[Federal Register: November 15, 2004 (Volume 69, Number 219)]
[Rules and Regulations]               
[Page 66235-66915]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15no04-29]                         
 

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Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 403, 405, 410, et al.



Medicare Program; Revisions to Payment Policies Under the Physician Fee 
Schedule for Calendar Year 2005; Final Rule


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 403, 405, 410, 411, 414, 418, 424, 484, and 486

[CMS-1429-FC]
RIN 0938-AM90

 
Medicare Program; Revisions to Payment Policies Under the 
Physician Fee Schedule for Calendar Year 2005

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule refines the resource-based practice expense 
relative value units (RVUs) and makes other changes to Medicare Part B 
payment policy. These policy changes concern: supplemental survey data 
for practice expense; updated geographic practice cost indices for 
physician work and practice expense; updated malpractice RVUs; revised 
requirements for supervision of therapy assistants; revised payment 
rules for low osmolar contrast media; changes to payment policies for 
physicians and practitioners managing dialysis patients; clarification 
of care plan oversight requirements; revised requirements for 
supervision of diagnostic psychological testing services; 
clarifications to the policies affecting therapy services; revised 
requirements for assignment of Medicare claims; addition to the list of 
telehealth services; and, several coding issues. We are making these 
changes to ensure that our payment systems are updated to reflect 
changes in medical practice and the relative value of services.
    This final rule also addresses the following provisions of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(Pub. L. 108-17) (MMA): coverage of an initial preventive physical 
examination; coverage of cardiovascular (CV) screening blood tests; 
coverage of diabetes screening tests; incentive payment improvements 
for physicians in shortage areas; payment for covered outpatient drugs 
and biologicals; payment for renal dialysis services; coverage of 
routine costs associated with certain clinical trials of category A 
devices as defined by the Food and Drug Administration; hospice 
consultation service; indexing the Part B deductible to inflation; 
extension of coverage of intravenous immune globulin (IVIG) for the 
treatment in the home of primary immune deficiency diseases; revisions 
to reassignment provisions; and, payment for diagnostic mammograms, 
physicians' services associated with drug administration services and 
coverage of religious nonmedical health care institution items and 
services to the beneficiary's home.
    In addition, this rule updates the codes subject to the physician 
self-referral prohibition, discusses payment for set-up of portable x-
ray equipment, discusses the third five-year refinement of work RVUs, 
and solicits comments on potentially misvalued work RVUs.
    We are also finalizing the calendar year (CY) 2004 interim RVUs and 
are issuing interim RVUs for new and revised procedure codes for CY 
2005.
    As required by the statute, we are announcing that the physician 
fee schedule update for CY 2005 is 1.5 percent, the initial estimate 
for the sustainable growth rate for CY 2005 is 4.3, and the conversion 
factor for CY 2005 is $37.8975.

DATES: Effective Date: These regulations are effective on January 1, 
2005.
    Applicability Date: Section 623 of the MMA, that is, the case-mix 
portion of the revised composite payment methodology and the budget 
neutrality adjustment required by the MMA, is applicable on April 1, 
2005.
    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, 2005.

ADDRESSES: In commenting, please refer to file code CMS-1429-FC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of three ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to http://www.cms.hhs.gov/regulations/ecomments.
 (Attachments should be in Microsoft Word, WordPerfect, or 

Excel; however, we prefer Microsoft Word.)
    2. By mail. You may mail written comments (one original and two 
copies) to the following address ONLY: Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Attention: CMS-1429-
FC, P.O. Box 8012, Baltimore, MD 21244-8012.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number 800-743-3951 in advance to schedule your arrival with 
one of our staff members. Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue, SW., Washington, DC 20201; or 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    (Because access to the interior of the HHH 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.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by mailing your 
comments to the addresses provided at the end of the ``Collection of 
Information Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
    Pam West (410) 786-2302 (for issues related to Practice Expense, 
Respiratory Therapy Coding, and Therapy Supervision).
    Rick Ensor (410) 786-5617 (for issues related to Geographic 
Practice Cost Index (GPCI) and malpractice RVUs).
    Craig Dobyski (410) 786-4584 (for issues related to list of 
telehealth services or payments for physicians and practitioners 
managing dialysis patients).
    Bill Larson or Tiffany Sanders (410) 786-7176 (for issues related 
to coverage of an initial preventive physical examination).
    Cathleen Scally (410) 786-5714 (for issues related to payment of an 
initial preventive physical examination).
    Joyce Eng (410) 786-7176 (for issues related to coverage of 
cardiovascular screening tests).
    Betty Shaw (410) 786-7176 (for issues related to coverage of 
diabetes screening tests).
    Anita Greenberg (410) 786-0548 (for issues related to payment of 
cardiovascular and diabetes screening tests).
    David Worgo (410) 786-5919, (for issues related to incentive 
payment

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improvements for physicians practicing in shortage areas).
    Angela Mason or Jennifer Fan (410) 786-0548 (for issues related to 
payment for covered outpatient drugs and biologicals).
    David Walczak (410) 786-4475 (for issues related to reassignment 
provisions).
    Henry Richter (410) 786-4562 (for issues related to payments for 
ESRD facilities).
    Steve Berkowitz (410) 786-7176 (for issues related to coverage of 
routine costs associated with certain clinical trials of category A 
devices).
    Terri Deutsch (410) 786-9462 (for issues related to hospice 
consultation services).
    Karen Daily (410) 786-7176 (for issues related to clinical 
conditions for payment of covered items of durable medical equipment).
    Dorothy Shannon (410) 786-3396 (for issues related to outpatient 
therapy services performed ``incident to'' physicians' services).
    Roberta Epps (410) 786-5919 (for issues related to low osmolar 
contrast media or supervision of diagnostic psychological testing 
services).
    Gail Addis (410) 786-4522 (for issues related to care plan 
oversight).
    Jean-Marie Moore (410) 786-3508 (for issues related to religious 
nonmedical health care institution services).
    Diane Milstead (410) 786-3355 or Gaysha Brooks (410) 786-9649 (for 
all other issues).

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on the 
following issues: interim RVUs for selected procedure codes identified 
in Addendum C; zip code areas for Health Professional Shortage Areas 
(HPSAs); the coverage of religious nonmedical health care institution 
items and services to the beneficiary's home; the physician self 
referral designated health services listed in tables 20 and 21; the 
third five-year refinement of work RVUs for services furnished 
beginning January 1, 2007; and, potentially misvalued work RVUs for all 
services in the CY 2005 physician fee schedule. You can assist us by 
referencing the file code CMS-1429-FC and the specific ``issue 
identifier'' that precedes the section on which you choose to comment.
    Inspection of Public Comments: Comments received timely will be 
available for public inspection as they are processed, 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, call 800-743-3951.
    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money order payable to 
the Superintendent of Documents, or enclose your Visa or Master Card 
number and expiration date. Credit card orders can also be placed by 
calling the order desk at (202) 512-1800 (or toll-free at 1-888-293-
6498) or by faxing to (202) 512-2250. The cost for each copy is $10. As 
an alternative, you can view and photocopy the Federal Register 
document at most libraries designated as Federal Depository Libraries 
and at many other public and academic libraries throughout the country 
that receive the Federal Register.
    This Federal Register document is also available from the Federal 
Register online database through GPO Access, a service of the U.S. 
Government Printing Office. The web site address is: http://www.access.gpo.gov/nara/index.html
.

