts and mail order companies in the same auction may make it 
difficult for small storefronts to compete against large mail order 
suppliers. We also believe the difference in payment between mail order 
companies and retail stores will not harm mail order companies because 
we expect that more beneficiaries will choose to obtain their test 
strips from mail order companies to lower their co-insurance payment, 
generating more business for mail order suppliers. In addition, non-
mail order diabetic supplies were not included the first round of the 
competitive bidding program and the issue with regard to payment for 
these items under the program will be addressed in the future as 
additional items subject to the program are phased in.
    Comment: One commenter stated that CMS should phase in a regional 
program, rather than moving immediately into a national program, since 
CMS and mail order suppliers are without sufficient knowledge base or 
experience with the operation of a large-scale competitive bidding 
program and its impact on beneficiaries' access to quality care.
    Response: We disagree with this comment. We believe that the option 
to bid on a national basis for all mail order diabetic supplies would 
result in large savings because of the volume purchase power of bidders 
providing these items on a national basis. Currently our data shows 
that over 62 percent of Medicare beneficiaries receive their testing 
supplies through the mail, we see no real benefit of bidding on a 
regional basis because most mail order suppliers operate nationally. We 
also believe that we have experience conducting the DMEPOS CBP since we 
have successfully completed the bidding and contract offers for Round 1 
Rebid and the program will begin January 1, 2011. We have established a 
process and will evaluate and monitor contract suppliers to ensure 
beneficiaries' have access to quality products.
    Comment: One commenter stated that diabetic testing supplies should 
be excluded from DMEPOS CBP because CMS does not have any experience 
with this product category with respect to competitive bidding, as 
diabetic supplies were not included in any prior demonstration project. 
Several commenters suggested that CMS should not initiate the bidding 
process for the national mail order DMEPOS CBP until it has had 
sufficient time to evaluate the rebid of Round 1.
    Response: Section 1847(a)(1)(A) of the Act mandates the 
establishment of DMEPOS CBP for items described in section 
1847(a)(2)(A) of the Act, including diabetic testing supplies. Section 
1847(a)(1)(B)(ii) of the Act authorizes the phase in of items and 
services under these programs beginning with the highest cost and 
highest volume items and services or those items and services that are 
determined to have the largest savings potential. Current Medicare 
claims data identifies diabetic testing supplies as a high cost/high 
volume item. Mail order diabetic testing supplies account for 
approximately one billion dollars in allowed charges per year and the 
majority of these payments are for mail order diabetic testing 
supplies. In addition, CMS does have experience bidding these items as 
they were included in both Round 1 and the Round 1 rebid.
    Comment: One commenter stated that section 1834(a)(1)(F) of the Act 
does not compel CMS to adjust prices for all items by January 1, 2016, 
or any other specific date. The commenter stated that CMS could elect 
to continue to exclude diabetic testing supplies provided through local 
retail storefronts.
    Response: We are required by section 1834(a)(1)(F) of the Act to 
either competitively bid in all areas of the country or adjust prices 
for all phased in items in areas where competitive bidding programs are 
not implemented by January 1, 2016. We intend to address specific 
issues related to implementation of clauses (ii) and (iii) of section 
1834(a)(1)(F) of the Act as part of separate rulemaking mandated by 
section 1834(a)(1)(G) of the Act.
    After consideration of the public comments we received, we are not 
making any changes to this section of the proposed rule on the future 
competitions of diabetic testing supplies.
(2) Definition of Mail Order Item
    We proposed to define ``mail order item'' in Sec.  414.402 to mean 
any item (for example, diabetic testing supplies) shipped or delivered 
to the beneficiary's home, regardless of the method of delivery. We 
also proposed to define ``non-mail order item'' as any item (for 
example, diabetic testing supplies) that a beneficiary or caregiver 
purchases at a local pharmacy or supplier storefront rather than having 
the item delivered to the beneficiary's home. For round 1 of the 
program, this means that beneficiaries that do not obtain their testing 
supplies through mail order may purchase these items at a local 
pharmacy or local storefront. Therefore, the only items excluded from 
the mail order definition and mail order competition would be those 
that a beneficiary or caregiver purchases at a local pharmacy or local 
supplier storefront and are not delivered to the beneficiary's home. 
These revised definitions of mail order item and non-mail order item 
are intended to clearly identify which items is truly mail order. In 
addition, we believe this definition will preserve the choice of the 
beneficiary to obtain replacement diabetic supplies in person from a 
local pharmacy and eliminate the circumvention of the mail order 
program.
    As previously discussed, for Round 1 and the Round 1 Rebid of the 
DMEPOS CBP, we defined mail order contract supplier in our regulations 
at Sec.  414.402 to mean a contract supplier that furnishes items 
through the mail. We further defined mail order in program

[[Page 73570]]

instructions to mean ``items ordered remotely (that is, by telephone, 
e-mail, internet or mail) and delivered to beneficiary's residence by 
common carriers (for example, U.S. Postal Service, Federal Express, 
United Parcel Service) and does not include items obtained by 
beneficiaries from local storefronts.'' The intent of the Round 1 
definition was to distinguish between mail order supplies (items 
shipped or delivered directly to the beneficiary's home, regardless of 
the method of delivery) and non-mail order supplies (items that a 
beneficiary or caregiver picks up in person at a local pharmacy or 
storefront). Manufacturers and suppliers of blood glucose monitors and 
test strips have expressed on numerous occasions the importance of 
maintaining the patient option of obtaining diabetic testing supplies 
from a local pharmacy that provides full time access to a licensed 
pharmacist who can provide instructions and guidance to the beneficiary 
or caregiver related to the use of the diabetic supplies (the pharmacy 
pickup option). This is the ``non-mail order'' option we attempted to 
separate from the mail order option with the Round 1 definition of mail 
order.
    During implementation of Round 1 of the program, we discovered that 
suppliers that did not successfully compete and win a contract under 
the program tried to adopt certain approaches to circumvent the mail 
order definition. In the first round of competitive bidding, suppliers 
that lost their bid to be a contract supplier for mail order diabetic 
testing supplies considered ways to change their delivery methods to 
circumvent the mail order DMEPOS CBP. For example, some mail order 
suppliers considered purchasing a fleet of cars to deliver these items 
to the beneficiary's home so as not to be considered a mail order 
supplier. Other suppliers attempted to enter into special ``private'' 
arrangements with well known delivery services and claimed that because 
of such arrangements they should not be considered mail order 
suppliers. These alternative home delivery methods do not provide any 
benefits to the patient beyond what the traditional mail order home 
delivery method offers. They are simply ways to continue furnishing 
diabetic supplies on a home delivery basis after submitting a bid for 
mail order that does not result in the award of a contract under the 
DMEPOS CBP. Without a clear distinction between mail order (home 
delivery option) and non-mail order (pharmacy pickup option), suppliers 
could continue to attempt to make arrangements as they did in the 
initial Round 1 competition to circumvent the DMEPOS CBP. We consider 
these practices to be inconsistent with the DMEPOS CBP statute and 
regulations currently in effect, and our proposal is intended to 
further clarify the existing definition of mail order. Such 
arrangements prevent beneficiaries and the Medicare program from 
realizing savings afforded by the mail order DMEPOS CBP and is unfair 
to winning suppliers who bid in good faith for a contract for 
furnishing supplies to the home delivery market.
    This proposed definition of mail order item would not apply to the 
Round 1 Rebid competition because of the specific requirement of MIPPA 
to rebid Round 1 in 2009 for the same items and services included in 
the initial Round 1 competition. However, for a national competition, 
it is imperative that the new definition of mail order item be in place 
because of the implications such a program would have on the entire 
mail order delivery market in the United States. In these future 
competitions, we will continue to emphasize in our educational efforts 
the basic distinction between mail order (items shipped or delivered to 
the beneficiary's home, regardless of the method of delivery) and non-
mail order (items that a beneficiary or caregiver picks up in person at 
a local pharmacy or storefront). In addition, we will continue to take 
appropriate and necessary action against suppliers that furnish mail 
order items and bill for them as if they were non-mail order items.
    As previously mentioned, an alternative DMEPOS CBP for replacement 
diabetic supplies would be to hold a national competition among all 
types of suppliers for all replacement diabetic supplies. One benefit 
to this approach is that it would eliminate the need to differentiate 
between mail order and non-mail order supplies; however, it would 
likely eliminate the pharmacy pickup choice since most local pharmacies 
would not be able to service the entire CBA if they did not also 
operate a national mail order service.
    We solicited comment on our proposed definition of ``mail order'' 
and its impact on future rounds of bidding. We received several 
comments regarding the proposed definition of mail order both in favor 
of and against the definition.
    Comment: Several commenters agreed with the proposed definition 
because they believe it will result in a clear distinction between mail 
order and non-mail order and reduce the ability of suppliers to game 
the program. A few commenters opposed the proposed change in definition 
stating that the definition is too broad and therefore, could be 
applied to any DMEPOS item delivered to a patient's home.
    Response: We agree that it is important to revise the definition of 
mail order to make a clear distinction between mail order and non mail 
order. We believe we cannot make the necessary distinction between mail 
order and non-mail order under our current definition. With the revised 
definition, beneficiaries will have a clear choice to make; they or 
their caregiver can either go to a retail store or get their items 
shipped or delivered to their home by any means. If they choose to get 
their items delivered to their home they would have their supplies 
delivered by a DMEPOS contract supplier who meets our qualifications to 
be a mail order supplier of diabetic testing supplies. We agree that 
the definition is broad with respect to DMEPOS items in general. 
However, for the reasons previously stated, we believe it is necessary 
to have this specific definition of mail order item for diabetic 
testing supplies that includes any item shipped or delivered to the 
beneficiary's home, regardless of the method of delivery. However, 
competitions for mail order items may not be necessary or appropriate 
for rented equipment or for items that require the presence of the 
supplier in the home for inspection, equipment set up, and other 
purposes. We believe that mail order competitions may be more 
appropriate for purchased items that do not require these in home 
services.
    Comment: Several commenters advocated for exemption from bidding as 
a local storefront and from the program when providing diabetic testing 
supplies delivered to the patient's home. These commenters believe that 
this service is necessary for some beneficiaries who have difficulty 
getting to a pharmacy. The commenters stated that the proposed 
definition of mail order prevents them from continuing to service snow 
bird beneficiaries. The commenter supported the policy that independent 
pharmacies do not have to bid to continue to provide diabetic testing 
supplies to beneficiaries that come into their store, but they would 
also like to continue to provide supplies to these beneficiaries via 
mail when they temporarily relocate as a snowbird. Several commenters 
also stated that they would like CMS to exempt from competitive bidding 
companies that deliver diabetic testing supplies directly to a 
beneficiary's home using their specially trained employees.
    Response: We disagree. We do not believe that such an exception is

[[Page 73571]]

warranted because contract suppliers will be able to deliver these 
items to the beneficiary's home in these situations. If the beneficiary 
or their caregiver would normally pick up the beneficiary's supplies in 
person at a local pharmacy they may switch for any reason or any period 
of time and obtain these items from a contract mail order supplier. 
Delivery of the supplies from a local store is no different than 
delivery thru the mail or some other means from a remote location. It 
would be unfair to exempt these companies from competitive bidding 
while still allowing them to provide these items when they deliver them 
to the patient's home. We believe that home delivery companies should 
have to bid in the DMEPOS CBP and be awarded a contract to continue to 
deliver these items to the home. We are not aware of what services are 
being provided by the specially trained employees that commenters refer 
to that are different than services that a mail order contract supplier 
would perform. The contract suppliers must meet all of the supplier and 
quality standards necessary for furnishing the items. The supplier of 
the glucose monitor is responsible for ensuring that the beneficiary is 
educated and trained on the use of their monitor. Since there are no 
in-home services necessary for furnishing replacement diabetic testing 
supplies, we do not understand the point these commenters are trying to 
make. We believe that mail order suppliers are qualified and capable of 
providing any education and services related to the furnishing of the 
replacement diabetic testing supplies. Finally, it is important to note 
that our current rules provide great flexibility in arranging for the 
furnishing of replacement diabetic testing supplies. The program allows 
beneficiaries to receive a 3-month supply of diabetic test strips and 
beneficiaries can order and obtain their supplies 5 days in advance of 
the start of the next 3-month period.
    Comment: Several commenters stated that mail order companies 
provide the same type of instruction and guidance that local pharmacies 
provide by offering hotlines, working with patients to educate and 
coach them on the use of glucose monitors, and continued patient 
counseling and monitoring.
    Response: As previously discussed, we believe that mail order 
suppliers are qualified and capable of providing any necessary services 
related to the furnishing of replacement diabetic testing supplies. The 
same supplier standards and quality standards that apply to local 
storefronts that furnish these items also apply to mail order 
suppliers. Local home delivery companies state that because they have 
local presence they can offer better service from specially trained 
employees to meet the needs of the beneficiaries. We believe that 
employees of mail order companies are also well trained and both 
companies train their employees to address beneficiaries' needs.
    After consideration of the public comments received, we are 
finalizing our proposal without modification.
(3) Special Rule in Case of Competition for Diabetic Testing Strips
    Following Round 1 Rebid of the program, any competition for 
diabetic testing strips, such as a national mail order program for 
diabetic testing supplies proposed in this rule, must include the 
special rule set forth in section 1847(b)(10)(A) of the Act. Under that 
section, a supplier must demonstrate that their bid to furnish diabetic 
testing strips covers the furnishing of a sufficient number of 
different types of diabetic testing strip products that, in the 
aggregate and taking into account volume for the different products, 
account for at least 50 percent of all such types of products on the 
market. Section 1847(a)(10)(A) of the Act also specifies that the 
volume for the different products may be determined in accordance with 
data (which may include market based data) recognized by the Secretary. 
When a beneficiary needs to obtain replacement test strips, they must 
obtain the specific brand of test strips products that work with their 
brand and model of blood glucose monitor. The test strips are not 
manufactured in a way that allows use of different brands of test 
strips in different brands of monitors. Therefore, when replacement 
test strips are furnished, the supplier must ensure that the specific 
brand and model of test strips that the patient requires for use with 
their purchased monitor is furnished.
    Section 1847(b)(10)(B) of the Act mandates the DHHS OIG conduct a 
study before 2011 to generate volume data for the various products that 
could be used for this purpose.
    Under the DMEPOS CBP, bidding suppliers are required to provide 
information on the products they plan to furnish if awarded a contract. 
We proposed to use this information and information on the market share 
(volume) of the various diabetic testing strip products to educate 
suppliers on meeting the requirements of this special rule. In 
addition, it may be necessary to obtain additional information from 
suppliers such as invoices or purchase orders to verify that the 
requirements in the statute have been met.
    We proposed that suppliers be required to demonstrate that their 
bids cover the minimum 50-percent threshold provided in the statute, 
but we invited comments on whether a higher threshold should be used. 
We have proposed the 50-percent threshold in part because we believe 
that all suppliers have an inherent incentive to furnish a wide variety 
of types of diabetic testing products to generate a wider customer 
referral base. The 50-percent threshold would ensure that beneficiaries 
have access to mail order delivery of the top-selling diabetic test 
strip products. In addition, as explained below, we proposed an ``anti-
switching provision'' that we believe should obviate the need to 
establish a threshold of greater than 50 percent for the purpose of 
implementing this special rule because the contract suppliers would not 
be able to carry a limited variety of products and switch beneficiaries 
to those products.
    For purposes of implementing the special rule in section 
1847(b)(10)(A) of the Act, we proposed to define ``diabetic testing 
strip product'' as a specific brand and model of test strip, as that is 
the best way to distinguish among different products. Therefore, we 
plan to use market based data for specific brands and models of 
diabetic test strips to determine the relative market share or volume 
of the various products on the market that are available to Medicare 
beneficiaries. We plan to review a variety of data, including but not 
limited to data furnished in the OIG report, to determine the market 
share of the various products. The special rule mandated by section 
1847(b)(10)(A) of the Act applies to all competitions for diabetic 
testing strips after the Round 1 Rebid of the DMEPOS CBP. Therefore, we 
would apply this rule to non-mail order competitions and local 
competitions conducted for diabetic testing strips after the Round 1 
Rebid of the DMEPOS CBP.
    Comment: Several commenters supported the requirement for suppliers 
to demonstrate that their bids cover 50 percent of the diabetic testing 
strips on the market. Other commenters noted problems associated with 
implementing the 50-percent rule. A few commenters stated that this 
rule provides an advantage to large manufacturers by encouraging 
suppliers to carry more of their products and disadvantages small 
manufacturers with limited product lines.
    Response: This special rule is mandated by the statute which 
stipulates a supplier must demonstrate

[[Page 73572]]

that its bid to furnish diabetic testing strips covers the furnishing 
of a sufficient number of different types of diabetic testing strip 
products that, in the aggregate and taking into account volume for the 
different products, to account for at least 50 percent of all such 
types of products on the market. Suppliers are able to decide from 
which manufacturers to obtain their diabetic testing supplies from, but 
we are required to ensure that suppliers are in compliance with the 
special rule before awarding a contract to them under the DMEPOS CBP.
    Comment: Several commenters are concerned that products developed 
between bidding cycles will be frozen out of the program for up to 3 
years and suppliers could be discouraged from offering new products 
until the next bidding cycle or up to 3 years after the product's 
release.
    Response: We disagree that the 50-percent rule creates a 
disincentive for manufacturers and innovators to develop new and 
progressive technology. This rule does not prevent suppliers from 
offering new products to their customers. In fact, suppliers may choose 
to offer new products in order to gain market share under the DMEPOS 
CBP. In addition, we believe that the anti-switching rule would create 
a strong incentive for contract suppliers to carry a wide range of 
products well beyond the 50-percent threshold in order to increase 
their volume of business. Contract supplier would have to carry the 
brand test strips that work with new products that are successfully 
marketed to Medicare beneficiaries.
    Comment: Several commenters stated that the minimum 50-percent 
threshold required by the statute may be insufficient to ensure that 
suppliers carry a wide array of available products. Other commenters 
recommended that CMS require suppliers to carry a more clinically 
diverse array of products. Without this change they believe suppliers 
could limit the range of diabetic testing supplies by only offering the 
lowest cost versions of those supplies.
    Response: We disagree. We believe that the 50-percent threshold is 
sufficient to ensure that contract suppliers offer the products that 
physicians and beneficiaries prefer because it will be extremely 
difficult for suppliers to limit the number of products they offer to 
the lowest cost versions unless those are also the top selling 
products. We believe that the top selling products are widely used 
because physicians and beneficiaries prefer them rather than because 
they are the cheapest products available. We do not believe that 
physicians and pharmacists would continue to recommend products to 
beneficiaries if they did not meet the needs of the specific 
beneficiaries. Likewise, we do not believe that beneficiaries who 
choose certain products would continue to use those products and make 
them top-selling products if they did not adequately meet their needs. 
Due to widespread manufacturer rebates, trade-ins, and other discounts, 
beneficiaries and other consumers are able to purchase new glucose 
monitor products at little or no cost. Therefore, beneficiaries who are 
unhappy with their choice of glucose monitor product, can easily switch 
to another brand of monitor. It would be extremely difficult for 
suppliers who only elect to furnish products that are not top-selling 
products to reach the 50-percent threshold.
    Comment: One commenter stated that the 50-percent rule is a strong 
beneficiary protection and that the 50-percent rule will not work 
without enforcement of the anti-switching rule.
    Response: We agree that the 50-percent threshold would ensure that 
beneficiaries have access to mail order delivery of the top-selling 
diabetic test strip brands and models. We also agree that the 50-
percent rule would be more effective with implementation of the anti-
switching rule.
    Comment: One commenter recommended that when CMS determines the 
product list they should identify the brands and products that have 
been furnished through the mail. This is important because market share 
data for mail order and retail medical supply establishments are not 
the same.
    Response: We agree. The DHHS OIG is conducting a study to generate 
volume data for various diabetic testing strip products furnished on a 
mail order basis. We will use this data in providing guidance to 
implement this special rule for mail order contract suppliers to ensure 
that their bids cover at least 50 percent of the volume of testing 
strip products currently furnished to beneficiaries via mail order. The 
OIG is required to complete their study before 2011 and will make their 
data available to the public.
    Comment: A few commenters believe that the proposed rule does not 
indicate how CMS will determine compliance with the percentage 
standard. The commenters urge CMS to do more than analyze a supplier's 
bid to determine compliance. They suggest CMS develop mechanisms to 
``look back'' at a supplier's actual performance over a period of time, 
preferably on a monthly basis for the first year of the program's 
operation. Also, CMS could review supplier's records, such as invoices 
and purchase orders, to verify compliance with the requirement.
    Response: We agree with this comment and the need for CMS to ensure 
compliance with the special rule. Suppliers will be required to submit 
information to document that their bid covers at least 50 percent of 
the products available to beneficiaries. In addition, contract 
suppliers will be required to submit quarterly reports that include 
information on the items that the contract supplier has furnished for 
the quarter. These quarterly reports will indicate the approximate 
number of items furnished, manufacturer, model and model number of the 
items furnished. The quarterly reports will enable us to monitor access 
to different products under the program.
    Comment: One commenter stated that the 50-percent rule fails to 
meets the non-discrimination requirement.
    Response: We disagree. The non-discrimination requirement does not 
conflict with the 50-percent rule. Contract suppliers must furnish the 
same products to Medicare patients that they furnish to their other 
customers and these products must make up at least 50 percent of the 
volume of items available. Neither requirement prevents the supplier 
from meeting the other requirement. The non-discrimination requirement 
will be fully enforced along with the special 50-percent rule.
    Comment: A commenter recommended that CMS consult with patient 
advocates, providers, and industry experts to determine whether the 
methodology used by CMS for determining the different types and amounts 
of products on the market is consistent with what is actually available 
to Medicare beneficiaries today.
    Response: We agree and will consider whether or not it is necessary 
to consult with patient advocates, providers, and industry experts to 
determine the types and volume products available to Medicare 
beneficiaries. The statute also mandates that the OIG conduct a study 
to generate volume data for various diabetic testing strip products 
that could be used to make this determination.
    Comment: A commenter suggested that CMS should consider adopting a 
generic substitution requirement for diabetic testing supplies.
    Response: This comment is outside the scope of this rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification.

[[Page 73573]]

(4) Anti-Switching Rule in Case of Competition for Diabetic Test Strips
    As previously noted, we believe that an anti-switching requirement 
will help ensure compliance with the 50-percent rule and creates an 
incentive for contract suppliers to offer a wide variety of testing 
strip products. Therefore, we proposed to prohibit suppliers awarded 
contracts for diabetic testing supplies from influencing or 
incentivizing the beneficiary by persuading, pressuring, or advising 
them to switch from their current brand or for new beneficiaries from 
their preferred brand of glucose monitor and testing supplies. The 
contract supplier may not furnish information about alternative brands 
to the beneficiary to influence the beneficiary's decision unless the 
beneficiary requests such information. We proposed that contract 
suppliers for diabetic testing supplies must furnish the brand of 
diabetic testing supplies that work with the home blood glucose monitor 
selected by the beneficiary. In the case where the beneficiary is 
receiving a monitor for the first time or a replacement monitor, the 
contract supplier would be subject to the requirements of Sec.  414.420 
in order to protect beneficiaries from feeling forced or incentivized 
to use a particular type or brand of monitor. We continue to believe 
the proper role of the contract supplier is to furnish diabetic testing 
strips and other supplies to beneficiaries, not to interfere with the 
beneficiary's selection of the type of monitor and supplies. This 
requires the supplier to furnish the brand of testing supplies that 
work with the blood glucose monitor product that the beneficiary, and 
not the supplier of the testing supplies, selects. If the beneficiary 
needs a blood glucose monitor for the first time, or needs to replace 
their existing blood glucose monitor, and neither the beneficiary nor 
their physician has determined which brand or type of monitor to 
obtain, the beneficiary may continue to ask for assistance from the 
supplier to select a monitor and the supplier should show them the full 
range of products. However, if the beneficiary has already selected a 
monitor and simply needs replacement diabetic testing supplies, the 
supplier must furnish the brands of testing supplies that work with the 
brand monitor that the beneficiary has selected. We believed that our 
proposal would preserve the integrity of the clinical decision 
regarding choice of glucose monitoring system and would result in 
contract suppliers offering a wide variety of diabetic testing supply 
products.
    We proposed to amend Sec.  414.422 to add the anti-switching 
requirement to the terms of the contract for a supplier of diabetic 
testing supplies. A supplier would be in breach of their contract and 
subject to the sanctions set forth under Sec.  414.423(g), including 
termination, if they violate this term.
    Comment: Numerous commenters stated that CMS should adopt a strong 
anti-switching rule and stated that this rule is an important 
improvement to the DMEPOS CBP and will protect beneficiaries' access to 
supplies.
    Response: We agree that the anti-switching rule will help protect 
beneficiaries from being influenced or incentivized to use a particular 
type of brand of glucose monitor.
    Comment: One commenter also recommended that the anti-switching 
rule should be actively monitored to ensure that beneficiaries are 
adequately protected.
    Response: We agree. The anti-switching rule will be actively 
monitored by requiring contract suppliers to submit quarterly reports 
that include information of the items that the contract supplier has 
furnished for the quarter. We will be analyzing the quarterly reports 
to determine changes in the rates that various brands are provided. We 
will also be monitoring beneficiary complaints to determine if this is 
an issue.
    Comment: One commenter stated suppliers should be required to 
submit evidence to CMS such as copies of agreements with manufactures 
to demonstrate how they will obtain adequate quantities of testing 
supplies in order to furnish the supplies sought by beneficiaries in a 
timely manner. This is to prevent suppliers from influencing a 
beneficiary's choice of products by not being able to fill certain 
orders.
    Response: We disagree. The anti-switching rule does not require the 
supplier to increase their capacity for furnishing sufficient 
quantities of all of the various products available. It is intended to 
prevent the supplier from actively influencing or incentivizing the 
beneficiary to switch to a different glucose monitor product. If the 
contract supplier does not stock a specific product or is out of 
inventory of a specific product they carry and which the beneficiary 
needs, the beneficiary can go to any other contract supplier to see if 
they carry the product they need in stock.
    Comment: A few commenters were concerned about the anti-switching 
rule because they believe that this rule will prevent suppliers from 
consulting with beneficiaries regarding the various features of the 
different products and the selection of diabetic supplies that best 
meet the patient's needs.
    Response: The anti-switching policy impacts those beneficiaries who 
are already using a specific monitor or whose physician ordered a 
specific brand. The anti-switching policy prevents suppliers from 
influencing or incentivizing beneficiaries to switch monitors. This 
policy has no impact on situations where the beneficiary has not yet 
selected a monitor or initiates discussions with the supplier about 
changing to a new type of monitor.
    Comment: One commenter stated that the anti-switching rule prevents 
beneficiaries from having access to lower cost glucose monitors and 
test strips, unless they specifically request information about less 
costly alternatives from their supplier. In addition, the commenter 
stated that the DMEPOS CBP should provide incentives to use lower cost 
alternatives and not prohibit their use.
    Response: We disagree. The purpose of this policy is to prevent 
beneficiaries from being influenced to switch from their current brand 
to a lower cost brand to increase a supplier's profit. The 
beneficiary's choice should not be influenced by the supplier's ability 
to obtain the product at a lower cost, rather than the product that the 
beneficiary prefers. This policy does not prevent a beneficiary from 
initiating a discussion with suppliers or their physician to determine 
the most appropriate brand. The contract supplier can discuss the 
features or how to operate the glucose monitor selected by the 
beneficiary, even if information is not requested by the beneficiary.
    Comment: One commenter stated that CMS should enforce the anti-
switching rule by prohibiting mail order suppliers from counseling 
patients on blood glucose monitors and supplies, pre-approving 
suppliers' marketing materials and establishing a hotline for 
beneficiaries.
    Response: We disagree. As previously stated, the contract supplier 
can discuss the features or how to operate the glucose monitor selected 
by the beneficiary even if this information is not requested by the 
beneficiary. We established a 1-800 Medicare number which is a 
beneficiary dedicated hotline that beneficiaries are to call when they 
have questions or concerns related to their Medicare needs. In 
addition, the presence of local ombudsman will be available for 
beneficiaries and suppliers for their Medicare related needs when the 
DMEPOS CBP is implemented.
    Comment: One commenter recommended that CMS take steps to

[[Page 73574]]

appropriately inform and educate beneficiaries in advance about their 
rights under the anti-switching provisions. The commenter also 
recommended that a special education effort be implemented during the 
new Round 1 Rebid and any future rounds of bidding aimed at eliminating 
any confusion that beneficiaries have regarding their ability to 
continue receiving their replacement supplies at their retail 
pharmacies.
    Response: We agree. We have designed and will conduct an extensive 
beneficiary educational campaign on the Round 1 Rebid. In addition, for 
future rounds of competition we will continue to conduct future 
educational campaigns to educate beneficiaries on all aspects of the 
program, including the anti-switching provisions and the 50-percent 
rule.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification
c. Off-the-Shelf (OTS) Orthotics Exemption
    In the April 10, 2007 final rule (72 FR 17992), we established 
Sec.  414.404(b)(1), which sets forth several exemptions to the DMEPOS 
CBP. These exceptions are applicable to providers, physicians, and 
treating practitioners that furnish certain DMEPOS items under Medicare 
Part B. The exempted items are limited to crutches, canes, walkers, 
folding manual wheelchairs, blood glucose monitors, and infusion pumps 
that are DME. For an explanation as to why these items were exempt see 
the DMEPOS Competitive Bidding final rule (CMS-1270-F) published April 
10, 2007, (72 FR 17992). For the exemptions to apply, the items must be 
furnished by a physician or treating practitioner to his or her own 
patients as part of his or her professional service. The items are to 
be billed under a billing number assigned to the physician, the 
treating practitioner (if possible), or a group practice to which the 
physician or treating practitioner has reassigned the right to receive 
Medicare payment.
    The April 10, 2007 final rule also established an exemption for a 
physical therapist in private practice (as defined in Sec.  410.60(c)) 
or an occupational therapist in private practice (as defined in Sec.  
410.59(c)) to furnish competitively bid OTS orthotics without 
submitting a bid and being awarded a contract under the DMEPOS CBP, 
provided that the items are furnished only to the therapist's own 
patients as part of a physical or occupational therapy service.
    Section 154(d) of MIPPA amended section 1847(a) of the Act by 
adding paragraph (7), which expands the exemptions from the DMEPOS CBP 
for certain OTS orthotics to physicians or other practitioners (as 
defined by the Secretary) if furnished to their own patients as part of 
their professional service. Section 1847(a)(7) of the Act, as added by 
MIPPA, also expanded the exemption from the program to hospitals for 
certain OTS orthotics, crutches, canes, walkers, folding manual 
wheelchairs, blood glucose monitors, and infusion pumps if these items 
are furnished to the hospital's own patients during an admission or on 
the date of discharge.
    The DMEPOS CBP Round 1 Rebid interim final rule with comment period 
(IFC) included the expanded exemption for certain DMEPOS items as 
provided by MIPPA for hospitals. We noted in the IFC that we would 
address the expanded exemption of OTS orthotics for hospitals, 
physicians and other practitioners in future rulemaking.
    We proposed to revise current provisions at Sec.  414.404(b)(1)(i) 
to incorporate the provision of section 1847(a)(7)(A)(i) and (ii) of 
the Act that exempts from the program OTS orthotics furnished by 
physicians and other practitioners to their own patients as part of 
their professional service or by hospitals to the hospital's own 
patients during an admission or on the date of discharge.
    Comment: One commenter submitted a question requesting 
clarification on whether a supplier owned by a hospital or provider 
affiliated with a hospital would qualify for the hospital exemption.
    Response: The OTS orthotics exemption for hospitals is limited to 
hospitals that furnish OTS orthotics to their own patients during an 
admission or on the date of discharge. The exemption for a hospital 
does not apply to suppliers or providers owned by or affiliated with a 
hospital. This exemption applies only to entities that meet the 
definition at section 1861(e) of the Act.
    Comment: One commenter suggested that CMS include small independent 
pharmacies in the definition of ``other practitioners'' and exempt OTS 
orthotics furnished by small independent pharmacies from bidding and 
contract requirements under the DMEPOS CBP.
    Response: We disagree. There are several factors we consider in 
determining which suppliers qualify for an exemption. As discussed in 
the April 10, 2007, Federal Register (72 FR 18029) we exempted physical 
and occupational therapists, from bidding in the DMEPOS CBP and being 
awarded a contract so that they could continue to provide competitively 
bid OTS orthotics to their own patients when these items are furnished 
as part of their professional service. MIPPA has extended this 
exemption to include OTS orthotics furnished by physicians, certain 
other practitioners, and hospitals to their own patients. The MIPPA 
expanded exemption does not include OTS orthotics furnished to the 
general public by suppliers such as pharmacies. Therefore, we do not 
agree that this exemption should be applied to small independent 
pharmacies who sell these products to the general public and they are 
not furnished as an integral part of a treatment service furnished by 
the pharmacy. Also, the term treating practitioner is defined at Sec.  
414.402 of the regulations and includes physician assistants, nurse 
practitioners, and clinical nurse specialists in accordance with the 
definition of these terms as defined at section 1861(aa)(5) of the Act. 
We do not believe that the statutory language that extended the OTS 
orthotic exemption to physicians, certain other practitioners, and 
hospitals was intended to extend the exemption to small independent 
pharmacies that provide products to the general public.
    Comment: One commenter supported the OTS orthotics exemption for 
physicians, practitioners, and hospitals.
    Response: We agree.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification.
d. Grandfathering Rules Resulting in Additional Payments to Contract 
Suppliers Under the DMEPOS Competitive Bidding Program (CBP)
    Section 1847(a)(4) of the Act requires that in the case of rented 
DME and oxygen and oxygen equipment, the Secretary shall establish a 
``grandfathering'' process. This requirement was implemented through 
regulations at Sec.  414.408(j) that were published in the April 10, 
2007 Federal Register (72 FR 17992). The grandfathering process allows 
beneficiaries who were renting DME items or receiving oxygen and oxygen 
equipment prior to the start of a DMEPOS CBP from a supplier who did 
not win a contract to continue to rent the equipment from that 
noncontract supplier if that supplier chooses to become a grandfathered 
supplier. Under Sec.  414.408(i)(2), when the beneficiary decides to 
use a contract supplier instead of a grandfathered supplier to receive 
their oxygen equipment and supplies, the contract supplier receives

[[Page 73575]]

a minimum of 10 monthly payments for taking over the furnishing of 
oxygen and oxygen equipment. When a beneficiary decides to use a 
contract supplier to furnish capped rental DME, section Sec.  
414.408(h)(2) restarts the 13-month capped rental period. These rules 
were established, in part, based on advice from the Program Advisory 
and Oversight Committee (PAOC) and are intended to give bidding 
suppliers an assurance that they would be compensated in these 
situations and would not have to factor into their bids the cost of 
receiving as few as one monthly payment for beneficiaries near the end 
of the 13-month cap for capped rental items and 36-month cap for oxygen 
equipment.
    At the time these rules were developed, the supplier was mandated 
by the statute to transfer title to the equipment to the beneficiary 
after the both the 13-month cap for capped rental items and the 36-
month cap for oxygen equipment. Section 144(b) of the MIPPA repealed 
the transfer of title requirement for oxygen equipment, as established 
by DRA, replacing that requirement with the 36-month rental cap. Under 
the revised oxygen payment provisions, suppliers now get the equipment 
back when the beneficiary no longer needs it. Also, at the time these 
rules were developed, the beneficiary had the option to acquire 
standard power wheelchairs on a lump sum purchase basis, an option 
which greater than 95 percent of the beneficiaries selected, based upon 
historic claims data. Therefore, those items generally would not be 
affected by the grandfathering rules. However, as discussed in section 
VI.V. of this final rule with comment period, section 3136 of the 
Affordable Care Act eliminates the lump sum purchase option for 
standard power wheelchairs. This new policy applies to items furnished 
under the DMEPOS CBP beginning with Round 2 of the program. Over 
200,000 beneficiaries received standard power wheelchairs nationwide in 
2009, and the Medicare allowed charges for these wheelchairs was over 
$650 million, including both rental and purchase options. Therefore, 
this large volume of capped rental items will be subject to the 
grandfathering rules effective with Round 2 of the DMEPOS CBP, thus 
increasing the overall magnitude of the effect these rules have on the 
program and beneficiaries.
    In some cases, the grandfathering rules described above place a 
financial burden on beneficiaries who are near the end of the 13 or 36-
month rental cap periods. If a beneficiary's existing supplier chooses 
not to be a grandfathered supplier, the beneficiary will be required to 
switch to a contract supplier in order for Medicare to continue to pay 
for the furnishing of the rental equipment. In such cases, the 
beneficiary will be responsible for additional co-insurance amounts. 
Based on experience from the initial Round 1 competition in 2008, we 
believe that most suppliers will choose to grandfather and therefore 
these rules will have no impact on these situations. However, in those 
limited situations in which the beneficiary does not use a 
grandfathered supplier and the beneficiary is near the end of the 13 or 
36-month rental cap period, the impact on the beneficiary could be 
significant. As mentioned above, our current grandfathering rules will 
result in a limited number of beneficiaries facing additional co-
insurance payments. To illustrate the impact some beneficiaries may 
face as a result of these rules, a beneficiary who has already made 12 
coinsurance payments for a capped rental item could make as many as 12 
additional copayments as a result of restarting the capped rental 
period when they transition from a noncontract supplier to a contract 
supplier at the beginning of a DMEPOS CBP. In another example, a 
beneficiary who has already made 35 coinsurance payments for oxygen and 
oxygen equipment could make as many as 9 additional copayments as a 
result of the rule that provides a minimum of 10 monthly payments when 
they transition from a noncontract supplier to a contract supplier at 
the beginning of a DMEPOS CBP. As stated above, we expect that most 
noncontract suppliers will choose to become grandfathered suppliers, 
therefore limiting the number of instances where these rules would 
apply. However, in light of the beneficiary impact in the those extreme 
cases illustrated above, and in light of the recent legislative changes 
by the MIPPA and the Affordable Care Act as explained above, we are 
reevaluating whether or not changes to these grandfathering rules are 
necessary. As discussed above, as a result of the MIPPA, suppliers of 
oxygen equipment no longer lose title to the equipment after receiving 
the 36th payment and this may warrant reconsideration of the minimum 
number of payments they should receive as contract suppliers when a 
beneficiary transitions to them from a noncontract supplier at the 
beginning of a DMEPOS CBP. In addition, we believe it is important to 
reevaluate the policy that restarts the 13-month capped rental period 
in situations where a beneficiary transitions from a noncontract 
supplier to a contract supplier at the beginning of a DMEPOS CBP.
    We received nine public comments on the grandfathering rules 
resulting in additional payments to contract suppliers under the DMEPOS 
CBP. In the proposed rule we solicited public comments on whether or 
not the current rules should be changed to reduce the number of 
payments the contract supplier would receive in these situations above 
the 13 and 36-month limits set forth under the standard payment rules 
in section 1834(a) of the Act. We requested comments only and did not 
propose any regulation changes. Therefore, the comments received will 
be taken into consideration in future proposed rulemaking.
e. Appeals Process
    The April 10, 2007 DMEPOS CBP final rule finalized Sec.  
414.422(g)(1), which states that ``any deviation from contract 
requirements, including a failure to comply with governmental agency or 
licensing organization requirements, constitutes a breach of 
contract.'' In the event we determine that a contract supplier's 
actions constitute a breach of contract, Sec.  414.422(g)(2) authorizes 
us to take one or more of the following actions:
    <bullet> Require the contract supplier to submit a corrective 
action plan.
    <bullet> Suspend the contract supplier's contract.
    <bullet> Terminate the contract.
    <bullet> Preclude the contract supplier from participating in the 
DMEPOS CBP.
    <bullet> Revoke the supplier number of the contract supplier, or
    <bullet> Avail itself of other remedies allowed by the statute.
    We proposed to add a new Sec.  414.423 to establish an appeals 
process for contracts terminated under section 1847(a) and (b) of the 
Act. Proposed Sec.  414.423 would set forth policies and procedures 
relating to our determinations of a breach of contract and the appeals 
process for contract suppliers that are considered to be in breach of 
contract. In addition, we proposed to add new definitions to Sec.  
414.402 that are used in the proposed Sec.  414.423.
    Given the impact that termination has on a contract supplier, we 
believe it is appropriate for contract suppliers whose contract(s) may 
be terminated due to a breach of contract to have access to an appeals 
process that will reconsider that termination. In establishing this 
process we reviewed other appeals processes, such as the appeals 
process under Part D located at Sec.  423.641 through Sec.  423.668, 
Subpart N--Medicare

[[Page 73576]]

