I 
111TH CONGRESS 
1ST SESSION H. R. 2820 
To amend title XVIII of the Social Security Act to transition to the use 
of metropolitan statistical areas as fee schedule areas for the physician 
fee schedule in California under the Medicare Program. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 11, 2009 
Mr. FARR (for himself, Mr. BILBRAY, Mrs. BONO MACK, Mrs. CAPPS, Mrs. 
DAVIS of California, Ms. ESHOO, Mr. FILNER, Mr. HONDA, Mr. 
HUNTER, Mr. ISSA, Ms. MATSUI, Ms. WOOLSEY, Mr. BACA, and Mr. 
THOMPSON of California) introduced the following bill; which was re-
ferred to the Committee on Energy and Commerce, and in addition to 
the Committee on Ways and Means, for a period to be subsequently de-
termined by the Speaker, in each case for consideration of such provisions 
as fall within the jurisdiction of the committee concerned 
A BILL 
To amend title XVIII of the Social Security Act to transition 
to the use of metropolitan statistical areas as fee sched-
ule areas for the physician fee schedule in California 
under the Medicare Program. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘GPCI Justice Act of 
2009’’. 
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SEC. 2. FINDINGS. 
Congress finds the following: 
(1) From 1966 through 1991, the Medicare 
program paid physicians based on what they charged 
for services. The Omnibus Reconciliation Act of 
1989 required the establishment of a national Medi-
care physician fee schedule, which was implemented 
in 1992, replacing the charge-based system. 
(2) The Medicare physician fee schedule cur-
rently includes more than 7,000 services together 
with their corresponding payment rates. In addition, 
each service on the fee schedule has three relative 
value units (RVUs) that correspond to the three 
physician payment components of physician work, 
practice expense, and malpractice expense. 
(3)(A) Each geographically adjusted RVU 
measures the relative costliness of providing a par-
ticular service in a particular location referred to as 
a locality. Physician payment localities are primarily 
consolidations of the carrier-defined localities that 
were established in 1966. 
(B) When physician payment localities were re-
designated in 1997, Administrator of the Centers for 
Medicare & Medicaid Services acknowledged that the 
new payment locality configuration had not been es-
tablished on a consistent geographic basis. Some 
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were based on zip codes or Metropolitan Statistical 
Areas (MSAs) while others were based on political 
boundaries, such as cities, counties, or States. 
(C) The Medicare program has not revised the 
geographic boundaries of the physician payment lo-
calities since the 1997 revision. 
(4) Medicare’s geographic adjustment for a par-
ticular physician payment locality is determined 
using three GPCIs (Geographic Practice Cost Indi-
ces) that also correspond to the three Medicare phy-
sician payment components of physician work, prac-
tice expense, and malpractice expense. 
(5) The major data source used in calculating 
the GPCIs is the decennial census which provides 
new data only once every 10 years. 
(6) This system of geographic payment designa-
tion has resulted in more than half of the current 
physician payment localities having counties within 
them with a large payment difference of 5 percent 
or more. A disproportionate number of these under-
paid counties are located in California, Georgia, 
Minnesota, Ohio, and Virginia. 
(7) For purposes of payment under the Medi-
care program, hospitals are organized and reim-
bursed for geographic costs according to MSAs. 
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(8) Studies by the Medicare Payment Advisory 
Commission (MedPAC) in 2007, the Government 
Accountability Office (GAO) in 2007, the Urban In-
stitute in 2008, and Acumen LLC in 2008 have all 
documented this physician GPCI payment discrep-
ancy—specifically that more than half of the current 
physician payment localities had counties within 
them with a large payment difference (that is, a pay-
ment difference of 5 percent or more) between 
GAO’s measure of physicians’ costs and Medicare’s 
geographic adjustment for an area. All these objec-
tive studies have recommended changes to the local-
ity system to correct the payment discrepancies. 
(9) A common recommendation among the 
GPCI payment discrepancy studies referred to in 
paragraph (8) is to eliminate the county-based local-
ity and replace it with one determined by Metropoli-
tan Statistical Area. 
SEC. 3. REDESIGNATING THE GEOGRAPHICAL PRACTICE 
COST INDEX (GPCI) LOCALITIES IN CALI-
FORNIA. 