    Information on the physician fee schedule can be found on the CMS 
homepage. You can access this data by using the following directions:
    1. Go to the CMS homepage (http://www.cms.hhs.gov).

    2. Place your cursor over the word ``Professionals'' in the blue 
area near the top of the page. Select ``physicians'' from the drop-down 
menu.
    3. Under ``Policies/Regulations'' select ``Physician Fee 
Schedule.''
    To assist readers in referencing sections contained in this 
preamble, we are providing the following table of contents. Some of the 
issues discussed in this preamble affect the payment policies but do 
not require changes to the regulations in the Code of Federal 
Regulations. Information on the regulation's impact appears throughout 
the preamble and is not exclusively in section VII.

Table of Contents

I. Background
    A. Legislative History
    B. Published Changes to the Fee Schedule
    C. Components of the Fee Schedule Payment Amounts
    D. Development of the Relative Value System
II. Provisions of the Proposed Regulation Related to the Physician 
Fee Schedule
    A. Resource-Based Practice Expense Relative Value Units
    1. Resource-Based Practice Expense Legislation
    2. Current Methodology
    3. Practice Expense Proposals for Calendar Year 2005
    B. Geographic Practice Cost Indices (GPCIs)
    C. Malpractice RVUs
    D. Coding Issues
III. Provisions Related to the Medicare Modernization Act of 2003
    A. Section 611--Preventive Physical Examination
    B. Section 613--Diabetes Screening
    C. Section 612--Cardiovascular Screening
    D. Section 413--Incentive Payment for Physician Scarcity
    E. Section 303--Payment for Covered Outpatient Drugs and 
Biologicals
    F. Section 952--Revision to Reassignment Provisions
    G. Section 642--Extension of Coverage of IVIG for the Treatment 
in the Home of Primary Immune Deficiency Diseases
    H. Section 623--Payment for Renal Dialysis Services
    I. Section 731--Coverage of Routine Costs for Category A 
Clinical Trials
    J. Section 629--Part B Deductible
    K. Section 512--Hospice Consultation Service
    L. Section 302--Clinical Conditions for Coverage of Durable 
Medical Equipment (DME)
    M. Section 614--Payment for Certain Mammography Services
    N. Section 305--Payment for Inhalation Drugs
    O. Section 706 Coverage of Religious Nonmedical Health Care 
Institution Services Furnished in the Home
IV. Other Issues
    A. Provisions Related to Therapy Services
    1. Outpatient Therapy Services Performed ``Incident to'' 
Physicians' Services
    2. Qualification Standards and Supervision Requirements in 
Therapy Private Practice Settings
    3. Other Technical Revisions
    B. Low Osmolar Contrast Media
    C. Payments for Physicians and Practitioners Managing Patients 
on Dialysis
    D. Technical Revision--Sec.  411.404
    E. Diagnostic Psychological Tests
    F. Care Plan Oversight
    G. Assignment of Medicare Claims-Payment to the Supplier
    H. Additional Issues Raised by Commenters
V. Refinement of Relative Value Units for Calendar Year 2004 and 
Response to Public Comments on Interim Relative Value Units for 2003
VI. Five-Year Refinement of Relative Value Units VII. Update to the 
Codes for Physician Self-Referral Prohibition
VIII. Physician Fee Schedule Update for Calendar Year 2005
IX. Allowed Expenditures for Physicians' Services and the 
Sustainable Growth Rate
X. Anesthesia and Physician Fee Schedule Conversion Factors for CY 
2005
XI. Telehealth Originating Site Facility Fee Payment Amount Update
XII. Provisions of the Final Rule
XIII. Waiver of Proposed Rulemaking
XIV. Collection of Information Requirements

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XV. Response to Comments
XVI. Regulatory Impact Analysis
Addendum A--Explanation and Use of Addendum B.
Addendum B--2005 Relative Value Units and Related Information Used 
in Determining Medicare Payments for 2005.
Addendum C--Codes With Interim RVUs
Addendum D--2005 Geographic Practice Cost Indices by Medicare 
Carrier and Locality
Addendum E--2006 Geographic Practice Cost Indices by Medicare 
Carrier and Locality
Addendum F--Comparison of 2004 GAFs to 2005 GAFs
Addendum G--Comparison of 2004 GAFs to 2006 GAFs
Addendum H--Specialty Care PSA Zip Codes
Addendum I--2005 Primary Care HSPA Zip Codes
Addendum J--Primary Care PSA Zip Codes
Addendum K--Mental Health HPSA Zip Codes
Addendum L--Updated List of CPT/HCPCS Codes Used To Describe Certain 
Designated Health Services Under the Physician Self-Referral 
Provision