Contract Determinations and Appeals, to consider essential steps to 
ensure suppliers have access to an appropriate review of certain CMS 
decisions. We proposed a simplified process that would not result in 
disruption to the program by having suppliers going in and out of the 
program. For this reason, we proposed a process for review and 
reconsideration before the contract is actually terminated. This 
proposal would avoid the necessity to reinstate retroactively suppliers 
because the contracts would generally not be terminated before the full 
review process has occurred. This would protect the supplier because we 
generally would not terminate a supplier until a final decision is 
made. Another feature of this process that may be beneficial to some 
suppliers is allowing them to submit a corrective action plan (CAP) 
depending upon the nature of the breach. We believe our proposal would 
allow most suppliers to correct identified deficiencies.
(1) Purpose and Definitions: (Sec.  414.402)
    We are proposed to amend Sec.  414.402 to define the following 
terms:
    <bullet> Affected party means a contract supplier that has been 
notified that their DMEPOS CBP contract will be terminated for a breach 
of contract.
    <bullet> Breach of contract means any deviation from contract 
requirements, including a failure to comply with a governmental agency 
or licensing organization requirements.
    <bullet> Corrective Action Plan (CAP) means a contract supplier's 
written document with supporting information that describes the actions 
the contract supplier would take within a specified timeframe to remedy 
the breach of contract.
    <bullet> Hearing Officer (HO) means an individual, who was not 
involved with the CBIC recommendation to terminate a DMEPOS Competitive 
Bidding Program contract, who is designated by CMS to review and make 
an unbiased and independent recommendation when there is an appeal of 
CMS's initial determination to terminate a DMEPOS Competitive Bidding 
Program contract.
    <bullet> Parties to the hearing means the DMEPOS contract supplier 
and CMS.
(2) Applicability
    The appeals process proposed in this regulation would allow 
contract suppliers the opportunity for a review of the following:
    <bullet> A CMS determination under Sec.  414.422(g)(1) that the 
contract supplier breached its contract entered into as part of the 
DMEPOS CBP; and
    <bullet> Certain agency actions taken under Sec.  414.422(g)(2).
    The proposed appeals process would not apply to any other actions 
made by CMS, nor would the existence of other appeals processes 
preclude us from terminating a DMEPOS CBP contract. In other words, the 
proposed appeals process would be in addition to--and would not 
replace--existing CMS regulations regarding other appeals mechanisms. 
For example, a contract may be terminated because a supplier's National 
Supplier Clearinghouse (NSC) number has been revoked or inactivated. In 
this case, the supplier would not appeal the decision to inactivate or 
revoke its number through this appeals process. Instead, the supplier 
would continue to appeal the inactivation or revocation of its supplier 
number through the NSC's appeals process. We would postpone the 
contract termination decision until the supplier completes the NSC 
appeals process unless there are multiple findings of breach of 
contract.
    Under our proposal, when we issue a termination decision, it would 
be final and binding unless a postponement of the termination decision 
is allowed by proposed Sec.  414.423.
(3) Contract Termination
    We proposed that this appeals process applies in situations where 
the supplier has received a notice that we have determined that they 
are in breach of contract and that their contract is therefore subject 
to termination. A contract may be terminated for any violation of the 
terms of the contract. Examples of violations include, but are not 
limited to, situations where the contract supplier--
    <bullet> Has committed or participated in false, fraudulent, or 
abusive activities affecting the Medicare program, including the 
submission of false or fraudulent data or claims;
    <bullet> Experiences financial difficulties so that they are unable 
to effectively provide the necessary services to a Medicare 
beneficiary; or
    <bullet> Fails to meet the non-discrimination policy and provides 
different items to beneficiaries located in a competitive bidding area 
(CBA) than it provides to its non-Medicare beneficiaries at Sec.  
414.422(c).
(4) Notice of Termination
    We proposed that the CBIC would work with suppliers to informally 
resolve performance deficiencies under its DMEPOS CBP contract prior to 
sending a recommendation to CMS that the supplier's contract be 
terminated. If the CBIC cannot informally resolve the supplier's 
deficiencies and recommends that we terminate the supplier's contract, 
we will review the CBIC's recommendation to terminate the supplier's 
contract. If we find that a breach occurred, we would begin the 
contract termination process by sending out a notice of termination to 
the supplier.
    We also proposed requirements for the notice of termination so that 
suppliers are informed of the basis for CMS's action as well as their 
options to respond to this action. The notice would explain all actions 
we plan to take in response to the supplier's breach, such as the 
ability to submit a CAP or our determination to preclude a supplier 
from participating in future rounds of competitive bidding if found in 
breach of contract. If the supplier decides to appeal any of these 
decisions the supplier would submit an appeal in response to the notice 
to terminate. If we consider a supplier to be in breach of its 
contract, either in part or in whole, we would notify the contract 
supplier of the termination by certified mail. The notice would 
indicate that the contract supplier has been found to be in breach of 
contract and that the supplier's contract will be terminated within 45 
days of the date of the notification of termination. The notice would 
be sent by the CBIC using certified mail on the same date that the 
notification is signed. The notification will be mailed on the date 
that it is signed. This is the same date as indicated on the 
notification.
    Our proposal required the notice to include, at a minimum, the 
following information:
    <bullet> The reasons for the termination in sufficient detail to 
allow the contract supplier to understand the nature of its breach of 
contract;
    <bullet> Depending on the nature of the breach, whether the 
supplier may be allowed to submit a CAP in lieu of requesting a hearing 
by the HO;
    <bullet> The right to request a hearing by the HO;
    <bullet> The address to which the written request for a hearing 
must be mailed;
    <bullet> The address to which the CAP must be mailed; and
    <bullet> The effective date of the termination of the contract, if 
a CAP is not submitted or if a request for a hearing has not been filed 
timely.
    We believe that this information will be sufficient to provide the 
supplier with the basis for CMS's action, as well as their options in 
responding to our decision.
    In addition, our proposal required the notice to indicate any 
additional penalties that may result from the termination, such as, not 
being eligible

[[Page 73577]]

to bid in future rounds of competitive bidding. An appeal of the 
termination would include the appeal of any other results from the 
termination that are permissible under Sec.  414.423, such as 
preclusion from participation in future rounds of the DMEPOS CBP. We 
believe this information may help the supplier to decide whether to 
appeal the notice of termination.
(5) Corrective Action Plan
    We proposed a process by which a contract supplier may be able to 
submit a CAP to address the breach of contract. Depending on the nature 
of the breach of contract, we proposed that the notice to the supplier 
would indicate whether a contract supplier would be allowed to provide 
the CBIC with a written CAP instead of submitting a request for a 
hearing by a HO. For example, under this proposal we would not allow a 
CAP if the supplier has been excluded from any federal program, 
debarred by any federal agency, or convicted of a healthcare-related 
crime. We may also not allow a CAP that would result in negative 
consequences to the beneficiaries or the program caused by delaying the 
termination of the contract.
    We proposed the following timelines for situations where the 
contract supplier is allowed to provide a written CAP:
    <bullet> If the supplier decides to submit a CAP, the CAP must be 
received by the CBIC within 30 days from the date on the notice of 
termination.
    <bullet> If the supplier decides not to submit a CAP, the supplier 
retains the right to request a review by a HO within 30 days from the 
date of the notice of termination. While the CAP is being evaluated, 
the termination action would be postponed. We believe that 30 days is a 
sufficient amount of time for suppliers to prepare and submit a CAP and 
this would also ensure that there are no unnecessary delays in the 
appeals process.
    We proposed to require the CAP to demonstrate that the contract 
supplier has a plan to remedy all of the deficiencies that were 
identified in its notice of termination and must specify the timeframes 
for correcting these deficiencies. The CBIC would review the CAP to 
ensure that the contract supplier would be taking the appropriate 
measures in a timely manner to remedy the breach of contract. What 
constitutes a timely manner is dependent on the type of deficiency that 
is being corrected. Once the nature of the deficiency is identified the 
CBIC and CMS would make a case-by-case determination concerning what 
constitutes a timely manner for correcting the deficiency. However, we 
expect most deficiencies to be corrected within 90 days or less. 
Further guidance of what constitutes a timely manner would be 
communicated to the contract supplier by the CBIC as part of the review 
process.
    As part of the review process, the CBIC would provide guidance, in 
accordance with CMS instructions, regarding the type of documentation 
that the CAP and the follow up report must provide to substantiate that 
the deficiencies have been corrected. To make a determination if a CAP 
would be considered acceptable, we would discuss any deficiencies 
related to the CAP with the supplier, and as a result of these 
discussions, the CBIC may allow a supplier to make revisions to its CAP 
during the review process. Suppliers will only revise their CAP one-
time during the review process. The timeframe for the review process 
would vary upon the circumstances for each case. If the supplier does 
not submit an acceptable CAP during the review process, the supplier 
would receive a new notice that their CAP is not acceptable or has not 
been implemented consistent with the supplier's original submission and 
its contract would be terminated within 45 days. Every supplier that 
submits a CAP will have a one-time opportunity to revise their CAP 
based upon deficiencies identified by the CBIC. Failure to develop and 
implement an approved CAP would result in a new notice to the supplier 
of the termination of the DMEPOS CBP contract and provide notice that 
the supplier may request a hearing on this termination. We proposed 
that once an acceptable CAP has been completed the contract supplier 
must provide a follow-up report within 5 days of the agreed upon date 
for the completion of the CAP to verify that all of the deficiencies 
identified in the CAP have been corrected consistent with the 
timeframes specified in the CAP, as approved by the CMS. We believe 
that 5 days is a sufficient time for a supplier to submit a report to 
the CBIC outlining all steps that have been completed to correct the 
identified deficiencies.
(6) Right To Request a Hearing by the CBIC Hearing Officer (HO)
    We proposed that a contract supplier that has received a notice 
that we consider the supplier in breach of contract has the right to 
request a hearing before a HO who was not involved with the original 
breach of contract determination. We consider this process to be a 
reconsideration of the original decision, and, consistent with other 
Medicare appeals provisions, we believe it is important that an 
individual not involved in making the initial recommendation conduct 
the reconsideration of the initial decision. As mentioned previously, 
the HO would be an individual who is designated by CMS to review and to 
make an unbiased and independent recommendation of whether to terminate 
the supplier's DMEPOS CBP contract. The notice to the contract supplier 
would also identify the location to which a request for hearing must be 
sent.
    We proposed that a contract supplier may appeal the notice of 
termination by submitting a written request to the CBIC for a hearing 
by a HO. The written request should include any evidence to support its 
appeal. The HO is not required to allow evidence submitted in addition 
to evidence beyond the evidence submitted along with the written 
request. The hearing request must be received by the CBIC within 30 
days from the date of the termination letter. A request for a hearing 
must be sent to the address identified on the notice. Failure to 
request a hearing within the allotted 30 days would result in a 
termination of the supplier's contract, as of the effective date of 
termination identified in the notice to the supplier. There would be no 
extension to this 30-day timeframe. We believe suppliers have 
sufficient time to decide whether or not to request a hearing and the 
deficiencies identified in the notice may pose a risk to the DMEPOS 
CBP. The date the request is received by the CBIC determines if the 
hearing request was timely filed.
    We would require that the request for hearing be filed by a 
supplier's authorized official, because an authorized official of the 
company signed the contract and this ensures the validity of the 
request. The authorized official must be an official of the company who 
is identified on the supplier's CMS 855-S form as an authorized 
official of the supplier. A supplier may appoint someone other than the 
authorized official to be a representative for them at the hearing. 
However, the representative may not be an individual who has been 
disqualified or suspended from acting as a representative by the 
Secretary or otherwise prohibited by law. The request for a hearing 
must be filed with the CBIC at the address identified on the notice of 
termination.
(7) Scheduling of the Hearing
    We proposed that within 30 days from the receipt of a supplier's 
timely hearing request the HO would contact the parties to schedule a 
hearing. The request for a hearing would result in the

[[Page 73578]]

postponement of the date of the contract termination. The only 
exception to this rule is when a supplier has been excluded from any 
federal program, debarred by any federal agency, or convicted of a 
healthcare related crime; in that situation the supplier's contract 
would be terminated immediately. In the hearing request the contract 
supplier may ask for the hearing to be held in person or by telephone. 
The HO would send a notice to the parties to the hearing indicating the 
time and place for the hearing at least 30 days before the date of the 
hearing. The HO may, on his or her own motion, or at the request of a 
party, change the time and place for the hearing, but must give the 
parties to the hearing a 30 day notice of the change.
    We proposed to require that the HO's notice scheduling the hearing 
must provide, at a minimum, the following information:
    <bullet> Date, time, and location of the scheduled hearing;
    <bullet> Description of the hearing procedure;
    <bullet> Issues to be resolved;
    <bullet> Requirement that the contract supplier bears the burden of 
proof to demonstrate that it is not in breach of contract; and
    <bullet> Provide an opportunity for the supplier to submit 
additional evidence if requested by the HO.
    We believe this information provides the supplier with sufficient 
information regarding the hearing date, time, and matters that would be 
addressed at that time. We solicited comment on the content of this 
notice and the procedures for scheduling a hearing.
(8) Burden of Proof
    We proposed that the contract supplier would present to the HO the 
basis for its disagreement with the termination notice and would have 
the burden of proof to demonstrate to the HO with supporting evidence 
that it is not in breach of its contract and that the termination 
action is not appropriate. The supplier's supporting evidence must be 
submitted with its request for a hearing. The supporting evidence and 
the request for a hearing must be submitted together and received by 
the HO within 30 days from the date identified on the notice of 
termination. In the absence of good cause, the HO may not allow 
evidence to be submitted in addition to the evidence submitted along 
with the written request. We also have the opportunity to submit 
evidence to the HO within 30 days of receiving the notice announcing 
the hearing. The HO will share all evidence submitted, both from the 
supplier and CMS, in preparation for the hearing with all affected 
parties within 15 days prior to the scheduled date of the hearing.
(9) Role of the Hearing Officer (HO)
    Our proposal requires that the HO conduct a thorough and 
independent review. Such a review requires the consideration of all 
information and documentation relevant to the hearing and submitted 
consistent with this proposal. Consistent with this goal, we propose 
that the HO is responsible for all of the following:
    <bullet> Sharing all evidence submitted, from both the supplier and 
CMS, in preparation for the hearing with all affected parties within 15 
days prior to the scheduled date of the hearing.
    <bullet> Conducting the hearing and deciding the order in which the 
evidence and the arguments of the parties would be presented.
    <bullet> Determining the rules on admissibility of the evidence.
    <bullet> Examining the witnesses, in addition to the examinations 
conducted by CMS and the contract supplier.
    <bullet> Determining the rules for requesting documents and other 
evidence from other parties.
    <bullet> Ensuring a complete recording of the hearing is available 
and provided to all parties to the hearing and the CBIC.
    <bullet> Preparing a file of the record of the hearing which 
includes all evidence submitted as well as any relevant documents 
identified by the HO and considered as part of the hearing.
    <bullet> Complying with all applicable provisions of 42 USC Title 
18 and related provisions of the Act, the applicable regulations issued 
by the Secretary, and manual instructions issued by CMS.
    The HO would make a recommendation based on the information 
presented and submitted. The HO would issue a written recommendation to 
CMS within 30 days of the close of the hearing, unless the HO requests 
an extension from CMS and demonstrates to CMS that he or she needs an 
extension due to complexity of the matter or heavy work load. The HO's 
recommendation would include the rationale for his or her 
recommendation regarding the termination of the supplier's contract and 
the HO would submit this recommendation to CMS for its determination.
(10) CMS's Final Determination
    We proposed that the HO's recommendation is submitted to CMS, and 
the agency would make the final determination regarding whether the 
supplier's contract would be terminated. Our determination would be 
based upon on the record of the hearing, evidence, and documents 
considered by the HO as part of the HO recommendation. Information 
submitted after the hearing would not be considered. Our decision would 
be made within 30 days of the receipt of the HO's recommendation. If 
our decision is to terminate the contract, the supplier would be 
notified of the effective date of termination by certified mail. Our 
decision regarding the termination of the contract is final and 
binding.
(11) Effective Date of the Contract Termination
    We proposed that suppliers who submit a CAP or request a hearing 
would have the termination date identified on the notice delayed. The 
only exception to this rule is when a supplier has been excluded from 
any federal program, debarred by any federal agency, or convicted of a 
healthcare related crime; in that situation the contract would be 
terminated immediately. For terminations that do not meet these 
exceptions, the effective date of a final termination would be 
determined as follows:
    <bullet> The termination of a supplier's DMEPOS CBP contract is 
effective on the date specified in the initial notice of termination, 
which will be 45 days from the date of the notice, unless the supplier 
requests a hearing with the HO or the supplier submits a CAP.
    <bullet> After reviewing the HO recommendation, if we terminate a 
supplier's contract the effective date of the termination would be the 
date specified in the post-hearing notice sent to the supplier 
indicating CMS's final determination to terminate the contract.
(12) Effect of Contract Termination
    Under our proposal, once a supplier's contract is terminated for 
breach of contract under the DMEPOS CBP, the contract supplier is no 
longer a DMEPOS CBP contract supplier for any DMEPOS CBP product 
category for which it was awarded a contract. This termination applies 
to all areas and product categories because there is only one contract 
that encompasses all CBAs and product categories for which the supplier 
was awarded a contract. We would not make payment and would reject 
claims for DMEPOS competitive bid items and services furnished by a 
supplier whose contract has been terminated after the effective date of 
the termination for the remainder of the contract period.
    We recognize that a supplier's termination would impact 
beneficiaries within the CBA. Therefore, we proposed that terminated 
suppliers must notify all

[[Page 73579]]

beneficiaries within the CBA who are receiving rented competitively bid 
items of the termination of their contract status so that the 
beneficiaries can make arrangements to receive equipment and suppliers 
through other contract suppliers. After we have made our final 
determination and sent notification to the supplier, the supplier must 
notify beneficiaries within 5 days of receipt of the contract 
supplier's final notice of termination. This notice must inform 
beneficiaries that they will have to select a new contract supplier to 
furnish their DMEPOS items in order for Medicare to pay for these 
items. For beneficiary protection, we also proposed that contract 
suppliers who fail to give proper notification to beneficiaries may be 
prevented from participating in future rounds of DMEPOS CBP. We also 
proposed that rental items may not be picked up from the beneficiary's 
home until after the last day of the rental month for which the 
supplier has already received payment. We proposed both of these 
policies to protect the beneficiary and to ensure that suppliers do not 
pick up equipment from a beneficiary for a time period for which they 
have already been paid to provide the service.
    Comment: A commenter supported CMS's appeals process for contract 
suppliers whose competitive bidding contract was terminated due to 
breach of contract. The commenter stated that ``including an appeals 
process under DMEPOS CBP protects contract providers from arbitrary or 
mistaken decisions by CMS or its contractors and preserves the 
continuity of care for the beneficiaries they are serving.''
    Response: We agree that the appeals process does provide protection 
for contract suppliers and preserves continuity of care for the 
beneficiaries they serve.
    Comment: A commenter who was concerned with the timeline required 
for communication between terminated suppliers and beneficiaries. The 
commenter suggested that CMS lengthen the period of time to afford 
providers ample opportunity to develop, mail and disseminate this 
critical information.
    Response: We agree and have increased the period of time from 5 to 
15 days of receipt of contract suppliers' final notice of termination. 
We believe that 15 days would be a good balance to ensure the 
beneficiaries receive information timely and suppliers will have enough 
time to notify the beneficiaries. Therefore, a contract supplier, whose 
contract was terminated, has 15 days from the receipt of the final 
notice of termination to notify each beneficiary currently renting a 
competitive bid item. This change will not impact any other of the 
timeframes or provisions described in this regulation. We also proposed 
that rental items may not be picked up from the beneficiary's home 
until after the last day of the rental month for which the supplier has 
already received payment. We proposed both of these policies to protect 
the beneficiary and to ensure that suppliers do not pick up equipment 
from a beneficiary for a time period for which they have already been 
paid to provide the service.
    Comment: A commenter opposed the proposed appeals process because 
they believed, ``the proposed process is biased and burdened with 
inherent CMS conflict of interests that disadvantage suppliers.'' This 
commenter recommended CMS adopt the appeals process used for DMEPOS 
claims which includes a hearing by an administrative law judge (ALJ) 
and the Departmental Appeals Board (DAB) or the process used under 
government contracting and FAR requirements.'' In addition, the 
commenter questioned whether the termination occurs at the supplier 
number level or the product category level. The commenter has 
questioned if a supplier has contracts for more than one of the product 
categories, and is determined to be in breach of contract in one 
category, does the termination apply to just that one product or to 
all? The commenter also stated that the process should include an 
appeal to a federal court.
    Response: We disagree with this comment and feel that our process 
does provide for an independent and unbiased review by the CBIC hearing 
officer who was not involved in the original recommendation. It is not 
in the best interest of the program to terminate contracts if the 
supplier has not breached their contract; therefore, this action will 
not be taken lightly. This process allows CMS contractor's hearing 
officers to conduct an independent review of the issues. Only after 
considering the HO's recommendation will CMS make a final determination 
regarding these issues. We believe this process provides suppliers with 
ample opportunities to have their positions reviewed and considered. 
Therefore, we are not including review by the ALJ or the DAB. Our 
process provides for different levels of review of breach of contract, 
one at the recommendation level, one at the CBIC hearing officer level, 
and one at the CMS Administrator level. We believe this process does 
provide for an extensive review by allowing for reconsideration before 
a contract is actually terminated, which may include the use of a 
corrective action plan. As stated in the final regulation, these 
contracts are not procurement contracts are not subject to the FAR 
requirements; therefore, the FAR is not applicable. The rule does not 
address federal court review that might otherwise exist. As we stated 
in the proposed rule Sec.  414.423(k)(4) CMS's decisions regarding 
contract terminations are final and binding. In response to the 
question regarding the scope of the termination, if a supplier is 
terminated due to a breach of contract all locations associated with 
that contract will be terminated, regardless of the competitive bid 
product category they provide. In addition, we have added clarifying 
language to Sec.  414.423(l)(1).
    After consideration of the public comments we received, we are 
revising the time for the supplier to notify the beneficiary once the 
supplier has been notified of their contract termination. Therefore, we 
have revised Sec.  414.423(l)(2)(i) of the regulation to state that the 
supplier whose contract was terminated must notify the beneficiary 
within 15 days of receipt of the final notice of termination. In 
addition, we are clarifying the regulation language by adding language 
to Sec.  414.423(l)(1) to state that ``all locations of the contract 
supplier'' may no longer furnish competitive bid items to beneficiaries 
within a CBA and be reimbursed by Medicare for these items after the 
effective date of the termination.
2. Changes to Payment Rules for Oxygen and Oxygen Equipment
a. Background
    The general Medicare payment rules for DME are set forth in section 
1834(a) of the Act and 42 CFR part 414, subpart D of our regulations. 
Section 1834(a)(1) of the Act and Sec.  414.210(a) of our regulations 
establish the Medicare payment for a DME item as equal to 80 percent of 
either the lower of the actual charge or the fee schedule amount for 
the item. The beneficiary coinsurance is equal to 20 percent of either 
the lower of the actual charge or the fee schedule amount for the item 
once the deductible is met.
    The specific payment rules for oxygen and oxygen equipment under 
the existing fee schedules are set forth in section 1834(a)(5) of the 
Act and Sec.  414.226 of our regulations. Suppliers are paid a monthly 
payment amount for furnishing medically necessary oxygen contents (for 
both stationary and portable) and stationary oxygen equipment described 
under the class

[[Page 73580]]

described in Sec.  414.226(c)(1)(i). Equipment in the stationary class 
includes stationary oxygen concentrators, which concentrate oxygen from 
room air; stationary liquid oxygen systems, which use oxygen stored as 
a very cold liquid in cylinders and tanks; and gaseous oxygen systems, 
which administer compressed oxygen directly from cylinders.
    A monthly add-on payment is also made to suppliers furnishing 
medically necessary portable oxygen equipment falling under one of two 
classes described in Sec.  414.226(c)(1)(ii) and (iii). Equipment in 
these classes includes traditional portable equipment, that is, 
portable liquid oxygen systems and portable gaseous oxygen systems, and 
oxygen generating portable equipment (OGPE), that is, portable oxygen 
concentrators and oxygen transfilling equipment used to fill portable 
tanks or cylinders in the home. Both the liquid and gaseous oxygen 
systems (for stationary and traditional portable systems) require on-
going delivery of oxygen contents.
    Section 1834(a)(5)(F) of the Act, as amended by section 144(b) of 
MIPPA, limits the monthly rental payments to suppliers for oxygen 
equipment to 36 months of continuous use, although monthly payments for 
furnishing gaseous or liquid oxygen contents continue after the 36-
month equipment rental cap is reached for gaseous or liquid systems. In 
the CY 2009 PFS final rule with comment period (73 FR 69875 through 
69876), we discussed section 144(b) of MIPPA and included a detailed 
discussion of how section 5101(b) of the DRA previously required 
suppliers to transfer title to oxygen equipment to the beneficiary at 
the end of the 36-month rental period. Section 144(b) of the MIPPA 
repealed this requirement to transfer title to the oxygen equipment to 
the beneficiary and allows suppliers to retain title to the oxygen 
equipment after 36 monthly rental payments are made for the equipment.
    Section 414.210 establishes the requirements for the replacement of 
DME, including oxygen equipment. Section 414.210(f)(1) states that if 
an item of DME, which includes oxygen equipment, has been in continuous 
use by the patient for the equipment's reasonable useful lifetime or if 
the original equipment is lost, stolen, or irreparably damaged, the 
patient may elect to obtain a new piece of equipment. In such 
circumstances, Sec.  414.420(f)(2) authorizes payment for the new 
oxygen equipment in accordance with Sec.  414.226(a). Section 
414.210(f)(1) states that the reasonable useful lifetime for DME, which 
includes oxygen equipment, is determined through program instructions. 
In the absence of CMS program instructions, the carrier may determine 
the reasonable useful lifetime for equipment, but in no case can it be 
less than 5 years. Computation is based on when the equipment is 
delivered to the beneficiary, not the age of the equipment. If the 
beneficiary elects to obtain new oxygen equipment after the reasonable 
useful lifetime, the payment is made for a new 36-month rental period 
in accordance with Sec.  414.226(a).
    We proposed to revise the payment rule for oxygen and oxygen 
equipment at Sec.  414.226(g)(1) to address situations where 
beneficiaries relocate outside the service area of a supplier during 
the 36-month rental payment cap period for the oxygen equipment.
    Beneficiaries are experiencing great difficulties in finding 
suppliers willing to furnish oxygen equipment in situations where only 
a few months are left in the 36-month rental payment period at the time 
they relocate. For example, if a beneficiary is in the 30th rental 
month, the new supplier would be entitled to only 6 months of rental 
payments and then would have to continue to furnish the oxygen and 
oxygen equipment during any period of medical need for the remainder of 
the reasonable useful lifetime of the equipment. This creates a 
financial disincentive for oxygen suppliers to furnish oxygen and 
oxygen equipment to beneficiaries in these situations.
    The proposed changes to the payment rules for oxygen and oxygen 
equipment would apply to oxygen and oxygen equipment furnished under 
Part B and would also apply to oxygen and oxygen equipment furnished 
under programs implemented in accordance with section 1847(a) of the 
Act.
b. Furnishing Oxygen Equipment After the 36-Month Rental Period (Cap)
    In the CY 2010 PFS final rule with comment period (74 FR 61887 
through 61890), we finalized Sec.  414.226(g)(1) which, in accordance 
with section 1834(a)(5)(F)(ii)(I) of the Act, requires the supplier 
that furnishes oxygen equipment during the 36-month rental period to 
continue furnishing the oxygen equipment after the 36-month rental 
period. The supplier is required to continue to furnish the equipment 
during any period of medical need for the remainder of the reasonable 
useful lifetime of the equipment. As we noted when finalizing this 
rule, section 1834(a)(5)(F)(ii)(I) does not provide any exceptions to 
this requirement. If the beneficiary relocates outside the supplier's 
normal service area at some time after the 36-month rental period but 
before the end of the reasonable useful lifetime of the equipment, the 
supplier must make arrangements for the beneficiary to continue 
receiving the equipment at his or her new place of residence. This 
responsibility for furnishing the equipment does not transfer to 
another supplier.
    We revised Sec.  414.226(f) to conform our regulations to this new 
MIPPA requirement. We deleted the transfer of ownership requirement and 
added the new requirement that the supplier must continue furnishing 
the oxygen equipment after the 36-month rental period during any period 
of medical need for the remainder of the reasonable useful lifetime of 
the equipment. It is important to note that Sec.  414.226(g)(1)(ii) 
does not apply this same requirement in situations where the 
beneficiary relocates outside of the supplier's normal service area 
during the 36-month rental period.
c. Furnishing Oxygen Equipment During the 36-Month Rental Period (CAP)
    Section Sec.  414.226(g)(1) contains the requirement that the 
supplier that furnishes oxygen and oxygen equipment for the first month 
of the 36th month of the rental cap period must continue to furnish the 
equipment for the entire 36-month period of continuous use, with 
limited exceptions. One exception at Sec.  414.226(g)(1)(ii) applies 
when a beneficiary permanently relocates his or her residence during 
the 36-month rental period outside of the current supplier's normal 
service area. This exception was proposed in the ``Home Health 
Prospective Payment System Rate Update for Calendar Year 2007 and 
Deficit Reduction Act of 2005 Changes to Medicare Payment for Oxygen 
Equipment and Capped Rental Durable Medical Equipment; Proposed Rule'' 
published in the August 3, 2006 Federal Register (71 FR 44094) and was 
intended to reduce the burden on the supplier in these situations. This 
approach is also consistent with the regulations addressing capped 
rental items described in Sec.  414.229. We addressed this issue in the 
context of other capped rental DME, not including oxygen and oxygen 
equipment, in the July 10, 1995 Federal Register (60 FR 35494) in 
response to comments. The discussion states that since the 
implementation of the capped rental payment methodology on January 1, 
1989, we received no reports of beneficiaries having difficulty 
obtaining access to capped rental DME after relocating outside the 
supplier's service area. Since enactment of the capped

[[Page 73581]]

rental DME payment category in section 4062 of the Omnibus Budget 
Reconciliation Act of 1987 (OBRA '87) (Pub. L. 100-203), 
representatives of the DME industry indicated that suppliers would be 
able to accommodate beneficiaries in these situations, and this has 
proven to be true for capped rental items. In fact, we have found this 
to be the case to this day.
    For this reason, we believed that beneficiaries would not encounter 
problems obtaining access to oxygen and oxygen equipment in similar 
situations, that is, following the 36-month cap imposed by section 
144(b) of MIPPA. However, since the changes to the payment rules for 
oxygen and oxygen equipment mandated by the DRA became effective in 
2006 and the 36-month rental cap imposed by MIPPA was reached for the 
first time in January 2009, we have received many reports of 
beneficiaries relocating prior to the end of the 36-month rental 
payment cap period and having difficulty finding an oxygen supplier in 
the new location. We have learned that many suppliers are unwilling to 
provide services in situations where there are a few number of months 
left in the 36-month rental payment period.
    We do not believe that beneficiaries have encountered similar 
issues following the 36-month rental cap, which most likely is the 
result of different statutory requirements for these two periods (that 
is, during and after the 36-month rental period). Section 
1834(a)(5)(F)(ii) of the Act requires the supplier that furnishes the 
oxygen equipment during the 36-month rental payment period to continue 
furnishing the equipment after the 36-month rental payment period. 
Consistent with this requirement, we established regulations at Sec.  
414.226(f)(1) that require the supplier to furnish the equipment or 
make arrangements for furnishing the equipment in situations where the 
beneficiary relocates outside the supplier's normal service area. Since 
no such requirement currently applies in situations where the 
beneficiary relocates prior to the end of the 36-month rental payment 
period, and in fact current regulations at Sec.  414.226(g)(1)(ii) 
absolve the supplier of the obligation to continue furnishing oxygen 
equipment in these situations, beneficiaries are experiencing 
difficulties finding suppliers of oxygen equipment in their new 
locations that are willing to accommodate them. As noted above, we have 
not seen this problem in the capped rental DME context. The requirement 
at Sec.  414.226(g)(1) to furnish oxygen equipment for the entire 36-
month rental cap period was established in the course of implementing 
section 5101(b) of the DRA in order to safeguard the beneficiary from 
situations where suppliers might discontinue service and pick up oxygen 
equipment prior to the end of the 36-month rental cap in order to avoid 
losing title to the equipment. As mentioned earlier, the transfer of 
title of oxygen and oxygen equipment after the 36th paid rental month 
was repealed. The exception to this rule at Sec.  414.226(g)(1)(ii) was 
established based on our experience that suppliers of capped rental DME 
have accommodated beneficiaries in these situations, which, 
unfortunately, has not been our experience in the context of oxygen 
equipment.
    In order to address this vulnerability facing beneficiaries as a 
result of regulations currently in effect, we proposed to revise the 
exception at Sec.  414.226(g)(1)(ii) to apply only to situations where 
the beneficiary relocates before the 18th paid rental month to an area 
that is outside the normal service area of the supplier that initially 
furnished the equipment. We proposed to revise the regulation to 
require the supplier that furnishes the oxygen equipment and receives 
payment for month 18 or later to either furnish the equipment for the 
remainder of the 36-month rental payment period or, in the case where 
the beneficiary has relocated outside the service area of the supplier, 
make arrangements for furnishing the oxygen equipment with another 
supplier for the remainder of the 36-month rental payment period. The 
supplier that is required to furnish the equipment on the basis of this 
requirement must also furnish the equipment after the 36-month rental 
payment period in accordance with the requirements of section 
1834(a)(5)(F)(ii) and Sec.  414.226(f).
    The proposed revision would mean that a supplier does not have to 
continue to furnish the oxygen equipment if the beneficiary relocates 
outside the normal service area before the 18th paid rental month 
during a period of continuous use. Under the current rule, a supplier 
does not have to furnish the oxygen equipment if the beneficiary 
relocated before the 36th paid rental month during a period of 
continuous use. The current rule was established based on the long 
term, demonstrated ability of suppliers of capped rental DME to 
accommodate beneficiaries in situations where they relocate near the 
end of a capped rental payment period.
    Comment: We received a total of 8 comments on our proposal to 
require oxygen suppliers to continue to furnish medically necessary 
oxygen equipment for the remainder of the reasonable useful lifetime of 
the equipment to beneficiaries who relocate on or after the 18th rental 
month. All the comments were opposed to the proposed requirement. Some 
of the commenters questioned whether the statute gives us the authority 
to establish this requirement before the 36th month rental payment. 
Others objected to the financial and coordination-of-benefits burden 
they believe that this requirement would cause for suppliers. Other 
objections were that the proposed requirement did not consider the 
effect on beneficiaries who relocate on a temporary basis during winter 
months (``snow birds''), or the access problems that it might cause in 
rural areas. Recommended alternatives included starting the rental 
period over at the time of relocation or keeping the current policy 
that only requires suppliers to continue furnishing oxygen equipment to 
beneficiaries who relocate outside of their service area if 36 rental 
amounts have already been paid.
    Response: In addition to considering the comments on the proposed 
rule, we analyzed complaint data from beneficiaries from January 2009 
to September 2010 which is data collected by the regional offices. In 
the limited situations where beneficiaries receiving oxygen equipment 
for less than 36 months relocated during this time and initially had 
trouble locating an oxygen supplier in their new location, CMS 
caseworkers in the CMS Regional Offices and the Office of the Medicare 
Beneficiary Ombudsman were able to locate suppliers to serve each and 
every beneficiary, usually within a matter of days. This means that, 
although supply arrangements and/or access to oxygen and oxygen 
equipment in these situations may have been briefly delayed, suppliers 
stepped forward to provide access to oxygen and oxygen equipment in 
these situations. Based on this information and certain comments 
received, we have decided not to finalize this proposed revision at 
this time. If in the future, beneficiaries' access to oxygen equipment 
becomes a problem following the relocation of beneficiaries, we may 
consider this proposal or similar proposals.

H. Provider and Supplier Enrollment Issue: Air Ambulance Provision

    The National Transportation Safety Board (NTSB) is an independent 
Federal agency charged by the Congress with investigating 
transportation accidents, determining their probable cause, and making 
recommendations to prevent

[[Page 73582]]

similar accidents from occurring. Based on information derived from 
testimony provided at the NTSB public hearing and investigations into 
recent helicopter air ambulance accidents, the NTSB made several 
specific recommendations to the Secretary on September 24, 2009.
    Specifically, the NTSB recommended that the Secretary develop 
minimum safety accreditation standards for helicopter air ambulance 
operators that augment the operating standards of 14 CFR 135 by 
including for all flights with medical personnel on board: (a) 
Scenario-based pilot training; (b) implementation of preflight risk 
evaluation programs; and (c) the installation of FAA-approved terrain 
awareness warning systems, night vision imaging systems, flight data 
recording systems for monitoring and autopilots if a second pilot is 
not used.
    In response to the NTSB concerns, the Secretary noted that the 
recommendations to CMS were similar to those being made to the Federal 
Aviation Administration (FAA). While we have expertise to regulate 
health and safety requirements that suppliers and providers of 
healthcare should meet, we do not have the expertise to determine 
aircraft safety requirements. The Secretary stated that, ``we believe 
the FAA should determine the minimum level of safety that HEMS 
operators should meet and CMS should adopt regulations that require any 
HEMS operator that enrolls in Medicare to meet those requirements.'' 
The Secretary also added that, ``while we do not believe CMS should 
augment FAA regulations, we do believe that CMS' regulations should 
ensure that only those HEMS operators that maintain the minimum level 
of requirements established by the FAA through its regulations are 
enrolled or maintain enrollment in the Medicare program.'' The FAA 
proposed Federal regulations to address the NTSB's concerns in their 
October 12, 2010 proposed rule (75 FR 62640) entitled ``Air Ambulance 
and Commercial Helicopter Operations, Part 91 Helicopter Operations, 
and Part 135 Aircraft Operations; Safety Initiatives and Miscellaneous 
Amendments.''
    In the April 21, 2006 Federal Register, we published the 
``Requirements for Providers and Suppliers to Establish and Maintain 
Medicare Enrollment'' final rule. This final rule implemented section 
1866(j)(1)(A) of the Act. In this final rule, we required that all 
providers and suppliers (other than physicians or practitioners who 
have elected to ``opt-out'' of the Medicare program) must complete an 
enrollment form and submit specific information to CMS in order to 
obtain Medicare billing privileges. Section 424.515 required that 
ambulance service providers continue to resubmit enrollment information 
in accordance with Sec.  410.41(c)(2), which states, ``Upon a carrier's 
request, complete and return the ambulance supplier form designated by 
CMS and provide the Medicare carrier with documentation of compliance 
with emergency vehicle and staff licensure and certification 
requirements in accordance with State and local laws.'' This final rule 
also established Sec.  424.510(d)(2)(iii) which states, ``Submission of 
all documentation, including all applicable Federal and State licensure 
and regulatory requirements that apply to the specific provider or 
supplier type related to providing health care services, required by 
CMS under this or other statutory or regulatory authority, or under the 
Paperwork Reduction Act of 1995, to establish the provider or 
supplier's eligibility to furnish Medicare covered items or services to 
beneficiaries in the Medicare program.''
    While the Airline Deregulation Act (Pub. L. 95-504) preempts a 
State, political subdivision of a State, or political authority of at 
least two States from enacting or enforcing a law, regulation, or other 
provision having the force and effect of law related to a price, route, 
or service of an air carrier that may provide air transportation, air 
ambulances remain subject to Federal laws and regulations. In 
accordance with Sec.  424.516(a)(2), providers and suppliers must 
adhere to all Federal regulations and State laws and regulations, as 
required, based on the type of services or supplies the provider or 
supplier type will furnish and bill Medicare.
    In Sec.  424.510(d)(iii), we proposed to clarify that ambulance 
suppliers and other providers and suppliers include documentation 
regarding all applicable Federal and State certifications. Accordingly 
we proposed to revise Sec.  424.510(d)(iii) from ``Submission of all 
documentation, including all applicable Federal and State licenses and 
regulatory requirements that apply to the specific provider or supplier 
type that relate to providing health care service, required by CMS 
under this or other statutory or regulatory authority, or under the 
Paperwork Reduction Act of 1995, to establish the provider or 
supplier's eligibility to furnish Medicare covered items or services to 
beneficiaries in the Medicare program,'' to ``Submission of all 
documentation, including all applicable Federal and State licenses, 
certifications (including, but not limited to FAA certifications), and 
regulatory requirements that apply to the specific provider or supplier 
type that relate to providing health care service, required by CMS 
under this or other statutory or regulatory authority, or under the 
Paperwork Reduction Act of 1995, to establish the provider or 
supplier's eligibility to furnish Medicare covered items or services to 
beneficiaries in the Medicare program.'' When revoked or suspended, we 
are requiring that the specific pilot certifications (for example, 
instrumentation and medical), and the airworthiness certifications be 
reported. We proposed to add new paragraph (e)(3) to clarify that 
Medicare enrolled providers and suppliers must report a revocation or 
suspension of a Federal or State license or certification, including 
but not limited to FAA certifications. The certifications, when 
revoked, that need to be reported are the specific pilot 
certifications, such as instrument and medical certified; as well as 
airworthiness certificates. This revision will clarify that fixed-wing 
ambulance operators and helicopter air ambulance operators are 
responsible for notifying the designated Medicare contractor for their 
State when FAA revokes or suspends any license or certification. 
Moreover, fixed-wing ambulance operators and helicopter air ambulance 
operators must maintain all requirements as specified in 14 CFR parts 
91, 119, and 135.
    We stated our belief that requiring fixed wing ambulance and 
helicopter air ambulance operators to notify their Medicare contractor 
of a suspension or revocation of a license or certification will ensure 
that any action taken by the FAA or other regulating authority will 
have a direct link to the operator's ability to maintain their Medicare 
enrollment. We also stated that such a policy will help improve 
aircraft safety for operators that are enrolled in Medicare and 
providing services to Medicare beneficiaries. We believe that allowing 
providers and suppliers to self-report licensure or certification 
revocations and suspensions within a 30 day period via the Medicare 
enrollment application (such as, the Internet-based Provider Enrollment 
Chain and Ownership System (PECOS) or the paper CMS-855) promotes 
compliance with the Medicare reporting requirements found in Sec.  
424.516. In addition, by reporting a licensure or certification 
revocation or suspension within 30 days, the provider or supplier 
avoids the Medicare contractor bringing an action to revoke its 
Medicare billing privileges and establishing a Medicare enrollment bar, 
see Sec.  424.535(c). Thus,

[[Page 73583]]

by complying with the reporting responsibilities found in Sec.  424.516 
and voluntarily terminating from the Medicare program, the air 
ambulance supplier can submit an initial application to enroll in the 
Medicare program as soon as the licensure or certification revocation 
or suspension action is resolved with the applicable licensing or 
certification organization. If the supplier does not self-report a 
licensure, certification revocation or a suspension action, then the 
supplier's enrollment in the Medicare program will be automatically 
revoked for a period of one to three years.
    In Sec.  424.502, we proposed to define the term, ``voluntary 
termination'' as it is currently used in the Medicare program and 
throughout this regulation in the context of the provider enrollment 
requirements: We proposed that the term, ``voluntary termination'' 
means an air ambulance supplier that submits written confirmation to 
CMS of its decision to discontinue enrollment in the Medicare program.
    Furthermore, we stated our belief that an air ambulance supplier 
can make the decision to voluntarily terminate their business 
relationship with the Medicare program at any time, including when the 
provider or supplier makes the decision that they will no longer 
furnish services to Medicare beneficiaries. In those situations, where 
an air ambulance supplier does not meet their reporting 
responsibilities and notify the Medicare program of a Federal or State 
licensure or certification revocation or suspension within 30 days of 
the reportable event, we believe that it is appropriate that CMS or the 
Medicare contractor revoke the supplier's Medicare billing privileges 
using Sec.  424.535(a)(1). We believe that this change will clarify 
that CMS or our Medicare contractor may revoke Medicare billing 
privileges when these types of suppliers do not report a revocation or 
suspension of a Federal or State license or certification.
    Comment: Several comments received agreed with CMS' enrollment 
requirements and believe the FAA has the appropriate resources to 
develop, monitor, and enforce aviation or aviation safety related 
standards. The commenters believe that the sole authority of the FAA to 
regulate matters of aviation safety assures continuity in regulations 
and further believe any change to the authority would have serious 
consequences for safe operations since CMS lacks the expertise and 
resources to develop and enforce such standards.
    Response: We agree with the commenters; and therefore, are 
finalizing the proposal without modification.
    Comment: Several commenters believe CMS missed an opportunity 
through this proposed rule to improve system safety for Medicare 
beneficiaries through an accreditation process.
    Response: Currently, we do not have the statutory authority to 
establish an accreditation program for fixed-wing air ambulance 
operators and air ambulance operators.
    Comment: Several commenters noted that the preamble language might 
cause confusion as stated, ``fixed-wing air ambulance operators and 
HEMS operators must maintain all requirements as specified in 14 CFR 
part 135.''
    Response: We are clarifying that all fixed-wing air ambulance 
operators and helicopter air ambulance operators must adhere to all 
applicable FAA regulations as specified in 14 CFR parts 91, 119 and 135 
or risk having their Medicare enrollment revoked or suspended.