(a) IN GENERAL.—Section 1848(e) of the Social Se-
curity Act (42 U.S.C.1395w–4(e)) is amended by adding 
at the end the following new paragraph: 
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‘‘(6) TRANSITION
TO
USE
OF
MSAS
AS
FEE 
SCHEDULE AREAS IN CALIFORNIA.— 
‘‘(A) IN GENERAL.— 
‘‘(i) REVISION.—Subject to clause (ii) 
and notwithstanding the previous provi-
sions of this subsection, for services fur-
nished on or after January 1, 2010, the 
Secretary shall revise the fee schedule 
areas used for payment under this section 
applicable to the State of California using 
the Metropolitan Statistical Area (MSA) 
iterative Geographic Adjustment Factor 
methodology as follows: 
‘‘(I) The Secretary shall con-
figure the physician fee schedule areas 
using 
the 
Core-Based 
Statistical 
Areas—Metropolitan Statistical Areas 
(each in this paragraph referred to as 
an ‘MSA’), as defined by the Director 
of the Office of Management and 
Budget, as the basis for the fee sched-
ule areas. The Secretary shall employ 
an iterative process to transition fee 
schedule areas. First, the Secretary 
shall list all MSAs within the State by 
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Geographic Adjustment Factor de-
scribed in paragraph (2) (in this para-
graph referred to as a ‘GAF’) in de-
scending order. In the first iteration, 
the Secretary shall compare the GAF 
of the highest cost MSA in the State 
to the weighted-average GAF of the 
group of remaining MSAs in the 
State. If the ratio of the GAF of the 
highest cost MSA to the weighted-av-
erage GAF of the rest of State is 1.05 
or greater then the highest cost MSA 
becomes a separate fee schedule area. 
‘‘(II) In the next iteration, the 
Secretary shall compare the MSA of 
the second-highest GAF to the weight-
ed-average GAF of the group of re-
maining MSAs. If the ratio of the sec-
ond-highest 
MSA’s 
GAF 
to 
the 
weighted-average of the remaining 
lower cost MSAs is 1.05 or greater, 
the second-highest MSA becomes a 
separate 
fee 
schedule 
area. 
The 
iterative process continues until the 
ratio of the GAF of the highest-cost 
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remaining MSA to the weighted-aver-
age of the remaining lower-cost MSAs 
is less than 1.05, and the remaining 
group of lower cost MSAs form a sin-
gle fee schedule area, If two MSAs 
have identical GAFs, they shall be 
combined in the iterative comparison. 
‘‘(ii) TRANSITION.—For services fur-
nished on or after January 1, 2010, in the 
State of California, after calculating the 
work, practice expense, and malpractice ge-
ographic indices described in clauses (i), 
(ii), and (iii) of paragraph (1)(A) that 
would otherwise apply through application 
of this paragraph, the Secretary shall in-
crease any such index to the county-based 
fee schedule area value on December 31, 
2009, if such index would otherwise be less 
than the value on January 1, 2010. 
‘‘(B) SUBSEQUENT REVISIONS.— 
‘‘(i) PERIODIC REVIEW AND ADJUST-
MENTS IN FEE SCHEDULE AREAS.—Subse-
quent to the process outlined in paragraph 
(1)(C), not less often than every three 
years, the Secretary shall review and up-
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date the California Rest-of-State fee sched-
ule area using MSAs as defined by the Di-
rector of the Office of Management and 
Budget and the iterative methodology de-
scribed in subparagraph (A)(i). 
‘‘(ii) LINK WITH GEOGRAPHIC INDEX 
DATA REVISION.—The revision described in 
clause (i) shall be made effective concur-
rently with the application of the periodic 
review of the adjustment factors required 
under paragraph (1)(C) for California for 
2012 and subsequent periods. Upon re-
quest, the Secretary shall make available 
to the public any county-level or MSA de-
rived data used to calculate the geographic 
practice cost index. 
‘‘(C) REFERENCES
TO
FEE
SCHEDULE 
AREAS.—Effective for services furnished on or 
after January 1, 2010, for the State of Cali-
fornia, any reference in this section to a fee 
schedule area shall be deemed a reference to an 
MSA in the State.’’. 
(b) CONFORMING AMENDMENT TO DEFINITION OF 
FEE SCHEDULE AREA.—Section 1848(j)(2) of the Social 
Security Act (42 U.S.C. 1395w(j)(2)) is amended by strik-
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ing ‘‘The term’’ and inserting ‘‘Except as provided in sub-
section (e)(6)(C), the term’’. 
Æ 
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