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

AAA Abdominal aortic aneurysm
AAFP American Academy of Family Physicians
AAKP American Association of Kidney Patients
AANA American Association of Nurse Anesthetists
ABI Ankle brachial index
ABN Advanced beneficiary notice
ACC American College of Cardiology
ACLA American Clinical Laboratory Association
ACP American College of Physicians
ACPM American College of Preventative Medicine
ACR American College of Radiology
ADLs Activities of daily living
AFROC Association of Freestanding Radiation Oncology Centers
AGS American Geriatric Society
AHA American Heart Association
AMA American Medical Association
AOA American Osteopathic Association
APA Administrative Procedures Act
APTA American Physical Therapy Association
ASA American Society of Anesthesiologists
ASCP American Society for Clinical Pathology
ASN American Society of Nephrology
ASP Average sales price
ASTRO American Society for Therapeutic Radiation Oncology
ATA American Telemedicine Association
AWP Average wholesale price
BBA Balanced Budget Act of 1997
BBRA Balanced Budget Refinement Act of 1999
BIPA Benefits Improvement and Protection Act of 2000
BLS Bureau of Labor Statistics
BMI Body mass index
BSA Body surface area
CAH Critical access hospital
CAP College of American Pathologists
CAPD Continuous ambulatory peritoneal dialysis
CCPD Continuous cycling peritoneal dialysis
CDC Centers for Disease Control and Prevention
CF Conversion factor
CFR Code of Federal Regulations
CLIA Clinical Laboratory Improvement Amendment
CMA California Medical Association
CMS Centers for Medicare & Medicaid Services
CNMs Certified nurse midwives
CNS Clinical nurse specialist
COPD Chronic obstructive pulmonary disease
CORF Comprehensive outpatient rehabilitation facilities
CPEP Clinical Practice Expert Panel
CPI Consumer Price Index
CPO Care Plan Oversight
CPT [Physicians'] Current Procedural Terminology [4th Edition, 2002, 
copyrighted by the American Medical Association]
CRNAs Certified Registered Nurse Anesthetists
CT Computed tomography
CV Cardiovascular
CY Calendar year
DEXA Dual energy x-ray absorptiometry
DHS Designated health services
DME Durable medical equipment
DMEPOS Durable medical equipment, prosthetics, orthotics, and 
supplies
DMERC Durable medical equipment regional carrier
DOI Departments of Insurance
DRE Digital rectal exam
DRG Diagnosis-related groups
DVT Deep venous thrombosis
EKG Electrocardiogram
E/M Evaluation and management
EPO Erythropoeitin
ESRD End-stage renal disease
FAX Facsimile
FMR Fair market rental
FQHC Federally qualified healthcare center
FR Federal Register
FY Fiscal year
GAF Geographic adjustment factor
GPCI Geographic practice cost index
GTT Glucose tolerance test
HBO Hyperbaric oxygen
HCPAC Health Care Professional Advisory Committee
HCPCS Healthcare Common Procedure Coding System
HHA Home health agency
HHS [Department of] Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996
HOCM High osmolar contrast media
HPSA Health professional shortage area
HRSA Health Resources and Services Administration
HsCRP high sensitivity C-reactive protein
HUD Housing and Urban Development
IDTFs Independent diagnostic testing facilities
IMRT Intensity modulated radiation therapy
IOM Internet Only Manual
IPD Intermittent peritoneal dialysis
IPPE Initial preventive physical examination
IPPS Inpatient prospective payment system
ISO Insurance Services Office
IVIG Intravenous immune globulin
JUAs Joint underwriting associations
KCP Kidney Care Partners
KECC Kidney Epidemiology and Cost Center
LCD Local coverage determination
LMRP Local medical review policies
LOCM Low osmolar contrast media
LUPA Low utilization payment adjustment
MCM Medicare Carrier Manual
MCP Monthly capitation payment
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MGMA Medical Group Management Association
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003
MPFS Medicare physician fee schedule
MSA Metropolitan statistical area
NAMCS National Ambulatory Medical Care Survey
NCD National coverage determination
NCIPC National Center for Injury Prevention and Control
NDC National drug code
NIH National Institutes of Health
NP Nurse practitioner
NPP Nonphysician practitioners
OASIS Outcome and Assessment Information Set
OBRA Omnibus Budget Reconciliation Act
OIG Office of Inspector General
OMB Office of Management and Budget
OPPS Outpatient prospective payment system
OT Occupational therapy
OTA Occupational therapist assistant
OTPP Occupational therapists in private practice
PA Physician assistant
PAD Peripheral arterial disease
PC Professional component
PCF Patient compensation fund
PD Peritoneal dialysis
PEAC Practice Expense Advisory Committee
PET Positron emission tomography
PFS Physician Fee Schedule
PHSA Public Health Services Act
PIAA Physician Insurers Association of America
PIN Provider identification number
PLI Professional liability insurance
POS Prosthetics, orthotics and supplies
PPI Producer price index
PPS Prospective payment system
PRA Paperwork Reduction Act
PSA Physician scarcity area
PT Physical therapy
PTA Physical therapist assistant
PTPP Physical therapists in private practice
PVD Peripheral vascular disease
RFA Regulatory Flexibility Act

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RHC Rural health clinic
RHHI Regional home health intermediary
RIA Regulatory impact analysis
RN Registered nurse
RNHCI Religious nonmedical health care institution
RPA Renal Physicians Association
RT Respiratory therapy
RTs Respiratory therapists
RUC [AMA's Specialty Society] Relative [Value] Update Committee
RUCA Rural-Urban commuting area
RVU Relative value unit
SAF Standard analytic file
SCHIP State Child Health Insurance Program
SGR Sustainable growth rate
SHIPs State Health Insurance Assistance Programs
SIR Society for Interventional Radiology
SLP Speech language pathology
SMR Standardized mortality ratio
SMS [AMA's] Socioeconomic Monitoring System
SNF Skilled nursing facility
TC Technical component
UAF Update adjustment factor
URR Urea reduction ratios
USPSTF U.S. Preventive Services Task Force

I. Background

A. Legislative History

    Medicare has paid for physicians' services under section 1848 of 
the Social Security Act (the Act), ``Payment for Physicians' Services'' 
since January 1, 1992. The Act requires that payments under the fee 
schedule be based on national uniform relative value units (RVUs) 
reflecting the resources used in furnishing a service. Section 1848(c) 
of the Act requires that national RVUs be established for physician 
work, practice expense, and malpractice expense. Section 
1848(c)(2)(B)(ii)(II) of the Act provides that adjustments in RVUs may 
not cause total physician fee schedule payments to differ by more than 
$20 million from what they would have been had the adjustments not been 
made. If adjustments to RVUs cause expenditures to change by more than 
$20 million, we must make adjustments to ensure that they do not 
increase or decrease by more than $20 million.

B. Published Changes to the Fee Schedule

    The July 2000 and August 2003 proposed rules ((65 FR 44177) and (68 
FR 49030), respectively), include a summary of the final physician fee 
schedule rules published through February 2003.
    In the November 7, 2003 final rule, we refined the resource-based 
practice expense RVUs and made other changes to Medicare Part B payment 
policy. The specific policy changes concerned: the Medicare Economic 
Index; practice expense for professional component services; definition 
of diabetes for diabetes self-management training; supplemental survey 
data for practice expense; geographic practice cost indices; and 
several coding issues. In addition, this rule updated the codes subject 
to the physician self-referral prohibition. We also made revisions to 
the sustainable growth rate and the anesthesia conversion factor. 
Additionally, we finalized the CY 2003 interim RVUs and issued interim 
RVUs for new and revised procedure codes for CY 2004.
    As required by the statute, we announced that the physician fee 
schedule update for CY 2004 was -4.5 percent; that the initial estimate 
of the sustainable growth rate for CY 2004 was 7.4 percent; and that 
the conversion factor for CY 2004 was $35.1339.
    Subsequent to the November 7, 2003 final rule, the Congress enacted 
the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 (Pub. L. 108-17) (MMA). On January 7, 2004, an interim final rule 
was published to implement provisions of the MMA applicable in 2004 to 
Medicare payment for covered drugs and physician fee schedule services. 
These provisions included--
     Revising the current payment methodology for Medicare Part 
B covered drugs and biologicals that are not paid on a cost or 
prospective payment basis;
     Making changes to Medicare payment for furnishing or 
administering drugs and biologicals;
     Revising the geographic practice cost indices;
     Changing the physician fee schedule conversion factor. 
(Note: The 2004 physician fee schedule conversion factor is $37.3374); 
and
     Extending the ``opt-out'' provisions of section 
1802(b)(5)(3) of the Act to dentists, podiatrists, and optometrists.
    The information contained in the January 7, 2004 interim final rule 
concerning payment under the physician fee schedule superceded 
information contained in the November 7, 2003 final rule to the extent 
that the two are inconsistent.

C. Components of the Fee Schedule Payment Amounts

    Under the formula set forth in section 1848(b)(1) of the Act, the 
payment amount for each service paid under the physician fee schedule 
is the product of three factors: (1) A nationally uniform relative 
value unit (RVU) for the service; (2) a geographic adjustment factor 
(GAF) for each physician fee schedule area; and (3) a nationally 
uniform conversion factor (CF) for the service. The CF converts the 
relative values into payment amounts.
    For each physician fee schedule service, there are three relative 
values: (1) An RVU for physician work; (2) an RVU for practice expense; 
and (3) an RVU for malpractice expense. For each of these components of 
the fee schedule, there is a geographic practice cost index (GPCI) for 
each fee schedule area. The GPCIs reflect the relative costs of 
practice expenses, malpractice insurance, and physician work in an area 
compared to the national average for each component.
    The general formula for calculating the Medicare fee schedule 
amount for a given service in a given fee schedule area can be 
expressed as:

Payment = [(RVU work x GPCI work) + (RVU practice expense x GPCI 
practice expense) + (RVU malpractice x GPCI malpractice)] x CF

    The CF for calendar year (CY) 2005 appears in section X. The RVUs 
for CY 2005 are in Addendum B. The GPCIs for CY 2005 can be found in 
Addendum D.
    Section 1848(e) of the Act requires us to develop GAFs for all 
physician fee schedule areas. The total GAF for a fee schedule area is 
equal to a weighted average of the individual GPCIs for each of the 
three components of the service. In accordance with the statute, 
however, the GAF for the physician's work reflects one-quarter of the 
relative cost of physician's work compared to the national average.