I. Technical Corrections

1. Physical Therapy, Occupational Therapy and Speech-Language Pathology
    We proposed to revise Sec.  409.23(c) by making a minor technical 
correction to remove an extraneous cross-reference which was initially 
proposed in the CY 2008 PFS proposed rule (72 FR 38122, 72 FR 38193, 
and 72 FR 38221). This cross-reference refers the reader to ``paragraph 
(c)(1)(ii) of this section,'' a paragraph also proposed in the CY 2008 
PFS proposed rule, but never finalized. In the CY 2008 PFS final rule 
with comment period, we inadvertently neglected to remove the 
associated cross-reference from the regulations text. Therefore, we 
proposed to rectify that oversight by making an appropriate correction 
in the regulations text, along with other minor formatting revisions by 
making the following changes:
    <bullet> To make a minor clarification to the section heading and 
introductory text of Sec.  409.23 (along with a conforming revision to 
the corresponding regulations text at Sec.  409.20(a)(3)) by revising 
the existing phrase ``speech therapy'' to read ``speech-language 
pathology services,'' so that it more accurately reflects the currently 
used terminology for this type of therapeutic treatment.
    <bullet> To make a minor wording change in the provision at Sec.  
409.17(d) (which is incorporated by reference in Sec.  409.23(c)(2)), 
in order to clarify that the former provision's reference to 
``hospital'' policies and procedures can alternatively refer, depending 
on the particular context, to SNF policies and procedures.
    We did not receive public comment on this proposal; and therefore, 
are finalizing this proposal without modification.
2. Scope of Benefits
    Currently, Sec.  410.3(b)(2) states that the specific rules on 
payment are set forth in subpart E of part 410. However, the specific 
payment rules are actually listed in subpart I of part 410. Therefore, 
we proposed correct this referencing error by making a technical 
correction to Sec.  410.3(b)(2).
    We did not receive public comment on this proposal; and therefore, 
are finalizing this proposal without modification.

J. Physician Self-Referral Prohibition: Annual Update to the List of 
CPT/HCPCS Codes

1. General
    Section 1877 of the Act prohibits a physician from referring a 
Medicare beneficiary for certain designated health services (DHS) to an 
entity with which the physician (or a member of the physician's 
immediate family) has a financial relationship, unless an exception 
applies. Section 1877 of the Act also prohibits the DHS entity from 
submitting claims to Medicare or billing the beneficiary or any other 
entity for Medicare DHS that are furnished as a result of a prohibited 
referral.
    Section 1877(h)(6) of the Act and Sec.  411.351 of our regulations 
specify that the following services are DHS:
    <bullet> Clinical laboratory services.
    <bullet> Physical therapy services.
    <bullet> Occupational therapy services.
    <bullet> Outpatient speech-language pathology services.
    <bullet> Radiology services.
    <bullet> Radiation therapy services and supplies.
    <bullet> Durable medical equipment and supplies.
    <bullet> Parenteral and enteral nutrients, equipment, and supplies.
    <bullet> Prosthetics, orthotics, and prosthetic devices and 
supplies.
    <bullet> Home health services.
    <bullet> Outpatient prescription drugs.
    <bullet> Inpatient and outpatient hospital services.
2. Annual Update to the Code List
a. Background
    In Sec.  411.351, we specify that the entire scope of four DHS 
categories is defined in a list of CPT/HCPCS codes (the Code List), 
which is updated annually to account for changes in the most recent CPT 
and HCPCS

[[Page 73584]]

publications. The DHS categories defined and updated in this manner 
are:
    <bullet> Clinical laboratory services.
    <bullet> Physical therapy, occupational therapy, and outpatient 
speech-language pathology services.
    <bullet> Radiology and certain other imaging services.
    <bullet> Radiation therapy services and supplies.
    The Code List also identifies those items and services that may 
qualify for either of the following two exceptions to the physician 
self-referral prohibition:
    <bullet> Dialysis-related drugs furnished in or by an ESRD facility 
(Sec.  411.355(g)).
    <bullet> Preventive screening tests, immunizations, or vaccines 
(Sec.  411.355(h)).
    The Code List was last updated in Addendum I of the CY 2010 PFS 
final rule with comment period (74 FR 62177 through 62188) and revised 
in a subsequent correction notice (75 FR 26350).
b. Response to Comments
    We received no public comments relating to the Code List that 
became effective January 1, 2010.
c. Revisions Effective for 2011
    The updated, comprehensive Code List effective January 1, 2011 
appears as Addendum J in this final rule with comment period and is 
available on our Web site at http://www.cms.gov/PhysicianSelfReferral/40_List_of_Codes.asp#TopOfPage. Additions and deletions to the Code 
List conform the Code List to the most recent publications of CPT and 
HCPCS and to changes in Medicare coverage policy and payment status.
    Tables 98 and 99 identify the additions and deletions, 
respectively, to the comprehensive Code List that became effective 
January 1, 2010. Tables 98 and 99 also identify the additions and 
deletions to the list of codes used to identify the items and services 
that may qualify for the exception in Sec.  411.355(g) (regarding 
dialysis-related outpatient prescription drugs furnished in or by an 
ESRD facility) and in Sec.  411.355(h) (regarding preventive screening 
tests, immunizations, and vaccines).
    In Table 98, we specify additions that reflect new CPT and HCPCS 
codes that become effective January 1, 2011, or that became effective 
since our last update. We also include additions that reflect changes 
in Medicare coverage policy or payment status that become effective 
January l, 2011, or that became effective since our last update.
    Table 99 reflects the deletions necessary to conform the Code List 
to the most recent publications of the CPT and HCPCS and to changes in 
Medicare coverage policy and payment status. In addition, we are 
deleting CPT codes 94667 and 94668 (Chest wall manipulation) from the 
category of ``physical therapy, occupational therapy, and outpatient 
speech-language pathology services'' because these services are not 
generally considered to be physical therapy services. Also, we are 
deleting CPT code 77014 (CT scan for therapy guide) from the category 
``radiology and certain other imaging services.'' This service is 
always integral to the performance of, and performed during, a non-
radiological medical procedure. Therefore, under Sec.  411.351, this 
service is excluded from the definition of ``radiology and certain 
other imaging services.''
    Lastly, we are deleting the drugs currently listed as qualifying 
for the exception for ``EPO and other dialysis-related drugs'' 
furnished in or by an ESRD facility. Beginning January 1, 2011, EPO and 
other dialysis-related drugs furnished by an ESRD facility (except 
drugs for which there are no injectable equivalents or other forms of 
administration) will be paid under the ESRD PPS promulgated in the 
final rule published on August 12, 2010 in the Federal Register (75 FR 
49030). Drugs for which there are no injectable equivalents or other 
forms of administration will be payable under the ESRD PPS beginning 
January 1, 2014. The definition of DHS at Sec.  411.351 excludes 
services that are reimbursed by Medicare as part of a composite rate 
(unless the services are specifically identified as DHS and are 
themselves payable through a composite rate, such as home health and 
inpatient and outpatient hospital services). Accordingly, EPO and other 
dialysis-related outpatient prescription drugs furnished by an ESRD 
facility (except drugs for which there are no injectable equivalents or 
other forms of administration) will not be DHS beginning January 1, 
2011. When dialysis-related drugs for which there are no injectable 
equivalents or other forms of administration are bundled into the ESRD 
PPS beginning January 1, 2014, and furnished by an ESRD facility, they 
will no longer meet the definition of DHS and, therefore, will not be 
subject to the physician self-referral prohibition. In the meantime, 
those drugs remain DHS. If we determine that any of those drugs may 
qualify for the exception for dialysis-related drugs at 411.355(g), we 
will announce them through the annual update to the Code List that 
appears in the PFS final rule.
    We will consider comments regarding the codes listed in Tables 98 
and 99. Comments will be considered if we receive them by the date 
specified in the DATES section of this final rule with comment period. 
We will not consider any comment that advocates a substantive change to 
any of the DHS defined in Sec.  411.351.

 Table 98 Additions to the Physician Self-Referral List of CPT \1\/HCPCS
                                  Codes
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                      CLINICAL LABORATORY SERVICES
------------------------------------------------------------------------
0058T.....................................  Cryopreservation ovary tiss.
0059T.....................................  Cryopreservation oocyte.
G0432.....................................  EIA HIV-1/HIV-2 screen.
G0433.....................................  ELISA HIV-1/HIV-2 screen.
G0434.....................................  Drug screen multi drug
                                             class.
G0435.....................................  Oral HIV-1/HIV-2 screen.
------------------------------------------------------------------------
 PHYSICAL THERAPY, OCCUPATIONAL THERAPY, AND OUTPATIENT SPEECH-LANGUAGE
                           PATHOLOGY SERVICES
------------------------------------------------------------------------
95992.....................................  Canalith repositioning proc.
------------------------------------------------------------------------
              RADIOLOGY AND CERTAIN OTHER IMAGING SERVICES
------------------------------------------------------------------------
72159.....................................  Mr angio spine w/o&w/dye.
73225.....................................  Mr angio upr extr w/o&w/dye.
74176.....................................  Ct angio abd & pelvis.
74177.....................................  Ct angio abd&pelv w/
                                             contrast.
74178.....................................  Ct angio abd & pelv 1+
                                             regns.
76881.....................................  Us xtr non-vasc complete.
76882.....................................  Us xtr non-vasc lmtd.
92132.....................................  Cmptr ophth dx img ant
                                             segmt.
92133.....................................  Cmptr ophth img optic nerve.
92134.....................................  Cptr ophth dx img post
                                             segmt.
92227.....................................  Remote dx retinal imaging.
92228.....................................  Remote retinal imaging mgmt.
------------------------------------------------------------------------
                 RADIATION THERAPY SERVICES AND SUPPLIES
------------------------------------------------------------------------
49327.....................................  Lap ins device for rt.
49412.....................................  Ins device for rt guide
                                             open.
57156.....................................  Ins vag brachytx device.
A4650.....................................  Implant radiation dosimeter.
------------------------------------------------------------------------
               DRUGS USED BY PATIENTS UNDERGOING DIALYSIS
[No additions]..........................................................
------------------------------------------------------------------------
         PREVENTIVE SCREENING TESTS, IMMUNIZATIONS AND VACCINES
------------------------------------------------------------------------
90662.....................................  Flu vacc prsv free inc
                                             antig.
90670.....................................  Pneumococcal vacc 13 val im.
G0432.....................................   EIA HIV-1/HIV-2 screen.
G0433.....................................  ELISA HIV-1/HIV-2 screen.
G0435.....................................  Oral HIV-1/HIV-2 screen.
Q2035.....................................  Afluria vacc, 3 yrs & >, im.
Q2036.....................................  Flulaval vacc, 3 yrs & >,
                                             im.
Q2037.....................................  Fluvirin vacc, 3 yrs & >,
                                             im.
Q2038.....................................  Fluzone vacc, 3 yrs & >, im.
Q2039.....................................  NOS flu vacc, 3 yrs & >, im.
------------------------------------------------------------------------
\1\ CPT codes and descriptions only are copyright 2010 AMA. All rights
  are reserved and applicable FARS/DFARS clauses apply.


[[Page 73585]]


Table 99--Deletions to the Physician Self-Referral List of CPT \1\ HCPCS
                                  Codes
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                      CLINICAL LABORATORY SERVICES
------------------------------------------------------------------------
0104T.............................  At rest cardio gas rebreathe.
0140T.............................  Exhaled breath condensate ph.
G0430.............................  Drug screen multi class.
------------------------------------------------------------------------
 PHYSICAL THERAPY, OCCUPATIONAL THERAPY, AND OUTPATIENT SPEECH-LANGUAGE
                           PATHOLOGY SERVICES
------------------------------------------------------------------------
94667.............................  Chest wall manipulation.
94668.............................  Chest wall manipulation.
------------------------------------------------------------------------
              RADIOLOGY AND CERTAIN OTHER IMAGING SERVICES
------------------------------------------------------------------------
76150.............................  X-ray exam, dry process.
76880.............................  Us exam, extremity.
77014.............................  Ct scan for therapy guide.
------------------------------------------------------------------------
                 RADIATION THERAPY SERVICES AND SUPPLIES
------------------------------------------------------------------------
[No deletions]..........................................................
------------------------------------------------------------------------
               DRUGS USED BY PATIENTS UNDERGOING DIALYSIS
------------------------------------------------------------------------
J0630.............................  Calcitonin salmon injection.
J0636.............................  Inj calcitriol per 0.1 mcg.
J0882.............................  Darbepoetin alfa, esrd use.
J0895.............................  Deferoxamine mesylate inj.
J1270.............................  Injection, doxercalciferol.
J1750.............................  Inj iron dextran.
J1756.............................  Iron sucrose injection.
J1955.............................  Inj levocarnitine per 1 gm.
J2501.............................  Paricalcitol.
J2916.............................  Na ferric gluconate complex.
J2993.............................  Reteplase injection.
J2995.............................  Inj streptokinase/250000 IU.
J2997.............................  Alteplase recombinant.
J3364.............................  Urokinase 5000 IU injection.
P9041.............................  Albumin (human), 5%, 50 ml.
P9045.............................  Albumin (human), 5%, 250 ml.
P9046.............................  Albumin (human), 25%, 20 ml.
P9047.............................  Albumin (human), 25%, 50 ml.
Q0139.............................  Ferumoxytol, esrd use.
Q4081.............................  Epoetin alfa, 100 units ESRD.
------------------------------------------------------------------------
         PREVENTIVE SCREENING TESTS, IMMUNIZATIONS AND VACCINES
------------------------------------------------------------------------
90658.............................  Flu vaccine, 3 yrs & >, im.
------------------------------------------------------------------------
\1\ CPT codes and descriptions only are copyright 2010 AMA. All rights
  are reserved and applicable FARS/DFARS clauses apply.

VIII. Waiver of Proposed Rulemaking and Delay in Effective Date

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed, and the terms and substance 
of the proposed rule or a description of the subjects and issues 
involved. This procedure can be waived, however, if an agency finds 
good cause that a notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued.
    We utilize HCPCS codes for Medicare payment purposes. The HCPCS is 
a national drug coding system comprised of Level I (CPT) codes and 
Level II (HCPCS National Codes) that are intended to provide uniformity 
to coding procedures, services, and supplies across all types of 
medical providers and suppliers. Level I (CPT) codes are copyrighted by 
the AMA and consist of several categories, including Category I codes 
which are 5-digit numeric codes, and Category III codes which are 
temporary codes to track emerging technology, services, and procedures.
    The AMA issues an annual update of the CPT code set each Fall, with 
January 1 as the effective date for implementing the updated CPT codes. 
The HCPCS, including both Level I and Level II codes, is similarly 
updated annually on a CY basis. Annual coding changes are not available 
to the public until the Fall immediately preceding the annual January 
update of the PFS. Because of the timing of the release of these new 
codes, it is impracticable for us to provide prior notice and solicit 
comment on these codes and the RVUs assigned to them in advance of 
publication of the final rule that implements the PFS. Yet, it is 
imperative that these coding changes be accounted for and recognized 
timely under the PFS for payment because services represented by these 
codes will be provided to Medicare beneficiaries by physicians during 
the CY in which they become effective. Moreover, regulations 
implementing HIPAA (42 CFR parts 160 and 162) require that the HCPCS be 
used to report health care services, including services paid under the 
PFS. We also assign interim RVUs to any new codes based on a review of 
the AMA RUC recommendations for valuing these services. By reviewing 
these AMA RUC recommendations for the new codes, we are able to assign 
RVUs to services based on input from the medical community and to 
establish payment for them, on an interim basis, that corresponds to 
the relative resources associated with furnishing the services. We are 
also able to determine, on an interim final basis, whether the codes 
will be subject other payment policies. If we did not assign RVUs to 
new codes on an interim basis, the alternative would be to either not 
pay for these services during the initial CY or have each Medicare 
contractor establish a payment rate for these new codes. We believe 
both of these alternatives are contrary to the public interest, 
particularly since the AMA RUC process allows for an assessment of the 
valuation of these services by the medical community prior to our 
establishing payment for these codes on an interim basis. Therefore, we 
believe it would be contrary to the public interest to delay 
establishment of fee schedule payment amounts for these codes.
    For the reasons outlined above in this section, we find good cause 
to waive the notice of proposed rulemaking for the interim RVUs for 
selected procedure codes identified in Addendum C and to establish RVUs 
for these codes on an interim final basis. We are providing a 60-day 
public comment period.
    Section II.C. of this final rule with comment period discusses the 
identification and review of potentially misvalued codes by the AMA 
RUC, as well as our review and decisions regarding the AMA RUC 
recommendations. Similar to the AMA RUC recommendations for new and 
revised codes discussed above, due to the timing of the AMA RUC 
recommendations for the potentially misvalued codes, it was 
impracticable for CMS to solicit public comment regarding specific 
proposals for revision prior to this final rule with comment period. We 
believe it is in the public interest to implement the revised RVUs for 
the codes that were identified as misvalued, and that have been 
reviewed and re-evaluated by the AMA RUC, on an interim final basis for 
CY 2011. The revisions of RVUs for these codes will establish a more 
appropriate payment that better corresponds to the relative resources 
associated with furnishing these services. A delay in implementing 
revised values for these misvalued codes would not only perpetuate the 
known misvaluation for these services, it would also perpetuate a 
distortion in the payment for other services under the PFS. 
Implementing the changes now allows for a more equitable distribution 
of payments across all PFS services. We believe a delay in 
implementation of these revisions would be contrary to the public 
interest, particularly since the AMA RUC process allows for an 
assessment of the valuation of these services by the medical community 
prior to the AMA RUC's recommendation to CMS. For the reasons described 
above, we find good cause to waive notice and comment procedures with 
respect to the misvalued codes identified in Tables 53, 54, and 55, and 
to revise RVUs for these codes on an interim final basis. We are

[[Page 73586]]

providing a 60-day public comment period.
    Furthermore, in this final rule with comment period, we are making 
a technical revision to Sec.  410.64 (Additional Preventive Services) 
to conform with section 1861(ddd)(1), as amended by section 4104 of the 
ACA. We are revising Sec.  410.64(a) by removing the words ``not 
otherwise described in this subpart'' and adding the words ``not 
described in subparagraphs (1) or (3) of Sec.  410.2 of this subpart'' 
in their place. This change reflects section 1861(ddd)(1) of the Act 
(as amended by section 4104(a)(2) of the ACA). While this change was 
not discussed in the CY 2011 PFS proposed rule (74 FR 40129), we are 
making this change pursuant to the ``good cause'' exception to APA 
notice and comment rulemaking. Under the good cause exception, public 
participation procedures are not required ``when the agency for good 
cause finds (and incorporates the finding and a brief statement of 
reasons therefore in the rules issued) that notice and public procedure 
thereon are impracticable, unnecessary, or contrary to the public 
interest'' (5 U.S.C. 553(b)). Section 410.64(a) previously reflected 
section 1861(ddd)(1) of the Act, which was subsequently amended. The 
revision to the regulations merely incorporates the new statutory 
language for consistency, and is not an interpretation or 
clarification. Therefore, we believe it is appropriate to waive 
advanced notice and public comment on this change for good cause, due 
to the technical nature of the revision to the regulations.
    We ordinarily provide a 60-day delay in the effective date of the 
provisions of a rule in accordance with the Administrative Procedure 
Act (APA) (5 U.S.C. 553(d)), which requires a 30-day delayed effective 
date, and the Congressional Review Act (5 U.S.C. 801(a)(3)), which 
requires a 60-day delayed effective date for major rules. However, we 
can waive the delay in the effective date if the Secretary finds, for 
good cause, that the delay is impracticable, unnecessary, or contrary 
to the public interest, and incorporates a statement of the finding and 
the reasons in the rule issued (5 U.S.C. 553(d)(3); 5 U.S.C. 808(2)).

IX. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
    <bullet> The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    <bullet> The accuracy of our estimate of the information collection 
burden.
    <bullet> The quality, utility, and clarity of the information to be 
collected.
    <bullet> Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs):

A. ICRs Regarding Diagnostic X-ray Tests, Diagnostic Laboratory Tests, 
and Other Diagnostic Tests: Conditions (Sec.  410.32)

    Section 410.32(d)(2)(i) requires the physician or qualified 
nonphysician practitioner (as defined in Sec.  410.32(a)(2)) who orders 
the service must maintain documentation of medical necessity in the 
beneficiary's medical record. In addition, both the medical record and 
the laboratory requisition (or order) would be required to be signed by 
the physician or qualified nonphysician practitioner (as defined in 
Sec.  410.32(a)(2)) who orders the service. The burden associated with 
these requirements would be the time and effort necessary for a 
physician or qualified nonphysician practitioner to sign the medical 
record or laboratory requisition (or order). There is also a 
recordkeeping requirement associated with maintaining the documentation 
of medical necessity in the beneficiary medical record. While these 
recordkeeping and reporting requirements are subject to the PRA, we 
believe the associated burden is exempt from the PRA in accordance with 
5 CFR 1320.3(b)(2). We believe that the time, effort, and financial 
resources necessary to comply with the aforementioned information 
collection requirements is incurred by persons in the normal course of 
their activities and therefore considered to be usual and customary 
business practices.

B. ICRs Regarding General Exceptions to the Referral Prohibition 
Related to Both Ownership/Investment and Compensation (Sec.  411.355)

    Section 411.355(b)(7)(i) states that with respect to magnetic 
resonance imaging, computed tomography, and positron emission 
tomography, the referring physician must provide written notice to the 
patient at the time of the referral that the patient may receive the 
same services from a person other than one described in Sec.  
411.355(b)(1). The written notice must include a list of other 
suppliers (as defined in Sec.  400.202 of this title) that provide the 
services for which the individual is being referred. In response to 
public comments received, we are finalizing this provision to require 
that the list must include a minimum of 5 suppliers within a 25-mile 
radius of the referring physician's office location at the time of the 
referral, rather than the proposed 10 suppliers. The notice should be 
written in a manner sufficient to be reasonably understood by all 
patients and should include for each supplier on the list, at a 
minimum, the supplier's name, address, and telephone number.
    This rule finalizes section 411.355(b)(7)(ii) to state that if the 
referring physician makes a referral within an area with fewer than 5 
other suppliers within the 25-mile radius of the physician's office 
location at the time of the referral, the physician shall list all of 
the other suppliers of the imaging service that are present within a 
25-mile radius of the referring physician's office location. Provision 
of the written list of alternate suppliers will not be required if no 
other suppliers provide the services for which the individual is being 
referred within the 25-mile radius. These physicians must still 
disclose to the patient that the patient may receive these services 
from a person other than one described in Sec.  411.355(b)(1) in a 
manner sufficient to reasonably be understood by all patients.
    The burden associated with the requirements contained in this 
section would be the time and effort necessary for a physician to 
develop a standard disclosure. There would also be burden associated 
with the time and effort necessary for a physician to provide the 
disclosure to the patient. Based upon public comments received, we have 
removed the requirement that a physician must obtain the patient's 
signature on the disclosure and maintain a copy of this document in the 
medical record. Physicians must retain adequate assurance that the 
information was shared with the patient so that this information can be 
verified.
    Our estimate that it would take 1 hour for a physician's office to 
develop a standard disclosure remains the same in this final rule with 
comment to account for physicians drafting the disclosure notice and 
listing the 5 alternate

[[Page 73587]]

suppliers. Our estimate that 71,000 physicians will be required to 
comply with these requirements remains unchanged from the proposed 
rule. The total burden associated with the development of the standard 
disclosure remains 71,000 hours at a cost of $1,042,280. Although the 
physician no longer must have the patient sign the disclosure and enter 
it into the medical record, we have not changed the estimate that it 
will take each physician 1 minute to provide the disclosure to the 
patient. Each provider will make approximately 106 disclosures. The 
total estimated annual burden for this requirement remains 125,433 
hours at a cost of $10,536,400.

C. ICRs Regarding Appeals Process for Termination of Competitive 
Bidding Contract (Sec.  414.423)

    Section 414.423(c)(1)(i) states that CMS has the option to allow a 
DMEPOS supplier to provide a written CAP to remedy the deficiencies 
identified in the notice, when CMS determines that the delay in the 
termination date caused by allowing a CAP will not cause harm to 
beneficiaries. As stated in Sec.  414.423(c)(2)(i) a CAP must be 
submitted within 30 calendar days from the date on the notification 
letter. If the supplier decides not to submit a CAP the supplier may 
within 30 days of the date on the termination letter request a hearing 
by a CBIC hearing officer.
    The burden associated with this requirement is the time and effort 
necessary for a supplier that has received a termination notice to 
develop and submit a CAP. We estimate that 10 suppliers will need to 
comply with this requirement annually. Similarly, we estimate that it 
will take a supplier an average of 3 hours to develop a CAP. The total 
estimated annual burden associated with this requirement is 30 hours at 
a cost of $2,250.
    Section 414.423(e)(2) requires that if CMS accepts the CAP, 
including supplier's designated timeframe for its completion, the 
supplier must provide a follow-up report within 5 days after the 
supplier has fully implemented the CAP that verifies that all of the 
deficiencies identified in the CAP have been corrected in accordance 
with the timeframes accepted by CMS. The burden associated with this 
requirement is the time and effort necessary for a supplier to develop 
and submit a follow-up report. While this requirement is subject to the 
PRA, we believe the associated burden is exempt under 5 CFR 
1320.3(h)(6). In accordance with 5 CFR 1320.3(h)(6), a request for 
facts or opinions addressed to a single person is not defined as 
information collection requirements and is therefore exempt from the 
PRA.
    Section 414.423(f)(1) states that a supplier who has received a 
notice that CMS considers them in breach of contract or that their CAP 
is not acceptable has the right to request a hearing before a CBIC HO 
who was not involved with the original determination. Section 
414.423(f)(2) further specifies that a supplier who wishes to appeal 
the termination notice must submit a written request to the CBIC. The 
request for a hearing must be received by the CBIC within 30 calendar 
days from the date of the notice to terminate.
    The burden associated with this section is the time and effort 
necessary for a supplier to develop and submit a written request for a 
hearing by a CBIC Hearing Officer. We estimate that it will take a 
supplier 8 hours to develop and submit a request for a hearing. We 
believe 5 suppliers will be subject to this requirement on an annual 
basis. The total estimated annual burden associated with developing and 
submitting a written request for a hearing by a CBIC Hearing Officer is 
40 hours at a cost of $3,000.
    Section 414.423 requires a contract supplier whose contract has 
been terminated to notify all beneficiaries who are receiving rented 
competitive bid items or competitive bid items received on a recurring 
basis, of the termination of their contract. The notice to the 
beneficiary from the supplier whose contract was terminated must be 
provided within 5 days of receipt of the notice of termination. The 
notification to the beneficiaries must inform the beneficiaries that 
they are going to have to select a new contract supplier for these 
items.
    The burden associated with this section is the time and effort 
necessary for a supplier to develop and distribute notification of its 
termination to all beneficiaries receiving rented competitive bid items 
or competitive bid items received on a recurring basis. We estimate 
that it will take a supplier 3 hours to develop and distribute a notice 
announcing its termination to all of its beneficiaries receiving rented 
competitive bid items or competitive bid items received on a recurring 
basis. We believe 2 suppliers will be subject to this requirement on an 
annual basis. The total estimated annual burden associated with this 
requirement is 6 hours at a cost of $450.

D. ICRs Regarding Additional Provider and Supplier Requirements for 
Enrolling and Maintaining Active Enrollment Status in the Medicare 
Program (Sec.  424.516)

    Section 424.516(e)(2) would require a provider or supplier to 
report a revocation or suspension to the applicable Medicare contractor 
within 30 days of any revocation or suspension of a Federal or State 
license or certification. Similarly, proposed Sec.  424.516(e)(2) 
states that within 30 days of a voluntary withdrawal or involuntary 
termination from the Medicare program, the provider or supplier must 
report a voluntary withdrawal or involuntary termination to the 
applicable Medicare contractor. The burden associated with the 
requirements in Sec.  424.516(e)(2) and (3) is the time and effort 
necessary for a provider or supplier to report the required information 
to the applicable Medicare contractor. While these requirements are 
subject to the PRA, each submission will be evaluated on a case-by-case 
basis.

                                                                 Table 100--Estimated Annual Recordkeeping and Reporting Burden
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                          Hourly labor   Total labor      Total
                                                                                                               Burden per   Total annual     cost of       cost of      capital/     Total cost
             Regulation section(s)                       OMB control No.           Respondents    Responses     response       burden       reporting     reporting    maintenance     (in $)
                                                                                                                 (hours)       (hours)       (in $)        (in $)     costs (in $)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   411.355................................  0938-New........................        71,000        71,000             1        71,000         14.68     1,042,280             0     1,042,280
                                                                                        71,000     7,454,760        0.0167       125,433         83.79   *10,536,400             0    10,536,400
Sec.   414.423................................  0938-New........................            10            10             3            30         75.00         2,250             0         2,250
                                                                                             5             5             8            40         75.00          3000             0          3000
                                                                                             2             2             3             6         75.00           450             0           450
                                                                                 ---------------------------------------------------------------------------------------------------------------

[[Page 73588]]

 
    Total.....................................  ................................        71,017     7,525,777  ............       196,509  ............  ............  ............    11,584,380
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* The annual cost burden for this provision was calculated by taking 106 disclosures per year per physician x $1.40 per disclosure = $148.40 a year per physician x 71,000 physicians =
  $10,536,400.

E. Additional Information Collection Requirements

    This final rule with comment period imposes collection of 
information requirements as outlined in the regulation text and 
specified above. However, this final rule with comment period also 
makes reference to several associated information collections that are 
not discussed in the regulation text contained in this document. The 
following is a discussion of these information collections, some of 
which have already received OMB approval.
1. Part B Drug Payment
    The discussion of average sales price (ASP) issues in section 
VII.A.1 of this final rule with comment period does not contain any new 
information collection requirements with respect to payment for 
Medicare Part B drugs and biologicals under the ASP methodology. Drug 
manufacturers are required to submit ASP data to us on a quarterly 
basis. The ASP reporting requirements are set forth in section 1927(b) 
of the Act. The burden associated with this requirement is the time and 
effort required by manufacturers of Medicare Part B drugs and 
biologicals to calculate, record, and submit the required data to CMS. 
While the burden associated with this requirement is subject to the 
PRA, it is currently approved under OMB control number 0938-0921 with a 
June 31, 2012, expiration date.
2. The Physician Quality Reporting System (Formerly the Physician 
Quality Reporting Initiative (PQRI))
    Section VII.F.1. of this final rule with comment period discusses 
the background of the Physician Quality Reporting System, provides 
information about the measures and reporting mechanisms that will be 
available to eligible professionals and group practices who choose to 
participate in the 2011 Physician Quality Reporting System, and the 
criteria for satisfactory reporting in 2011.
    With respect to satisfactory submission of data on quality measures 
by eligible professionals, eligible professionals include physicians, 
other practitioners as described in section 1842(b)(18)(c) of the Act, 
physical and occupational therapists, qualified speech-language 
pathologists, and qualified audiologists. Eligible professionals may 
choose whether to participate and, to the extent they satisfactorily 
submit data on quality measures for covered professional services, they 
can qualify to receive an incentive payment. To qualify to receive an 
incentive payment for 2011, the eligible professional (or group 
practice) must meet one of the criteria for satisfactory reporting 
described in section VII.F.1.e. or VII.F.1.f. of this final rule with 
comment period (or section VII.F.1.g. for group practices).
    Because this is a voluntary program, it is difficult to accurately 
estimate how many eligible professionals will opt to participate in the 
Physician Quality Reporting System in CY 2011. Information from the 
``Physician Quality Reporting System 2007 Reporting Experience 
Report,'' which is available on the Physician Quality Reporting System 
section of the CMS Web site at http://www.cms.hhs.gov/pqri, indicates 
that nearly 110,000 unique TIN/NPI combinations attempted to submit 
Physician Quality Reporting System quality measures data via claims for 
the 2007 Physician Quality Reporting System. Therefore, for purposes of 
conducting a burden analysis for the 2011 Physician Quality Reporting 
System, we will assume that all eligible professionals who attempted to 
participate in the 2007 Physician Quality Reporting System will also 
attempt to participate in the 2011 Physician Quality Reporting System. 
Furthermore, we believe that the burden for eligible professionals who 
are participating in the Physician Quality Reporting System for the 
first time in 2011 will be considerably higher than the burden for 
eligible professionals who have participated in the Physician Quality 
Reporting System in prior years.
    For individual eligible professionals, the burden associated with 
the requirements of this reporting initiative is the time and effort 
associated with eligible professionals identifying applicable Physician 
Quality Reporting System quality measures for which they can report the 
necessary information, collecting the necessary information, and 
reporting the information needed to report the eligible professional's 
or group practice's measures. We believe it is difficult to accurately 
quantify the burden because eligible professionals may have different 
processes for integrating the Physician Quality Reporting System into 
their practice's work flows. Moreover, the time needed for an eligible 
professional to review the quality measures and other information, 
select measures applicable to his or her patients and the services he 
or she furnishes to them, and incorporate the use of quality data codes 
into the office work flows is expected to vary along with the number of 
measures that are potentially applicable to a given professional's 
practice. Since eligible professionals are generally required to report 
on at least 3 measures to earn a Physician Quality Reporting System 
incentive, we will assume that each eligible professional who attempts 
to submit Physician Quality Reporting System quality measures data is 
attempting to earn a Physician Quality Reporting System incentive 
payment and reports on an average of 3 measures for this burden 
analysis.
    Because we anticipate even greater participation in the 2011 
Physician Quality Reporting System than in previous years, including 
participation by eligible professionals who are participating in the 
Physician Quality Reporting System for the first time in 2011, we will 
assign 5 hours as the amount of time needed for eligible professionals 
to review the 2011 Physician Quality Reporting System Measures List, 
review the various reporting options, select the most appropriate 
reporting option, identify the applicable measures or measures groups 
for which they can report the necessary information, review the measure 
specifications for the selected measures or measures groups, and 
incorporate reporting of the selected measures or measures groups into 
the office work flows. This estimate is based on our assumption that an 
eligible professional will need up to 2 hours to review the 2011 
Physician Quality Reporting System Measures List, review the reporting 
options, and select a reporting option and measures on which