D. Development of the Relative Value System

1. Work Relative Value Units
    Approximately 7,500 codes represent services included in the 
physician fee schedule. The 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 work RVUs for 
most codes in a cooperative agreement with us. In constructing the 
vignettes for the original RVUs, Harvard worked with expert panels of 
physicians and obtained input from physicians from numerous 
specialties.
    The RVUs for radiology services were based on the American College 
of Radiology (ACR) relative value scale, which we integrated into the 
overall physician fee schedule. The RVUs for anesthesia services were 
based on RVUs from a uniform relative value guide. We established a 
separate CF for anesthesia services, and we continue to recognize

[[Page 66240]]

time as a factor in determining payment for these services. As a 
result, there is a separate payment system for anesthesia services.
2. Practice Expense and Malpractice Expense Relative Value Units
    Section 1848(c)(2)(C) of the Act requires that the practice expense 
and malpractice expense RVUs equal the product of the base allowed 
charges and the practice expense and malpractice percentages for the 
service. Base allowed charges are defined as the national average 
allowed charges for the service furnished during 1991, as estimated 
using the most recent data available. For most services, we used 1989 
charge data aged to reflect the 1991 payment rules, because those were 
the most recent data available for the 1992 fee schedule.
    Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 
103-432), enacted on October 31, 1994, required us to develop a 
methodology for a resource-based system for determining practice 
expense RVUs for each physician's service. As amended by the Balanced 
Budget Act of 1997 (BBA) (Pub. L. 105-33), enacted on August 5, 1997, 
section 1848(c) required the new payment methodology to be phased in 
over 4 years, effective for services furnished in 1999, with resource-
based practice expense RVUs becoming fully effective in 2002. The BBA 
also required us to implement resource-based malpractice RVUs for 
services furnished beginning in 2000.

II. Provisions of the Proposed Rule Related to the Physician Fee 
Schedule

    In response to the publication of the August 5, 2004 proposed rule 
(69 FR 47488), we received approximately 9,302 comments. We received 
comments from individual physicians, health care workers, professional 
associations and societies, and beneficiaries. The majority of the 
comments addressed the proposals related to ``incident to'' therapy 
services, GPCI, diagnostic psychological testing, and drug issues 
including average sales price (ASP).
    The proposed rule discussed policies that affected the number of 
RVUs on which payment for certain services would be based. The proposed 
rule also discussed policies related to implementation of the MMA. RVU 
changes implemented through this final rule are subject to the $20 
million limitation on annual adjustments contained in section 
1848(c)(2)(B)(ii)(II) of the Act.
    After reviewing the comments and determining the policies we would 
implement, we have estimated the costs and savings of these policies 
and discuss in detail the effects of these changes in the Regulatory 
Impact Analysis in section XIV.
    For the convenience of the reader, the headings for the policy 
issues correspond to the headings used in the August 5, 2004 proposed 
rule. More detailed background information for each issue can be found 
in the August 5, 2004 proposed rule.

A. Resource-Based Practice Expense Relative Value Units

1. Resource-Based Practice Expense Legislation
    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 Social Security Act (the Act) and required us 
to develop a methodology for a resource-based system for determining 
practice expense RVUs for each physician's service beginning in 1998. 
Until that time, physicians' practice expenses were established based 
on historical allowed charges.
    In developing the methodology, we were to consider the staff, 
equipment, and supplies used in providing medical and surgical services 
in various settings. The legislation specifically required that, in 
implementing the new system of practice expense RVUs, we apply the same 
budget-neutrality provisions that we apply to other adjustments under 
the physician fee schedule.
    Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 
105-33), enacted on August 5, 1997, amended section 1848(c)(2)(C)(ii) 
of the Act and delayed the effective date of the resource-based 
practice expense RVU system until January 1, 1999. In addition, section 
4505(b) of the BBA provided for a 4-year transition period from charge-
based practice expense RVUs to resource-based RVUs.
    Further legislation affecting resource-based practice expense RVUs 
was included in the Medicare, Medicaid and State Child Health Insurance 
Program (SCHIP) Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 
106-113) enacted on November 29, 1999. Section 212 of the BBRA amended 
section 1848(c)(2)(C)(ii) of the Act by directing us 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. These data would supplement 
the data we normally collect in determining the practice expense 
component of the physician fee schedule for payments in CY 2001 and CY 
2002. (The 1999 and 2003 final rules (64 FR 59380 and 68 FR 63196, 
respectively, extended the period during which we would accept 
supplemental data.)
2. Current Methodology for Computing the Practice Expense Relative 
Value Unit System
    In the November 2, 1998 final rule (63 FR 58910), effective with 
services furnished on or after January 1, 1999, we established at 42 
CFR 414.22(b)(5) a new methodology for computing resource-based 
practice expense RVUs that used the two significant sources of actual 
practice expense data we have available--the Clinical Practice Expert 
Panel (CPEP) data and the American Medical Association's (AMA) 
Socioeconomic Monitoring System (SMS) data. The CPEP data were 
collected from panels of physicians, practice administrators, and 
nonphysicians (for example registered nurses) 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. The AMA's SMS data provided 
aggregate specialty-specific information on hours worked and practice 
expenses. The methodology was based on an assumption that current 
aggregate specialty practice costs are a reasonable way to establish 
initial estimates of relative resource costs for physicians' services 
across specialties. The methodology allocated these aggregate specialty 
practice costs to specific procedures and, thus, can be seen as a 
``top-down'' approach.
    Also in the November 2, 1998 final rule, in response to comments, 
we discussed the establishment of the Practice Expense Advisory 
Committee (PEAC) of the AMA's Specialty Society Relative Value Update 
Committee (RUC), which would review code'specific CPEP data during the 
refinement period. This committee would include representatives from 
all major specialty societies and would make recommendations to us on 
suggested changes to the CPEP data.
    As directed by the BBRA, we also established a process (see 65 FR 
65380) under which we would accept and use, to the maximum extent 
practicable and consistent with sound data practices, data collected by 
entities and organizations to supplement the data we normally collect 
in determining the practice expense component of the physician fee 
schedule.