[[Page 73589]]

to report and 3 hours to review the measure specifications for up to 3 
selected measures or up to 1 selected measures group and to develop a 
mechanism for incorporating reporting of the selected measures or 
measures group into the office work flows.
    Information from the PVRP, which was a predecessor to the Physician 
Quality Reporting System, indicated an average labor cost of $50 per 
hour. To account for salary increases over time, we will use an average 
practice labor cost of $58 per hour in our estimates based on an 
assumption of an average annual increase of approximately 3 percent. 
Thus, we estimate the cost for an eligible professional associated with 
preparing to report Physician Quality Reporting System quality measures 
would be approximately $290 per eligible professional ($58 per hour x 5 
hours).
    We continue to expect the ongoing costs associated with Physician 
Quality Reporting System participation to decline based on an eligible 
professional's familiarity with and understanding of the Physician 
Quality Reporting System, experience with participating in the 
Physician Quality Reporting System, and increased efforts by CMS and 
stakeholders to disseminate useful educational resources and best 
practices.
    We believe the burden associated with actually reporting the 
Physician Quality Reporting System quality measures will vary depending 
on the reporting mechanism selected by the eligible professional. For 
claims-based reporting, eligible professionals must gather the required 
information, select the appropriate QDCs, and include the appropriate 
QDCs on the claims they submit for payment. The Physician Quality 
Reporting System will collect QDCs as additional (optional) line items 
on the existing HIPAA transaction 837-P and/or CMS Form 1500 (OCN: 
0938-0999). We do not anticipate any new forms and no modifications to 
the existing transaction or form. We also do not anticipate changes to 
the 837-P or CMS Form 1500 for CY 2011.
    Based on our experience with the PVRP, we continue to estimate that 
the time needed to perform all the steps necessary to report each 
measure (that is, reporting the relevant quality data code(s) for a 
measure) on claims ranges from 15 seconds (0.25 minutes) to over 12 
minutes for complicated cases and/or measures, with the median time 
being 1.75 minutes. At an average labor cost of $58 per hour per 
practice, the cost associated with this burden ranges from $0.24 in 
labor to about $11.60 in labor time for more complicated cases and/or 
measures, with the cost for the median practice being $1.69.
    The total estimated annual burden for this requirement will also 
vary along with the volume of claims on which quality data is reported. 
In previous years, when we required reporting on 80 percent of eligible 
cases for claims-based reporting, we found that on average, the median 
number of reporting instances for each of the Physician Quality 
Reporting System measures was 9. Since we proposed to reduce the 
required reporting rate by over one-third to 50 percent, then for 
purposes of this burden analysis we will assume that an eligible 
professional will need to report each selected measure for 6 reporting 
instances. The actual number of cases on which an eligible professional 
would be required to report quality measures data will vary, however, 
with the eligible professional's patient population and the types of 
measures on which the eligible professional chooses to report (each 
measure's specifications includes a required reporting frequency).
    Based on the assumptions discussed above, we estimate the total 
annual reporting burden per eligible professional associated with 
claims-based reporting to range from 4.5 minutes (0.25 minutes per 
measure x 3 measures x 6 cases per measure) to 180 minutes (12 minutes 
per measure x 3 measures x 6 cases per measure), with the burden to the 
median practice being 31.5 minutes (1.75 minutes per measure x 3 
measures x 6 cases). We estimate the total annual reporting cost per 
eligible professional associated with claims-based reporting to range 
from $4.32 ($0.24 per measure x 3 measures x 6 cases per measure) to 
$208.80 ($11.60 per measure x 3 measures x 6 cases per measure), with 
the cost to the median practice being $30.42 per eligible professional 
($1.69 per measure x 3 measures x 6 cases per measure).
    For registry-based reporting, there would be no additional time 
burden for eligible professionals to report data to a registry as 
eligible professionals opting for registry-based reporting would more 
than likely already be reporting data to the registry for other 
purposes and the registry would merely be re-packaging the data for use 
in the Physician Quality Reporting System. Little, if any, additional 
data would need to be reported to the registry for purposes of 
participation in the 2011 Physician Quality Reporting System. However, 
eligible professionals would need to authorize or instruct the registry 
to submit quality measures results and numerator and denominator data 
on quality measures to CMS on their behalf. We estimate that the time 
and effort associated with this would be approximately 5 minutes per 
eligible professional.
    Registries interested in submitting quality measures results and 
numerator and denominator data on quality measures to CMS on their 
participants' behalf in 2011 will need to complete a self-nomination 
process in order to be considered ``qualified'' to submit on behalf of 
eligible professionals unless the registry was qualified to submit on 
behalf of eligible professionals for prior years and did so 
successfully. We estimate that the self-nomination process for 
qualifying additional registries to submit on behalf of eligible 
professionals for the 2011 Physician Quality Reporting System involves 
approximately 1 hour per registry to draft the letter of intent for 
self-nomination. It is estimated that each self-nominated entity will 
also spend 2 hours for the interview with CMS officials and 2 hours 
calculating numerators, denominators, and measure results for each 
measure the registry wishes to report using a CMS-provided measure 
flow. However, the time it takes to complete the measure flow could 
vary depending on the registry's experience and the number and type of 
measures for which the registry wishes to submit on behalf of eligible 
professionals. Additionally, part of the self-nomination process 
involves the completion of an XML submission by the registry, which is 
estimated to take approximately 5 hours, but may vary depending on the 
registry's experience. We estimate that the registry staff involved in 
the registry self-nomination process have an average labor cost of $50 
per hour. Therefore, assuming the total burden hours per registry 
associated with the registry self-nomination process is 10 hours, we 
estimate the total cost to a registry associated with the registry 
self-nomination process to be approximately $500 ($50 per hour x 10 
hours per registry).
    The burden associated with the registry-based reporting 
requirements of this voluntary reporting initiative is the time and 
effort associated with the registry calculating quality measures 
results from the data submitted to the registry by its participants and 
submitting the quality measures results and numerator and denominator 
data on quality measures to CMS on behalf of their participants. The 
time needed for a registry to review the quality measures and other 
information, calculate the measures results, and submit the measures 
results and numerator and denominator data on the quality

[[Page 73590]]

measures on their participants' behalf is expected to vary along with 
the number of eligible professionals reporting data to the registry and 
the number of applicable measures. However, we believe that registries 
already perform many of these activities for their participants. The 
number of measures that the registry intends to report to CMS and how 
similar the registry's measures are to CMS' Physician Quality Reporting 
System measures will determine the time burden to the registry.
    For EHR-based reporting, the eligible professional must have access 
to a CMS-specified identity management system, such as IACS, which we 
believe takes less than 1 hour to obtain. Once an eligible professional 
has an account for this CMS-specified identity management system, he or 
she must extract the necessary clinical data from his or her EHR, and 
submit the necessary data to the CMS-designated clinical data 
warehouse. With respect to our requirement for an eligible professional 
to submit a test file, we believe that doing so would take less than 1 
hour. With respect to submitting the actual 2011 data file in 2012, we 
believe that this would take an eligible professional no more than 2 
hours, depending on the number of patients on which the eligible 
professional is submitting. We believe that once the EHR is programmed 
by the vendor to allow data submission to CMS, the burden to the 
eligible professional associated with submission of data on Physician 
Quality Reporting System quality measures should be minimal. Because 
this manner of reporting quality data to CMS was new to the Physician 
Quality Reporting System for 2010 and no EHR data submissions have 
taken place yet, it is difficult to estimate how many eligible 
professionals will opt to participate in the Physician Quality 
Reporting System through the EHR mechanism in CY 2011.
    An EHR vendor interested in having their product(s) be used by 
eligible professionals to submit Physician Quality Reporting System 
quality measures data to CMS was required to complete a self-nomination 
process in order for the vendor's product(s) to be considered 
``qualified'' for 2011. It is difficult to accurately quantify the 
burden associated with the EHR self-nomination process as there is 
variation regarding the technical capabilities and experience among 
vendors. For purposes of this burden analysis, however, we estimate 
that the time required for an EHR vendor to complete the self-
nomination process will be similar to the time required for registries 
to self-nominate, that is approximately 10 hours at $50 per hour for a 
total of $500 per EHR vendor ($50 per hour x 10 hours per EHR vendor).
    The burden associated with the EHR vendor programming its EHR 
product(s) to extract the clinical data that the eligible professional 
needs to submit to CMS for purposes of reporting 2010 Physician Quality 
Reporting System quality measures will be dependent on the EHR vendor's 
familiarity with the Physician Quality Reporting System, the vendor's 
system capabilities, as well as the vendor's programming capabilities. 
Some vendors already have these necessary capabilities and for such 
vendors, we estimate the total burden hours to be 40 hours at a rate of 
$50 per hour for a total burden estimate of $2,000 ($50 per hour x 40 
hours per vendor). However, given the variability in the capabilities 
of the vendors, those vendors with minimal experience would have a 
burden of approximately 200 hours at $50 per hour, for a total estimate 
of $10,000 per vendor ($50 per hour x 200 hours per EHR vendor).
    With respect to the process for group practices to be treated as 
satisfactorily submitting quality measures data under the 2011 
Physician Quality Reporting System discussed in section VII.F.1. of 
this final rule with comment, group practices interested in 
participating in the 2011 Physician Quality Reporting System through 
one of the group practice reporting options (GPRO I or GPRO II) will 
need to complete a self-nomination process similar to the self-
nomination process required of registries and EHR vendors. Therefore, 
assuming 2 hours for a group practice to decide whether to participate 
as a group or individually, approximately 2 hours per group practice to 
draft the letter of intent for self-nomination, gather the requested 
information, and provide this requested information, and an additional 
2 hours undergoing the vetting process with CMS officials, we estimate 
a total of 6 hours associated with the self-nomination process. 
Assuming that the group practice staff involved in the group practice 
self-nomination process have the same average practice labor cost as 
the average practice labor cost estimates we used for individual 
eligible professionals of $58 per hour, we estimate the total cost to a 
group practice associated with the group practice self-nomination 
process to be approximately $348 ($58 per hour x 6 hours per group 
practice).
    The burden associated with the group practice reporting 
requirements of this voluntary reporting initiative is the time and 
effort associated with the group practice submitting the quality 
measures data. For practices participating under the GPRO I process, 
this would be the time associated with the physician group completing 
the data collection tool. The information collection components of this 
data collection tool have been reviewed by OMB and are currently 
approved under OMB control number 0938-0941, with an expiration date of 
December 31, 2011, for use in the Physician Group Practice, Medicare 
Care Management Performance (MCMP), and EHR demonstrations. Based on 
burden estimates for the PGP demonstration, which uses the same data 
submission methods, we estimate the burden associated with a physician 
group completing the data collection tool would be approximately 79 
hours per physician group. Based on an average labor cost of $58 per 
physician group, we estimate the cost of data submission per physician 
group associated with participating in the Physician Quality Reporting 
System GPRO I would be $4,582 ($58 per hour x 79 hours per group 
practice).
    For group practices participating under the GPRO II process, the 
burden associated with submitting the Physician Quality Reporting 
System quality measures data would be the time associated with the 
group practice submitting the required data to CMS via claims or a 
registry. We would expect that data submission under GPRO II would take 
no more time than the time it would take an individual eligible 
professional to submit via claims or registry. We believe it would be 
appropriate to multiply the appropriate burden estimates for each 
reporting mechanism for individual eligible professionals by the number 
of eligible professionals in a group to obtain the burden estimates for 
data submission under GPRO II. For example, based on our estimate of 
15.75 minutes per eligible professional under claims-based reporting, 
we would expect that a 2-person group would have a burden of 31.50 
minutes for claims-based submission under GPRO II.
    Eligible professionals who wish to qualify for the additional 0.5 
percent incentive payment authorized under section 1848(m)(7) of the 
Act (``Additional Incentive Payments'') for 2011 will need to more 
frequently than is required to qualify for or maintain board 
certification status participate in a qualified Maintenance of 
Certification Program for 2011 and successfully complete a qualified 
Maintenance of Certification Program practice assessment for 2011. We 
believe that a majority of the eligible professionals who would attempt 
to qualify for this

[[Page 73591]]

additional 0.5 percent incentive payment would be those who are already 
enrolled and participating in a Maintenance of Certification Board. The 
amount of time that it would take for the eligible professional to 
participate in the Maintenance of Certification Program more frequently 
than is required to qualify for or maintain board certification status 
would vary based on what each individual board determines constitutes 
``more frequently.'' The amount of time needed to complete a qualified 
Maintenance of Certification Program practice assessment is expected to 
be spread out over time since a quality improvement component is often 
required. Information from an informal poll of a few ABMS member boards 
indicates that the time an individual eligible professional spends to 
complete the practice assessment component of the Maintenance of 
Certification ranges from 8 to 12 hours.
    We invited comments on this burden analysis, including the 
underlying assumptions used in developing our burden estimates and 
received no comments.
3. Electronic Prescribing (eRx) Incentive Program
    We believe it is difficult to accurately estimate how many eligible 
professionals will opt to participate in the eRx Incentive Program in 
CY 2011. Information from the 2009 eRx Incentive Program indicates that 
nearly 90,000 eligible professionals participated in the first year of 
the program. We believe, however, that the number of participants will 
increase in light of the payment adjustment that will start in 2012. 
Therefore, for purposes of conducting a burden analysis for the 2011 
eRx Incentive Program, we will assume that as many eligible 
professionals who attempted to participate in the 2007 Physician 
Quality Reporting System will attempt to participate in the 2011 eRx 
Incentive Program. As such, we can estimate that nearly 110,000 unique 
TIN/NPI combinations will participate in the 2011 eRx Incentive Program 
(see the ``PQRI 2007 Reporting Experience Report,'' which is available 
on the Physician Quality Reporting System section of the CMS Web site 
at http://www.cms.hhs.gov/pqri).
    Section VII.F.2 of this final rule with comment discusses the 
background of the eRx Incentive Program. Section VII.F.2.b.(2) of this 
final rule with comment provides information on how eligible 
professionals and group practices can qualify to be considered a 
successful electronic prescriber in 2011 in order to earn an incentive 
payment. For 2011, eligible professionals and group practices may 
choose whether to participate and, to the extent they meet-- (1) 
certain thresholds with respect to the volume of covered professional 
services furnished; and (2) the criteria to be considered a successful 
electronic prescriber described in section VII.F.2.b.(2) of this final 
rule with comment, they can qualify to receive an incentive payment for 
2011 and/or avoid being subject to the payment adjustment that goes 
into effect in 2012.
    For the 2011 eRx Incentive Program, as discussed in section 
VII.F.2. of this final rule with comment, each eligible professional 
will need to report the G-code indicating that at least one 
prescription generated during an encounter was electronically submitted 
at least 25 instances during the reporting period. We expect the 
ongoing costs associated with participation in the eRx Incentive 
Program to decline based on an eligible professional's familiarity with 
and understanding of the eRx Incentive Program, experience with 
participating in the eRx Incentive Program, and increased efforts by 
CMS and stakeholders to disseminate useful educational resources and 
best practices.
    Similar to the Physician Quality Reporting System, one factor in 
the burden to individual eligible professionals is the time and effort 
associated with individual eligible professionals reviewing the 
electronic prescribing measure to determine whether it is applicable to 
them, reviewing the available reporting options (for purposes of the 
2011 incentive, this measure will be reportable through claims-based 
reporting, registry-based reporting, or through EHRs) and selecting 
one, gathering the required information, and incorporating reporting of 
the measure into their office work flows. Since the eRx Incentive 
Program consists of only 1 measure to report, we estimate 2 hours as 
the amount of time needed for individual eligible professionals to 
prepare for participation in the eRx Incentive Program. At an average 
cost of approximately $58 per hour per practice, we estimate the total 
preparation costs to individual eligible professionals to be 
approximately $116 (2 hours x $58 per hour).
    Another factor that influences the burden to eligible professionals 
is how they choose to report the electronic prescribing measure. For 
eligible professionals who choose to do so via claims, we estimate that 
the burden associated with the requirements of this incentive program 
is the time and effort associated with gathering the required 
information, selecting the appropriate quality data codes (QDCs), and 
including the appropriate QDCs on the claims they submit for payment. 
For claims-based reporting, the QDCs will be collected as additional 
(optional) line items on the existing HIPAA transaction 837-P and/or 
CMS Form 1500. We do not anticipate any new forms and no modifications 
to the existing transaction or form. We also do not anticipate changes 
to the 837-P or CMS Form 1500 for CY 201.
    Based on the information from the PVRP described above for the 
amount of time it takes a median practice to report one measure one 
time on claims (1.75 minutes) and our requirement that eligible 
professionals to report the measure 25 times for purposes of the 
incentive payment, we estimate the burden associated with claims-based 
data submission to be 43.75 minutes (1.75 minutes per case x 1 measure 
x 25 cases per measure). This equates to a cost of approximately $42.29 
(1.75 minutes per case x 1 measure x 25 cases per measure x $58 per 
hour) per individual eligible professional. For purposes of the 2012 
eRx payment adjustment, where an eligible professional is required to 
report the measure only 10 times, we estimate the burden associated 
with claims-based submission to be 17.5 minutes (1.75 minutes per case 
x 1 measure x 10 cases per measure). This equates to a cost of 
approximately $16.92 (1.75 minutes per case x 1 measure x 10 cases per 
measure x $58 per hour) per individual eligible professional.
    Because registry-based reporting of the electronic prescribing 
measure to CMS was added to the eRx Incentive Program for 2010 and 
eligible professionals are not required to indicate to us how they plan 
to report the electronic prescribing measure each year, it is difficult 
to accurately estimate how many eligible professionals will opt to 
participate in the eRx Incentive Program through the registry-based 
reporting mechanism in CY 2011. We do not anticipate, however, any 
additional burden for eligible professionals to report data to a 
registry as eligible professionals opting for registry-based reporting 
would more than likely already be reporting data to the registry for 
other purposes. Little, if any, additional data would need to be 
reported to the registry for purposes of participation in the 2011 eRx 
Incentive Program. However, eligible professionals would need to 
authorize or instruct the registry to submit quality measures results 
and numerator and denominator data on the electronic

[[Page 73592]]

prescribing measure to CMS on their behalf. We estimate that the time 
and effort associated with this would be approximately 5 minutes for 
each eligible professional that wishes to authorize or instruct the 
registry to submit quality measures results and numerator and 
denominator data on the electronic prescribing measure to CMS on their 
behalf.
    Based on our decision to consider only registries qualified to 
submit Physician Quality Reporting System quality measures results and 
numerator and denominator data on quality measures to CMS on their 
participants' behalf for the 2011 Physician Quality Reporting System to 
be qualified to submit results and numerator and denominator data on 
the electronic prescribing measure for the 2011 eRx Incentive Program, 
there would be no need for a registry to undergo a separate self-
nomination process for the eRx Incentive Program and therefore, no 
additional burden associated with the registry self-nomination process.
    There would also be a burden to the registry associated with the 
registry calculating results for the electronic prescribing measure 
from the data submitted to the registry by its participants and 
submitting the quality measures results and numerator and denominator 
data on the electronic prescribing quality measure to CMS on behalf of 
their participants. The time needed for a registry to review the 
electronic prescribing measure and other information, calculate the 
measure's results, and submit the measure's results and numerator and 
denominator data on the measure on their participants behalf is 
expected to vary along with the number of eligible professionals 
reporting data to whom the measure applies. However, we believe that 
registries already perform many of these activities for their 
participants. Since the eRx Incentive Program consists of only one 
measure, we believe that the burden associated with the registry 
reporting the measure's results and numerator and denominator to CMS on 
behalf of their participants would be minimal.
    For EHR-based reporting, the eligible professional must extract the 
necessary clinical data from his or her EHR and submit the necessary 
data to the CMS-designated clinical data warehouse. Because this manner 
of reporting quality data to CMS was first added to the eRx Incentive 
Program in 2010 and eligible professionals are not required to indicate 
to us how they intend to report the electronic prescribing measure, it 
is difficult to estimate how many eligible professionals will opt to 
participate in the eRx Incentive Program through the EHR-based 
reporting mechanism in CY 2011. We believe that once an eligible 
professional's EHR is programmed by the vendor to allow data submission 
to CMS, the burden to the eligible professional associated with 
submission of data on the electronic prescribing measure should be 
minimal.
    Since we are considering only EHR products qualified for the 2010 
Physician Quality Reporting System to be qualified for the 2011 eRx 
Incentive Program, there will be no need for EHR vendors to undergo a 
separate self-nomination process for the 2011 eRx Incentive Program and 
therefore, no additional burden associated with the self-nomination 
process.
    There will also be a burden to the EHR vendor associated with the 
EHR vendor programming its EHR product(s) to extract the clinical data 
that the eligible professional needs to submit to CMS for purposes of 
reporting the proposed 2011 electronic prescribing measure. The time 
needed for an EHR vendor to review the measure and other information 
and program each qualified EHR product to enable eligible professionals 
to submit data on the measure to the CMS-designated clinical data 
warehouse will be dependent on the EHR vendor's familiarity with the 
electronic prescribing measure, the vendor's system capabilities, as 
well as the vendor's programming capabilities. Since only EHR products 
qualified for the 2011 Physician Quality Reporting System will be 
qualified for the 2011 eRx Incentive Program and the eRx Incentive 
Program consists of only one measure, we believe that any burden 
associated with the EHR vendor to program its product(s) to enable 
eligible professionals to submit data on the electronic prescribing 
measure to the CMS-designated clinical data warehouse would be minimal.
    Finally, with respect to the process for group practices to be 
treated as successful electronic prescribers under the 2011 eRx 
Incentive Program discussed in section VII.F.2. of this final rule with 
comment, group practices will have the same options as individual 
eligible professionals in terms of the form and manner for reporting 
the electronic prescribing measure (that is, group practices would have 
the option of reporting the measure through claims, a qualified 
registry, or a qualified EHR product). There are only 2 differences 
between the requirements for an individual eligible professional and a 
group practice: (1) The fact that a group practice will have to self-
nominate; and (2) the number of times that a group practice will be 
required to report the electronic prescribing measure.
    We do not anticipate any additional burden associated with the 
group practice self-nomination practice since we are limiting the group 
practices to those selected to participate in the 2011 Physician 
Quality Reporting System GPRO I or Physician Quality Reporting System 
GPRO II. The practice only will need to indicate their desire to 
participate in the eRx GPRO at the same time they self-nominate for 
either Physician Quality Reporting System GPRO I or Physician Quality 
Reporting System GPRO II and indicate how they intend to report the 
electronic prescribing measure.
    In terms of the burden to group practices associated with 
submission of the electronic prescribing measure, we believe that this 
would be similar to the burden to individual eligible professionals for 
submitting the electronic prescribing measure. In fact, overall, there 
could be less burden associated with a practice participating as a 
group rather than as individual eligible professionals because the 
total number of reporting instances required by the group could be less 
than the total number of reporting instances that would be required if 
each member of the group separately reported the electronic prescribing 
measure. Thus, we believe that the burden to a group practice 
associated with reporting the electronic prescribing measure could 
range from almost no burden (for groups who choose to do so through a 
qualified EHR or registry) to 72.92 hours (1.75 minutes per measure x 1 
measure x 2500 cases per measure) for a GPRO I group who chooses to 
report the electronic prescribing measures through claims submission. 
Consequently, the total estimated cost per group practice to report the 
electronic prescribing measure could be as high as $4,225 ($1.69 per 
measure x 1 measure x 2500 cases per measure).
    As with individual eligible professionals, we believe that group 
practices that choose to participate in the 2011 eRx GPRO through 
registry-based reporting of the electronic prescribing measure would 
more than likely already be reporting data to the registry. Little, if 
any, additional data would need to be reported to the registry for 
purposes of participation in the 2011 eRx Incentive Program beyond 
authorizing or instructing the registry to submit quality measures 
results and numerator and denominator data on the electronic 
prescribing measure to CMS on their behalf. We estimate that the time 
and effort associated with this would be approximately 5 minutes for

[[Page 73593]]

each group practice that wishes to authorize or instruct the registry 
to submit quality measures results and numerator and denominator data 
on the electronic prescribing measure to CMS on their behalf.
    For group practices that choose to participate in the 2011 eRx 
Incentive Program through EHR-based reporting of the electronic 
prescribing measure, once the EHR is programmed by the vendor to allow 
data submission to CMS, the burden to the group practice associated 
with submission of data on the electronic prescribing measure should be 
minimal.
    We invited comments on this burden analysis, including the 
underlying assumptions used in developing our burden estimates and 
received none.

X. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

XI. Regulatory Impact Analysis

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, section 202 of the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). We estimate, 
as discussed below in this section, that the PFS provisions included in 
this final rule with comment period will redistribute more than $100 
million in 1 year. Therefore, we estimate that this rulemaking is 
``economically significant'' as measured by the $100 million threshold, 
and hence also a major rule under the Congressional Review Act. 
Accordingly, we have prepared a Regulatory Impact Analysis that to the 
best of our ability presents the costs and benefits of the rulemaking.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses, if a rule has a significant impact on a 
substantial number of small entities. For purposes of the RFA, we 
estimate that most hospitals and most other providers are small 
entities as that term is used in the RFA (including small businesses, 
nonprofit organizations, and small governmental jurisdictions). The 
great majority of hospitals and most other health care providers and 
suppliers are small entities, either by being nonprofit organizations 
or by meeting the SBA definition of a small business (having revenues 
of less than $34.5 million in any 1 year) (for details see the SBA's 
Web site at http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (refer to the 620000 series). Individuals and 
States are not included in the definition of a small entity. The RFA 
requires that we analyze regulatory options for small businesses and 
other entities. We prepare a regulatory flexibility analysis unless we 
certify that a rule would not have a significant economic impact on a 
substantial number of small entities. The analysis must include a 
justification concerning the reason action is being taken, the kinds 
and number of small entities the rule affects, and an explanation of 
any meaningful options that achieve the objectives with less 
significant adverse economic impact on the small entities.
    For purposes of the RFA, physicians, NPPs, and suppliers including 
IDTFs are considered small businesses if they generate revenues of $10 
million or less based on SBA size standards. Approximately 95 percent 
of physicians are considered to be small entities. There are over 1 
million physicians, other practitioners, and medical suppliers that 
receive Medicare payment under the PFS.
    For purposes of the RFA approximately 85 percent of suppliers of 
DMEPOS are considered small businesses according to the SBA size 
standards. Our most recent claims information includes 47,000 entities 
billing Medicare for DMEPOS each year. Total annual estimated Medicare 
expenditures for DMEPOS suppliers are approximately $10.1 billion in CY 
2009, for which $8.1 billion was fee-for-service (FFS) and $2 billion 
was for managed care.
    For purposes of the RFA, approximately 80 percent of clinical 
diagnostic laboratories are considered small businesses according to 
the SBA size standards.
    Ambulance providers and suppliers for purposes of the RFA are also 
considered to be small entities.
    In addition, most ESRD facilities are considered small entities for 
purposes of the RFA, either based on nonprofit status or by having 
revenues of $34.5 million or less in any year. We note that a 
considerable number of ESRD facilities are owned and operated by large 
dialysis organizations (LDOs) or regional chains, which would have 
total revenues more than $34.5 million in any year if revenues from all 
locations are combined. However, the claims data we use to estimate 
payments for this RFA and RIA does not identify which dialysis 
facilities are parts of an LDO, regional chain, or other type of 
ownership. Each individual dialysis facility has its own provider 
number and bills Medicare using this number. Therefore, we consider 
each ESRD facility to be a small entity for purposes of the RFA. We 
consider a substantial number of entities to be significantly affected 
if the final rule with comment period has an annual average impact on 
small entities of 3 to 5 percent or more. The majority of ESRD 
facilities will experience impacts of approximately 2 percent of total 
revenues. There are 976 nonprofit ESRD facilities with a combined 
increase of 2.1 percent in overall payments relative to current overall 
payments. We note that although the overall effect of the wage index 
changes is budget neutral, there are increases and decreases based on 
the location of individual facilities. The analysis and discussion 
provided in this section and elsewhere in this final rule with comment 
period complies with the RFA requirements.
    Because we acknowledge that many of the affected entities are small 
entities, the analysis discussed throughout the preamble of this final 
rule with comment period constitutes our regulatory flexibility 
analysis for the remaining provisions and addresses comments received 
on these issues.
    In addition, section 1102(b) of the Act requires us 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. Any 
such regulatory impact analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. We do not 
believe this final rule with comment period has impact on

[[Page 73594]]

significant operations of a substantial number of small rural hospitals 
because most dialysis facilities are freestanding. While there are 180 
rural hospital-based dialysis facilities, we do not know how many of 
them are based at hospitals with fewer than 100 beds. However, overall, 
the 180 rural hospital-based dialysis facilities will experience an 
estimated 2.1 percent increase in payments. As a result, this rule will 
not have a significant impact on small rural hospitals. Therefore, the 
Secretary has determined that this final rule with comment period will 
not have a significant impact on the operations of a substantial number 
of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2010, that 
threshold is approximately $135 million. This final rule with comment 
period will not mandate any requirements for State, local, or tribal 
governments in the aggregate, or by the private sector, of $135 
million. Medicare beneficiaries are considered to be part of the 
private sector and as a result a more detailed discussion is presented 
on the Impact of Beneficiaries in section XI.G. of this regulatory 
impact analysis.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have examined this final rule with comment period in 
accordance with Executive Order 13132 and have determined that this 
regulation would not have any substantial direct effect on State or 
local governments, preempt States, or otherwise have a Federalism 
implication.
    We have prepared the following analysis, which together with the 
information provided in the rest of this preamble, meets all assessment 
requirements. The analysis explains the rationale for and purposes of 
this final rule with comment period; details the costs and benefits of 
the rule; analyzes alternatives; and presents the measures we will use 
to minimize the burden on small entities. As indicated elsewhere in 
this rule, we are implementing a variety of changes to our regulations, 
payments, or payment policies to ensure that our payment systems 
reflect changes in medical practice and the relative value of services. 
We provide information for each of the policy changes in the relevant 
sections of this final rule with comment period. We are unaware of any 
relevant Federal rules that duplicate, overlap, or conflict with this 
final rule with comment period. The relevant sections of this rule 
contain a description of significant alternatives if applicable.

A. RVU Impacts

1. Resource-Based Work, PE, and Malpractice RVUs
    Section 1848(c)(2)(B)(ii)(II) of the Act requires that increases or 
decreases in RVUs may not cause the amount of expenditures for the year 
to differ by more than $20 million from what expenditures would have 
been in the absence of these changes. If this threshold is exceeded, we 
make adjustments to preserve budget neutrality.
    Our estimates of changes in Medicare revenues for PFS services 
compare payment rates for CY 2010 with final payment rates for CY 2011 
using CY 2009 Medicare utilization for all years. To the extent that 
there are year-to-year changes in the volume and mix of services 
provided by physicians, the actual impact on total Medicare revenues 
will be different than those shown in Table 101. The payment impacts 
reflect averages for each specialty based on Medicare utilization. The 
payment impact for an individual physician would be different from the 
average, based on the mix of services the physician furnishes. The 
average change in total revenues would be less than the impact 
displayed here because physicians furnish services to both Medicare and 
non-Medicare patients and specialties may receive substantial Medicare 
revenues for services that are not paid under the PFS. For instance, 
independent laboratories receive approximately 85 percent of their 
Medicare revenues from clinical laboratory services that are not paid 
under the PFS.
    Table 101 shows only the payment impact on PFS services. We note 
that these impacts do not include the effect of the December 2010 and 
January 2011 conversion factor changes under current law. The following 
is an explanation of the information represented in Table 101:
    <bullet> Column A (Specialty): The Medicare specialty code as 
reflected in our physician/supplier enrollment files.
    <bullet> Column B (Allowed Charges): The aggregate estimated PFS 
allowed charges for the specialty based on CY 2009 utilization and CY 
2010 rates. That is, allowed charges are the PFS amounts for covered 
services and include coinsurance and deductibles (which are the 
financial responsibility of the beneficiary). These amounts have been 
summed across all services furnished by physicians, practitioners, and 
suppliers within a specialty to arrive at the total allowed charges for 
the specialty.
    <bullet> Column C (Impact of Work and Malpractice (MP) RVU 
Changes): This column shows the estimated CY 2011 impact on total 
allowed charges of the changes in the work and malpractice RVUs, 
including the impact of changes due to new, revised, and potentially 
misvalued codes.
    <bullet> Column D (Impact of PE RVU and Multiple Procedure Payment 
Reduction Changes--Full): This column shows the estimated CY 2011 
impact on total allowed charges of the changes in the PE RVUs if there 
were no remaining transition to the full use of the new PPIS data. This 
column also includes the impact of the various MPPR and imaging 
equipment utilization polices, and the impact of changes due to new, 
revised, and potentially misvalued codes.
    <bullet> Column E (Impact of PE RVU and Multiple Procedure Payment 
Reduction Changes--Tran): This column shows the estimated CY 2011 
impact on total allowed charges of the changes in the PE RVUs under the 
second year of the 4-year transition to the full use of the new PPIS 
data. This column also includes the impact of the various MPPR and 
imaging equipment utilization policies, and the impact of changes due 
to new, revised, and potentially misvalued codes.
    <bullet> Column F (Impact of MEI Rebasing): This column shows the 
estimated CY 2011 impact on total allowed charges of the CY 2011 
rescaling of the RVUs so that the proportions of total payments based 
on the work, PE, and malpractice RVUs match the proportions in the 
final revised and rebased MEI for CY 2011.
    <bullet> Column G (Combined Impact--Full): This column shows the 
estimated CY 2011 combined impact on total allowed charges of all the 
changes in the previous columns if there were no remaining transition 
to the new PE RVUs using the PPIS data.
    <bullet> Column H (Combined Impact--Tran): This column shows the 
estimated CY 2011 combined impact on total allowed charges of all the 
changes in the previous columns under the second year of the 4-year 
transition to the new PE RVUs using the PPIS data.
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2. CY 2011 PFS Impact Discussion
    a. Changes in RVUs
    The most widespread specialty impacts of the RVU changes are 
generally related to several factors. First, as discussed in section 
II.A.2. of this final rule with comment period, we are currently 
implementing the second year of the 4-year transition to new PE RVUs 
using the new PPIS data that were adopted in the CY 2010 PFS final rule 
with comment period (74 FR 61751). The impacts of using the new PPIS 
data are generally consistent with the impacts discussed in the CY 2010 
PFS final rule with comment period (74 FR 61983 through 61984).
    The second general factor contributing to the CY 2011 impacts shown 
in Table 101 is the CY 2011 rescaling of the RVUs so that in the 
aggregate they match the work, PE, and malpractice proportions in the 
revised and rebased MEI for CY 2011. That is, as discussed in section 
II.E.5. of this final rule with comment period, the revised and rebased 
MEI has a greater proportion attributable to malpractice and PE and, 
correspondingly, a lesser proportion attributable to work. Specialties 
that have a high proportion of total RVUs attributable to work, such as 
anesthesiology, are estimated to experience a decrease in aggregate 
payments as a result of this rescaling, while specialties that have a 
high proportion attributable to PE, such as radiation oncology, are 
estimated to experience an increase in aggregate payments. Malpractice 
generally represents a small proportion of total payments and the 
rescaling of the malpractice RVUs is not the primary driver of the 
specialty impacts. As discussed in section II.E.7. of this final rule 
with comment period, the rescaling of the RVUs to match the rebased MEI 
is budget neutral overall.
    Finally, another significant factor contributing to the impacts 
shown in Table 101 (but on a specialty-specific rather than widespread 
level) is the final policies regarding new, revised, and potentially 
revised codes resulting from our CY 2011 acceptance of 70 percent of 
the AMA RUC work RVU recommendations and the majority of the direct PE 
input recommendations. We have incorporated alternative RVUs and direct 
PE inputs for some codes in accordance with our recommended policies. 
We note that some specialties, such as radiation oncology, 
ophthalmology, and IDTFs that commonly furnish potentially misvalued 
codes that have been examined by the AMA RUC and newly

[[Page 73597]]

valued for CY 2011, experience decreases in aggregate payment as a 
result of these changes.
    Table 101 also includes the impacts resulting from our regulatory 
change to expand the current 50 percent MPPR policy to therapy 
services, but at an MPPR rate of 25 percent on the PE component payment 
for therapy services. Under the PFS, we estimate that this change would 
primarily reduce payments to the specialties of physical therapy and 
occupational therapy. In order to maintain budget neutrality, we 
redistributed the PFS savings back into other services paid under the 
PFS by increasing all PE RVUs by approximately 0.5 percent.
    Because providers in settings outside of the PFS, such as 
outpatient hospital departments, are also paid using the PFS payment 
rates and policies for physical therapy services, we estimated that 
this will reduce (not redistribute) payments in those settings for 
therapy services by approximately 7 percent in CY 2011.
    In addition, Table 101 includes the impacts resulting from the 
regulatory change to the scope of the current contiguous body area MPPR 
policy for imaging services from contiguous body areas to include 
noncontiguous body areas. We estimate that this change would primarily 
reduce payments to the specialties of IDTF and radiology. In order to 
maintain budget neutrality, we redistributed these savings back into 
other services paid under the PFS by increasing all PE RVUs by 
approximately 0.1 percent.
    Table 101 also reflects the impacts resulting from certain ACA 
provisions, including reductions in payment under section 3135 of the 
ACA which amends section 1848(b)(4) of the Act to increase the 
equipment utilization rate assumption for expensive diagnostic imaging 
equipment, and, effective July 1, 2010, to increase the level of the 
MPPR for contiguous body areas from 25 percent to 50 percent. The 
expansion of the MPPR policy is further discussed in section II.C.4. of 
this final rule with comment period, while the discussions of the 
provisions of section 3135 of the ACA are found in sections VI.M. and 
II.A.3.a. of this final rule with comment period. As required by 
sections 1848(c)(2)(B)(v)(V) and (VI) of the Act (as added by sections 
3135(a) and (b) of the ACA), these changes are not budget neutral and 
result in program savings.
    We note that in section XI.D of this final rule with comment 
period, we provide discussions of the budget impacts of individual ACA 
provisions not elsewhere discussed in this section. Additionally, while 
column H in Table 101 illustrates the estimated combined CY 2011 impact 
on total allowed charges by specialty of all the final RVU and MPPR 
changes and the MEI rebasing, including several ACA provisions that 
directly affect the determination of PFS payments as discussed 
previously, we note that other ACA provisions discussed in section 
XI.D. of this final rule with comment period could also result in 
additional impacts on individual practitioners or specialties, 
depending on their practice patterns. Since the effects of a number of 
the ACA provisions are dependent on the practice patterns of 
practitioners, we would expect these impacts to be non-uniform among 
specialties. For example, as discussed further in section XI.D.19 of 
this final rule with comment period, section 1833(x) of the Act (as 
added by section 5501(a) of the ACA) provides for a 10 percent 
incentive payment for primary care services furnished by primary care 
practitioners. Accordingly, potentially eligible primary care 
specialties designated under the statute (including family practice and 
geriatric medicine), are expected to experience an estimated aggregate 
increase in payment of between 4 and 9 percent, which includes the 
estimated impacts under the PFS displayed in column H of Table 101 and 
the new primary care incentive payments. We note that in general the 
payment impact for an individual physician may be different from the 
average, based on the mix of services the physician furnishes and his 
or her eligibility for the primary care incentive payment program.
b. Combined Impact
    Column H of Table 101 displays the estimated CY 2011 combined 
impact on total allowed charges by specialty of all the final RVU and 
MPPR changes. These impacts range from an increase of 6 percent for 
portable x-ray suppliers to a decrease of 15 percent for diagnostic 
testing facilities. There is generally a slightly positive net effect 
of our final policies on primary care specialties, such as family 
practice, internal medicine, and geriatrics. Again, these impacts are 
estimated prior to the application of the negative CY 2011 CF update 
applicable under the current statute.
    Comment: One commenter requested that the specialty impact table 
incorporate the impact of payment changes for other Medicare Part B 
services that are not paid under the PFS.
    Response: The purpose of Table 101 is to isolate the impacts by 
specialty for services paid under the PFS. To the extent that changes 
in payment for other Part B services are adopted in this final rule 
with comment period and have significant impacts upon providers, those 
impacts are discussed elsewhere in this section.
    Table 102 shows the estimated impact on total payments for selected 
high-volume procedures of all of the changes discussed previously, 
including the effect of the CY 2011 negative PFS CF update. We selected 
these procedures because they are the most commonly furnished by a 
broad spectrum of physician specialties. There are separate columns 
that show the change in the facility rates and the nonfacility rates. 
For an explanation of facility and nonfacility PE, we refer readers to 
Addendum A of this final rule with comment period.
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B. Geographic Practice Cost Indices (GPCIs)

    As discussed in section II.D. of this final rule with comment 
period, we are required to update the GPCI values at least every 3 
years and phase in the adjustment over 2 years (if there has not been 
an adjustment in the past year). For CY 2011, we are finalizing new 
GPCIs for each Medicare locality. The updated GPCIs reflect the first 
year of the 2-year phase-in. The new GPCIs rely upon the 2010 HUD data 
for determining the relative cost differences in the office rent 
component of the PE GPCIs, as well as the 2006 through 2007 
professional malpractice premium data for determining the malpractice 
GPCIs. The 2006 through 2008 Bureau of Labor and Statistics (BLS) 
Occupational Employment Statistics (OES) data were used as a 
replacement for 2000 Census data for determining the physician work 
GPCIs and the employee compensation component of the PE GPCIs. However, 
as discussed in section II.D. of this final rule with comment period, 
we are continuing to use the current cost share weights for determining 
the PE GPCI values and locality GAFs.
    Additionally, the updated GPCIs reflect several provisions required 
by changes included in the ACA. Section 1848(e)(1)(H) of the Act (as 
added by section 3102(b) of the ACA) specifies that for CYs 2010 and 
2011, the employee wage and rent portions of the PE GPCIs reflect only 
one-half of the relative cost differences for each locality compared to 
the national average and includes a ``hold harmless'' provision for any 
PFS locality that would receive a reduction to its PE GPCI resulting 
from the limited recognition of cost differences. Section 1848(e)(1)(E) 
of the Act (as amended by section 3102(a) of the ACA) extends the 1.000 
work GPCI floor only through December 31, 2010. Therefore, the CY 2011 
GPCIs reflect the sunset of the 1.000 work GPCI floor. Section 
1848(e)(1)(G) of the Act (as amended by section 134(b) of the MIPPA) 
established a permanent 1.500 work GPCI floor in Alaska, beginning 
January 1, 2009 and, therefore, the 1.500 work GPCI floor in Alaska 
will remain in place for CY 2011. Moreover, section 1848(e)(1)(I) of 
the Act (as added by section 10324(c) of the ACA) establishes a 1.000 
PE GPCI floor for services furnished in frontier states effective 
January 1, 2011. We estimate the combined impact of these provisions on 
a fiscal year cash basis to be $580 million for FY 2011.
    As required by the statute, the updated GPCIs would be phased in 
over a 2-year period. Addendum D to this final rule with comment period 
shows the estimated effects of the revised GPCIs on locality GAFs for 
the transitional year (CY 2011) by State and Medicare locality. The 
GAFs reflect the use of updated underlying GPCI data and the ACA 
provisions. The GAFs are a weighted composite of each area's work, PE, 
and malpractice GPCIs using the national GPCI cost share weights. While 
we do not actually use the GAFs in computing the PFS payment for a 
specific service, they are useful in comparing the estimated overall 
costs and payments for different localities. The actual effect on 
payment for any specific service would deviate from the estimated 
payment based on the GAF to the extent that the proportions of work, 
PE, and malpractice expense RVUs for the specific service differ from 
those of the GAF. The most significant changes would occur in 12 
payment localities, where the GAF increases or decreases by more than 2 
percent. The cumulative effects of all of the GPCI revisions, including 
the updated underlying GPCI data and provisions of the ACA, are 
reflected in the CY 2012 GPCI values that are displayed in Addendum E 
to this final rule with comment period.