[[Page 66241]]

a. Major Steps

    A brief discussion of the major steps involved in the determination 
of the practice expense RVUs follows. (Please see the November 1, 2001 
final rule (66 FR 55249) for a more detailed explanation of the top-
down methodology.)
     Step 1--Determine the specialty specific practice expense 
per hour of physician direct patient care. We used the AMA's SMS survey 
of actual aggregate cost data by specialty to determine the practice 
expenses per hour for each specialty. We calculated the practice 
expenses per hour for the specialty by dividing the aggregate practice 
expenses for the specialty by the total number of hours spent in 
patient care activities.
     Step 2--Create a specialty-specific practice expense pool 
of practice expense costs for treating Medicare patients. To calculate 
the total number of hours spent treating Medicare patients for each 
specialty, we used the physician time assigned to each procedure code 
and the Medicare utilization data. The primary sources for the 
physician time data were surveys submitted to the AMA's RUC and surveys 
done by Harvard for the establishment of the work RVUs. We then 
multiplied the physician time assigned per procedure code by the number 
of times that code was billed by each specialty, and summed the 
products for each code, by specialty, to get the total physician hours 
spent treating Medicare patients for that specialty. We then calculated 
the specialty-specific practice expense pools by multiplying the 
specialty practice expenses per hour (from step 1) by the total 
Medicare physician hours for the specialty.
     Step 3--Allocate the specialty-specific practice expense 
pool to the specific services (procedure codes) performed by each 
specialty. For each specialty, we divided the practice expense pool 
into two groups based on whether direct or indirect costs were involved 
and used a different allocation basis for each group.
    (i) Direct costs--For direct costs (which include clinical labor, 
medical supplies, and medical equipment), we used the procedure-
specific CPEP data on the staff time, supplies, and equipment as the 
allocation basis. For the separate practice expense pool for services 
without physician work RVUs, we have used, on an interim basis, 1998 
practice expense RVUs to allocate the direct cost pools.
    (ii) Indirect costs--To allocate the cost pools for indirect costs, 
including administrative labor, office expenses, and all other 
expenses, we used the total direct costs, or the 1998 practice expense 
RVUs, in combination with the physician fee schedule work RVUs. We 
converted the work RVUs to dollars using the Medicare CF (expressed in 
1995 dollars for consistency with the SMS survey years).
     Step 4--The direct and indirect costs are then added 
together to attain the practice expense for each procedure, by 
specialty. For procedures performed by more than one specialty, the 
final practice expense allocation was a weighted average of practice 
expense allocations for the specialties that perform the procedure, 
based on the frequency with which each specialty performs the procedure 
on Medicare patients.

b. Other Methodological Issues

i. Nonphysician Work Pool
    As an interim measure, until we could further analyze the effect of 
the top-down methodology on the Medicare payment for services with 
physician work RVUs equal to zero (including the technical components 
of radiology services and other diagnostic tests), we created a 
separate practice expense pool. We first used the average clinical 
staff time from the CPEP data and the ``all physicians'' practice 
expense per hour to create the pool. In the December 2002 final rule, 
we changed this policy and now use the total clinical staff time and 
the weighted average specialty-specific practice expense per hour for 
specialties with services in this pool. In the next step, we used the 
adjusted 1998 practice expense RVUs to allocate this pool to each 
service. Also, for all radiology services that are assigned physician 
work RVUs, we used the adjusted 1998 practice expense RVUs for 
radiology services as an interim measure to allocate the direct 
practice expense cost pool for radiology.
    A specialty society may request that its services be removed from 
the nonphysician work pool. We have removed services from the 
nonphysician work pool if the requesting specialty predominates 
utilization of the service.
ii. Crosswalks for Specialties Without Practice Expense Survey Data
    Since many specialties identified in our claims data did not 
correspond exactly to the specialties included in the SMS survey data, 
it was necessary to crosswalk these specialties to the most appropriate 
SMS specialty.
iii. Physical Therapy Services
    Because we believe that most physical therapy services furnished in 
physicians' offices are performed by physical therapists, we 
crosswalked all utilization for therapy services in the CPT 97000 
series to the physical and occupational therapy practice expense pool.
3. Practice Expense Proposals for Calendar Year 2005

a. Supplemental Practice Expense Surveys

i. Survey Criteria and Submission Dates
    As required by the BBRA, we established criteria to evaluate survey 
data collected by organizations to supplement the SMS survey data used 
in the calculation of the practice expense component of the physician 
fee schedule. The deadline for submission of supplemental data to be 
considered in CY 2006 is March 1, 2005.
ii. Survey by the College of American Pathologists (CAP)
    In the August 5, 2004 rule, we proposed to incorporate the CAP 
survey data into the practice expense methodology and to implement a 
change to the practice expense methodology to calculate the technical 
component RVUs for pathology services as the difference between the 
global and professional component RVUs. (This technical change was 
proposed in the June 28, 2002 Federal Register (67 FR 43849), but, at 
the specialty's request, we delayed implementation of this change for 
pathology services to permit evaluation of the combined effects of the 
use of the new survey data along with this technical change to the 
methodology.) We proposed to use the following practice expense per 
hour figures for specialty 69--Independent Laboratory.

[[Page 66242]]

[GRAPHIC] [TIFF OMITTED] TR15NO04.487

    Comment: Specialty organizations representing clinical laboratories 
and pathologists expressed support for the use of the CAP supplemental 
survey data and urged us to finalize this proposal.
    Response: We will incorporate the CAP survey data into the practice 
expense methodology and implement the proposed change to the practice 
expense methodology to calculate the technical component RVUs for 
pathology services as the difference between the global and 
professional component RVUs.
iii. Submission of Supplemental Surveys
    We received surveys from the American College of Cardiology (ACC), 
the American College of Radiology (ACR), and the American Society for 
Therapeutic Radiation Oncology (ASTRO). Our contractor, The Lewin 
Group, evaluated the data and recommended that we accept the data from 
the ACC and the ACR, but indicated that the survey from ASTRO did not 
meet the precision criteria established for supplemental surveys and, 
thus, did not recommend using the ASTRO survey results at this time. We 
agreed with these recommendations. However, as explained in the August 
5, 2004 proposed rule, the ACR and the ACC requested that we not use 
the data until we have a stable and global solution that is workable 
for all specialties that are currently paid using the nonphysician work 
pool. We agreed with these requests and proposed delaying use of these 
supplemental surveys until issues related to the nonphysician work pool 
can be addressed.
    Comment: The ACR expressed appreciation for our acceptance of the 
supplemental data and for our proposal to delay implementation until 
next year, as they had requested, to allow further time to examine the 
issue of the nonphysician work pool. The Society for Interventional 
Radiology (SIR) also expressed support for the use of the ACR data and 
the delay in implementation.
    Response: We look forward to working with these and other 
specialties as we seek a permanent solution to practice expense issues 
associated with the nonphysician work pool.
    Comment: ASTRO stated that they appreciate the opportunity to 
submit data and, that they understand we will not be using the data in 
2005. ASTRO further commented that, due to the specific practice 
patterns and practice environment of radiation oncology, new data, 
regardless of the response rate, may not meet the criteria. ASTRO 
further stated that they will continue to work with CMS and with the 
Lewin Group as this issue is analyzed. The Association of Freestanding 
Radiation Oncology Centers (AFROC) expressed concern that freestanding 
centers that have higher costs than hospital-based centers were 
underrepresented by the ASTRO survey. They also expressed concern about 
the reference in the Lewin Group report to crosswalking radiation 
oncology costs from another specialty. In addition, AFROC argued that 
we should not average costs associated with freestanding centers with 
those that are hospital-based, because the costs would be understated. 
They urged us to ensure that any assumption regarding 
representativeness of any survey data is justified.
    Response: We will take these comments into consideration as we 
continue to work with these groups concerning the supplemental survey 
data. We currently have no plans to propose a practice expense 
crosswalk for radiation oncology.
    Comment: The ACC expressed appreciation that we are not eliminating 
the nonphysician workpool until methodologic issues are addressed. 
While they support the delay in implementing their supplemental survey 
data, they believe that the contractor's suggestion that the ACC survey 
data could be blended with the existing SMS survey data is invalid for 
two reasons: (1) The suggestion that similar changes to physician 
practice (for example, increased use of technology) may have occurred 
throughout all physician services is an unfounded speculation because 
few other specialties are as technologically driven as cardiology; and 
(2) other supplemental data has not been blended and all specialties 
must be treated consistently.
    Response: We will take these comments into consideration as part of 
the evaluation and discussion of the cardiology survey data in next 
year's proposed rule.
    Comment: The American Urological Association requested that, as we 
explore alternate sources of data and consider how to incorporate new 
practice expense data into the methodology, we find a way to 
incorporate recently collected specialty supplemental data into the new 
efforts. They also requested that we clarify whether we would apply the 
budget neutrality exemption to any increases in drug administration PE 
RVUs that result from the use of urology survey data that will be 
submitted under the supplemental survey process.
    Response: We anticipate that we would incorporate all accepted 
supplemental survey data into any comprehensive changes to the 
nonphysician work pool.
    As we explained in the January 7, 2004 Federal Register (69 FR 1093 
through 1094), section 303(a)(1) of the MMA modifies section 
1848(c)(2)(B) of the Act to provide an exemption from the budget 
neutrality requirements in 2006 for further increases in the practice 
expense RVUs for drug administration that may result from using survey 
data from specialties meeting certain criteria. The survey must include 
expenses for the administration of drugs and biologicals and be 
submitted by a specialty that receives more than 40 percent of its 2002 
Medicare revenues from drugs. Urology received more than 40 percent of 
its 2002 Medicare revenues from drugs. Therefore, if we were to receive 
a practice expense survey of urologists by March 1, 2005

[[Page 66243]]

that included expenses for the administration of drugs and biologicals 
and the survey met the criteria we have established (and those of 
section 1848(c)(2)(I)(ii) of the Act), we would exempt the change in 
the practice expense RVUs for drug administration services from the 
budget neutrality requirements of section 1848(c)(2)(B) of the Act.

b. Practice Expense Advisory Committee (PEAC)

Recommendations on CPEP Inputs for 2005
     CPEP Refinement Process.
    In the August 5, 2004 proposed rule, we included the PEAC 
recommendations from meetings held in March and August 2003 and January 
and March 2004, which accounted for over 2,200 codes from many 
specialties. We also stated that future practice expense issues, 
including the refinement of the remaining codes not addressed by the 
PEAC, would be handled by the RUC.
    Comment: We received comments from the AMA that future practice 
expense issues, including the refinement of the remaining codes not 
addressed by the PEAC, would be handled by the RUC with the help of a 
new ad hoc committee, now termed the Practice Expense Review Committee 
(PERC), comprised of former PEAC members. The RUC also noted that their 
Practice Expense Subcommittee remains committed to reviewing 
improvements to the practice expense methodology.
    The AMA and the RUC, as well as the specialty society representing 
neurological surgeons, noted their appreciation of our continued 
efforts to improve the direct practice expense data and to establish a 
reasonable methodology for determining practice expense relative 
values.
    Response: We look forward to our continuing work with the AMA, the 
RUC and all the specialty societies on the refinement of the remaining 
codes and with ongoing practice expense issues.
    Comment: The National Association for the Support of Long Term Care 
expressed concern about the dissolution of the PEAC and requested that 
we require the RUC to expand its membership to include a broad array of 
providers who are reimbursed under the physician fee schedule.
    Response: Because the RUC is an independent committee, we are not 
in a position to set the requirements for RUC membership. However, we 
are confident that the RUC and the Health Care Professional Advisory 
Committee, which also sends practice expense recommendations directly 
to us, together represent two broad ranges of practitioners, both 
physician and nonphysician.
    Comment: A specialty society suggested that there should be a 
process for fixing minor errors that are identified outside of the 
refinement process. The commenter also suggested that there should be a 
system to address individual exceptions to PEAC standard packages.
    Response: If we have made errors, major or minor, in any part of 
our calculation of practice expense RVUs in this final rule, inform us 
as soon as possible so that we are able to correct them in the 
physician fee schedule correction notice. Any other revisions would 
have to be made in the next physician fee schedule rule. If a specialty 
society believes that a RUC decision is not appropriate, the society 
can always request that the decision be revisited or can discuss the 
issue with us at any time. For the concern with the standard packages 
adopted by the PEAC, it is our understanding that all presenters at the 
RUC have the opportunity to demonstrate that something other than the 
standard would be more appropriate.
     PEAC Recommendations.
    We proposed to adopt nearly all of the PEAC recommendations. 
However, we disagreed with the PEAC recommendation for clinical labor 
time for CPT code 99183, Physician attendance and supervision of 
hyperbaric oxygen therapy, per session, and proposed a total clinical 
labor time of 112 minutes for this service.
    Comment: Specialty societies representing interventional radiology 
and neurological surgeons, as well as the AMA, expressed appreciation 
for our acceptance of well over 2,000 PEAC refinements in this rule. 
However, the specialty society representing orthopaedic surgeons 
commented that some of our proposals appeared to be circumventing the 
PEAC process, in that we changed the PEAC recommendation for hyperbaric 
oxygen (HBO) therapy and proposed in-office inputs for two services 
rather than referring these to the RUC.
    Response: We appreciate the hard work and perseverance on the part 
of the PEAC and the specialty societies that produced the recommended 
refinements for so many services. In addition, we do not believe that 
we circumvented the PEAC process in any way. We have the greatest 
respect for the PEAC and RUC recommendations that we received. However, 
we do have the final responsibility for all payments made under the 
physician fee schedule, and this can lead to disagreement with a 
specific recommendation. The RUC itself has always demonstrated its 
understanding and respect for our responsibility in this regard. With 
regard to the two services that we priced in the office, we stated 
explicitly in the proposed rule that we were requesting that the RUC 
review the practice expense inputs.
    Comment: The specialty society representing family physicians 
disagreed with our proposed changes to the PEAC recommendations for the 
clinical labor time for CPT code 99183, Physician attendance and 
supervision of hyperbaric oxygen therapy, per session. The commenter 
contended that a physician providing this service would probably have 
multiple hyperbaric oxygen chambers; therefore, staff would not be in 
constant attendance. However, the specialty society representing 
podiatrists supported this change in clinical staff time.
    Response: Based on our concern that the PEAC recommendation of 20 
minutes of clinical staff time during the intra-service period 
undervalued the clinical staff time, we proposed increasing this time 
to 90 minutes in the proposed rule. This was, of course, subject to 
comment. We believe there is some merit to the claim that the clinical 
staff may be monitoring more than one chamber at a time. Therefore, we 
are adjusting the time for the intra-service period from the proposed 
90 minutes to 60 minutes in recognition of this point. We will continue 
our examination of this issue and entertain ongoing dialog with all 
interested organizations and individuals familiar with this service to 
assure the accuracy of the intra-service time.
    Comment: The Cardiac Event Monitoring Provider Group Coalition 
expressed concern about the PEAC recommendations that would 
substantially reduce the clinical staff time associated with cardiac 
monitoring services. Of particular concern to the Coalition was the 70 
percent reduction in time for CPT code 93271, the code for cardiac 
event monitoring, receipt of transmissions, and analysis. Although all 
these services are currently priced in the nonphysician work pool and 
this decrease in the staff times has no immediate impact, the commenter 
was concerned that, when the nonphysician work pool is eliminated, 
these services will be undervalued. The commenter also believed that 
the PEAC recommendations may not have reflected all the supplies and 
equipment utilized in these services and included a complete list of 
necessary supplies