C. Rebasing and Revising of the MEI

    As discussed in section II.E.5. of this final rule with comment 
period, we finalized the rebasing and revision of the MEI for the CY 
2011 PFS. Using the new 2006 MEI weights in place of the 2000 weights 
and implementing the revisions to the MEI results in a slightly higher 
projected MEI increase for CY 2011 than would have been the case 
without the rebasing and revision of the MEI. The MEI update for CY 
2011 is 0.4 percent under the 2006-based MEI, while the MEI update for 
CY 2011 would have been 0.3 percent under the 2000-based MEI. After CY 
2011, the 2006-based MEI updates are forecasted to be either the same 
or slightly lower (0.1 to 0.2 percentage point) than the forecasted 
2000-based MEI updates.

D. The Affordable Care Act Provisions

1. Section 3002: Improvements to the Physician Quality Reporting System
    For the impact of this provision see section XI.E.6. of this final 
rule with comment period.
2. Sections 3003 and 3007: Improvements to the Physician Feedback 
Program and Value-Based Payment Under the Physician Fee Schedule
    As discussed in section VI.B. of this final rule with comment 
period, these provisions: (1) continue the confidential feedback 
program and requires the Secretary, beginning in 2012, to provide 
reports that compare patterns of resource use of individual physicians 
to other physicians; and (2) require the Secretary to apply a separate, 
budget-neutral, value-based payment modifier to the payment calculation 
for PFS services furnished by certain practitioners beginning in CY 
2015. There is no budgetary impact associated with these provisions for 
CY 2011.
3. Section 3102: Extension of the Work Geographic Index Floor and 
Revisions to the Practice Expense Geographic Adjustment under the 
Medicare Physician Fee Schedule, and Protections for Frontier States as 
Amended by Section 10324
    For the impact of this provision see section XI.B. of this final 
rule with comment period.
4. Section 3103: Extension of Exceptions Process for Medicare Therapy 
Caps
    This provision extends the exceptions process for therapy caps 
through December 31, 2010. Therapy caps are discussed in detail in 
section III.A.1. of this final rule with comment period. We estimate 
the impact on a fiscal year cash basis to be $1.16 billion for FY 2011.
5. Section 3104: Extension of Payment for Technical Component of 
Certain Physician Pathology Services
    As discussed in section VI.E. of this final rule with comment 
period, this provision continues payment to independent laboratories 
for the TC of physician pathology services for fee-for-service Medicare 
beneficiaries who are inpatients or outpatients of a covered hospital 
through CY 2010. We estimate the impact on a fiscal year cash basis to 
be $80 million for FY 2011.
6. Sections 3105 and 10311: Extension of Ambulance Add-Ons
    As discussed in section VI.F. of this final rule with comment 
period, these provisions require the extension of certain add-on 
payments for ground ambulance services, and the extension of certain 
rural area designations for purposes of air ambulance payment. As 
further discussed in section VI.F. of this final rule with comment 
period, we are amending the Medicare program regulations to conform the 
regulations to these provisions of the ACA. These statutory provisions 
are essentially prescriptive and do not allow for discretionary 
alternatives on the part of the Secretary.
    As discussed in the July 1, 2004 interim final rule (69 FR 40288), 
in

[[Page 73602]]

determining the super-rural bonus amount under section 1834(l)(12) of 
Act, we followed the statutory guidance of using the data from the 
Comptroller General (GAO) of the U.S. We obtained the same data as the 
data that were used in the GAO's September 2003 Report titled 
``Ambulance Services: Medicare Payments Can Be Better Targeted to Trips 
in Less Densely Populated Rural Areas'' (GAO report number GAO-03-986) 
and used the same general methodology in a regression analysis as was 
used in that report. The result was that the average cost per trip in 
the lowest quartile of rural county populations was 22.6 percent higher 
than the average cost per trip in the highest quartile. As required by 
section 1834(l)(12) of the Act, this percent increase is applied to the 
base rate for ground ambulance transports that originate in qualified 
rural areas, which were identified using the methodology set forth in 
the statute. Payments for ambulance services under Medicare are 
determined by the point of pick-up (by zip code area) where the 
beneficiary is loaded on board the ambulance. We determined that ground 
ambulance transports originating in 7,842 zip code areas (which were 
determined to be in ``qualified rural areas'') out of 42,879 zip code 
areas, according to the July 2010 zip code file, will realize increased 
base rate payments under this provision. However, the number and level 
of services that might occur in these areas for CY 2011 is unknown at 
this time. While many elements may factor into the final impact of 
sections 3105(a) through (c) and 10311(a) through (c) of the ACA, we 
estimate the impact of all these provisions to be $10 million for FY 
2011.
7. Section 3107: Extension of Physician Fee Schedule Mental Health Add-
On
    As discussed in section VI.G. of this final rule with comment 
period, this provision extends application of the five percent increase 
in Medicare payment for specified mental health services only through 
CY 2010. We estimate the impact on a fiscal year cash basis to be $20 
million for FY 2011.
8. Section 3108: Permitting Physician Assistants to Order Post-Hospital 
Extended Care Services
    As discussed in section VI.H. of this final rule with comment 
period, this provision adds PAs to the list of practitioners (that is, 
physicians, nurse practitioners (NPs), and clinical nurse specialists) 
that can perform the required initial certification and periodic 
recertifications under section 1814(a)(2)(B) of the Act with respect to 
the SNF level of care. There is no budgetary impact associated with 
this provision.
9. Section 3111: Payment for Bone Density Tests
    As discussed in section VI.I. of this final rule with comment 
period, this provision requires payment for dual-energy x-ray 
absorptiometry (DXA) services furnished during CYs 2010 and 2011 at 70 
percent of the Medicare rate paid in CY 2006, with the applicable 
geographic adjustment for CY 2011. We estimate the impact on a fiscal 
year cash basis to be $60 million for FY 2011.
10. Section 3114: Improved Access for Certified Nurse-Midwife Services
    As discussed in section VI.J. of this final rule with comment 
period, this provision increased the amount of Medicare payment made 
under the PFS for certified nurse-midwife (CNM) services. There is no 
significant budgetary impact associated with this provision.
11. Section 3122: Extension of Medicare Reasonable Costs Payments for 
Certain Clinical Diagnostic Laboratory Tests Furnished to Hospital 
Patients in Certain Rural Areas
    As discussed in section VI.K. of this final rule with comment 
period, this provision reinstitutes reasonable cost payment for 
clinical diagnostic laboratory tests performed by hospitals with fewer 
than 50 beds that are located in qualified rural areas as part of their 
outpatient services for cost reporting periods beginning on or after 
July 1, 2010 through June 30, 2011. For some hospitals with cost 
reports that begin as late as June 30, 2011, this reinstitution of 
reasonable cost payment could affect services performed as late as June 
29, 2012, because this is the date those cost reports will close.
12. Section 3134: Misvalued Codes Under the PFS
    As discussed in section II.C. of this final rule with comment 
period, section 1848 (c)(2)(K) of the Act (as added by section 3134 of 
the ACA) requires the Secretary to periodically review and identify 
potentially misvalued codes and make appropriate adjustments to the 
relative values of those services identified as being potentially 
misvalued. The impacts of our CY 2011 policy changes under this 
provision are included in the discussion of RVU impacts in section 
XI.A. of this final rule and summarized by specialty in Table Q1 of 
this final rule with comment period.
13. Section 3135: Modification of Equipment Utilization Factor for 
Advanced Imaging Services
    As discussed in section VI.M. of this final rule with comment 
period, for services furnished on or after July 1, 2010, section 
1848(b)(4)(D) of the Act (as added by section 3135(b) of the ACA) 
adjusts the technical component MPPR for multiple imaging studies 
provided in a single imaging session on contiguous body parts within 
families of codes from 25 percent to 50 percent as of July 1, 2010. For 
services furnished on or after January 1, 2011, section 1848(b)(4)(C) 
of the Act (as added by section 3135(a) of the ACA) increases the 
equipment utilization rate to 75 percent for expensive diagnostic 
imaging equipment, changing the CY 2011 utilization rate adopted in the 
CY 2010 PFS final rule with comment period to the 75 percent rate. We 
estimate the impact on a fiscal year cash basis to be savings to the 
Medicare program of $160 million for FY 2011.
14. Section 3136: Revisions in Payments for Power Wheelchairs
    As discussed in section VI.N. of this final rule with comment 
period, this provision requires the Secretary to revise the capped 
rental fee schedule amounts for all power wheelchairs effective for 
power wheelchairs furnished on or after January 1, 2011. Under the 
monthly capped rental payment structure, the fee schedule will pay 15 
percent (instead of 10 percent) of the purchase price for the first 3 
months and 6 percent (instead of 7.5 percent) for the remaining rental 
months not to exceed 13 months. In addition, the lump sum (up front) 
purchase payment will be eliminated for standard power-driven 
wheelchairs. For complex rehabilitative power-driven wheelchairs, the 
provision permits payment to be made on a lump sum purchase method or a 
monthly rental method. These changes are prescriptive in the statute 
and do not allow for alternatives.
    We expect the changes mandated by section 3136 of the ACA as a 
whole to achieve program savings as a result of total payments per 
standard power wheelchair being less than 100 percent of the purchase 
fee schedule amount. This decrease in expenditures is expected for two 
reasons. Primarily, the provision will eliminate the lump sum payment 
method for standard power-driven wheelchairs and instead payment will 
be made under the monthly rental method resulting in lower aggregate 
payments because many beneficiaries who use standard power wheelchairs 
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as 13 months. In addition, we note that currently a significantly lower 
volume of power-driven wheelchairs are paid under the monthly payment 
method. The payment impact of increasing monthly rental payments in the 
initial 3 months will be offset both by the savings achieved from 
eliminating the lump sum payment method for standard power-driven 
wheelchairs and by decreasing payments for the remaining months of 
rental from 7.5 percent to 6 percent of the purchase price for all 
power-driven wheelchairs. We compared the estimates of current payments 
for power-driven wheelchairs to estimates of payments resulting from 
the changes required by section 3136 of the ACA which showed an 
estimated payment impact of a decrease in expenditures of approximately 
$780 million over a 5-year period. The FY 2011 cash savings was $120 
million.
15. Section 3139: Payment for Biosimilar Biological Products
    In Section VI.O. of this rule we discussed the provisions of the 
ACA that establish the definition of biosimilar, and reference 
biological product as well as the payment methodology for these 
products under Section 1847A of the Act. We noted that while these 
provisions are effective July 1, 2010, per statute, we do not expect to 
make payment for biosimilar products until after such products are 
approved by the FDA. We do not expect this provision to have any impact 
on spending.
16. Section 3401: Revisions of Certain Market Basket Updates and 
Incorporation of Productivity Adjustments
    As discussed in section VI.P. of this final rule with comment 
period, section 3401 of the ACA amends section 1881(b)(14)(F) of the 
Act so that in CY 2011, there is a full ESRD market basket update to 
the composite rate component of the blended payment amount under the 
new ESRD PPS. This provision is estimated to be a cost to the Medicare 
program of $40 million (does not include coinsurance).
    Section 3401 of the ACA also incorporates a productivity adjustment 
into the update factors for certain payment systems. Specifically, 
section 3401 requires that in CY 2011 (and in subsequent years), update 
factors under the ASC payment system, the AFS, the CLFS, and the DMEPOS 
fee schedules be adjusted by the productivity adjustment. We estimate 
the impact to be savings to the Medicare program of $20 million, $30 
million, $50 million, and $60 million for the ASC payment system, the 
AFS, the CLFS, and the DMEPOS fee schedules respectively, for FY 2011.
17. Section 4103: Medicare Coverage of Annual Wellness Visit Providing 
a Personalized Prevention Plan
    As discussed in section VI.Q. of this final rule with comment 
period, for services furnished on or after January 1, 2011, section 
1861(s)(2)(FF) of the Act (as added by section 4103 of the ACA) 
provides Medicare coverage, with no coinsurance or deductible, for an 
annual wellness visit. The annual wellness visit entails the creation 
of a personalized prevention plan for an individual that ultimately 
will include a health risk assessment and also includes other elements, 
such as updating the family history, identifying providers that 
regularly provide medical care to the individual, body mass index 
measurement, development of a screening service schedule, and 
identification of risk factors. We estimate the impact on a fiscal year 
cash basis to be $110 million for FY 2011.
18. Section 4104: Removal of Barriers to Preventive Services in 
Medicare
    As discussed in section VI.R. of this final rule with comment 
period, for services furnished on or after January 1, 2011, sections 
1833(a)(1) and 1833(b) of the Act (as amended by section 4104 of the 
ACA) waive the deductible and coinsurance requirements for most 
preventive services, and waive the deductible for colorectal cancer 
screening tests that are reported with other codes. Services to which 
no coinsurance or deductible would be applied are the annual wellness 
visit, the initial preventive physical examination, and any covered 
preventive service if it is recommended with a grade of A or B by the 
United States Preventive Services Task Force. We estimate that this new 
benefit will result in an increase in Medicare payments. We estimate 
the impact on a fiscal year cash basis to be $110 million for FY 2011.
19. Section 5501: Expanding Access to Primary Care Services and General 
Surgery Services
    As discussed in section VI.S. of this final rule with comment 
period, for services furnished on or after January 1, 2011 and before 
January 1, 2016, sections 1833(x) and (y) of the Act (as added by 
section 5501 of the ACA) provides for a 10 percent incentive payment 
applied to primary care services furnished by primary care 
practitioners, as well as a 10 percent incentive payment for major 
surgical procedures furnished by general surgeons practicing in 
geographic health professional shortage areas. Under the final CY 2011 
policies, we estimate the impact on a fiscal year cash basis to be $240 
million for section 1833(x) of the Act and $10 million for section 
1833(y) of the Act for FY 2011.
20. Section 6003: Disclosure Requirements for In-office Ancillary 
Services Exception to the Prohibition of Physician Self-referral for 
Certain Imaging Services
    In section VI.T of this final rule with comment period, we discuss 
our revisions to Sec.  411.355(b)(2) to include a new disclosure 
requirement created by section 6003 of the ACA and related to the in-
office ancillary services exception to the physician self-referral 
prohibition. We are finalizing this provision with some modification, 
including reducing the number of required suppliers on the disclosure 
from 10 to 5 and removing the requirement that a record of the signed 
disclosure notification be maintained as a part of the patient's 
medical record. Physicians are now able to document the disclosure 
without the patient's signature.
    Comment: Two commenters disagreed with the estimated impact in the 
proposed rule related to section 6003 of the ACA. The commenter noted 
that requiring physicians to list 10 suppliers is excessive and places 
an unnecessary administrative burden on the referring physicians. The 
commenters also expressed concern that it will take longer to create 
and maintain the disclosure notice than we proposed. The commenters did 
not provide alternative values for calculating the impact of this 
provision.
    Response: We have addressed the commenters' concerns regarding the 
administrative burden related to this new disclosure requirement in the 
final rule by reducing the number of suppliers that must be listed from 
10 to 5. In addition, we have removed the requirement that the 
disclosure notice be signed by the patient and a copy of this 
maintained in the medical record. We believe that our previous economic 
estimates are appropriate taking into account the public comments 
received in response to the estimated values included in the proposed 
rule and the changes that have been finalized in this rule.
    We believe that the provisions in section VI.T. of this final rule 
with comment period will have a minor economic impact on the affected 
physicians who self-refer for advanced imaging services under the in-
office

[[Page 73604]]

ancillary services exception. We did not receive any public comments 
addressing the estimated number of physicians impacted by this 
provision. The burden associated for these physicians remains de 
minimis as we have reduced the number of suppliers to be listed and 
have reduced the requirements for effective disclosure by eliminating 
the patient signature maintained as part of the medical record. We 
still believe physicians will incur a one-time cost associated with 
developing the disclosure notice.
21. Section 6404: Maximum Period for Submission of Medicare Claims 
Reduced to Not More Than 12 Months
    As discussed in section VI.U. of this final rule with comment 
period, section 6404 of the ACA reduces the maximum time period for 
filing Medicare claims to no more than 12 months after the date of 
service. Under the new law, claims for services furnished on or after 
January 1, 2010, must be filed within 1 calendar year after the date of 
service. In addition, section 6404 of the ACA provides that claims for 
services furnished before January 1, 2010, must be filed no later than 
December 31, 2010. Section 6404 of the ACA also permits the Secretary 
to make certain exceptions to the 1-year filing deadline. This final 
rule with comment period would create three new exceptions to the 1-
year filing deadline.
    The budgetary impact related to this provision is significant as 
future payment of claims for services incurred will now be made at an 
earlier date, relative to the 12-month submission expiration. This is 
reflected by the Part A and Part B payment amounts of $60 and $50 
million for FY 2011. However, for purposes of the RIA, the economic 
impact of this provision is non-economically significant, as to the 
interest lost on money now required to pay claims prior to the 12-month 
submission expiration is minimal.
    Providers and suppliers have established billing practices for the 
submission of claims for payment to the Medicare program. Although this 
final rule with comment period would require providers and suppliers to 
submit Medicare FFS claims within 12 months from the date of service, 
we believe providers and suppliers would easily revise their billing 
practices on a one-time basis, and suffer no economic impact. In fact, 
analysis of Medicare claims data shows that more than 99 percent of 
Part A and Part B claims are filed in 12 months or less. Lastly, 
providers, suppliers, or the small number of beneficiaries that 
occasionally submit claims may benefit from the availability of the 
three new exceptions to the timely filing rule. However, we believe the 
impact on program costs would be negligible.
    We did not receive any comments on the RIA for this provision.
22. Section 6410 of Patient Accountability and Affordable Care Act and 
Section 154 of MIPPA: Adjustments to the Metropolitan Statistical Areas 
(MSA) for Medicare Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies Competitive Acquisition Program
    For the impact of this provision see section XI.E.7.c. of this 
final rule with comment period.
23. Section 10501(i)(3): Collection of HCPCS Data for the Development 
and Implementation of a Prospective Payment System for the Medicare 
FQHC Program
    As discussed in section VI.W. of this final rule with comment 
period, section 10501(i)(3) of the ACA establishes a process by which 
we will collect claims level data, using HCPCS codes, from FQHCs. This 
data will be used to determine the time, scope, and intensity of 
services provided by FQHCs in anticipation of the establishment of a 
prospective payment system to be implemented beginning in 2014. We 
further noted that the proposed new data collection effort would be for 
informational and data gathering purposes only, and would not be 
utilized to determine Medicare payment to the FQHC. Because this 
provision does not affect payment to FQHCs, there is no impact.

E. Other Provisions of the Final Rule

1. Part B Drug Payment: ASP Issues
    Application of our policies for ``Carry Over ASP'' and ``Partial 
Quarter ASP Data,'' as discussed in section VII.A. of this final rule 
with comment period, are dependent on the status and quality of 
quarterly manufacturer data submissions, so we cannot quantify 
associated savings.
    Furthermore, we do not expect that our policy for determining the 
payment amount for drugs and biologicals that include intentional 
overfill, as discussed in section VII.A of this final rule with comment 
period, will impact payments made by the Medicare program.
    Finally, as discussed in section VII.A of this final rule with 
comment period, we are not finalizing our price substitution policy at 
this time and as a result there is no impact to the program as no 
changes to policy are being made.
2. Ambulance Fee Schedule: Policy for Reporting Units When Billing for 
Ambulance Fractional Mileage
    As discussed in section VII.B. of this final rule with comment 
period, we are implementing fractional mileage billing for all 
providers and suppliers of ambulance services. Effective for dates of 
service on and after January 1, 2011, ambulance providers and suppliers 
(except for providers eligible to bill on the Form UB-04) will be 
required to report mileage rounded up to the nearest tenth of a mile, 
rather than the nearest whole mile, on all claims for mileage totaling 
up to 100 covered miles, and we will pay based on that amount. 
Implementation of the fractional mileage billing policy will be delayed 
until August 1, 2011 for ambulance providers submitting claims on the 
Form UB-04, unless updates to allow billing fractional units on the 
Form UB-04 are not completed by July 2011. In that case, implementation 
of the fractional mileage billing policy is delayed for ambulance 
providers eligible to bill on the Form UB-04 until January 1, 2012.
    By requiring that providers and suppliers round up to the nearest 
tenth of a mile rather than the nearest whole mile, providers and 
suppliers will be submitting claims for anywhere between 0.1 and 0.9 of 
a mile less per claim and Medicare will pay based on that amount. In 
our analysis (using 2008 claim data) for the proposed rule, we 
indicated that Medicare could potentially save at least $45 million per 
year in payments for base mileage billed by suppliers, and perhaps as 
much as $80 million per year when considering other types of ambulance 
mileage payments such as those for rural mileage and those made to 
institutional providers. Further analysis has revealed that, once 
adjusted for other factors such as premium offsets and MA savings, the 
potential annual savings totals approximately $30 million for supplier-
billed base mileage alone. We continue to anticipate that the total 
savings will likely increase when considering other ambulance mileage 
payments such as for rural mileage, institutional provider payments, 
etc. However, we were not able to further analyze the potential 
additional savings using available data. Although implementation of the 
fractional mileage billing policy for institutional providers billing 
on paper claims is delayed in the final rule with comment period, the 
volume of institutional paper billers is insignificant--less than 1 
percent of all institutional billers submits claims on the Form UB-04--
and therefore, will

[[Page 73605]]

not significantly impact any potential savings.
3. Chiropractic Services Demonstration
    As discussed in section VII.D. of this final rule with comment 
period, we are continuing the recoupment of the $50 million in 
expenditures from this demonstration in order to satisfy the budget 
neutrality requirement in section 651(f)(1)(b) of the MMA. We initiated 
this recoupment in CY 2010 and this will be the second year. As 
discussed in the CY 2010 PFS final rule with comment period, we 
finalized a policy to recoup $10 million each year through adjustments 
to the PFS for all chiropractors in CYs 2010 through 2014. To implement 
this required budget neutrality adjustment, we are recouping $10 
million in CY 2011 by reducing the payment amount under the PFS for the 
chiropractic CPT codes (that is, CPT codes 98940, 98941, and 98942) by 
approximately 2 percent.
4. Renal Dialysis Services Furnished by ESRD Facilities
    The ESRD related provisions are discussed in sections VI.P.1. and 
VII.E. of this final rule with comment period. To understand the impact 
of the changes affecting payments to different categories of ESRD 
facilities, it is necessary to compare estimated payments under the 
current year (CY 2010 payments) to estimated payments under the 
revisions to the composite rate payment system (CY 2011 payments) as 
discussed in section VII.E. of this final rule with comment period. To 
estimate the impact among various classes of ESRD facilities, it is 
imperative that the estimates of current payments and estimates of 
proposed payments contain similar inputs. Therefore, we simulated 
payments only for those ESRD facilities for which we are able to 
calculate both current CY 2010 payments and proposed CY 2011 payments.
    Also, as explained in the ESRD PPS final rule (74 FR 49162 through 
49164), section 1881(b)(14)(E)(i) of the Act requires a 4-year 
transition (phase-in) from the current composite payment system to the 
ESRD PPS, and section 1881(b)(14)(E)(ii) allows ESRD facilities to make 
a one-time election to be excluded from the transition. As of January 
1, 2011, ESRD facilities that elect to go through the transition would 
be paid a blended amount that will consist of 75 percent of the basic 
case-mix adjusted composite payment system and the remaining 25 percent 
would be based on the ESRD PPS payment. Therefore, these final rates 
listed in the impact table (Table Q3) reflect only the composite rate 
portion of the blended payment amounts for facilities going through the 
first year of the 4-year transition under the new ESRD PPS.
    ESRD providers were grouped into the categories based on 
characteristics provided in the Online Survey and Certification and 
Reporting (OSCAR) file and the most recent cost report data from the 
Healthcare Cost Report Information System (HCRIS). We also used the 
June 2010 update of CY 2009 National Claims History file as a basis for 
Medicare dialysis treatments and separately billable drugs and 
biologicals. Since the December 2009 update of the CY 2009 National 
Claims History File is incomplete, we updated the data. The description 
of the updates for the separately billable drugs is described in 
section VII.E. of this final rule with comment period. To update the 
treatment counts we used the ratio of the June 2009 to the December 
2008 updates of the CY 2008 National Claims History File figure for 
treatments. This was an increase of 12.4 percent. Due to data 
limitations, we are unable to estimate current and proposed payments 
for 32 of the 5431 ESRD facilities that bill for ESRD dialysis 
treatments.
    Table 103 shows the impact of this year's changes to CY 2011 
payments to hospital-based and independent ESRD facilities. The first 
column of Table 103 identifies the type of ESRD provider, the second 
column indicates the number of ESRD facilities for each type, and the 
third column indicates the number of dialysis treatments. The fourth 
column shows the effect of all changes to the ESRD wage index for CY 
2011 as it affects the composite rate payments to ESRD facilities. The 
fourth column compares aggregate ESRD wage-adjusted composite rate 
payments in CY 2011 to aggregate ESRD wage-adjusted composite rate 
payments in CY 2010. In CY 2010, ESRD facilities receive 100 percent of 
the CBSA wage-adjusted composite rate. The overall effect to all ESRD 
providers in aggregate is zero because the CY 2011 ESRD wage index has 
been multiplied by a budget neutrality adjustment factor to comply with 
the statutory requirement that any wage index revisions be done in a 
manner that results in the same aggregate amount of expenditures as 
would have been made without any changes in the wage index. The fifth 
column shows the effect of changes to the ESRD wage index in CY 2011 
and the effect of section 3401(h) of the ACA, which amends section 
1881(b)(14)(F) of the Act to revise the ESRD market basket increase 
factor. Effective January 1, 2011, there is a full ESRD bundled market 
basket update to the composite rate component of the blended payment 
amount under the payment system. We apply an ESRD market basket 
increase factor of 2.5 percent for those facilities electing to go 
through the ESRD PPS transition. The sixth column shows the overall 
effect of the changes in composite rate payments to ESRD providers, 
including the drug add-on. The overall effect is measured as the 
difference between the CY 2011 payment with all changes in this rule 
and current CY 2010 payment. This payment amount is computed by 
multiplying the wage-adjusted composite rate with the drug add-on for 
each provider times the number of dialysis treatments from the CY 2009 
claims. The CY 2011 payment is the composite rate for each provider 
(with the 14.7 percent drug add-on) times dialysis treatments from CY 
2009 claims. The CY 2010 current payment is the composite rate for each 
provider (with the current 15.0 percent drug add-on) times dialysis 
treatments from CY 2009 claims.
    The overall impact to ESRD providers in aggregate is 2.2 percent as 
shown in Table 103. Most ESRD facilities will see an increase in 
payments as a result of the ACA provision. While section 3401(h) of the 
ACA modifies the ESRD bundled market basket, which we will be a 2.5 
percent increase to the ESRD composite rate portion of the blended 
payment amount, this 2.5 percent increase does not apply to the drug 
add-on to the composite rate. For this reason, the impact of all 
changes in this final rule with comment period is a 2.2 percent 
increase for all ESRD providers. Overall, payments to ineligible 
professional independent ESRD facilities will increase by 2.2 percent 
and payments to hospital-based ESRD facilities will increase by 2.1 
percent.

[[Page 73606]]



       Table 103--Impact of CY 2011 Changes in Payments to Hospital-Based and Independent ESRD Facilities
                         [Percent change in composite rate payments to ESRD facilities]
----------------------------------------------------------------------------------------------------------------
                1                        2               3               4               5               6
----------------------------------------------------------------------------------------------------------------
                                                                                     Effect of
                                                                                    changes in    Overall effect
                                                     Number of       Effect of    wage index and   of wage index
                                     Number of       dialysis       changes in     of affordable    affordable
                                    facilities      treatments    wage index \1\     Care Act       Care Act &
                                                   (in millions)     (percent)     provision \2\    Drug Add-on
                                                                                     (percent)     \3\ (percent)
----------------------------------------------------------------------------------------------------------------
All Providers:                             5,399            38.6             0.0             2.5             2.2
    Independent.................           4,821            34.9             0.0             2.5             2.2
    Hospital Based..............             578             3.7            -0.1             2.4             2.1
By Facility Size:
    Less than 5000 treatments...            2105             5.9             0.1             2.5             2.3
    5000 to 9999 treatments.....           2,049            14.8             0.1             2.6             2.3
    Greater than 9999 treatments           1,245            17.9            -0.1             2.4             2.2
Type of Ownership:
    Profit......................           4,423            31.8             0.0             2.5             2.3
    Nonprofit...................             976             6.7            -0.1             2.4             2.1
By Geographic Location:
    Rural.......................           1,178             6.2             0.1             2.6             2.4
    Urban.......................           4,221            32.4             0.0             2.5             2.2
By Region:
    New England.................             165             1.3            -0.6             1.8             1.6
    Middle Atlantic.............             603             4.8            -0.4             2.1             1.8
    East North Central..........             885             6.0             0.2             2.7             2.4
    West North Central..........             403             2.1            -0.1             2.4             2.2
    South Atlantic..............           1,211             8.8             0.0             2.5             2.2
    East South Central..........             422             2.9             0.2             2.7             2.4
    West South Central..........             729             5.6             0.4             2.9             2.6
    Mountain....................             323             1.8             0.2             2.7             2.4
    Pacific.....................             619             5.0             0.1             2.6             2.4
    Puerto Rico & Virgin Islands              39             0.4            -2.4             0.0            -0.2
----------------------------------------------------------------------------------------------------------------
Notes: Payments have been adjusted to reflect budget neutrality.
2010 includes the MIPPA 1% increase and site neutral rates.
2010 & 2011 are 100 percent new CBSA wage adjusted composite rate.
\1\ This column shows the overall effect of wage index changes on ESRD providers. Composite rate payments are
  computed using the final CY 2011 wage indexes which are compared to composite rate payments using the current
  CY 2010 wage indexes.
\2\ This column shows the effect of the changes in the Wage Indexes and the ACA provision which includes an ESRD
  Bundled Market Basket (2.5 percent) increase to the composite rate. This provision is effective January 1,
  2011.
\3\ This column shows the percent change between CY 2011 and CY 2010 composite rate payments to ESRD facilities.
  The CY 2011 payments include the CY 2011 wage adjusted composite rate, a 2.5% increase due to the ACA,
  effective January 1, 2011, and the drug add-on of 14.7%. The CY 2010 payments include the CY 2010 wage
  adjusted composite rate, a 1% increase and site neutral rates effective January 1, 2009 and the drug add-on of
  15.0%. This column shows the effect of wage index, ACA, and drug add-on changes. While the ACA provision
  includes a 2.5% increase to the composite rate, this increase does not apply to the drug add-on to the
  composite rate. For this reason, the impact of all changes in this final rule with comment period is a 2.2%
  increase for all ESRD providers.

5. Section 131(b) of the MIPPA: Physician Payment, Efficiency, and 
Quality Improvements--Physician Quality Reporting System
    As discussed in section VII.F.1 of this final rule with comment 
period, we are finalizing several different reporting options for 
eligible professionals who wish to participate in the 2011 Physician 
Quality Reporting System. Although there may be some cost incurred in 
the Physician Quality Reporting System and their associated code sets, 
and for expanding an existing clinical data warehouse to accommodate 
registry-based reporting and EHR-based reporting for the Physician 
Quality Reporting System, we do not anticipate a significant cost 
impact on the Medicare program.
    Participation in the CY 2011 Physician Quality Reporting System by 
individual eligible professionals is voluntary and individual eligible 
professionals and group practices may have different processes for 
integrating the Physician Quality Reporting System into their 
practice's work flows. Given this variability and the multiple 
reporting options that we provide, it is difficult to accurately 
estimate the impact of the Physician Quality Reporting System on 
providers. Furthermore, we believe that costs for eligible 
professionals who are participating in the Physician Quality Reporting 
System for the first time in 2011 will be considerably higher than the 
cost for eligible professionals who participated in Physician Quality 
Reporting System in prior years. In addition, for many eligible 
professionals, the cost of participating in the Physician Quality 
Reporting System is offset by the incentive payment received.
    With respect to the potential incentive payment that will be made 
for the 2011 Physician Quality Reporting System, we estimate this 
amount to be approximately $100 million. This estimate is derived from 
looking at our 2008 incentive payment of more than $95 million and then 
accounting for the fact that the 2008 incentive payment was 1.5 percent 
of an eligible professional's total estimated Medicare Part B PFS 
allowed charges for all covered professional services furnished during 
the 2008 reporting period. For 2011, the incentive payment is 1.0 
percent of an eligible professional's total estimated Medicare Part B 
PFS allowed charges for all covered professional services furnished 
during the 2011 reporting period. Although we expect

[[Page 73607]]

that the lower incentive payment amount for 2011 would reduce the total 
outlay by approximately one-third, we also expect more eligible 
professionals to participate in the 2011 Physician Quality Reporting 
System as there are more methods of data submission and additional 
alternative reporting periods and that some eligible professionals 
would qualify for the additional 0.5 percent incentive authorized under 
section 1848(m)(7) of the Act (``Additional Incentive Payment'').
    One factor that influences the cost to individual eligible 
professionals is the time and effort associated with individual 
eligible professionals identifying applicable Physician Quality 
Reporting System quality measures and reviewing and selecting a 
reporting option. This burden will vary with each individual eligible 
professional by the number of applicable measures, the eligible 
professional's familiarity, and understanding of the Physician Quality 
Reporting System I, experience with Physician Quality Reporting System 
participation, and the method(s) selected by the eligible professional 
for reporting of the measures, and incorporating the reporting of the 
measures into the office work flows. Information obtained from the 
Physician Voluntary Reporting Program (PVRP), which was a predecessor 
to the Physician Quality Reporting System and was the first step for 
the reporting of physician quality of care through certain quality 
metrics, indicated an average labor cost per practice of approximately 
$50 per hour. To account for salary increases over time, we will use an 
average practice labor cost of $58 per hour for our estimates, based on 
an assumption of an average annual increase of approximately 3 percent. 
Therefore, assuming that it takes an individual eligible professional 
approximately 5 hours to review the PQRI quality measures, review the 
various reporting options, select the most appropriate reporting 
option, identify the applicable measures for which they can report the 
necessary information, and incorporate reporting of the selected 
measures into their office work flows, we estimate that the cost to 
eligible professionals associated with preparing to report Physician 
Quality Reporting System quality measures would be approximately $290 
per individual eligible professional ($58 per hour x 5 hours).
    Another factor that influences the cost to individual eligible 
professionals is how they choose to report the Physician Quality 
Reporting System measures (that is, whether they select the claims-
based, registry-based or EHR-based reporting mechanism). For claims-
based reporting, estimates from the PVRP indicate the time needed to 
perform all the steps necessary to report quality data codes (QDCs) for 
1 measure on a claim ranges from 15 seconds (0.25 minutes) to 12 
minutes for complicated cases or measures. In previous years, when we 
required reporting on 80 percent of eligible cases for claims-based 
reporting, we found that on average, the median number of reporting 
instances for each of the PQRI measures was 9. Since we reduced the 
required reporting rate by over one-third to 50 percent, then for 
purposes of this impact analysis we will assume that an eligible 
professional will need to report each selected measure for 6 reporting 
instances, or 6 cases. Assuming that an eligible professional, on 
average, will report 3 measures and that an eligible professional 
reports on an average of 6 reporting instances per measure, we estimate 
that the cost to an individual eligible professional associated with 
claims-based reporting of Physician Quality Reporting System measures 
would range from approximately $4.35 (0.25 minutes per reporting 
instance x 6 reporting instances per measure x 3 measures x $58 per 
hour) to $208.80 (12 minutes per reporting instance x 6 reporting 
instances per measure x 3 measures x $58 per hour). If an eligible 
professional satisfactorily reports, these costs will more than likely 
be negated by the incentive earned. For the 2007 PQRI, which had a 1.5 
percent incentive for a 6-month reporting period, the mean incentive 
amount was close to $700 for an individual eligible professional and 
the median incentive payment amount was over $300.
    For registry-based reporting, individual eligible professionals 
must generally incur a cost to submit data to registries. Estimated 
fees for using a qualified registry range from no charge, or a nominal 
charge, for an individual eligible professional to use a registry to 
several thousand dollars, with a majority of registries charging fees 
ranging from $500 to $1,000. However, our impact analysis is limited to 
the incremental costs associated with Physician Quality Reporting 
System reporting, which we believe are minimal. Many eligible 
professionals who select registry-based reporting were already 
utilizing the registry for other purposes and would not need to report 
additional data to the registry specifically for Physician Quality 
Reporting System. The registries also often provide the eligible 
professional services above and beyond what is required for Physician 
Quality Reporting System.
    For EHR-based reporting, an individual eligible professional 
generally will incur a cost associated with purchasing an EHR product. 
Although we do not believe that the majority of eligible professionals 
would purchase an EHR solely for the purpose of participating in 
Physician Quality Reporting System, cost estimates for EHR adoption by 
eligible professionals from the EHR Incentive Program final rule (75 FR 
44549) show that an individual eligible professional who chooses to do 
so would have to spend anywhere from $25,000 to $54,000 to purchase and 
implement an EHR and up to $18,000 annually for ongoing maintenance.
    Although we believe that the majority of eligible professionals 
attempting to qualify for the additional 0.5 percent incentive payment 
authorized by section 1848(m)(7) of the Act would be those who are 
already required by their Boards to participate in a Maintenance of 
Certification Program, individual eligible professionals who wish to 
qualify for the additional 0.5 percent incentive payment and are not 
currently participating in a Maintenance of Certification Program would 
also have to incur a cost for participating in a Maintenance of 
Certification Program. The manner in which fees are charged for 
participating in a Maintenance of Certification Program vary by 
specialty. Some Boards charge a single fee for participation in the 
full cycle of Maintenance of Certification Program. Such fees appear to 
range anywhere from over $1,100 to nearly $1,800 per cycle. Some Boards 
have annual fees that are paid by their diplomates. On average, ABMS 
diplomates pay approximately $200.00 per year for participating in 
Maintenance of Certification Program. Some Boards have an additional 
fee for the Maintenance of Certification Program Part III secure 
examination, but most Boards do not have additional charges for 
participation in the Part IV practice/quality improvement activities.
    With respect to the process for group practices to be treated as 
satisfactorily submitting quality measures data for the CY 2011 
Physician Quality Reporting System discussed in section VII.F.1 of this 
final rule with comment period, group practices interested in 
participating in the CY 2011 Physician Quality Reporting System through 
the group practice reporting option (GPRO) I or GPRO II may also incur 
a cost. However, for groups that satisfactorily report for 2011 
Physician Quality Reporting System, we believe these