[[Page 66244]]

and equipment. The American College of Cardiology (ACC) presented these 
services at the PEAC meeting and commented they had been unable to 
collect sufficient data so that the PEAC could make an appropriate 
recommendation.
    Response: It is clear from the Coalition and ACC comments that more 
information is needed in order to ensure that the appropriate practice 
expense inputs are assigned to these services in the event that they 
are removed from the nonphysician work pool. We would be glad to work 
with the Coalition and the specialty society so that they can make a 
new presentation to the RUC this coming year.
     Adjustments To Conform With PEAC Standards
    We also reviewed those codes that are currently unrefined or that 
were refined early in the PEAC process to apply some of the major PEAC-
agreed standards. For the unrefined 10-day global services, we proposed 
to substitute for the original CPEP times the PEAC-agreed standard 
post-service office visit clinical staff times used for all 90-day and 
refined 10-day global services. We also proposed to eliminate the 
discharge day management clinical staff time from all but the 10 and 
90-day global codes, substituting one post-service phone call if not 
already in the earlier data. Lastly, we proposed to delete any extra 
clinical staff time for post-visit phone calls for 10 and 90-day global 
service because that time is already included in the time allotted for 
the visits.
    Comment: A specialty society representing family physicians 
supported the elimination of the discharge day management time assigned 
in the facility setting for all 0-day global services, as well as all 
the other adjustments we made to apply PEAC standards. However, several 
specialty societies representing gastroenterology and orthopaedics, as 
well as the American College of Physicians, did not agree with the 
deletion of the discharge day management time. These groups requested 
restoration of the six minutes allocated to the discharge day 
management for 0-day global services and argued that most 0-day 
services require as much staff time as do many 10-day global services 
performed in the outpatient setting. One of these commenters did not 
believe a rationale was provided for this change. Another commenter, 
although recommending that any future refinements take into account all 
of the PEAC standards, expressed concern regarding all of the above 
changes, suggesting that this could lead to additional anomalies and 
recommending that the revisions should be reviewed by the RUC.
    Response: The PEAC recommended that the discharge day management 
time apply only to 10-day and 90-day global services and we were 
complying with this recommendation. We also believe that this PEAC 
recommendation is reasonable; it is hard to imagine what tasks a 
physician's clinical staff back in the office is performing for a 
patient during the period that the patient is undergoing a same-day 
procedure in the hospital outpatient department. However, the point 
made about 10-day global procedures is pertinent. We would suggest that 
the RUC reconsider whether the discharge day management clinical staff 
time should apply only to services that are typically performed in the 
inpatient setting. We also believe that it was appropriate to apply the 
PEAC standards to codes that were not refined or that were refined 
before the standards were developed. The application of these standards 
is not only fair, but can also help to avoid the possible rank order 
anomalies cited by the commenter.

Methacholine Chloride

    The PEAC recommendations for CPT codes 91011 and 91052 included a 
supply input for methacholine chloride as the injected stimulant for 
these two services. In discussions with representatives from the 
gastroenterology specialty society subsequent to receipt of the PEAC 
recommendations, we learned this is incorrect. For the esophageal 
motility study, CPT code 91011, we proposed to include edrophonium as 
the drug typically used in this procedure. For the gastric analysis 
study, CPT code 91052, we were unable to identify the single drug that 
is most typically used with this procedure. We requested that 
commenters provide us with information on the drug that is most 
typically used for CPT code 91052, including drug dosage and price, so 
that it could be included in the practice expense database.
    Comment: Several specialty societies representing allergists, 
pulmonologists and chest physicians, as well as the AMA, requested that 
the additional cost of methacholine be reflected in the RVUS for the 
bronchial challenge test, CPT code 95070. As an alternative, the 
specialty society representing allergists suggested that a HCPCS code 
could be created so that methacholine could be billed separately.
    In response to our request for information about the supply inputs 
for CPT codes 91011 and 91052, the American Gastroenterological 
Association (AGA) indicated that edrophonium may be an appropriate 
supply proxy for CPT code 91011, but, in practice, other agents are 
more commonly used. However, they provided no additional information 
regarding these other agents. AGA also stated that the most commonly 
used drug for CPT code 91052 is pentagastrin, but betazole or histamine 
may also be used. Again, they did not provide further specific 
information.
    Response: Because CPT code 95070 is valued in the nonphysician work 
pool, the PEAC's addition of methacholine to this procedure could not 
be captured by the practice expense RVUs. However, a J-code was 
established, J7674, Methacholine chloride administered as inhalation 
solution through nebulizer, per 1mg, so that this drug can be billed 
separately. Accordingly, we have deleted methacholine from the practice 
expense database.
    For CPT code 91011, we have retained the drug edrophonium, and our 
proposed price of $4.67 per ml, as a supply in the practice expense 
database. However, we were not able to include a price for pentagastrin 
in the supply practice expense database for CPT code 91052. We will be 
happy to work with the specialty societies involved with both of these 
procedures to obtain accurate drug pricing for the 2006 fee schedule.
     Nursing Facility and Home Visits.
    We proposed to adopt the direct practice expense input 
recommendations from the March 2003 PEAC meeting for CPT codes 99348 
and 99350, two E/M codes for home visits, as well as the March 2004 
PEAC recommendations for E/M codes for nursing home services (CPT codes 
99301 through 99316).
    Comment: A specialty group representing family physicians supported 
the acceptance of the PEAC recommendations for nursing facility visits, 
even though this resulted in a decrease for these services. The 
commenter stated that the decrease occurred because the original CPEP 
data was flawed and the clinical staff times were too high. The 
commenter also stated that the payments in the facility setting will 
increase for these services and that setting has the higher volume of 
visits. Other commenters representing long term care physicians, 
geriatricians and podiatrists expressed disappointment in these PEAC 
recommendations and stated that, while the PEAC did consider the views 
of long term care physicians, the PEAC failed to accept these views 
even though they were supported by data. These commenters believe the 
PEAC did not