[[Page 73608]]

costs would be completely offset by the incentive payment earned since 
the group practice would be eligible for an incentive payment equal to 
1 percent of the entire group's total estimated Medicare Part B PFS 
allowed charges for covered professional services furnished during the 
reporting period.
    One factor in the cost to group practices would be the costs 
associated with the self-nomination process. Similar to our estimates 
for staff involved with the claims-based reporting option for 
individual eligible professionals, we also estimate that the group 
practice staff involved in the group practice self-nomination process 
has an average labor cost of $58 per hour. Therefore, assuming 2 hours 
for a group practice to decide whether to participate individually or 
as a group and 4 hours for the self-nomination process, we estimate the 
total cost to a group practice associated with the group practice self-
nomination process to be approximately $348 ($58 per hour x 6 hours per 
group practice).
    For groups participating under the GPRO I process, another factor 
in the cost to the group would be the time and effort associated with 
the group practice completing and submitting the proposed data 
collection tool. The information collection components of this data 
collection tool have been reviewed by OMB and are currently approved 
under OMB control number 0938-0941, with an expiration date of December 
31, 2011. Based on the Physician Group Practice (PGP) demonstration's 
estimate that it takes approximately 79 hours for a group practice to 
complete the data collection tool, which uses the same data submission 
methods as those we have finalized, we estimate the cost associated 
with a physician group completing the data collection tool would be 
approximately $4,582 ($58 per hour x 79 hours per group practice).
    For group practices participating under the GPRO II process, the 
costs associated with submitting the Physician Quality Reporting System 
quality measures data will be the time associated with the group 
practice submitting the required data to CMS via claims or, if 
applicable, a registry. The costs for a group practice reporting to a 
registry is similar to the costs associated with registry reporting for 
an individual eligible professional, as the process is the same with 
the exception that more patients and more measures must be reported in 
GPRO II compared to an individual eligible professional. For similar 
reasons, the costs for a group practice reporting via claims should 
also be similar to the costs associated with claims-based reporting for 
an individual eligible professional. Overall, there is significantly 
less burden associated with a group practice participating in Physician 
Quality Reporting System via GPRO II than doing so as individual 
eligible professionals. Participation in GPRO II requires the group 
practice as a whole to report a fewer number of measures on a fewer 
number of people since eligible professionals within a group who share 
patients will not be required to separately report measures for those 
shared patients. Therefore, assuming that an average group practice 
will spend 20 hours for data submission, we estimate the cost of data 
submission under GPRO II would be approximately $1,160 (20 hours for 
data submission x $58 per hour). Smaller groups may need less time for 
data submission as they would be required to report fewer measures and 
presumably have a smaller patient population while larger groups may 
need more time for data submission since they would be required to 
report more measures and presumably have a larger patient population.
    In addition to costs incurred by eligible professionals and group 
practices, registries and EHR vendors may also incur some costs related 
to the Physician Quality Reporting System. Registries interested in 
becoming ``qualified'' to submit on behalf of individual eligible 
professionals would also have to incur a cost associated with the 
vetting process and with calculating quality measures results from the 
data submitted to the registry by its participants and submitting the 
quality measures results and numerator and denominator data on quality 
measures to CMS on behalf of their participants. We estimate the 
registry self-nomination process will cost approximately $500 per 
registry ($50 per hour x 10 hours per registry). This cost estimate 
includes the cost of submitting the self-nomination letter to CMS and 
completing the CMS vetting process. Our estimate of $50 per hour 
average labor cost for registries is based on the assumption that 
registry staff include IT professionals whose average hourly rates 
range from $36 to $84 per hour depending on experience, with an average 
rate of nearly $50 per hour for a mid-level programmer. Because we are 
finalizing new requirements for 2011, the 2010 qualified registries 
will incur similar costs associated with the self-nomination process. 
We do not believe that there are any additional costs for registries 
associated with a registry calculating quality measures results from 
the data submitted to the registry by its participants and submitting 
the quality measures results and numerator and denominator data on 
quality measures to CMS on behalf of their participants. We believe 
that the majority of registries already perform these functions for 
their participants.
    An EHR vendor interested in having its product(s) be used by 
individual eligible professionals to submit Physician Quality Reporting 
System measures to CMS for 2012 will have to complete a vetting process 
during 2011 and program its EHR product(s) to extract the clinical data 
that the eligible professional needs to submit to CMS for purposes of 
reporting 2012 quality measures in 2013 as well. We specified that 
previously qualified vendors will need to only update their electronic 
measure specifications and data transmission schema during 2011 to 
incorporate any new EHR measures to maintain their qualification for 
the 2012 Physician Quality Reporting System. Therefore, for EHR vendors 
that were not previously qualified, the cost associated with completing 
the self-nomination process, including the vetting process with CMS 
officials, is estimated to be $500 ($50 per hour x 10 hours per EHR 
vendor). Our estimate of a $50 per hour average labor cost for EHR 
vendors is based on the assumption that vendor staff include IT 
professionals whose average hourly rates range from $36 to $84 per hour 
depending on experience, with an average rate of nearly $50 per hour 
for a mid-level programmer. We believe that the cost associated with 
the time and effort needed for an EHR vendor to review the quality 
measures and other information and program the EHR product to enable 
individual eligible professionals to submit Physician Quality Reporting 
System quality measures data to the CMS-designated clinical warehouse 
will be dependent on the EHR vendor's familiarity with the Physician 
Quality Reporting System, the vendor's system's capabilities, as well 
as the vendor's programming capabilities. Some vendors already have the 
necessary capabilities and for such vendors, we estimate the total cost 
to be approximately $2,000 ($50 per hour x 40 hours per vendor). 
However, given the variability in the capabilities of the vendors, we 
believe an estimate for those vendors with minimal experience would be 
approximately $10,000 per vendor ($50 per hour x 200 hours per EHR 
vendor).
6. Section 132 of the MIPPA: Incentives for Electronic Prescribing 
(eRx)--The eRx Incentive Program
    Section VII.F.2. of this final rule with comment period describes 
the 2011

[[Page 73609]]

Electronic Prescribing (eRx) Incentive Program. To be considered a 
successful electronic prescriber in CY 2011, an individual eligible 
professional will need to meet the requirements described in section 
VII.F.2. of this final rule with comment period.
    We estimate that the cost impact of the eRx Incentive Program on 
the Medicare program would be the cost incurred for maintaining the 
electronic prescribing measure and its associated code set, and for 
maintaining the existing clinical data warehouse to accommodate 
registry-based reporting and EHR-based reporting for the electronic 
prescribing measure. However, we do not believe that this provision has 
a significant cost impact on the Medicare program since much of this 
infrastructure has already been established for the Physician Quality 
Reporting System program.
    Individual eligible professionals and group practices may have 
different processes for integrating the eRx Incentive Program into 
their practices' work flows. Given this variability and the multiple 
reporting options that we provide, it is difficult to accurately 
estimate the impact of the eRx Incentive Program on providers. 
Furthermore, we believe that costs for eligible professionals who are 
participating in the eRx Incentive Program for the first time in 2011 
will be considerably higher than the cost for eligible professionals 
who participated in the eRx Incentive Program in prior years. In 
addition, for many eligible professionals (especially those who 
participated in the eRx Incentive Program in prior years), the cost of 
participating in the eRx Incentive Program for 2011 will be offset by 
the incentive payment received. As a result of the payment adjustment 
that begins in 2012, the cost of not participating in the eRx Incentive 
Program for 2011 could be higher than the cost of participating in the 
form of reduced Medicare payments.
    For the 2009 eRx Incentive Program, approximately $148 million in 
total incentives were paid to eligible professionals with a median 
incentive amount of about $1,600. We estimate that the total incentive 
payments for the 2011 eRx Incentive Program (which will be paid in 
2012) will be similar. We anticipate that despite a decrease in the 
incentive payment amount from 2 percent in 2010 to 1 percent of total 
estimated Medicare Part B allowed charges for covered professional 
services in 2011, more eligible professionals (and groups) will choose 
to participate in the 2011 eRx Incentive Program to avoid a prospective 
1 percent payment penalty in 2012 for not demonstrating that they are 
successful electronic prescribers. Any eligible professional who wishes 
to participate in the eRx Incentive Program must have a qualified 
electronic prescribing system in order to participate. Therefore, a 
one-time potential cost to some individual eligible professionals would 
be the cost of purchasing and using an eRx system, which varies by the 
commercial software package selected, the level at which the 
professional currently employs information technology in his or her 
practice and the training needed. One study indicated that a midrange 
complete electronic medical record with electronic prescribing 
functionality costs $2,500 per license with an annual fee of $90 per 
license for quarterly updates of the drug database after setup costs 
while standalone prescribing, messaging, and problem list system may 
cost $1,200 per physician per year after setup costs. Hardware costs 
and setup fees substantially add to the final cost of any software 
package. (Corley, S.T. (2003). ``Electronic prescribing: A review of 
costs and benefits.'' Topics in Health Information Management 24(1):29-
38.). These are the estimates that we intend to use for our impact 
analysis.
    Similar to the Physician Quality Reporting System, one factor in 
the cost to individual eligible professionals is the time and effort 
associated with individual eligible professionals reviewing the 
electronic prescribing measure to determine whether it is applicable to 
them, reviewing the available reporting options and selecting one, 
gathering the required information, and incorporating reporting of the 
measure into their office work flows. Since the eRx Incentive Program 
consists of only 1 quality measure, we estimate 2 hours as the amount 
of time needed for individual eligible professionals to prepare for 
participation in the eRx Incentive Program. Information obtained from 
the PVRP, which was a predecessor to the Physician Quality Reporting 
System and was the first step for the reporting of physician quality of 
care through certain quality metrics, indicated an average labor cost 
per practice of approximately $50 per hour. To account for salary 
increases over time, we will use an average practice labor cost of $58 
per hour for our estimates, based on an assumption of an average annual 
increase of approximately 3 percent. At an average cost of 
approximately $58 per hour, we estimate the total preparation costs to 
individual eligible professionals to be approximately $116 ($58 per 
hour x 2 hours).
    Another factor that influences the cost to individual eligible 
professionals is how they choose to report the electronic prescribing 
measure (that is, whether they select the claims-based, registry-based 
or EHR-based reporting mechanism). For claims-based reporting, there 
would be a cost associated with reporting the appropriate QDC on the 
claims an individual eligible professional submits for payment. Based 
on the information from the PVRP described above for the amount of time 
it takes a median practice to report one measure one time (1.75 
minutes) and the requirement to report 25 electronic prescribing events 
during 2011, we estimate the annual estimated cost per individual 
eligible professional to report the electronic prescribing measure via 
claims-submission to be $42.29 (1.75 minutes per case x 1 measure x 25 
cases per measure x $58 per hour). We believe that for most successful 
electronic prescribers who earn an incentive, these costs would be 
negated by the incentive payment received given that the median 
incentive for eligible professionals who qualified for a 2009 eRx 
incentive was around $1,600.
    For eligible professionals who select the registry-based reporting 
mechanism, we do not anticipate any additional cost for individual 
eligible professionals to report data to a registry, as individual 
eligible professionals opting for registry-based reporting are more 
than likely already reporting data to the registry. Little, if any, 
additional data would need to be reported to the registry for purposes 
of participation in the CY 2011 eRx Incentive Program. Individual 
eligible professionals using registries for Physician Quality Reporting 
System will likely experience minimal, if any, increased costs charged 
by the registry to report this 1 additional measure.
    For EHR-based reporting, the eligible professional must extract the 
necessary clinical data from his or her EHR, and submit the necessary 
data to the CMS-designated clinical data warehouse. Once the EHR is 
programmed by the vendor to allow data submission to CMS, the cost to 
the individual eligible professional associated with the time and 
effort to submit data on the electronic prescribing measure should be 
minimal.
    With respect to the process for group practices to be treated as 
successful electronic prescribers under the CY 2011 eRx Incentive 
Program discussed in section VII.F.2 of this final rule with comment 
period, group practices have the same option as individual eligible 
professionals in terms of the form and manner for reporting the eRx 
measure (that is, group practices have the option of reporting the 
measure through claims,

[[Page 73610]]

a qualified registry, or a qualified EHR product). There are only 2 
differences between the requirements for an individual eligible 
professional and a group practice: (1) The fact that a group practice 
would have to self-nominate; and (2) the number of times a group 
practice would be required to report the eRx measure. Overall, there 
could be less cost associated with a practice participating in the eRx 
Incentive Program as a group rather than the individual members of the 
group separately participating. We do not believe that there are any 
additional costs associated with the group practice self-nomination 
process since we are limiting the group practices to those selected to 
participate in the 2011 Physician Quality Reporting System GPRO I or 
Physician Quality Reporting System GPRO II. The practices only will 
need to indicate their desire to participate in the eRx GPRO at the 
time they self-nominate for either Physician Quality Reporting System 
GPRO I or Physician Quality Reporting System GPRO II.
    The costs for a group practice reporting to an EHR or registry 
should be similar to the costs associated with registry and EHR 
reporting for an individual eligible professional, as the process is 
the same with the exception that more electronic prescribing events 
must be reported by the group. For similar reasons, the costs for a 
group practice reporting via claims should also be similar to the costs 
associated with claims-based reporting for an individual eligible 
professional. Therefore, we estimate that the costs for group practices 
who are selected to participate in the CY 2011 eRx Incentive Program as 
a group would range from $126.88 (1.75 minutes per case x 1 measure x 
75 cases per measure x $58 per hour) for the smallest groups 
participating under GPRO II to $4,229.17 (1.75 minutes per case x 2,500 
cases per measure x $58 per hour) for the groups participating under 
GPRO I.
    We believe that the costs to individual eligible professionals and 
group practices associated with avoiding the eRx payment adjustment 
that goes into effect in 2012 would be similar to the costs of an 
eligible professional or group practice reporting the electronic 
prescribing measure for purposes of the 2011 eRx incentive. 
Specifically, we believe that the cost of reporting the eRx measure in 
one instance for purposes of the payment adjustment is identical to the 
cost of reporting the eRx measure for one instance on claims for 
purposes of the incentive payment. The only difference would be in the 
total costs for an individual eligible professional. Group practices 
are required to report the eRx measure for the same number of eRx 
events for both the 2011 incentive and the 2012 payment adjustment. 
Individual eligible professionals, however, are required to report the 
eRx measure only for 10 eRx events for purposes of the 2012 payment 
adjustment as opposed to 25 eRx events for purposes of the 2011 
incentive.
    Based on our decision to consider only registries qualified to 
submit quality measures results and numerator and denominator data on 
quality measures to CMS on their participants' behalf for the 2011 
Physician Quality Reporting System to be qualified to submit results 
and numerator and denominator data on the eRx measure for the CY 2011 
eRx Incentive Program, we do not estimate any cost to the registry 
associated with becoming a registry qualified to submit the eRx measure 
for CY 2011.
    The cost for the registry would be the time and effort associated 
with the registry calculating results for the eRx measure from the data 
submitted to the registry by its participants and submitting the 
quality measures results and numerator and denominator data on the eRx 
quality measure to CMS on behalf of their participants. We believe such 
costs will be minimal as registries would already be required to 
perform these activities for the Physician Quality Reporting System.
    Likewise, based on our decision to consider only EHR products 
qualified for the CY 2011 Physician Quality Reporting System to be 
qualified to submit results and numerator and denominator data on the 
electronic prescribing measure for the CY 2011 eRx Incentive Program, 
there would be no need for EHR vendors to undergo a separate self-
nomination process for the eRx Incentive Program. Therefore, there will 
be no additional cost associated with the self-nomination process.
    The cost to the EHR vendor associated with the EHR-based reporting 
requirements of this reporting initiative is the time and effort 
associated with the EHR vendor programming its EHR product(s) to 
extract the clinical data that the individual eligible professional 
needs to submit to CMS for reporting the CY 2011 eRx measure. Since we 
determined that only EHR products qualified for the 2011 Physician 
Quality Reporting System will be qualified for the CY 2011 eRx 
Incentive Program, and the eRx Incentive Program consists of only one 
measure, we believe that any burden associated with the EHR vendor to 
program its product(s) to enable individual eligible professionals to 
submit data on the eRx measure to the CMS-designated clinical data 
warehouse will be minimal.
7. Durable Medical Equipment-Related Issues
a. Off-the-Shelf (OTS) Orthotics Exemption
    In section VII.G. of this final rule with comment period, we are 
expanding the exemptions from the CBP for certain OTS orthotics to 
physicians, other practitioners (as defined by the Secretary), or by 
hospitals if furnished to their own patients as part of their 
professional service.
    The exemption is a self-implementing mandate required by section 
154(d) of MIPPA, which added section 1847(a)(7) of the Act. Section 
1847(a)(7)(A) of the Act expanded the exemptions from the CBP for 
certain OTS orthotics to physicians, other practitioners (as defined by 
the Secretary), or hospitals if furnished to their own patients as part 
of their professional service. Section 1847(a)(7)(B) of the Act, as 
added by section 154(d) of MIPPA, also expanded the exemption from CBP 
for certain DME items (crutches, canes, walkers, folding manual 
wheelchairs, blood glucose monitors, and infusion pumps) when furnished 
by hospitals to the hospital's own patients during an admission or on 
the date of discharge.
    We believe this exemption will have a negligible impact on 
physicians, other practitioners, and hospitals. The exemption allows 
physicians, other practitioners, and hospitals to continue to provide 
these items to their own patients without submitting a bid and becoming 
a contract supplier. This exemption also allows continued access to 
these items for beneficiaries when these items are furnished by 
physicians, other practitioners, and hospitals to their own patients.
b. Changes to Payment for Oxygen Equipment
    We are not finalizing our proposal pertaining to oxygen and oxygen 
equipment; and therefore, the impact analysis associated with this 
proposal is not being finalized.
c. Diabetic Testing Supplies
    We are establishing requirements for conducting a national 
competition for furnishing diabetic testing supplies on a mail order 
basis. Specifically this final rule with comment period will establish 
3 requirements: A new definition for what constitutes mail order; a 
rule that requires contract suppliers to provide at a minimum 50 
percent of all of the different types of diabetic testing products on 
the market by brand and model name; and a prohibition against

[[Page 73611]]

influencing and incentivizing beneficiaries to switch their brand of 
monitor and testing supplies.
    Currently, based on claims data from FY 2009, over 62 percent of 
beneficiaries receive their replacement diabetic testing supplies from 
mail order suppliers. The new mail order definition will not impact 
these beneficiaries because they can continue to obtain their items 
through mail order. The remaining 38 percent of beneficiaries may 
continue to obtain these items from a local pharmacy. We do not expect 
this rule to have any adverse effects on beneficiaries because the new 
definition of mail order item is reflective of the way that 
beneficiaries currently get their diabetic testing supplies. However, 
we believe that by clarifying this definition, we will protect 
beneficiaries from paying higher co-payment amounts and we anticipate 
program savings that would have been eroded by suppliers circumventing 
our definition to continue to provide items, even if not awarded a 
contract under competitive bidding and to obtain the higher fee 
schedule payment amount. This definition is also consistent with the 
way that suppliers currently do business by either providing items 
through mail order or at a local storefront. For these reasons we 
believe this new definition will have minimal impact.
    Also, we considered the option to not bifurcate bidding based on 
delivery method and to bid for diabetic testing supplies regardless of 
how the items were obtained. We rejected this approach because it would 
force companies with different business models to compete against each 
other, by requiring local pharmacies to compete with national mail 
order suppliers in order to win a contract to be able to furnish 
diabetic testing supplies.
    In order to implement a national mail order competition for 
diabetic supplies, we are also implementing the special ``50 percent 
rule'' mandated by MIPPA. This final rule with comment period requires 
a bidder to demonstrate that its bid covers types of diabetic testing 
strip products that, in the aggregate and taking into account volume 
for the different products, cover 50 percent (or such higher percentage 
as the Secretary may specify) of all such types of products. The 50 
percent threshold would ensure that beneficiaries have access to mail 
order delivery of the top-selling diabetic test strip products from 
every contract supplier. We plan to use the information that bidding 
suppliers provide on their bidding Form B where suppliers list the 
products they plan to furnish. We believe this requirement will have a 
minimal impact on suppliers because most suppliers currently provide a 
wide range of the brands and models in order to gain market share. The 
statute states that suppliers are required to carry at least 50 percent 
of all brands on the market. However, the Secretary can establish 
suppliers to carry a higher percentage of brands. We have adopted the 
50 percent criteria because we believe this is reflective of what 
suppliers are currently doing and ensures appropriate access for 
beneficiaries.
    In addition to the 50 percent rule we are establishing an anti-
switching requirement. This provision would prevent contract suppliers 
from influencing or incentivizing beneficiaries by persuading, 
pressuring, or advising them to switch from their current brand to a 
brand provided by the supplier. We believe this requirement will 
protect the beneficiary and physician choice of glucose monitoring 
systems. The decision concerning the type of monitor and testing 
supplies that a beneficiary chooses should not be made by the supplier 
but rather by the beneficiary and their physician. We believe that this 
provision will have a minimal impact on suppliers because suppliers 
currently offer a variety of products and generally do not require 
beneficiaries to switch from the brands they are familiar with and 
customarily use.
d. Metropolitan Statistical Areas
    In section VII.V. of this final rule with comment period, we 
implement section 6410 of the ACA regarding adjustments to the DMEPOS 
CBP. We believe that the provisions pertaining to subdividing 
metropolitan statistical areas (MSAs) with populations of at least 
8,000,000 for the purpose of establishing competitive bidding areas 
(CBAs) under Round 2 of the DMEPOS CBP will have a positive impact on 
most suppliers, particularly small suppliers. The authority provided by 
section 1847(a)(1)(D)(ii)(II) of the Act will be used to create CBAs 
that are smaller than the highly and densely populated MSAs of: 
Chicago-Naperville-Joliet, IL-IN-WI; Los Angeles-Long Beach-Santa Ana, 
CA; and New York-Northern New Jersey-Long Island, NY-NJ-PA. This 
results in more manageable service areas for suppliers to navigate when 
furnishing items. More importantly, it ensures more timely delivery of 
items and services to beneficiaries located throughout each of the 
MSAs. It also benefits small suppliers because they will have smaller 
geographic areas to cover as contract suppliers than the large MSAs, 
which in some cases, might prevent them from being considered for 
participation under the program. The larger suppliers will still have 
the opportunity to bid in all of the CBAs within each MSA. We expect 
that subdividing the large MSAs of Chicago, Los Angeles, and New York 
would not have a negative impact on program savings, as long as each 
CBA is large enough to be attractive to suppliers for bidding purposes.
    Table 104 considers FY cash impact on the entire Medicare program, 
including Medicare Advantage for FYs 2011 thru 2015, of the provisions 
of this final rule with comment period related to the establishment of 
CBAs during Round 2 and prior to calendar year 2015. The FY-CY 
distinction is an important one when comparing savings. For example, 
the savings for the DMEPOS CBP will be for 9 months of FY 2013, but for 
12 months of CY 2013. Table 104 considers the impact on program 
expenditures, and does not include beneficiary coinsurance. Finally, 
the estimates in Table 104 incorporate spillover effects from the 
competitive acquisition program onto the Medicare Advantage program. 
The expectation is that the 21 additional MSAs added to the DMEPOS CBP 
would lower prices for DME products in FFS and would lead to lower 
prices in the Medicare Advantage market. The table below considers FY 
cash impact of the above provisions on the entire Medicare program, 
including Medicare Advantage for the FY.

  Table 104--Impact of Adding 21 MSAs to Round 2 of the Medicare DMEPOS
                       Competitive Bidding Program
------------------------------------------------------------------------
                                                          Cost  (in $
                          FY                               millions)
------------------------------------------------------------------------
2011.................................................                  0
2012.................................................                  0
2013.................................................                -40
2014.................................................                -70
2015.................................................               -110
------------------------------------------------------------------------

Subdividing the large MSAs of Chicago, Los Angeles, and New York is 
considered to have little to no fiscal impact. The exceptions to the 
DMEPOS CBP involving rural areas, MSAs with populations less than 
250,000, and low population density areas in selected MSAs before 2015 
are considered to have little to no impact because the baseline never 
considered these areas as subject to competitive bidding prices.

[[Page 73612]]

8. Air Ambulance
    In section VII.H. of this final rule with comment period, we 
present our provision regarding air ambulance and provider and supplier 
enrollment. We note that this provision is an administrative initiative 
that may result in Medicare program savings but at this time those 
savings are inestimable. We believe the probable costs providers or 
suppliers will incur as a result of this rule to be negligible.

F. Alternatives Considered

    This final rule with comment period contains a range of policies, 
including some provisions related to specific MIPPA and ACA provisions. 
The preceding preamble provides descriptions of the statutory 
provisions that are addressed, identifies those policies when 
discretion has been exercised, presents rationale for our final 
policies and, where relevant, alternatives that were considered.

G. Impact on Beneficiaries

    There are a number of changes in this final rule with comment 
period that would have an effect on beneficiaries. In general, we 
believe that many of the proposed changes, including the refinements of 
the PQRI with its focus on measuring, submitting, and analyzing quality 
data, the expansion of the list of Medicare-approved telehealth 
services, the incentive payments for primary care services furnished by 
primary care practitioners in any location and major surgical 
procedures furnished by general surgeons in HPSAs, the waiver of 
beneficiary cost-sharing for most preventive services, and the annual 
wellness visit provisions, will have a positive impact and improve the 
quality and value of care provided to Medicare beneficiaries.
    The regulatory provisions may affect beneficiary liability in some 
cases. For example, the waiver of the deductible and coinsurance for 
the annual wellness visit, the IPPE, and preventive services with a 
grade of A or B from the USPSTF would reduce beneficiary liability for 
these services. Most changes in aggregate beneficiary liability due to 
a particular provision would be a function of the coinsurance (20 
percent if applicable for the particular provision after the 
beneficiary has met the deductible). To illustrate this point, as shown 
in Table 102, the CY 2010 national payment amount in the nonfacility 
setting for CPT code 99203 (Office/outpatient visit, new) is $76.93 
which means that in CY 2010 a beneficiary would be responsible for 20 
percent of this amount, or $15.39. Based on this final rule with 
comment period, the CY 2011 national payment amount in the nonfacility 
setting for CPT code 99203, as shown in Table 102, is $77.59, which 
means that, in CY 2011, the beneficiary coinsurance for this service 
would be $15.52
    Additionally, beneficiary liability would also be impacted by the 
effect of the aggregate cost (savings) of the provisions on the 
standard calculation of the Medicare Part B premium rate (generally 25 
percent of the provision's cost or savings).
    Most policies discussed in this final rule with comment period that 
impact payment rates, such as the expansion of the MPPR to therapy 
services and the increased discount on the TC of multiple imaging 
procedures from 25 percent to 50 percent, would similarly impact 
beneficiaries' coinsurance.

H. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 105, we have 
prepared an accounting statement showing the estimated expenditures 
associated with this final rule with comment period. This estimate 
includes the estimated FY 2011 cash benefit impact associated with 
certain ACA and MIPPA provisions, and the CY 2011 incurred benefit 
impact associated with the estimated CY 2011 PFS conversion factor 
update based on the Mid-Session Review of the FY 2011 President's 
Budget baseline.

      Table 105--Accounting Statement: Classification of Estimated
                              Expenditures
------------------------------------------------------------------------
           Category                            Transfers
------------------------------------------------------------------------
CY 2011 Annualized Monetized   Estimated decrease in expenditures of
 Transfers.                     $17.6 billion for PFS conversion factor
                                update.
From Whom To Whom?...........  Federal Government to physicians, other
                                practitioners and providers and
                                suppliers who receive payment under
                                Medicare.
FY 2011 Annualized Monetized   Estimated increase in expenditures of
 Transfers.                     $1.97 billion for Affordable Care Act
                                provisions.
From Whom To Whom?...........  Federal Government to providers.
------------------------------------------------------------------------

    In accordance with the provisions of Executive Order 12866, this 
final rule with comment period was reviewed by the Office of Management 
and Budget.

List of Subjects

42 CFR Part 405

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

42 CFR Part 409

    Health facilities, Medicare.

42 CFR Part 410

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

42 CFR Part 411

    Kidney diseases, Medicare, Physician Referral, Reporting and 
recordkeeping requirements.

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 414

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping.

42 CFR Part 415

    Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 424

    Emergency medical services, Health facilities, Health professions, 
Medicare, Reporting and recordkeeping requirements.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapter IV as set forth below:

[[Page 73613]]

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority for part 405 continues to read as follows:

    Authority:  Secs. 1102, 1861, 1862(a), 1871, 1874, 1881, and 
1886(k) of the Social Security Act (42 U.S.C. 1302, 1395x, 1395y(a), 
1395hh, 1395kk, 1395rr and 1395ww(k)), and sec. 353 of the Public 
Health Service Act (42 U.S.C. 263a).

Subpart X--Rural Health Clinic and Federally Qualified Health 
Center Services

0
2. A new Sec.  405.2449 is added to read as follows


Sec.  405.2449  Preventive services.

    For services furnished on or after January 1, 2011, preventive 
services covered under the Medicare Federally qualified health center 
benefit are those preventive services defined in section 1861(ddd)(3) 
of the Act, and Sec.  410.2 of this chapter. Specifically, these 
include the following:
    (a) The specific services currently listed in section 1861(ww)(2) 
of the Act, with the explicit exclusion of electrocardiograms.
    (b) The Initial Preventive Physical Examination (IPPE) (as 
specified by section 1861(ww)(1) of the Act as added by section 611 of 
the Medicare Prescription Drug, Improvement and Modernization Act of 
2003 (Pub. L. 108-173) and Sec.  410.16 of this chapter); and
    (c) The Personalized Prevention Plan Services (PPPS), also known as 
the ``Annual Wellness Visit'' (as specified by section 1861(hhh) of the 
Act as added by section 4103 of the Affordable Care Act (Pub. L. 111-
148) and Sec.  410.15 of this chapter).

0
3. Section 405.2470 is amended by adding a new paragraph (d) to read as 
follows:


Sec.  405.2470  Reports and maintenance of records.

* * * * *
    (d) Collection of additional claims data. Beginning January 1, 
2011, a Medicare FQHC must report on its Medicare claims such 
information as the Secretary determines is needed to develop and 
implement a prospective payment system for FQHCs including, but not 
limited to all pertinent HCPCS (Healthcare Common Procedure Coding 
System) code(s) corresponding to the service(s) provided for each 
Medicare FQHC visit (as defined in Sec.  405.2463).

PART 409--HOSPITAL INSURANCE BENEFITS

0
4. The authority citation for part 409 continues to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart B--Inpatient Hospital Services and Inpatient Critical 
Access Hospital Services


Sec.  409.17  [Amended]

0
5. Amend Sec.  409.17(d) by removing the phrase ``hospital policies and 
procedures.'' and adding in its place the phrase ``the provider's 
policies and procedures.''.

Subpart C--Posthospital SNF Care

0
6. Section 409.20 is amended by revising paragraph (a)(3) to read as 
follows:


Sec.  409.20  Coverage of services.

    (a) * * *
    (3) Physical therapy, occupational therapy, and speech-language 
pathology services.
* * * * *

0
7. Section 409.23 is revised to read as follows:


Sec.  409.23  Physical therapy, occupational therapy, and speech-
language pathology services.

    Medicare pays for physical therapy, occupational therapy, or 
speech-language pathology services as posthospital SNF care if they are 
furnished--
    (a) By (or under arrangements made by) the facility and billed by 
(or through) the facility;
    (b) By qualified physical therapists, physical therapist 
assistants, occupational therapists, occupational therapy assistants, 
or speech-language pathologists as defined in part 484 of this chapter; 
and
    (c) In accordance with a plan that meets the requirements of Sec.  
409.17(b) through (d) of this part.

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

0
8. The authority citation for part 410 continues to read as follows:

    Authority:  Secs. 1102, 1834, 1871, and 1893 of the Social 
Security Act (42 U.S.C. 1302, 1395m, 1395hh, and 1395ddd).

Subpart A--General Provisions

0
9. Section 410.2 is amended by adding the definition of ``Preventive 
services'' in alphabetical order to read as follows:


Sec.  410.2  Definitions.

* * * * *
    Preventive services means all of the following:
    (1) The specific services listed in section 1861(ww)(2) of the Act, 
with the explicit exclusion of electrocardiograms;
    (2) The Initial Preventive Physical Examination (IPPE) (as 
specified by section 1861(ww)(1) of the Act); and
    (3) Annual Wellness Visit (AWV), providing Personalized Prevention 
Plan Services (PPPS) (as specified by section 1861(hhh)(1) of the Act).


Sec.  410.3  [Amended]

0
10. Amend Sec.  410.3(b)(2) by removing the reference ``subpart E'' and 
adding in its place the reference ``subpart I.''

Subpart B--Medical and Other Health Services

0
11. Section 410.15 is added to read as follows:


Sec.  410.15  Annual wellness visits providing Personalized Prevention 
Plan Services: Conditions for and limitations on coverage.

    (a) Definitions. For purposes of this section--
    Detection of any cognitive impairment means assessment of an 
individual's cognitive function by direct observation, with due 
consideration of information obtained by way of patient report, 
concerns raised by family members, friends, caretakers or others.
    Eligible beneficiary means an individual who is no longer within 12 
months after the effective date of his or her first Medicare Part B 
coverage period and who has not received either an initial preventive 
physical examination or an annual wellness visit providing a 
personalized prevention plan within the past 12 months.
    Establishment of, or an update to the individual's medical and 
family history means, at minimum, the collection and documentation of 
the following:
    (i) Past medical and surgical history, including experiences with 
illnesses, hospital stays, operations, allergies, injuries and 
treatments.
    (ii) Use or exposure to medications and supplements, including 
calcium and vitamins.
    (iii) Medical events in the beneficiary's parents and any siblings 
and children, including diseases that may be hereditary or place the 
individual at increased risk.
    First annual wellness visit providing personalized prevention plan 
services means the following services furnished to an eligible 
beneficiary by a health professional as those terms are defined in this 
section:

[[Page 73614]]

    (i) Establishment of an individual's medical and family history.
    (ii) Establishment of a list of current providers and suppliers 
that are regularly involved in providing medical care to the 
individual.
    (iii) Measurement of an individual's height, weight, body-mass 
index (or waist circumference, if appropriate), blood pressure, and 
other routine measurements as deemed appropriate, based on the 
beneficiary's medical and family history.
    (iv) Detection of any cognitive impairment that the individual may 
have, as that term is defined in this section.
    (v) Review of the individual's potential (risk factors) for 
depression, including current or past experiences with depression or 
other mood disorders, based on the use of an appropriate screening 
instrument for persons without a current diagnosis of depression, which 
the health professional may select from various available standardized 
screening tests designed for this purpose and recognized by national 
medical professional organizations.
    (vi) Review of the individual's functional ability and level of 
safety, based on direct observation or the use of appropriate screening 
questions or a screening questionnaire, which the health professional 
as defined in this section may select from various available screening 
questions or standardized questionnaires designed for this purpose and 
recognized by national professional medical organizations.
    (vii) Establishment of the following:
    (A) A written screening schedule for the individual such as a 
checklist for the next 5 to 10 years, as appropriate, based on 
recommendations of the United States Preventive Services Task Force and 
the Advisory Committee on Immunization Practices, and the individual's 
health status, screening history, and age-appropriate preventive 
services covered by Medicare.
    (B) A list of risk factors and conditions for which primary, 
secondary or tertiary interventions are recommended or are underway for 
the individual, including any mental health conditions or any such risk 
factors or conditions that have been identified through an initial 
preventive physical examination (as described under Sec.  410.16 of 
this subpart), and a list of treatment options and their associated 
risks and benefits.
    (viii) Furnishing of personalized health advice to the individual 
and a referral, as appropriate, to health education or preventive 
counseling services or programs aimed at reducing identified risk 
factors and improving self management, or community-based lifestyle 
interventions to reduce health risks and promote self-management and 
wellness, including weight loss, physical activity, smoking cessation, 
fall prevention, and nutrition.
    (ix) Voluntary advance care planning (as defined in this section) 
upon agreement with the individual.
    (x) Any other element determined appropriate through the national 
coverage determination process.
    Health professional means--
    (i) A physician who is a doctor of medicine or osteopathy (as 
defined in section 1861(r)(1) of the Act); or
    (ii) A physician assistant, nurse practitioner, or clinical nurse 
specialist (as defined in section 1861(aa)(5) of the Act); or
    (iii) A medical professional (including a health educator, a 
registered dietitian, or nutrition professional, or other licensed 
practitioner) or a team of such medical professionals, working under 
the direct supervision (as defined in Sec.  410.32(b)(3)(ii)) of a 
physician as defined in paragraph (i) of this definition.
    Review of the individual's functional ability and level of safety 
means, at minimum, assessment of the following topics:
    (i) Hearing impairment.
    (ii) Ability to successfully perform activities of daily living.
    (iii) Fall risk.
    (iv) Home safety.
    Subsequent annual wellness visit providing personalized prevention 
plan services means the following services furnished to an eligible 
beneficiary by a health professional as those terms are defined in this 
section:
    (i) An update of the individual's medical and family history.
    (ii) An update of the list of current providers and suppliers that 
are regularly involved in providing medical care to the individual as 
that list was developed for the first annual wellness visit providing 
personalized prevention plan services.
    (iii) Measurement of an individual's weight (or waist 
circumference), blood pressure and other routine measurements as deemed 
appropriate, based on the individual's medical and family history.
    (iv) Detection of any cognitive impairment that the individual may 
have, as that term is defined in this section.
    (v) An update to the following:
    (A) The written screening schedule for the individual as that 
schedule is defined in paragraph (a) of this section for the first 
annual wellness visit providing personalized prevention plan services.
    (B) The list of risk factors and conditions for which primary, 
secondary or tertiary interventions are recommended or are underway for 
the individual as that list was developed at the first annual wellness 
visit providing personalized prevention plan services.
    (vi) Furnishing of personalized health advice to the individual and 
a referral, as appropriate, to health education or preventive 
counseling services or programs as that advice and related services are 
defined in paragraph (a) of this section.
    (vii) Voluntary advance care planning (as defined in paragraph (a) 
of this section) upon agreement with the individual.
    (viii) Any other element determined appropriate through the 
national coverage determination process.
    Voluntary advance care planning means, for purposes of this 
section, verbal or written information regarding the following areas:
    (i) An individual's ability to prepare an advance directive in the 
case where an injury or illness causes the individual to be unable to 
make health care decisions.
    (ii) Whether or not the physician is willing to follow the 
individual's wishes as expressed in an advance directive.
    (b) Conditions for coverage of annual wellness visits providing 
personalized prevention plan services. Medicare Part B pays for first 
and subsequent annual wellness visits providing personalized prevention 
plan services that are furnished to an eligible beneficiary, as 
described in this section, if they are furnished by a health 
professional, as defined in this section.
    (c) Limitations on coverage of an annual wellness visit providing 
personalized prevention plan services. Payment may not be made for 
either a first or a subsequent annual wellness visit providing 
personalized prevention plan services that is performed for an 
individual who is--
    (1) Not an eligible beneficiary as described in this section.
    (2) An eligible beneficiary as described in this section and who 
has had either an initial preventive physical examination as specified 
in Sec.  410.16 of this subpart or either a first or a subsequent 
annual wellness visit providing personalized prevention plan services 
performed within the past 12 months.
    (d) Effective date. Coverage for an annual wellness visit providing 
personalized prevention plan services is

[[Page 73615]]

effective for services furnished on or after January 1, 2011.

0
12. Section 410.32 is amended by adding paragraph (b)(2)(vii) to read 
as follows:


Sec.  410.32  Diagnostic x-ray tests, diagnostic laboratory tests, and 
other diagnostic tests: Conditions.

* * * * *
    (b) * * *
    (2) * * *
    (vii) Diagnostic tests performed by a certified nurse-midwife 
authorized to perform the tests under applicable State laws.
* * * * *

0
13. Section 410.64 is amended by revising paragraph (a) introductory 
text to read as follows:


Sec.  410.64  Additional Preventive Services

    (a) Medicare Part B pays for additional preventive services not 
described in paragraph (1) or (3) of the definition of ``preventive 
services'' under Sec.  410.2, that identify medical conditions or risk 
factors for individuals if the Secretary determines through the 
national coverage determination process (as defined in section 
1869(f)(1)(B) of the Act) that these services are all of the following:
* * * * *

0
14. Section 410.78 is amended by revising paragraph (b) introductory 
text to read as follows:


Sec.  410.78  Telehealth services.

* * * * *
    (b) General rule. Medicare Part B pays for office or other 
outpatient visits, subsequent hospital care services (with the 
limitation of one telehealth visit every 3 days), subsequent nursing 
facility care services (not including the Federally-mandated periodic 
visits under Sec.  483.40(c) and with the limitation of one telehealth 
visit every 30 days), professional consultations, psychiatric 
diagnostic interview examination, neurobehavioral status exam, 
individual psychotherapy, pharmacologic management, end-stage renal 
disease-related services included in the monthly capitation payment 
(except for one ``hands on'' visit per month to examine the access 
site), individual and group medical nutrition therapy services, 
individual and group kidney disease education services, individual and 
group diabetes self-management (DSMT) training services (except for one 
hour of in-person services to be furnished in the year following the 
initial DSMT service to ensure effective injection training), and 
individual and group health and behavior assessment and intervention 
services furnished by an interactive telecommunications system if the 
following conditions are met:
* * * * *

Subpart I--Payment for SMI Benefits

0
15. Section 410.150 is amended by adding paragraph (b)(20) to read as 
follows:


Sec.  410.150  To whom payment is made.

* * * * *
    (b) * * *
    (20) To a certified nurse-midwife for professional services 
furnished by the certified nurse-midwife in all settings and for 
services and supplies furnished incident to those services. Payment is 
made only if no facility or other provider charges or is paid any 
amount for the furnishing of the professional services of the certified 
nurse-midwife.

0
16. Section 410.152 is amended by revising paragraph (l) to read as 
follows:


Sec.  410.152  Amount of payment.

* * * * *
    (l) Amount of payment: Preventive services. Medicare Part B pays 
100 percent of the Medicare payment amount established under the 
applicable payment methodology for the service setting for providers 
and suppliers for the following preventive services:
    (1) Pneumococcal (as specified in paragraph (h) of this section), 
influenza, and hepatitis B vaccine and administration.
    (2) Screening mammography.
    (3) Screening pap tests and screening pelvic exam.
    (4) Prostate cancer screening tests (excluding digital rectal 
examinations).
    (5) Colorectal cancer screening tests (excluding barium enemas).
    (6) Bone mass measurement.
    (7) Medical nutrition therapy (MNT) services.
    (8) Cardiovascular screening blood tests.
    (9) Diabetes screening tests.
    (10) Ultrasound screening for abdominal aortic aneurysm (AAA).
    (11) Additional preventive services identified for coverage through 
the national coverage determination (NCD) process.
    (12) Initial Preventive Physical Examination (IPPE).
    (13) Annual Wellness Visit (AWV), providing Personalized Prevention 
Plan Services (PPPS).

0
16. Section 410.160 is amended by--
0
A. Revising paragraph (b)(2).
0
B. Adding paragraphs (b)(10) through (13).
    The revisions and additions read as follows:


Sec.  410.160  Part B annual deductible.

* * * * *
    (b) * * *
    (2) Pneumococcal, influenza, and hepatitis b vaccines and their 
administration.
* * * * *
    (10) Bone mass measurement.
    (11) Medical nutrition therapy (MNT) services.
    (12) Annual Wellness Visit (AWV), providing Personalized Prevention 
Plan Services (PPPS).
    (13) Additional preventive services identified for coverage through 
the national coverage determination (NCD) process.
* * * * *

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

0
17. The authority citation for part 411 continues to read as follows:

    Authority:  Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 
of the Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-
152, 1395hh, and 1395nn).

Subpart A--General Exclusions and Exclusion of Particular Services

0
18. Section 411.15 is amended by--
0
A. Revising paragraph (a)(1).
0
B. Adding new paragraph (k)(16).
    The revision and addition read as follows:


Sec.  411.15  Particular services excluded from coverage.

* * * * *
    (a) * * *
    (1) Examinations performed for a purpose other than treatment or 
diagnosis of a specific illness, symptoms, complaint, or injury, except 
for screening mammography, colorectal cancer screening tests, screening 
pelvic exams, prostate cancer screening tests, glaucoma screening 
exams, ultrasound screening for abdominal aortic aneurysms (AAA), 
cardiovascular disease screening tests, diabetes screening tests, a 
screening electrocardiogram, initial preventive physical examinations 
that meet the criteria specified in paragraphs (k)(6) through (k)(15) 
of this section, additional preventive services that meet the criteria 
in Sec.  410.64 of this chapter, or annual wellness visits providing 
personalized prevention plan services.
* * * * *
    (k) * * *
    (16) In the case of an annual wellness visit providing a 
personalized

[[Page 73616]]

prevention plan, subject to the conditions and limitations specified in 
Sec.  410.15 of this subpart.
* * * * *

Subpart J--Financial Relationships Between Physicians and Entities 
Furnishing Designated Health Services

0
19. Section 411.355 is amended by adding paragraph (b)(7) to read as 
follows:


Sec.  411.355  General exceptions to the referral prohibition related 
to both ownership/investment and compensation.

* * * * *
    (b) * * *
    (7) Disclosure requirement for certain imaging services.
    (i) With respect to magnetic resonance imaging, computed 
tomography, and positron emission tomography services identified as 
``radiology and certain other imaging services'' on the List of CPT/
HCPCS Codes, the referring physician must provide written notice to the 
patient at the time of the referral that the patient may receive the 
same services from a person other than one described in paragraph 
(b)(1) of this section. Except as set forth in paragraph (b)(7)(ii) of 
this section, the written notice must include a list of at least 5 
other suppliers (as defined in Sec.  400.202 of this chapter) that 
provide the services for which the individual is being referred and 
which are located within a 25-mile radius of the referring physician's 
office location at the time of the referral. The notice should be 
written in a manner sufficient to be reasonably understood by all 
patients and should include for each supplier on the list, at a 
minimum, the supplier's name, address, and telephone number.
    (ii) If there are fewer than 5 other suppliers located within a 25-
mile radius of the physician's office location at the time of the 
referral, the physician must list all of the other suppliers of the 
imaging service that are present within a 25-mile radius of the 
referring physician's office location. Provision of the written list of 
alternate suppliers will not be required if no other suppliers provide 
the services for which the individual is being referred within the 25-
mile radius.
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

0
20. The authority citation for part 413 continues to read as follows:

    Authority:  Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), 
and (n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security 
Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and 
(n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of 
Public Law 106-133 (113 Stat. 1501A-332).

Subpart E--Payments to Providers

0
21. Section 413.70 is amended by adding a sentence at the end of 
paragraph (b)(3)(ii)(B) to read as follows:


Sec.  413.70  Payment for services of a CAH.

* * * * *
    (b) * * *
    (3) * * *
    (ii) * * *
    (B) * * * Effective for primary care services furnished by primary 
care practitioners (as defined in Sec.  414.80(a)) and major surgical 
procedures furnished by general surgeons in health professional 
shortage areas (as defined in Sec.  414.2) furnished on or after 
January 1, 2011 and before January 1, 2016, incentive payments 
specified under Sec.  414.80 and Sec.  414.67(b), respectively, of this 
title must not be included in determining payment made under this 
paragraph.
* * * * *

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

0
22. The authority citation for part 414 continues to read as follows:

    Authority:  Secs. 1102, 1871, and 1881(b)(l) of the Social 
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l)).

Subpart A--General Provisions

0
23. Section 414.2 is amended by adding the definitions of ``Health 
Professional Shortage Area'' and ``Major surgical procedure'' in 
alphabetical order to read as follows:


Sec.  414.2  Definitions.

* * * * *
    Health Professional Shortage Area (HPSA) means an area designated 
under section 332(a)(1)(A) of the Public Health Service Act as 
identified by the Secretary prior to the beginning of such year.
    Major surgical procedure means a surgical procedure for which a 10-
day or 90-day global period is used for payment under the physician fee 
schedule and section 1848(b) of the Act.
* * * * *

0
24. Section 414.26 is amended by--
0
A. Redesignating paragraph (c) as paragraph (d).
0
B. Adding a new paragraph (c).
    The addition reads as follows:


Sec.  414.26  Determining the GAF.

* * * * *
    (c) Adjusting the practice expense index to account for the 
Frontier State floor.
    (1) General criteria. Effective on or after January 1, 2011, CMS 
will adjust the practice expense index for physicians' services 
furnished in qualifying States to recognize the practice expense index 
floor established for Frontier States. A qualifying State must meet the 
following criteria:
    (i) At least 50 percent of counties located within the State have a 
population density less than 6 persons per square mile.
    (ii) The State does not receive a non-labor related share 
adjustment determined by the Secretary to take into account the unique 
circumstances of hospitals located in Alaska and Hawaii.
    (2) Amount of adjustment. The practice expense value applied for 
physicians' services furnished in a qualifying State will be not less 
than 1.00.
    (3) Process for determining adjustment. (i) CMS will use the most 
recent population estimate data published by the U.S. Census Bureau to 
determine county definitions and population density. This analysis will 
be periodically revised, such as for updates to the decennial census 
data.
    (ii) CMS will publish annually a listing of qualifying Frontier 
States receiving a practice expense index floor attributable to this 
provision.
* * * * *

Subpart B--Physicians and Other Practitioners

0
25. Section 414.54 is revised to read as follows:


Sec.  414.54  Payment for certified nurse-midwives' services.

    (a) For services furnished after December 31, 1991, allowed amounts 
under the fee schedule established under section 1833(a)(1)(K) of the 
Act for the payment of certified nurse-midwife services may not exceed 
65

[[Page 73617]]

percent of the physician fee schedule amount for the service.
    (b) For certified nurse-midwife services furnished on or after 
January 1, 2011, allowed amounts may not exceed 100 percent of the 
physician fee schedule amount that would be paid to a physician for the 
services.

0
26. Section 414.65 is amended by revising paragraph (a)(1) introductory 
text to read as follows:


Sec.  414.65  Payment for telehealth services.

    (a) * * *
    (1) The Medicare payment amount for office or other outpatient 
visits, subsequent hospital care services (with the limitation of one 
telehealth subsequent hospital care service every 3 days), subsequent 
nursing facility care services (not including the Federally-mandated 
periodic visits under Sec.  483.40(c) and with the limitation of one 
telehealth nursing facility care service every 30 days), professional 
consultations, psychiatric diagnostic interview examination, 
neurobehavioral status exam, individual psychotherapy, pharmacologic 
management, end-stage renal disease-related services included in the 
monthly capitation payment (except for one ``hands on'' visit per month 
to examine the access site), individual and group medical nutrition 
therapy services, individual and group kidney disease education 
services, individual and group diabetes self-management training (DSMT) 
services (except for 1 hour of in-person DSMT services to be furnished 
in the year following the initial DSMT service to ensure effective 
injection training), and individual and group health and behavior 
assessment and intervention furnished via an interactive 
telecommunications system is equal to the current fee schedule amount 
applicable for the service of the physician or practitioner.
* * * * *

0
27. Section 414.67 is revised to read as follows:


Sec.  414.67  Incentive payments for services furnished in Health 
Professional Shortage Areas.

    (a) Health Professional Shortage Area (HPSA) physician bonus 
program. A HPSA physician incentive payment will be made subject to the 
following:
    (1) HPSA bonuses are payable for services furnished by physicians 
as defined in section 1861(r) of the Act in areas designated as of 
December 31 of the prior year as geographic primary medical care HPSAs 
as defined in section 332(a)(1)(A) of the Public Health Service Act.
    (2) HPSA bonuses are payable for services furnished by 
psychiatrists in areas designated as of December 31 of the prior year 
as geographic mental health HPSAs if the services are not already 
eligible for the bonus based on being in a geographic primary care 
HPSA.
    (3) Physicians eligible for the HPSA physician bonus are entitled 
to a 10 percent incentive payment above the amount paid for their 
professional services under the physician fee schedule.
    (4) Physicians furnishing services in areas that are designated as 
geographic HPSAs prior to the beginning of the year but not included on 
the published list of zip codes for which automated HPSA bonus payments 
are made must use the AQ modifier to receive the HPSA physician bonus 
payment.
    (b) HPSA surgical incentive payment program. A HPSA surgical 
incentive payment will be made subject to the following:
    (1) A major surgical procedure as defined in Sec.  414.2 of this 
part is furnished by a general surgeon on or after January 1, 2011 and 
before January 1, 2016 in an area recognized for the HPSA physician 
bonus program under paragraph (a)(1) of this section.
    (2) Payment will be made on a quarterly basis in an amount equal to 
10 percent of the Part B payment amount for major surgical procedures 
furnished as described in paragraph (b)(1) of this section, in addition 
to the amount the physician would otherwise be paid.
    (3) Physicians furnishing services in areas that are designated as 
geographic HPSAs eligible for the HPSA physician bonus program under 
paragraph (a)(1) of this section prior to the beginning of the year but 
not included on the published list of zip codes for which automated 
HPSA surgical incentive payments are made should report HCPCS modifier 
-AQ to receive the HPSA surgical incentive payment.
    (4) The payment described in paragraph (b)(2) of this section is 
made to the surgeon or, where the surgeon has reassigned his or her 
benefits to a critical access hospital (CAH) paid under the optional 
method, to the CAH based on an institutional claim.

0
28. Section 414.80 is added to read as follows:


Sec.  414.80  Incentive payment for primary care services.

    (a) Definitions. As defined in this section--
    Eligible primary care practitioner means one of the following:
    (i) A physician (as defined in section 1861(r)(1) of the Act) who 
meets all of the following criteria:
    (A) Enrolled in Medicare with a primary specialty designation of 
08-family practice, 11-internal medicine, 37-pediatrics, or 38-
geriatrics.
    (B) At least 60 percent of the physician's allowed charges under 
the physician fee schedule (excluding hospital inpatient care and 
emergency department visits) during a reference period specified by the 
Secretary are for primary care services.
    (ii) A nurse practitioner, clinical nurse specialist, or physician 
assistant (as defined in section 1861(aa)(5) of the Act) who meets all 
of the following criteria:
    (A) Enrolled in Medicare with a primary specialty designation of 
50-nurse practitioner, 89-certified clinical nurse, or 97-physician 
assistant.
    (B) At least 60 percent of the practitioner's allowed charges under 
the physician fee schedule (excluding hospital inpatient care and 
emergency department visits) during a reference period specified by the 
Secretary are for primary care services.
    Primary care services means--
    (i) New and established patient office or other outpatient 
evaluation and management (E/M) visits;
    (ii) Initial, subsequent, discharge, and other nursing facility E/M 
services;
    (iii) New and established patient domiciliary, rest home (for 
example, boarding home), or custodial care E/M services;
    (iv) Domiciliary, rest home (for example, assisted living 
facility), or home care plan oversight services; and
    (v) New and established patient home E/M visits.
    (b) Payment.
    (1) For primary care services furnished by an eligible primary care 
practitioner on or after January 1, 2011 and before January 1, 2016, 
payment is made on a quarterly basis in an amount equal to 10 percent 
of the payment amount for the primary care services under Part B, in 
addition to the amount the primary care practitioner would otherwise be 
paid for the primary care services under Part B.
    (2) The payment described in paragraph (b)(1) of this section is 
made to the eligible primary care practitioner or, where the physician 
has reassigned his or her benefits to a critical access hospital (CAH) 
paid under the optional method, to the CAH based on an institutional 
claim.

0
29. A new Sec.  414.90 is added to read as follows:

[[Page 73618]]

Sec.  414.90  Physician Quality Reporting System.

    (a) Basis and scope. This section implements the following 
provisions of the Act:
    (1) 1848(a)--Payment Based on Fee Schedule.
    (2) 1848(k)--Quality Reporting System.
    (3) 1848(m)--Incentive Payments for Quality Reporting.
    (b) Definitions. As used in this section, unless otherwise 
indicated--
    Covered professional services means services for which payment is 
made under, or is based on, the Medicare physician fee schedule as 
provided under section 1848(k)(3) of the Act and which are furnished by 
an eligible professional.
    Eligible professional means any of the following:
    (i) A physician.
    (ii) A practitioner described in section 1842(b)(18)(C) of the Act.
    (iii) A physical or occupational therapist or a qualified speech-
language pathologist.
    (iv) A qualified audiologist (as defined in section 1861(ll)(3)(B) 
of the Act).
    Group practice means a single Taxpayer Identification Number (TIN) 
with two or more eligible professionals, as identified by their 
individual National Provider Identifier (NPI), who have reassigned 
their Medicare billing rights to the TIN.
    Maintenance of Certification Program means a continuous assessment 
program, such as qualified American Board of Medical Specialties 
Maintenance of Certification Program or an equivalent program (as 
determined by the Secretary), that advances quality and the lifelong 
learning and self-assessment of board certified specialty physicians by 
focusing on the competencies of patient care, medical knowledge, 
practice-based learning, interpersonal and communication skills, and 
professionalism. Such a program must include the following:
    (i) The program requires the physician to maintain a valid 
unrestricted license in the United States.
    (ii) The program requires a physician to participate in educational 
and self-assessment programs that require an assessment of what was 
learned.
    (iii) The program requires a physician to demonstrate, through a 
formalized secure examination, that the physician has the fundamental 
diagnostic skills, medical knowledge, and clinical judgment to provide 
quality care in their respective specialty.
    (iv) The program requires successful completion of a qualified 
maintenance of certification program practice assessment.
    Maintenance of Certification Program Practice Assessment means an 
assessment of a physician's practice that--
    (i) Includes an initial assessment of an eligible professional's 
practice that is designed to demonstrate the physician's use of 
evidence-based medicine;
    (ii) Includes a survey of patient experience with care; and
    (iii) Requires a physician to implement a quality improvement 
intervention to address a practice weakness identified in the initial 
assessment under paragraph (h) of this section and then to remeasure to 
assess performance improvement after such intervention.
    Measures group means a subset of four or more Physician Quality 
Reporting System measures that have a particular clinical condition or 
focus in common. The denominator definition and coding of the measures 
group identifies the condition or focus that is shared across the 
measures within a particular measures group.
    Physician Quality Reporting System means the physician reporting 
system under section 1848(k) of the Act for the reporting by eligible 
professionals of data on quality measures and the incentive payment 
associated with this physician reporting system.
    Performance rate means the percentage of a defined population who 
receives a particular process of care or achieve a particular outcome 
for a particular quality measure.
    Reporting rate means the percentage of patients that the eligible 
professional indicated a quality action was or was not performed 
divided by the total number of patients in the denominator of the 
measure.
    Qualified registry means a medical registry or a maintenance of 
certification program operated by a specialty body of the American 
Board of Medical Specialties that, with respect to a particular program 
year, has self-nominated and successfully completed a vetting process 
(as specified by CMS) to demonstrate its compliance with the Physician 
Quality Reporting System qualification requirements specified by CMS 
for that program year. The registry may act as a data submission 
vendor, which has the requisite legal authority to provide Physician 
Quality Reporting System data (as specified by CMS) on behalf of an 
eligible professional to CMS.
    Qualified electronic health record product means an electronic 
health record vendor's product and version that, with respect to a 
particular program year, has self-nominated and successfully completed 
a vetting process (as specified by CMS) to demonstrate the product's 
compliance with the Physician Quality Reporting System qualification 
requirements specified by CMS for a program year. The requirements and 
process for an electronic health record product to be qualified for the 
purpose of the Physician Quality Reporting System is separate from the 
standards, implementation specifications, and certification criteria 
established for the EHR Incentive Program specified in part 495.
    (c) Incentive payments. With respect to covered professional 
services furnished during a reporting period by an eligible 
professional, if --
    (1) There are any quality measures that have been established under 
the Physician Quality Reporting System that are applicable to any such 
services furnished by such professional (or in the case of a group 
practice under paragraph (g) of this section, such group practice) for 
such reporting period; and
    (2) The eligible professional (or in the case of a group practice 
under paragraph (g) of this section, the group practice) satisfactorily 
submits (as determined under paragraph (f) of this section for eligible 
professionals and paragraph (g) of this section for group practices) to 
the Secretary data on such quality measures in accordance with the 
Physician Quality Reporting System for such reporting period, in 
addition to the amount otherwise paid under section 1848 of the Act, 
there also must be paid to the eligible professional (or to an employer 
or facility in the cases described in section 1842(b)(6)(A) of the Act 
or, in the case of a group practice) under paragraph (g) of this 
section, to the group practice, from the Federal Supplementary Medical 
Insurance Trust Fund established under section 1841 of the Act an 
amount equal to the applicable quality percent (as specified in 
paragraph (c)(3) of this section) of the eligible professional's (or, 
in the case of a group practice under paragraph (g) of this section, 
the group practice's) total estimated allowed charges for all covered 
professional services furnished by the eligible professional (or, in 
the case of a group practice under paragraph (g) of this section, by 
the group practice) during the applicable reporting period. For 
purposes of this paragraph,
    (i) The eligible professional's (or, in the case of a group 
practice under paragraph (g) of this section, the group practice's) 
total estimated allowed charges for covered professional services 
furnished during a reporting period are determined based on claims

[[Page 73619]]

processed in the National Claims History (NCH) no later than 2 months 
after the end of the applicable reporting period;
    (ii) In the case of an eligible professional who furnishes covered 
professional services in more than one practice, incentive payments are 
separately determined for each practice based on claims submitted for 
the eligible professional for each practice;
    (iii) Incentive payments earned by an eligible professional (or in 
the case of a group practice under paragraph (g) of this section, by a 
group practice) for a particular program year will be paid as a single 
consolidated payment to the TIN holder of record.
    (3) Applicable quality percent. The applicable quality percent is 
as follows:
    (i) For 2011, 1.0 percent; and
    (ii) For 2012, 2013, and 2014, 0.5 percent;
    (d) Additional incentive payment. (1) Through 2014, if an eligible 
professional meets the requirements described in paragraph (d)(2) of 
this section, the applicable percent for such year, as described in 
paragraphs (c)(3)(i) and (ii) of this section, must be increased by 0.5 
percentage points.
    (2) In order to qualify for the additional incentive payment 
described in paragraph (d)(1) of this section, an eligible professional 
must meet the following requirements:
    (i) The eligible professional must--
    (A) Satisfactorily submit data on quality measures for purposes of 
this section for a year; and
    (B) Have such data submitted on their behalf through a Maintenance 
of Certification program (as defined in paragraph (b) of this section) 
that meets:
    (1) The criteria for a registry (as specified by CMS); or
    (2) An alternative form and manner determined appropriate by the 
Secretary.
    (ii) The eligible professional, more frequently than is required to 
qualify for or maintain board certification status--
    (A) Participates in a maintenance of certification program (as 
defined in paragraph (b) of this section) for a year; and
    (B) Successfully completes a qualified maintenance of certification 
program practice assessment (as defined in paragraph (b) of this 
section) for such year.
    (iii) A Maintenance of Certification Program submits to the 
Secretary, on behalf of the eligible professional, information--
    (A) In a form and manner specified by the Secretary, that the 
eligible professional has successfully met the requirements of 
paragraph (d)(2)(ii) of this section, which may be in the form of a 
structural measure);
    (B) If requested by the Secretary, on the survey of patient 
experience with care (as described in paragraph (b) of this section); 
and
    (C) As the Secretary may require, on the methods, measures, and 
data used under the Maintenance of Certification Program and the 
qualified Maintenance of Certification Program practice assessment.
    (e) Use of consensus-based quality measures. For each program year, 
CMS will publish the final list of measures and the final detailed 
measure specifications for all quality measures selected for inclusion 
in the Physician Quality Reporting System quality measure set for a 
given program year on a CMS Web site by no later than December 31 of 
the prior year.
    (1) General rule. Subject to paragraph (e)(2) of this section, for 
purposes of reporting data on quality measures for covered professional 
services furnished during a year, subject to paragraph (f) of this 
section, the quality measures specified under this paragraph must be 
such measures selected by the Secretary from measures that have been 
endorsed by the entity with a contract with the Secretary under section 
1890(a) of the Act.
    (2) Exception. In the case of a specified area or medical topic 
determined appropriate by the Secretary for which a feasible and 
practical measure has not been endorsed by the entity with a contract 
under section 1890(a) of the Act, the Secretary may specify a measure 
that is not so endorsed as long as due consideration is given to 
measures that have been endorsed or adopted by a consensus organization 
identified by the Secretary, such as the AQA alliance.
    (3) Opportunity to provide input on measures. For each quality 
measure adopted by the Secretary under this paragraph, the Secretary 
ensures that eligible professionals have the opportunity to provide 
input during the development, endorsement, or selection of quality 
measures applicable to services they furnish.
    (f) Requirements for individual eligible professionals to qualify 
to receive an incentive payment. In order to qualify to earn a 
Physician Quality Reporting System incentive payment for a particular 
program year, an individual eligible professional, as identified by a 
unique TIN/NPI combination, must meet the criteria for satisfactory 
reporting specified by CMS for such year by reporting on either 
individual Physician Quality Reporting System quality measures or 
Physician Quality Reporting System measures groups identified by CMS 
during a reporting period specified in paragraph (f)(1) of this section 
and using one of the reporting mechanisms specified in paragraph (f)(2) 
of this section. Although an eligible professional may attempt to 
qualify for the Physician Quality Reporting System incentive payment by 
reporting on both individual Physician Quality Reporting System quality 
measures and measures groups, using more than one reporting mechanism 
(as specified in paragraph (f)(2) of this section), or reporting for 
more than one reporting period, he or she will receive only one 
Physician Quality Reporting System incentive payment per TIN/NPI 
combination for a program year.
    (1) Reporting periods. For purposes of this paragraph, the 
reporting period with respect to program year 2011 is--
    (i) The 12-month period from January 1 through December 31 of such 
program year; or
    (ii) The 6-month period from July 1 through December 31 of such 
program year.
    (2) Exceptions. In program year 2011, the 6-month reporting period 
is not available for EHR-based reporting of individual Physician 
Quality Reporting System quality measures or for reporting by group 
practices under the process described in paragraph (g) of this section.
    (3) Reporting mechanisms. For program year 2011, an eligible 
professional who wishes to participate in the Physician Quality 
Reporting System must report information on the individual Physician 
Quality Reporting System quality measures or Physician Quality 
Reporting System measures groups identified by CMS in the following 
manner:
    (i) Reporting the individual Physician Quality Reporting System 
quality measures or Physician Quality Reporting System measures groups 
to CMS, by no later than 2 months after the end of the applicable 
reporting period, on the eligible professional's Medicare Part B claims 
for covered professional services furnished during the applicable 
reporting period.
    (ii) Reporting the individual Physician Quality Reporting System 
quality measures or Physician Quality Reporting System measures groups 
to a qualified registry (as specified in paragraph (b) of this section) 
in the form and manner and by the deadline specified by the qualified 
registry selected by the eligible professional. The selected registry 
will submit information, as required by CMS, for covered professional 
services furnished

[[Page 73620]]

by the eligible professional during the applicable reporting period to 
CMS on the eligible professional's behalf; or
    (iii) Reporting the individual Physician Quality Reporting System 
quality measures to CMS by extracting clinical data using a secure data 
submission method, as required by CMS, from a qualified EHR product (as 
defined in paragraph (b) of this section) by the deadline specified by 
CMS for covered professional services furnished by the eligible 
professional during the applicable reporting period. Prior to actual 
data submission for a given program year and by a date specified by 
CMS, the eligible professional must submit a test file containing real 
or dummy clinical quality data extracted from the qualified EHR product 
selected by the eligible professional using a secure data submission 
method, as required by CMS.
    (g) Requirements for group practices to qualify to receive an 
incentive payment. A group practice (as defined in paragraph (b) of 
this section) will be treated as satisfactorily submitting data on 
quality measures under Physician Quality Reporting System for covered 
professional services for a reporting period, if, in lieu of reporting 
Physician Quality Reporting System measures, the group practice--
    (1) Meets the participation requirements specified by CMS for the 
Physician Quality Reporting System group practice reporting option or 
is a group practice of any size (including solo practitioners) or 
comprised of multiple TINs participating in a Medicare approved 
demonstration project that is deemed to be participating in the 
Physician Quality Reporting System group practice reporting option;
    (2) Is selected by CMS to participate in the Physician Quality 
Reporting System group practice reporting option;
    (3) Reports measures specified by CMS in the form and manner, and 
at a time specified by CMS; and
    (4) Meets other requirements for satisfactory reporting specified 
by CMS.
    (5) No double payments. Payments to a group practice under this 
paragraph must be in lieu of the payments that would otherwise be made 
under the Physician Quality Reporting System to eligible professionals 
in the group practice for meeting the criteria for satisfactory 
reporting for individual eligible professionals.
    (i) If an eligible professional, as identified by an individual 
NPI, has reassigned his or her Medicare billing rights to a TIN 
selected to participate in the Physician Quality Reporting System group 
practice reporting option for a program year, then for that program 
year the eligible professional must participate in the Physician 
Quality Reporting System via the group practice reporting option. For 
any program year in which the TIN is selected to participate in the 
Physician Quality Reporting System group practice reporting option, the 
eligible professional cannot individually qualify for a Physician 
Quality Reporting System incentive payment by meeting the requirements 
specified in paragraph (f) of this section.
    (ii) If, for the program year, the eligible professional 
participates in the Physician Quality Reporting System under another 
TIN that is not selected to participate in the Physician Quality 
Reporting System group practice reporting option for that program year, 
then the eligible professional may individually qualify for a Physician 
Quality Reporting System incentive by meeting the requirements 
specified in paragraph (f) of this section under that TIN.
    (h) Limitations on review. Except as specified in paragraph (i) of 
this section, there is no administrative or judicial review under 
section 1869 or 1879 of the Act, or otherwise of--
    (1) The determination of measures applicable to services furnished 
by eligible professionals under the Physician Quality Reporting System;
    (2) The determination of the payment limitation; and
    (3) The determination of any Physician Quality Reporting System 
incentive payment and the Physician Quality Reporting System payment 
adjustment.
    (i) Informal review. Eligible professionals (or in the case of 
reporting under paragraph (g) of this section, group practices) may 
seek an informal review of the determination that an eligible 
professional (or in the case of reporting under paragraph (g) of this 
section, group practices) did not satisfactorily submit data on quality 
measures under the Physician Quality Reporting System.
    (1) To request an informal review, an eligible professional (or in 
the case of reporting under paragraph (g) of this section, group 
practices) must submit a request to CMS within 90 days of the release 
of the feedback reports. The request must be submitted in writing or 
via e-mail and summarize the concern(s) and reasons for requesting an 
informal review and may also include information to assist in the 
review.
    (2) CMS will provide a written response within 60 days of the 
receipt of the original request.
    (i) All decisions based on the informal review will be final.
    (ii) There will be no further review or appeal.
    (j) Public reporting of an eligible professional's or group 
practice's Physician Quality Reporting System data. For each program 
year, CMS will post on a public Web site, in an easily understandable 
format, a list of the names of eligible professionals (or in the case 
of reporting under paragraph (g) of this section, group practices) who 
satisfactorily submitted Physician Quality Reporting System quality 
measures.

0
30. A new Sec.  414.92 is added to read as follows:


Sec.  414.92  Electronic Prescribing Incentive Program.

    (a) Basis and scope. This section implements the following 
provisions of the Act:
    (1) Section 1848(a)--Payment Based on Fee Schedule.
    (2) Section 1848(m)--Incentive Payments for Quality Reporting.
    (b) Definitions. As used in this section, unless otherwise 
indicated--
    Covered professional services means services for which payment is 
made under, or is based on, the Medicare physician fee schedule which 
are furnished by an eligible professional.
    Electronic Prescribing Incentive Program means the incentive 
payment program established under section 1848(m) of the Act for the 
adoption and use of electronic prescribing technology by eligible 
professionals.
    Eligible professional means any of the following healthcare 
professionals who have prescribing authority:
    (i) A physician.
    (ii) A practitioner described in section 1842(b)(18)(C) of the Act.
    (iii) A physical or occupational therapist or a qualified speech-
language pathologist.
    (iv) A qualified audiologist (as defined in section 1861(ll)(3)(B) 
of the Act).
    Group practice means a group practice that is--
    (i) Defined at Sec.  414.90(b), that is participating in the 
Physician Quality Reporting System; or
    (ii) (A) In a Medicare approved demonstration project that is 
deemed to be participating in the Physician Quality Reporting System 
group practice reporting option; and
    (B) Has indicated its desire to participate in the electronic 
prescribing group practice option.
    Qualified electronic health record product means an electronic 
health record product and version that, with

[[Page 73621]]

respect to a particular program year, is designated by CMS as a 
qualified electronic health record product for the purpose of the 
Physician Quality Reporting System (as described in Sec.  414.90) and 
the product's vendor has indicated a desire to have the product 
qualified for purposes of the product's users to submit information 
related to the electronic prescribing measure.
    Qualified registry means a medical registry or a Maintenance of 
Certification Program operated by a specialty body of the American 
Board of Medical Specialties that, with respect to a particular program 
year, is designated by CMS as a qualified registry for the purpose of 
the Physician Quality Reporting System (as described in Sec.  414.90) 
and that has indicated its desire to be qualified to submit the 
electronic prescribing measure on behalf of eligible professionals for 
the purposes of the Electronic Prescribing Incentive Program.
    (c) Incentive payments and payment adjustments. (1) Incentive 
payments. Subject to paragraph (c)(3) of this section, with respect to 
covered professional services furnished during a reporting period by an 
eligible professional, if the eligible professional is a successful 
electronic prescriber for such reporting period, in addition to the 
amount otherwise paid under section 1848 of the Act, there also must be 
paid to the eligible professional (or to an employer or facility in the 
cases described in section 1842(b)(6)(A) of the Act) or, in the case of 
a group practice under paragraph (e) of this section, to the group 
practice, from the Federal Supplementary Medical Insurance Trust Fund 
established under section 1841 of the Act an amount equal to the 
applicable electronic prescribing percent (as specified in paragraph 
(c)(1)(ii) of this section) of the eligible professional's (or, in the 
case of a group practice under paragraph (e) of this section, the group 
practice's) total estimated allowed charges for all covered 
professional services furnished by the eligible professional (or, in 
the case of a group practice under paragraph (e) of this section, by 
the group practice) during the applicable reporting period.
    (i) For purposes of paragraph (c)(1) of this section,
    (A) The eligible professional's (or, in the case of a group 
practice under paragraph (e) of this section, the group practice's) 
total estimated allowed charges for covered professional services 
furnished during a reporting period are determined based on claims 
processed in the National Claims History (NCH) no later than 2 months 
after the end of the applicable reporting period;
    (B) In the case of an eligible professional who furnishes covered 
professional services in more than one practice, incentive payments are 
separately determined for each practice based on claims submitted for 
the eligible professional for each practice;
    (C) Incentive payments earned by an eligible professional (or in 
the case of a group practice under paragraph (e) of this section, by a 
group practice) for a particular program year will be paid as a single 
consolidated payment to the TIN holder of record.
    (ii) Applicable electronic prescribing percent. The applicable 
electronic prescribing percent is as follows:
    (A) For the 2011 and 2012 program years, 1.0 percent.
    (B) For the 2013 program year, 0.5 percent.
    (iii) Limitation with respect to electronic health record (EHR) 
incentive payments. The provisions of this paragraph do not apply to an 
eligible professional (or, in the case of a group practice under 
paragraph (e) of this section, a group practice) if, for the electronic 
health record reporting period the eligible professional (or group 
practice) receives an incentive payment under section 1848(o)(1)(A) of 
the Act with respect to a certified electronic health record technology 
(as defined in section 1848(o)(4) of the Act) that has the capability 
of electronic prescribing.
    (2) Incentive payment adjustment. Subject to paragraphs (c)(1)(ii) 
and (c)(3) of this section, with respect to covered professional 
services furnished by an eligible professional during 2012, 2013, or 
2014, if the eligible professional (or in the case of a group practice 
under paragraph (e) of this section, the group practice) is not a 
successful electronic prescriber (as specified by CMS for purposes of 
the payment adjustment) for an applicable reporting period (as 
specified by CMS) the fee schedule amount for such services furnished 
by such professional (or group practice) during the program year 
(including the fee schedule amount for purposes of determining a 
payment based on such amount) is equal to the applicable percent (as 
specified in paragraph (c)(2)(i) of this section) of the fee schedule 
amount that would otherwise apply to such services under section 1848 
of the Act.
    (i) Applicable percent. The applicable percent is as follows:
    (A) For 2012, 99 percent;
    (B) For 2013, 98.5 percent; and
    (C) For 2014, 98 percent.
    (ii) Significant hardship exception. CMS may, on a case-by-case 
basis, exempt an eligible professional (or in the case of a group 
practice under paragraph (e) of this section, a group practice) from 
the application of the payment adjustment under paragraph (c)(2) of 
this section if, CMS determines, subject to annual renewal, that 
compliance with the requirement for being a successful electronic 
prescriber would result in a significant hardship.
    (3) Limitation with respect to electronic prescribing quality 
measures. The provisions of paragraphs (c)(1) and (c)(2) of this 
section do not apply to an eligible professional (or, in the case of a 
group practice under paragraph (e) of this section, a group practice) 
if for the reporting period the allowed charges under section 1848 of 
the Act for all covered professional services furnished by the eligible 
professional (or group, as applicable) for the codes to which the 
electronic prescribing measure applies are less than 10 percent of the 
total of the allowed charges under section 1848 of the Act for all such 
covered professional services furnished by the eligible professional 
(or the group practice, as applicable).
    (d) Requirements for individual eligible professionals to qualify 
to receive an incentive payment. In order to be considered a successful 
electronic prescriber and qualify to earn an electronic prescribing 
incentive payment (subject to paragraph (c)(3) of this section), an 
individual eligible professional, as identified by a unique TIN/NPI 
combination, must meet the criteria for successful electronic 
prescriber under section 1848(m)(3)(B) of the Act and as specified by 
CMS during the reporting period specified in paragraph (d)(1) of this 
section and using one of the reporting mechanisms specified in 
paragraph (d)(2) of this section. Although an eligible professional may 
attempt to qualify for the electronic prescribing incentive payment 
using more than one reporting mechanism (as specified in paragraph 
(d)(2) of this section), the eligible professional will receive only 
one electronic prescribing incentive payment per TIN/NPI combination 
for a program year.
    (1) Reporting period. For purposes of this paragraph in 2011, the 
reporting period with respect to a program year is the entire calendar 
year.
    (2) Reporting mechanisms. For program year 2011, an eligible 
professional who wishes to participate in the Electronic Prescribing 
Incentive Program must report information on the electronic prescribing 
measure identified by CMS to--

[[Page 73622]]

    (i) CMS, by no later than 2 months after the end of the applicable 
reporting period, on the eligible professional's Medicare Part B claims 
for covered professional services furnished by the eligible 
professional during the reporting period specified in paragraph (d)(1) 
of this section;
    (ii) A qualified registry (as defined in paragraph (b) of this 
section) in the form and manner and by the deadline specified by the 
qualified registry selected by the eligible professional. The selected 
qualified registry will submit information, as required by CMS, for 
covered professional services furnished by the eligible professional 
during the reporting period specified in paragraph (d)(1) of this 
section to CMS on the eligible professional's behalf; or
    (iii) CMS by extracting clinical data using a secure data 
submission method, as required by CMS, from a qualified electronic 
health record product (as defined in paragraph (b) of this section) by 
the deadline specified by CMS for covered professional services 
furnished by the eligible professional during the reporting period 
specified in paragraph (d)(1) of this section. Prior to actual data 
submission for a given program year and by a date specified by CMS, the 
eligible professional must submit a test file containing real or dummy 
clinical quality data extracted from the qualified electronic health 
record product selected by the eligible professional using a secure 
data submission method, as required by CMS.
    (e) Requirements for group practices to qualify to receive an 
incentive payment. (1) A group practice (as defined in paragraph (b) of 
this section) will be treated as a successful electronic prescriber for 
covered professional services for a reporting period if the group 
practice meets the criteria for successful electronic prescriber 
specified by CMS in the form and manner and at the time specified by 
CMS.
    (2) No double payments. Payments to a group practice under this 
paragraph must be in lieu of the payments that would otherwise be made 
under the Electronic Prescribing Incentive Program to eligible 
professionals in the group practice for being a successful electronic 
prescriber.
    (i) If an eligible professional, as identified by an individual 
NPI, has reassigned his or her Medicare billing rights to a TIN 
selected to participate in the electronic prescribing group practice 
reporting option for a program year, then for that program year the 
eligible professional must participate in the Electronic Prescribing 
Incentive Program via the group practice reporting option. For any 
program year in which the TIN is selected to participate in the 
Electronic Prescribing Incentive Program group practice reporting 
option, the eligible professional cannot individually qualify for an 
electronic prescribing incentive payment by meeting the requirements 
specified in paragraph (d) of this section.
    (ii) If, for the program year, the eligible professional 
participates in the Electronic Prescribing Incentive Program under 
another TIN that is not selected to participate in the Electronic 
Prescribing Incentive Program group practice reporting option for that 
program year, then the eligible professional may individually qualify 
for an electronic prescribing incentive by meeting the requirements 
specified in paragraph (d) of this section under that TIN.
    (f) Public reporting of an eligible professional's or group 
practice's Electronic Prescribing Incentive Program data. For each 
program year, CMS will post on a public Web site, in an easily 
understandable format, a list of the names of eligible professionals 
(or in the case of reporting under paragraph (e) of this section, group 
practices) who are successful electronic prescribers.

Subpart D--Payment for Durable Medical Equipment and Prosthetic and 
Orthotic Devices

0
31. Section 414.202 is amended by adding the definition of ``Complex 
rehabilitative power-driven wheelchair.


Sec.  414.202  Definitions.

* * * * *
    Complex rehabilitative power-driven wheelchair means a power-driven 
wheelchair that is classified as--
    (1) Group 2 power wheelchair with power options that can 
accommodate rehabilitative features (for example, tilt in space); or
    (2) Group 3 power wheelchair.
* * * * *

0
32. Section 414.229 is amended by--
0
A. Revising paragraphs (a)(3), (d)(1), and (h).
0
B. Adding paragraphs (a)(4), (a)(5), and (b)(3).
    The revisions and additions read as follows:


Sec.  414.229  Other durable medical equipment-capped rental items.

    (a) * * *
    (3) For power-driven wheelchairs furnished on or after January 1, 
2006 through December 31, 2010, payment is made in accordance with the 
rules set forth in paragraphs (f) or (h) of this section.
    (4) For power-driven wheelchairs that are not classified as complex 
rehabilitative power-driven wheelchairs, furnished on or after January 
1, 2011, payment is made in accordance with the rules set forth in 
paragraph (f) of this section.
    (5) For power-driven wheelchairs classified as complex 
rehabilitative power-driven wheelchairs, furnished on or after January 
1, 2011, payment is made in accordance with the rules set forth in 
paragraphs (f) or (h) of this section.
    (b) * * *
    (3) For power-driven wheelchairs furnished on or after January 1, 
2011, the monthly fee schedule amount for rental equipment equals 15 
percent of the purchase price recognized as determined under paragraph 
(c) of this section for each of the first 3 months and 6 percent of the 
purchase price for each of the remaining months.
* * * * *
    (d) * * *
    (1) Suppliers must offer beneficiaries the option of purchasing 
power-driven wheelchairs at the time the supplier first furnishes the 
item. On or after January 1, 2011, this option is available only for 
complex rehabilitative power-driven wheelchairs. Payment must be on a 
lump-sum fee schedule purchase basis if the beneficiary chooses the 
purchase option. The purchase fee is the amount established in 
paragraph (c) of this section.
* * * * *
    (h) Purchase of power-driven wheelchairs furnished on or after 
January 1, 2006. (1) Suppliers must offer beneficiaries the option to 
purchase power-driven wheelchairs at the time the equipment is 
initially furnished.
    (2) Payment is made on a lump-sum purchase basis if the beneficiary 
chooses this option.
    (3) On or after January 1, 2011, this option is available only for 
complex rehabilitative power-driven wheelchairs.

Subpart F--Competitive Bidding for Certain Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)

0
33. Section 414.402 is amended by adding the definitions of ``Affected 
party,'' ``Breach of contract,'' ``Corrective action plan (CAP),'' 
``Hearing officer,'' ``Mail order item,'' ``National mail order DMEPOS 
competitive bidding program,'' ``Non-mail order item'' and ``Parties to 
the hearing'' in alphabetical order to read as follows:

[[Page 73623]]

Sec.  414.402  Definitions.

    Affected party means a contract supplier that has been notified 
that their DMEPOS CBP contract will be terminated for a breach of 
contract.
* * * * *
    Breach of contract means any deviation from contract requirements, 
including a failure to comply with a governmental agency or licensing 
organization requirements, constitutes a breach of contract.
* * * * *
    Corrective action plan (CAP) means a contract supplier's written 
document with supporting information that describes the actions the 
contract supplier will take within a specified timeframe to remedy a 
breach of contract.
* * * * *
    Hearing officer (HO) means an individual, who was not involved with 
the CBIC recommendation to terminate a DMEPOS Competitive Bidding 
Program contract, who is designated by CMS to review and make an 
unbiased and independent recommendation when there is an appeal of 
CMS's initial determination to terminate a DMEPOS Competitive Bidding 
Program contract.
* * * * *
    Mail order item means any item (for example, diabetic testing 
supplies) shipped or delivered to the beneficiary's home, regardless of 
the method of delivery.
* * * * *
    National mail order DMEPOS competitive bidding program means a 
program whereby contracts are awarded to suppliers for the furnishing 
of mail order items across the nation.
* * * * *
    Non-mail order item means any item (for example, diabetic testing 
supplies) that a beneficiary or caregiver picks up in person at a local 
pharmacy or supplier storefront.
    Parties to the hearing means the DMEPOS contract supplier and CMS.
* * * * *

0
34. Section 414.404 is amended by revising paragraph (b)(1)(i) to read 
as follows:


Sec.  414.404  Scope and applicability.

* * * * *
    (b) * * *
    (1) * * *
    (i) The items furnished are limited to crutches, canes, walkers, 
folding manual wheelchairs, blood glucose monitors, and infusion pumps 
that are DME, and off-the-shelf (OTS) orthotics.
* * * * *

0
35. Section 414.408 is amended by--
0
A. Revising paragraph (f)(1).
0
B. Redesignating paragraph (h)(2) through (h)(7) as paragraphs (h)(3) 
through (h)(8), respectively.
0
C. Adding new paragraph (h)(2).
0
D. In newly designated paragraphs (h)(3)(i) and (ii), remove the phrase 
``(h)(2)'' and insert in its place the phrase ``(h)(3).''
    The revision and addition reads as follows:


Sec.  414.408  Payment rules.

* * * * *
    (f) * * *
    (1) The single payment amounts for new purchased durable medical 
equipment, including power wheelchairs that are purchased when the 
equipment is initially furnished and enteral nutrition equipment are 
calculated based on the bids submitted and accepted for these items. 
For contracts entered into beginning on or after January 1, 2011, 
payment on a lump sum purchase basis is only available for power 
wheelchairs classified as complex rehabilitative power wheelchairs.
* * * * *
    (h) * * *
    (2) For contracts entered into beginning on or after January 1, 
2011, the monthly fee schedule amount for rental of power wheelchairs 
equals 15 percent of the single payment amounts calculated for new 
durable medical equipment under paragraph (f)(1) of this section for 
each of the first 3 months, and 6 percent of the single payment amounts 
calculated for these items for each of the remaining months 4 through 
13.
* * * * *

0
36. Section 414.410 is amended as follows:
0
A. Revising paragraphs (a)(2) and (a)(3).
0
B. Adding a new paragraph (a)(4).
    The revisions and addition read as follows:


Sec.  414.410  Phase-in implementation of competitive bidding programs.

    (a) * * *
    (2) In CY 2011, in an additional 91 MSAs (the additional 70 MSAs 
selected by CMS as of June 1, 2008, and the next 21 largest MSAs by 
total population based on 2009 population estimates, and not already 
phased in as of June 1, 2008). CMS may subdivide any of the 91 MSAs 
with a population of greater than 8,000,000 into separate CBAs, thereby 
resulting in more than 91 CBAs.
    (3) After CY 2011, additional CBAs (or, in the case of national 
mail order for items and services, after CY 2010).
    (4) For competitions (other than for national mail order items and 
services) after CY 2011 and prior to CY 2015, the following areas are 
excluded:
    (i) Rural areas.
    (ii) MSAs not selected under paragraphs (a)(1) or (a)(2) of this 
section with a population of less than 250,000.
    (iii) An area with low population density within an MSA not 
selected under paragraphs (a)(1) or (a)(2) of this section.
* * * * *

0
37. Section 414.411 is added to read as follows:


Sec.  414.411  Special rule in case of competitions for diabetic 
testing strips conducted on or after January 1, 2011.

    (a) National mail order competitions. A supplier must demonstrate 
that their bid submitted as part of a national mail order competition 
for diabetic testing strips covers the furnishing of a sufficient 
number of different types of diabetic testing strip products that, in 
the aggregate, and taking into account volume for the different 
products, includes at least 50 percent of all the different types of 
products on the market. A type of diabetic testing strip means a 
specific brand and model of testing strips.
    (b) Other competitions. CMS may apply this special rule to non-mail 
order or local competitions for diabetic testing strips.

0
38. Section 414.422 is amended by adding paragraph (e)(3) to read as 
follows:


Sec.  414.422  Term of contracts.

* * * * *
    (e) * * *
    (3) Contract suppliers for diabetic testing supplies must furnish 
the brand of diabetic testing supplies that work with the home blood 
glucose monitor selected by the beneficiary. The contract supplier is 
prohibited from influencing or incentivizing the beneficiary by 
persuading, pressuring, or advising them to switch from their current 
brand or for new beneficiaries from their preferred brand of glucose 
monitor and testing supplies. The contract supplier may not furnish 
information about alternative brands to the beneficiary unless the 
beneficiary requests such information.
* * * * *

0
39. Section 414.423 is added to read as follows:


Sec.  414.423  Appeals Process for Termination of Competitive Bidding 
Contract.

    This section implements an appeals process for suppliers that CMS 
has determined are in breach of their

[[Page 73624]]

Medicare DMEPOS Competitive Bidding Program contracts and where CMS has 
taken action to terminate the supplier's contract. Except as specified 
in this regulation termination decisions made under this section are 
final and binding.
    (a) Terminations for breach of contract. CMS may terminate a 
supplier's DMEPOS Competitive Bidding Program contract when it 
determines that the supplier has violated any of the terms of its 
contract.
    (b) Notice of termination.
    (1) CMS notification. If CMS determines a supplier to be in breach 
of its contract either in part or in whole, it will notify the Medicare 
DMEPOS supplier of the termination by certified mail.
    (2) Content of the notice. The CMS notice will include the 
following:
    (i) The reasons for the termination.
    (ii) The right to request a hearing by a CBIC Hearing Officer, and 
depending on the nature of the breach, the supplier may also be allowed 
to submit a CAP in lieu of requesting a hearing by a CBIC Hearing 
Officer, as specified in paragraph (c)(1)(i) of this section.
    (iii) The address to which the written request for a hearing must 
be mailed.
    (iv) The address to which the CAP must be mailed, if applicable.
    (v) Penalties that will accompany the termination, such as not 
being eligible to bid in future rounds of competitive bidding.
    (vi) The effective date of termination is 45 days from the date of 
the notification letter unless a timely hearing request has been filed 
or a corrective action plan (CAP) has been submitted within 30 days of 
the date on the notification letter.
    (c) Corrective action plan (CAP). (1) Option for corrective action 
plan (CAP).
    (i) CMS has the option to allow a DMEPOS supplier to provide a 
written corrective action plan (CAP) to remedy the deficiencies 
identified in the notice, when CMS determines that the delay in the 
termination date caused by allowing a CAP will not cause harm to 
beneficiaries, for example, we would not allow a CAP if the supplier 
has been excluded from any Federal program, debarred by a Federal 
agency, or convicted of a healthcare-related crime.
    (ii) If a supplier chooses not to submit a CAP or if CMS determines 
that a supplier's CAP is insufficient, the supplier may request a 
hearing on the termination.
    (2) Submission of a CAP. (i) A corrective action plan must be 
submitted within 30 days from the date on the notification letter. If 
the supplier decides not to submit a corrective action plan the 
supplier may within 30 days of the date on the termination letter 
request a hearing by a CBIC hearing officer.
    (ii) Suppliers will only have the opportunity to submit a CAP when 
they are first notified that they have been determined to be in breach 
of contract. If the CAP is not acceptable or properly implemented, 
suppliers will receive a subsequent termination notice.
    (d) The purpose of the corrective action plan. (1) For the supplier 
to eliminate all of the deficiencies that were identified in the notice 
to terminate its contract to avoid contract termination.
    (2) To identify the timeframes by which the supplier will implement 
each of the components of the CAP.
    (e) Review of the CAP. (1) The CBIC will review the CAP. Suppliers 
may only revise their CAP one-time during the review process based on 
the deficiencies identified by the CBIC. The CBIC will submit a 
recommendation to CMS concerning whether the CAP includes the steps 
necessary to remedy the contract deficiencies as identified in the 
notice of termination.
    (2) If CMS accepts the CAP, including supplier's designated 
timeframe for its completion; the supplier must provide a follow-up 
report within 5 days after the supplier has fully implemented the CAP 
that verifies that all of the deficiencies identified in the CAP have 
been corrected in accordance with the timeframes accepted by CMS.
    (3) If the supplier does not implement an acceptable CAP the 
supplier will receive a subsequent notice that their contract will be 
terminated within 45 days of the date on that notice.
    (f) Right to request a hearing by the CBIC hearing officer (HO). 
(1) A supplier who has received a notice that CMS considers the 
supplier in breach of contract or that the supplier's CAP is not 
acceptable has the right to request a hearing before an HO who was not 
involved with the original determination.
    (2) A supplier who wishes to appeal the termination notice must 
submit a written request to the CBIC. The request for a hearing must be 
received by the CBIC within 30 days from the date of the notice to 
terminate.
    (3) A request for hearing must be in writing and submitted by an 
authorized official of the supplier.
    (4) The appeals process for the Medicare DMEPOS Competitive Bidding 
Program is not to be used in place of other existing appeals processes 
that apply to other parts of the Medicare.
    (5) If the supplier is given the opportunity to submit a CAP and a 
CAP is not submitted and the supplier fails to timely request a 
hearing, this will result in the termination of the supplier's DMEPOS 
Competitive Bidding Program contract effective 45 days from the date on 
the notice to terminate received by the supplier.
    (g) The CBIC Hearing Officer schedules and conducts the hearing. 
(1) Within 30 days from the receipt of the supplier's timely request 
for a hearing the hearing officer will contact the parties to schedule 
the hearing.
    (2) The hearing may be held in person or by telephone at the 
supplier's request.
    (3) The scheduling notice to the parties must indicate the time and 
place for the hearing and must be sent to the supplier 30 days before 
the date of the hearing.
    (4) The HO may, on his or her own motion, or at the request of a 
party, change the time and place for the hearing, but must give the 
parties to the hearing 30 days notice of the change.
    (5) The HO's scheduling notice must provide the parties to the 
hearing and the CBIC the following information:
    (i) Description of the hearing procedure.
    (ii) The general and specific issues to be resolved.
    (iii) The supplier has the burden to prove it is not in violation 
of the contract.
    (iv) The opportunity for parties to the hearing to submit 
additional evidence to support their positions, if requested by the HO.
    (v) All evidence submitted, both from the supplier and CMS, in 
preparation for the hearing with all affected parties within 15 days 
prior to the scheduled date of the hearing.
    (h) Burden of proof. (1) The burden of proof is on the Competitive 
Bidding Program contract supplier to demonstrate to the HO with 
convincing evidence that it has not breached its contract or that 
termination is not appropriate.
    (2) The supplier's supporting evidence must be submitted with its 
request for a hearing.
    (3) If the Medicare DMEPOS supplier fails to submit this evidence 
at the time of its submission, the Medicare DMEPOS supplier is 
precluded from introducing new evidence later during the hearing 
process, unless permitted by the hearing officer.
    (4) CMS also has the opportunity to submit evidence to the HO 
within 10 days of receiving a notice announcing the hearing.
    (5) The HO will share all evidence submitted by the supplier and/or 
CMS, with all parties to the hearing and the

[[Page 73625]]

CBIC within 15 days prior to the scheduled date of the hearing.
    (i) Role of the Hearing Officer. The HO will conduct a thorough and 
independent review of the evidence including the information and 
documentation submitted for the hearing and other information that the 
HO considers pertinent for the hearing. The role of the HO includes, at 
a minimum, the following:
    (1) Conducts the hearing and decides the order in which the 
evidence and the arguments of the parties are presented;
    (2) Determines the rules on admissibility of the evidence;
    (3) Examines the witnesses, in addition to the examinations 
conducted by CMS and the contract supplier;
    (4) The CBIC may assist CMS in the appeals process including being 
present at the hearing, testifying as a witness, or performing other, 
related ministerial duties.
    (5) Determines the rules for requesting documents and other 
evidence from other parties;
    (6) Ensures a complete record of the hearing is made available to 
all parties to the hearing;
    (7) Prepares a file of the record of the hearing which includes all 
evidence submitted as well as any relevant documents identified by the 
HO and considered as part of the hearing; and
    (8) Complies with all applicable provisions of 42 USC Title 18 and 
related provisions of the Act, the applicable regulations issued by the 
Secretary, and manual instructions issued by CMS.
    (j) Hearing Officer recommendation. (1) The HO will issue a written 
recommendation to CMS within 30 days of the close of the hearing unless 
an extension has been granted by CMS because the HO has demonstrated 
that an extension is needed due to the complexity of the matter or 
heavy workload.
    (2) The recommendation will explain the basis and the rationale for 
the HO's recommendation.
    (3) The hearing officer must include the record of the hearing, 
along with all evidence and documents produced during the hearing along 
with its recommendation.
    (k) CMS' final determination. (1) CMS' review of the HO 
recommendation will not allow the supplier to submit new information.
    (2) After reviewing the HO recommendation, CMS' decision will be 
made within 30 days from the date of receipt of the HO's 
recommendation.
    (3) A CMS decision to terminate will indicate the effective date of 
the termination.
    (4) This decision is final and binding.
    (l) Effect of contract termination. A contract supplier whose 
contract has been terminated--
    (1) All locations included in the contract can no longer furnish 
competitive bid items to beneficiaries within a CBA and the supplier 
cannot be reimbursed by Medicare for these items after the effective 
date of the termination.
    (2) Must notify all beneficiaries who are receiving rented 
competitive bid items or competitive bid items received on a recurring 
basis, of the termination of their contract.
    (i) The notice to the beneficiary from the supplier whose contract 
was terminated must be provided within 15 days of receipt of the final 
notice of termination.
    (ii) The notification to the beneficiaries must inform the 
beneficiaries that they are going to have to select a new contract 
supplier to furnish these items in order for Medicare to pay these 
items.
    (m) Effective date of the contract termination. (1) A supplier's 
DMEPOS CBP contract is terminated effective on the termination date 
specified in the notice to the supplier, unless the supplier timely 
requests a hearing with the HO or the supplier has submitted a CAP 
under paragraph (c) of this section.
    (2) If a supplier requests an HO review of the CMS decision to 
terminate its contract, and CMS based upon the HO's recommendation 
terminates the supplier's contract, the effective date of the 
termination will be the date specified in the post-hearing notice to 
the supplier indicating CMS's final determination to terminate the 
contract.
    (3) For violations of the terms of the supplier's DMEPOS CBP 
contract that may harm beneficiaries, such as a supplier providing an 
inferior product that causes harm to the beneficiary, no delays of the 
effective date of the termination will be allowed.

Subpart H --Fee Schedule for Ambulance Services

0
39. Section 414.610 is amended as follows:
0
A. Revising paragraph (c)(1)(i).
0
B. Redesignating (c)(1)(ii) as (c)(1)(iii).
0
C. Adding a new paragraph (c)(1)(ii).
0
D. Revising paragraphs (c)(5)(ii), (f), and (h).
    The revisions and addition read as follows:


Sec.  414.610  Basis of payments.

* * * * *
    (c) * * *
    (1) * * *
    (i) For services furnished during the period July 1, 2004 through 
December 31, 2006, ambulance services originating in--
    (A) Urban areas (both base rate and mileage) are paid based on a 
rate that is 1 percent higher than otherwise is applicable under this 
section; and
    (B) Rural areas (both base rate and mileage) are paid based on a 
rate that is 2 percent higher than otherwise is applicable under this 
section.
    (ii) For services furnished during the period July 1, 2008 through 
December 31, 2010, ambulance services originating in--
    (A) Urban areas (both base rate and mileage) are paid based on a 
rate that is 2 percent higher than otherwise is applicable under this 
section;
    (B) Rural areas (both base rate and mileage) are paid based on a 
rate that is 3 percent higher than otherwise is applicable under this 
section.
* * * * *
    (5) * * *
    (ii) For services furnished during the period July 1, 2004 through 
December 31, 2010, the payment amount for the ground ambulance base 
rate is increased by 22.6 percent where the point of pickup is in a 
rural area determined to be in the lowest 25 percent of rural 
population arrayed by population density. The amount of this increase 
is based on CMS's estimate of the ratio of the average cost per trip 
for the rural areas in the lowest quartile of population compared to 
the average cost per trip for the rural areas in the highest quartile 
of population. In making this estimate, CMS may use data provided by 
the GAO.
* * * * *
    (f) Updates. The CF, the air ambulance base rates, and the mileage 
rates are updated annually by an inflation factor established by law. 
The inflation factor is based on the consumer price index for all urban 
consumers (CPI-U) (U.S. city average) for the 12-month period ending 
with June of the previous year and, for 2011 and each subsequent year, 
is reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act.
* * * * *
    (h) Treatment of certain areas for payment for air ambulance 
services. Any area that was designated as a rural area for purposes of 
making payments under the ambulance fee schedule for air ambulance 
services furnished on December 31, 2006, must be treated as a rural 
area for purposes of making payments under the ambulance fee schedule 
for air ambulance services

[[Page 73626]]

furnished during the period July 1, 2008 through December 31, 2010.

0
40. Section 414.620 is revised to read as follows:


Sec.  414.620  Publication of the ambulance fee schedule.

    (a) Changes in payment rates resulting from incorporation of the 
annual inflation factor and the productivity adjustment as described in 
Sec.  414.610(f) will be announced by CMS by instruction and on the CMS 
Web site.
    (b) CMS will follow applicable rulemaking procedures in publishing 
revisions to the fee schedule for ambulance services that result from 
any factors other than those described in Sec.  414.610(f).

Subpart J--Submission of Manufacturer's Average Sales Price Data

0
41. Section 414.804 is amended by--
0
A. Redesignating paragraph (a)(6) as (a)(7).
0
B. Adding new paragraph (a)(6).
0
C. Reserving paragraph (b).
0
The addition reads as follows:


Sec.  414.804  Basis of payment.

    (a) * * *
    (6) The manufacturer's average sales price must be calculated based 
on the amount of product in a vial or other container as conspicuously 
reflected on the FDA approved label as defined by section 201(k) of the 
Food, Drug, and Cosmetic Act.
    (b) [Reserved]

Subpart K--Payment for Drugs and Biologicals Under Part B

0
42. Section 414.902 is amended by adding the definitions of 
``Biosimilar biological product'' and ``Reference biological product'' 
in alphabetical order to read as follows:


Sec.  414.902  Definitions.

* * * * *
    Biosimilar biological product means a biological product approved 
under an abbreviated application for a license of a biological product 
that relies in part on data or information in an application for 
another biological product licensed under section 351 of the Public 
Health Service Act (PHSA) as defined at section 1847A(c)(6)(H) of the 
Act.
* * * * *
    Reference biological product means the biological product licensed 
under such section 351 of the PHSA that is referred to in the 
application of the biosimilar biological product as defined at section 
1847A(c)(6)(I) of the Act.
* * * * *

0
43. Section 414.904 is amended by--
0
A. Adding paragraphs (a)(3), (i), and (j).
0
B. Revising paragraph (d)(3).
    The revisions and additions read as follows:


Sec.  414.904  Average sales price as the basis for payment.

    (a) * * *
    (3) For purposes of this paragraph--
    (i) CMS calculates an average sales price payment limit based on 
the amount of product included in a vial or other container as 
reflected on the FDA-approved label.
    (ii) Additional product contained in the vial or other container 
does not represent a cost to providers and is not incorporated into the 
ASP payment limit.
    (iii) No payment is made for amounts of product in excess of that 
reflected on the FDA-approved label.
* * * * *
    (d) * * *
    (3) Widely available market price and average manufacturer price. 
If the Inspector General finds that the average sales price exceeds the 
widely available market price or the average manufacturer price by 5 
percent or more in CYs 2005 through 2011 the payment limit in the 
quarter following the transmittal of this information to the Secretary 
is the lesser of the widely available market price or 103 percent of 
the average manufacturer price.
* * * * *
    (i) If manufacturer ASP data is not available prior to the 
publication deadline for quarterly payment limits and the 
unavailability of manufacturer ASP data significantly changes the 
quarterly payment limit for the billing code when compared to the prior 
quarter's billing code payment limit, the payment limit is calculated 
by carrying over the most recent available manufacturer ASP price from 
a previous quarter for an NDC in the billing code, adjusted by the 
weighted average of the change in the manufacturer ASPs for the NDCs 
that were reported for both the most recently available previous 
quarter and the current quarter.
    (j) Biosimilar biological products. Effective July 1, 2010, the 
payment amount for a biosimilar biological drug product (as defined in 
Sec.  414.902 of this subpart) is the sum of the average sales price of 
all NDCs assigned to the biosimilar biological product as determined 
under section 1847A(b)(6) of the Act and 6 percent of the amount 
determined under section 1847A(b)(4) of the Act for the reference drug 
product (as defined in Sec.  414.902 of this subpart).

PART 415--SERVICES FURNISHED BY PHYSICIANS IN PROVIDERS, 
SUPERVISING PHYSICIANS IN TEACHING SETTINGS, AND RESIDENTS IN 
CERTAIN SETTINGS

0
44. 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).

Subpart C--Part B Carrier Payments for Physician Services to 
Beneficiaries in Providers

0
45. Section 415.130 is amended by revising paragraph (d) to read as 
follows:


Sec.  415.130  Conditions for payment: Physician pathology services.

* * * * *
    (d) Physician pathology services furnished by an independent 
laboratory.
    (1) The technical component of physician pathology services 
furnished by an independent laboratory to a hospital inpatient or 
outpatient on or before December 31, 2010, may be paid to the 
laboratory by the contractor under the physician fee schedule if the 
Medicare beneficiary is a patient of a covered hospital as defined in 
paragraph (a)(1) of this section.
    (2) For services furnished after December 31, 2010, an independent 
laboratory may not bill the Medicare contractor for the technical 
component of physician pathology services furnished to a hospital 
inpatient or outpatient.
    (3) For services furnished on or after January 1, 2008, the date of 
service policy in Sec.  414.510 of this chapter applies to the TC of 
specimens for physician pathology services.

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
46. The authority citation for part 424 continues to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart B--Certification and Plan of Treatment Requirements

0
47. Section 424.20 is amended by revising paragraph (e)(2) to read as 
follows:


Sec.  424.20  Requirements for posthospital SNF care.

* * * * *
    (e) * * *
    (2) A physician extender (that is, a nurse practitioner, a clinical 
nurse

[[Page 73627]]

specialist, or a physician assistant as those terms are defined in 
section 1861(aa)(5) of the Act) who does not have a direct or indirect 
employment relationship with the facility but who is working in 
collaboration with a physician. For purposes of this section--
    (i) Collaboration. (A) Collaboration means a process whereby a 
physician extender works with a doctor of medicine or osteopathy to 
deliver health care services.
    (B) The services are delivered within the scope of the physician 
extender's professional expertise, with medical direction and 
appropriate supervision as provided for in guidelines jointly developed 
by the physician extender and the physician or other mechanisms defined 
by Federal regulations and the law of the State in which the services 
are performed.
    (ii) Types of employment relationships. (A) Direct employment 
relationship. A direct employment relationship with the facility is one 
in which the physician extender meets the common law definition of the 
facility's ``employee,'' as specified in Sec.  404.1005, Sec.  
404.1007, and Sec.  404.1009 of title 20 of the regulations. When a 
physician extender meets this definition with respect to an entity 
other than the facility itself, and that entity has an agreement with 
the facility for the provision of nursing services under Sec.  409.21 
of this subchapter, the facility is considered to have an indirect 
employment relationship with the physician extender.
    (B) Indirect employment relationship. (1) When a physician extender 
meets the definition of a direct employment relationship in paragraph 
(e)(2)(ii)(A) of this section with respect to an entity other than the 
facility itself, and that entity has an agreement with the facility for 
the provision of nursing services under Sec.  409.21 of this 
subchapter, the facility is considered to have an indirect employment 
relationship with the physician extender.
    (2) An indirect employment relationship does not exist if the 
agreement between the entity and the facility involves only the 
performance of delegated physician tasks under Sec.  483.40(e) of this 
chapter.
* * * * *

Subpart C--Claims for Payment

0
48. Section 424.44 is amended by revising paragraphs (a), (b), and (e) 
to read as follows:


Sec.  424.44  Time limits for filing claims.

    (a) Time limits. (1) Except as provided in paragraphs (b) and (e) 
of this section, for services furnished on or after January 1, 2010, 
the claim must be filed no later than the close of the period ending 1 
calendar year after the date of service.
    (2) Except as provided in paragraphs (b) and (e) of this section 
and except for services furnished during the last 3 months of 2009, for 
services furnished before January 1, 2010, the claim must be filed--
    (i) On or before December 31 of the following year for services 
that were furnished during the first 9 months of a calendar year; and
    (ii) On or before December 31st of the second following year for 
services that were furnished during the last 3 months of the calendar 
year.
    (3) For services furnished during the last 3 months of CY 2009 all 
claims must be filed no later than December 31, 2010.
    (b) Exceptions to time limits. Exceptions to the time limits for 
filing claims include the following:
    (1) The time for filing a claim will be extended if CMS or one of 
its contractors determines that a failure to meet the deadline in 
paragraph (a) of this section was caused by error or misrepresentation 
of an employee, Medicare contractor (including Medicare Administrative 
Contractor, intermediary, or carrier), or agent of HHS that was 
performing Medicare functions and acting within the scope of its 
authority.
    (2) The time for filing a claim will be extended if CMS or one of 
its contractors determines that a failure to meet the deadline in 
paragraph (a) of this section is caused by all of the following 
conditions:
    (i) At the time the service was furnished the beneficiary was not 
entitled to Medicare.
    (ii) The beneficiary subsequently received notification of Medicare 
entitlement effective retroactively to or before the date of the 
furnished service.
    (3) The time for filing a claim will be extended if CMS or one of 
its contractors determines that a failure to meet the deadline in 
paragraph (a) of this section is caused by all of the following 
conditions:
    (i) At the time the service was furnished the beneficiary was not 
entitled to Medicare.
    (ii) The beneficiary subsequently received notification of Medicare 
entitlement effective retroactively to or before the date of the 
furnished service.
    (iii) A State Medicaid agency recovered the Medicaid payment for 
the furnished service from a provider or supplier 6 months or more 
after the service was furnished.
    (4) The time for filing a claim will be extended if CMS or one of 
its contractors determines that a failure to meet the deadline in 
paragraph (a) of this section is caused by all of the following 
conditions:
    (i) At the time the service was furnished the beneficiary was 
enrolled in a Medicare Advantage plan or Program of All-inclusive Care 
for the Elderly (PACE) provider organization.
    (ii) The beneficiary was subsequently disenrolled from the Medicare 
Advantage plan or Program of All-inclusive Care for the Elderly (PACE) 
provider organization effective retroactively to or before the date of 
the furnished service.
    (iii) The Medicare Advantage plan or Program of All-inclusive Care 
for the Elderly (PACE) provider organization recovered its payment for 
the furnished service from a provider or supplier 6 months or more 
after the service was furnished.
    (5) Extension of time. (i) If CMS or one of its contractors 
determines that a failure to meet the deadline specified in paragraph 
(a) of this section was caused by error or misrepresentation of an 
employee, Medicare contractor (including Medicare Administrative 
Contractor, intermediary, or carrier), or agent of HHS that was 
performing Medicare functions and acting within the scope of its 
authority, the time to file a claim will be extended through the last 
day of the sixth calendar month following the month in which either the 
beneficiary or the provider or supplier received notification that the 
error or misrepresentation referenced in paragraph (b)(1) of this 
section was corrected. No extension of time will be granted for 
paragraph (b)(1) when the request for that exception is made to CMS or 
one of its contractors more than 4 years after the date of service.
    (ii) If CMS or one of its contractors determines that both of the 
conditions are met in paragraph (b)(2) of this section but that all of 
the conditions in paragraph (b)(3) are not satisfied, the time to file 
a claim will be extended through the last day of the sixth calendar 
month following the month in which either the beneficiary or the 
provider or supplier received notification of Medicare entitlement 
effective retroactively to or before the date of the furnished service.
    (iii) If CMS or one of its contractors determines that all of the 
conditions are met in paragraph (b)(3) of this section, the time to 
file a claim will be extended through the last day of the sixth

[[Page 73628]]

calendar month following the month in which the State Medicaid agency 
recovered the Medicaid payment for the furnished service from the 
provider or supplier.
    (iv) If CMS or one of its contractors determines that all of the 
conditions are met in paragraph (b)(4) of this section, the time to 
file a claim will be extended through the last day of the sixth 
calendar month following the month in which the Medicare Advantage plan 
or Program of All-inclusive Care for the Elderly (PACE) provider 
organization recovered its payment for the furnished service from the 
provider or supplier.
* * * * *
    (e) As specified in Sec.  424.520 and Sec.  424.521 of this 
subpart, there are restrictions on the ability of the following newly-
enrolled suppliers to submit claims for items or services furnished 
prior to the effective date of their Medicare billing privileges:
    (1) Physician or nonphysician practitioner organizations.
    (2) Physicians.
    (3) Nonphysician practitioners.
    (4) Independent diagnostic testing facilities.
* * * * *

Subpart P--Requirements for Establishing and Maintaining Medicare 
Billing Privileges

0
49. Section 424.502 is amended by adding a definition of ``Voluntary 
termination'' to read as follows:


Sec.  424.502  Definitions.

* * * * *
    Voluntary termination means that a provider or supplier, including 
an individual physician or nonphysician practitioner, submits written 
confirmation to CMS of its decision to discontinue enrollment in the 
Medicare program.

0
50. Section 424.510 is amended by revising paragraph (d)(2)(iii) to 
read as follows:


Sec.  424.510  Requirements for enrolling in the Medicare program.

    (d) * * *
    (2) * * *
    (iii) Submission of all documentation, including--
    (A) All applicable Federal and State licenses, certifications 
including, but not limited to Federal Aviation Administration; and
    (B) Documentation associated with regulatory and statutory 
requirements necessary to establish a provider's or supplier's 
eligibility to furnish Medicare covered items or services to 
beneficiaries in the Medicare program.

0
51. Section 424.516 is amended by adding a new paragraph (e)(3) to read 
as follows:


Sec.  424.516  Additional provider and supplier requirements for 
enrolling and maintaining active enrollment status in the Medicare 
program.

    (e) * * *
    (3) Within 30 days of any revocation or suspension of a Federal or 
State license or certification including Federal Aviation 
Administration certifications, an air ambulance supplier must report a 
revocation or suspension of its license or certification to the 
applicable Medicare contractor. The following FAA certifications must 
be reported:
    (i) Specific pilot certifications including but not limited to 
instrument and medical certifications.
    (ii) Airworthiness certification.
* * * * *

    Authority:  Catalog of Federal Domestic Assistance Program No. 
93.773, Medicare--Hospital Insurance; and Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program.

    Dated: October 26, 2010.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: October 29, 2010.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.

Addendum A: Explanation and Use of Addenda B and C

    The Addenda on the following pages provide various data 
pertaining to the Medicare fee schedule for physicians' services 
furnished in CY 2011. Addendum B contains the RVUs for work, 
nonfacility PE, facility PE, and malpractice expense, and other 
information for all services included in the PFS. Addendum C 
contains the list of HCPCS codes that have interim work, PE, and/or 
malpractice expense RVUs for CY 2011 and are open for comment on 
this final rule with comment period.
    (1) Addendum B, CY 2011 Relative Value Units and Related 
Information Used in Determining Medicare Payments
    In previous years, we have listed many services in Addendum B 
that are not paid under the PFS. To avoid publishing as many pages 
of codes for these services, we are not including clinical 
laboratory codes or the alpha-numeric codes (Healthcare Common 
Procedure Coding System (HCPCS) codes not included in CPT) not paid 
under the PFS in Addendum B.
    Addendum B contains the following information for each CPT code 
and alpha-numeric HCPCS code, except for: alpha-numeric codes 
beginning with B (enteral and parenteral therapy); E (durable 
medical equipment); K (temporary codes for nonphysicians' services 
or items); or L (orthotics); and codes for anesthesiology. Please 
also note the following:
    <bullet> An ``NA'' in the ``Nonfacility PE RVUs'' column of 
Addendum B means that CMS has not developed a PE RVU in the 
nonfacility setting for the service because it is typically 
performed in the hospital (for example, an open heart surgery is 
generally performed in the hospital setting and not a physician's 
office). If there is an ``NA'' in the nonfacility PE RVU column, and 
the contractor determines that this service can be performed in the 
nonfacility setting, the service will be paid at the facility PE RVU 
rate.
    <bullet> Services that have an ``NA'' in the ``Facility PE 
RVUs'' column of Addendum B are typically not paid under the PFS 
when provided in a facility setting. These services (which include 
``incident to'' services and the technical portion of diagnostic 
tests) are generally paid under either the hospital outpatient 
prospective payment system or bundled into the hospital inpatient 
prospective payment system payment. In some cases, these services 
may be paid in a facility setting at the PFS rate (for example, 
therapy services), but there would be no payment made to the 
practitioner under the PFS in these situations.
    1. CPT/HCPCS code. This is the CPT or alpha-numeric HCPCS number 
for the service. Alpha-numeric HCPCS codes are included at the end 
of this Addendum.
    2. Modifier. A modifier is shown if there is a technical 
component (modifier TC) and a professional component (PC) (modifier-
26) for the service. If there is a PC and a TC for the service, 
Addendum B contains three entries for the code. A code for: the 
global values (both professional and technical); modifier-26 (PC); 
and modifier TC. The global service is not designated by a modifier, 
and physicians must bill using the code without a modifier if the 
physician furnishes both the PC and the TC of the service. Modifier-
53 is shown for a discontinued procedure, for example, a colonoscopy 
that is not completed. There will be RVUs for a code with this 
modifier.
    3. Status indicator. This indicator shows whether the CPT/HCPCS 
code is included in the PFS and whether it is separately payable if 
the service is covered. An explanation of types of status indicators 
follows:
    A = Active code. These codes are separately payable under the 
PFS if covered. There will be RVUs for codes with this status. The 
presence of an ``A'' indicator does not mean that Medicare has made 
a national coverage determination regarding the service. Contractors 
remain responsible for coverage decisions in the absence of a 
national Medicare policy.
    B = Bundled code. Payments for covered services are always 
bundled into payment for other services not specified. If RVUs are 
shown, they are not used for Medicare payment. If these services are 
covered, payment for them is subsumed by the payment for the 
services to which they are incident (for example, a telephone call 
from a hospital nurse regarding care of a patient).
    C = Contractors price the code. Contractors establish RVUs and 
payment amounts for these services, generally on an individual case 
basis following review of documentation, such as an operative 
report.
    E = Excluded from the PFS by regulation. These codes are for 
items and services that

[[Page 73629]]

CMS chose to exclude from the PFS by regulation. No RVUs are shown, 
and no payment may be made under the PFS for these codes. Payment 
for them, when covered, continues under reasonable charge 
procedures.
    I = Not valid for Medicare purposes. Medicare uses another code 
for the reporting of, and the payment for these services. (Codes not 
subject to a 90 day grace period.)
    M = Measurement codes, used for reporting purposes only. There 
are no RVUs and no payment amounts for these codes. CMS uses them to 
aid with performance measurement. No separate payment is made. These 
codes should be billed with a zero (($0.00) charge and are denied) 
on the MPFSDB.
    N = Non-covered service. These codes are noncovered services. 
Medicare payment may not be made for these codes. If RVUs are shown, 
they are not used for Medicare payment.
    R = Restricted coverage. Special coverage instructions apply. If 
the service is covered and no RVUs are shown, it is contractor-
priced.
    T = There are RVUs for these services, but they are only paid if 
there are no other services payable under the PFS billed on the same 
date by the same provider. If any other services payable under the 
PFS are billed on the same date by the same provider, these services 
are bundled into the service(s) for which payment is made.
    X = Statutory exclusion. These codes represent an item or 
service that is not within the statutory definition of ``physicians' 
services'' for PFS payment purposes. No RVUs are shown for these 
codes, and no payment may be made under the PFS, (for example, 
ambulance services and clinical diagnostic laboratory services.)
    4. Description of code. This is the code's short descriptor, 
which is an abbreviated version of the narrative description of the 
code.
    5. Physician work RVUs. These are the RVUs for the physician 
work in CY 2011.
    6. Fully implemented nonfacility PE RVUs. These are the fully 
implemented resource-based PE RVUs for nonfacility settings.
    7. CY 2011 transitional nonfacility PE RVUs. These are the CY 
2011 resource-based PE RVUs for nonfacility settings.
    8. Fully implemented facility PE RVUs. These are the fully 
implemented resource-based PE RVUs for facility settings.
    9. CY 2011 Transitional facility PE RVUs. These are the CY 2011 
resource-based PE RVUs for facility settings.
    10. Malpractice expense RVUs. These are the RVUs for the 
malpractice expense for CY 2011.

    Note:  The BN reduction resulting from the chiropractic 
demonstration is not reflected in the RVUs for CPT codes 98940, 
98941, and 98942. The required reduction will only be reflected in 
the files used for Medicare payment.

    11. Global period. This indicator shows the number of days in 
the global period for the code (0, 10, or 90 days). An explanation 
of the alpha codes follows:
    MMM = Code describes a service furnished in uncomplicated 
maternity cases, including ante partum care, delivery, and 
postpartum care. The usual global surgical concept does not apply. 
See the Physicians' Current Procedural Terminology for specific 
definitions.
    XXX = The global concept does not apply.
    YYY = The global period is to be set by the contractor (for 
example, unlisted surgery codes).
    ZZZ = Code related to another service that is always included in 
the global period of the other service. (Note: Physician work and PE 
are associated with intra-service time and, in some instances, with 
the post-service time.)
    (2) Addendum C, Codes with Interim RVUs
    Addendum C, Codes with Interim RVUs, includes the columns and 
indicators described above for Addendum B, plus an additional column 
to indicate which component, or components, of each code's RVUs are 
interim final for CY 2011 and, therefore, open for public comment: 
work, PE, and/or malpractice expense. This column, headed ``RVUs 
Open for Comment'' and located between the columns for the 
``Description'' and ``Physician Work RVUs,'' displays the indicators 
below.
    W = Physician work RVUs are interim for CY 2011 and open for 
comment.
    PE = Nonfacility and facility PE RVUs are interim for CY 2011 
and open for comment.
    MP = Malpractice expense RVUs are interim for CY 2011 and open 
for comment.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C[FR Doc. 2010-27969 Filed 11-2-10; 4:15 pm]
BILLING CODE 4120-01-C


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