[[Page 66245]]

recommend an appropriate increase based on a false assumption that the 
nursing home provides the staff. Another commenter contended that the 
new values do not adequately account for work performed by the 
physician's clinical staff. The commenter stated that the pre- and 
post-times for these codes are less than for the comparable office 
visit codes, even though it is clear that more clinical staff time is 
required for the nursing facility resident. One commenter suggested 
that these concerns would need to be addressed within the framework of 
the 5-year review. The specialty society representing homecare 
physicians also commented that, rather than challenging a flawed 
system, they will use the 5-year review process to have work and 
practice expense re-valuated for the home visit codes.
    Response: While sympathetic to the concerns expressed by the long-
term care physicians regarding the overall decrease in clinical staff 
time in the nursing facility E/M procedures, we believe the PEAC 
recommendations for these services to be reasonable. We also agree with 
commenters regarding the upcoming 5-year review process as a means to 
address the physician work component of these codes. To the extent that 
there is overlap between the physician time and the clinical labor 
practice expenses involved in a particular procedure, the 5-year review 
process can be utilized to address these issues. We encourage the home 
care physicians and the long-term care physicians to consider using the 
5-year review process for these codes.
     Suggested Corrections to the CPEP Data.
    Comment: The RUC and American Podiatric Medical Association 
identified a number of PEAC refinements from the August 2003 meeting 
that were not reflected in the practice expense database and asked that 
these be implemented. The RUC also asked us to correct the equipment 
times for all of the 90-day global services to correspond with the 
PEAC-refined clinical staff times for these codes.
    Response: We have made the recommended corrections to our practice 
expense database.
    Comment: The specialty society representing hematology noted the 
supply items missing from the practice expense database for CPT codes 
36514 through 36516 that had been included in the CMS-accepted PEAC 
refinements.
    Response: We regret the error. These items are incorporated into 
the practice expense database.
    Comment: The specialty society representing pediatrics as well as 
the RUC commented that the PEAC recommendations also included a 
recommendation for a change in the global period for CPT code 54150, 
Circumcision, using clamp or other device; newborn, from a 10-day 
global to an ``xxx'' designation, which would mean the global period 
does not apply. This issue was not discussed in the proposed rule and 
the commenters requested that this change be reflected in the final 
rule.
    Response: As stated by the commenters, this request was included in 
the PEAC recommendations but was inadvertently omitted from the 
proposed rule. We agree that the 10-day global period currently 
assigned to this procedure may not be appropriate because the physician 
performing the procedure most likely does not see the infant for a 
post-procedure visit. However, we believe that a 0-day global period 
rather than ``xxx'' should be assigned to this procedure. We generally 
use the ``xxx'' designation for diagnostic tests and no surgical 
procedure currently is designated as an ``xxx'' global service. We 
believe this will accomplish the same end because most any other 
service performed at the same time as the circumcision could be billed 
with the appropriate modifier. We are adjusting the practice expense 
database to delete any staff time, supplies and equipment associated 
with the post-procedure office visit.
    Comment: Specialty societies representing dermatology stated that 
there was an error in the nonfacility practice expense RVUS for the 
Mohs micrographic surgery service, CPT code 17307, due to the omission 
of clinical staff time from the practice expense database.
    Response: We have corrected the practice expense database to 
reflect the appropriate clinical staff time.
    Comment: We received comments from the American College of 
Radiology (ACR) and Society of Nuclear Medicine noting that some of the 
codes used by their specialty were omitted from the listing of PEAC-
refined codes that appeared in Addendum C in our proposed rule. They 
submitted a complete list of the codes that had gone through PEAC 
refinement, beginning at the first PEAC meeting in April 1999, and 
asked that we include these codes on the Addendum.
    Response: We appreciate the specialty societies bringing to our 
attention that some of their codes were omitted from Addendum C and we 
have reviewed the codes on their submitted list. Addendum C was meant 
to list only those codes that were refined in this year's rule, and 
thus, only listed those refined by the PEAC from March and August 2003 
and January and March 2004. However, it does appear that there is some 
confusion regarding what codes were refined during this period, 
particularly from the March 2004 meeting. We will work with all medical 
societies and the RUC to clarify the status of all the codes in 
question.
     Other Issues.
    Comment: The RUC requested that we publish practice expense RVUs 
for all Medicare noncovered services for which the RUC has recommended 
direct inputs. We also received a request from the American Academy of 
Pediatrics to publish work and practice expense RVUs for the noncovered 
nasal or oral immunization services (CPT codes 90473 and 90474) and the 
visual acuity test (CPT code 99173).
    Response: In the past, we have published the practice expense RVUs 
for only a small number of noncovered codes which are listed in our 
national payment files that can be accessed via our physician web page 
under ``Medicare Payment Systems'' as part of the public use files at 
http://www.cms.hhs.gov/physicians/. Because we have not yet established a 

consistent policy regarding the publication of RVUs for noncovered 
services, we will need to examine this issue further to carefully weigh 
the pros and cons of publishing these RVUs for noncovered services.
    Comment: The American Speech-Language Hearing Association (ASHA) 
and the American Academy of Audiology (AAA), expressed concern about 
the reduction of practice expense RVUs for CPT code 92547, Use of 
vertical electrodes (List separately in addition to code for primary 
procedure), which resulted after the PEAC refinement. The commenters 
asked for our assistance to clarify a CPT instruction regarding this 
procedure because they believe it prevents the multiple billings of CPT 
92547 in a given patient encounter.
    Response: While we are sympathetic to the concerns expressed by 
ASHA and AAA, we also want to note that CPT code descriptors and 
accompanying coding instructions are proprietary to CPT. We would 
encourage these organizations to discuss this issue directly with the 
CPT editorial committee.
    Comment: A specialty society representing vascular surgery 
expressed concern about the wide variations in practice expense RVUs 
that are sometimes derived under the current methodology. The commenter 
suggested that some outliers require additional focus to determine 
whether these are errors in the direct inputs or if they

[[Page 66246]]

reflect problems inherent in the methodology. According to the 
commenter, it would appear that some of the extreme variation is due to 
the high costs of certain disposable supplies in the office setting as 
well as high scaling factors. A few examples of outlier codes were 
provided. The commenter suggested that we consider an alternative 
methodology for payment of high-priced single-use items in the 
nonfacility setting.
    Response: We agree with the commenter that the issue raised is one 
worth study and analysis. Unfortunately, this is not a task that can be 
accomplished in time for discussion in this final rule. We will be very 
willing to work with the specialty society and with the Practice 
Expense Subcommittee of the RUC, as well as any other interested 
parties, to work further on this issue that will only be magnified as 
more complex procedures are moved into the office setting.
    Comment: A provider of radiology services questioned the reductions 
in practice expense for CPT code 77370, Special medical radiation 
physics consultation.
    Response: The practice expense RVUs for CPT code 77370 decreased by 
0.02 RVUs between last year's final rule and this year's proposed rule. 
This small decrease is due to the normal fluctuations resulting from 
updating our practice expense data.

c. Repricing of Clinical Practice Expense Inputs--Equipment

    We use the practice expense inputs (the clinical staff, supplies, 
and equipment assigned to each procedure) to allocate the specialty-
specific practice expense cost pools to the procedures performed by 
each specialty. The costs of the original equipment inputs assigned by 
the CPEP panels were determined in 1997 by our contractor, Abt 
Associates, based primarily on list prices from equipment suppliers. 
Subsequent to the CPEP panels, equipment has also been added to the 
CPEP data, with the costs of the inputs provided by the relevant 
specialty society. We only include equipment with costs equal to or 
exceeding $500 in our practice expense database because the cost per 
use for equipment costing less than $500 would be negligible. We also 
consider the useful life of the equipment in establishing an equipment 
cost per minute of use.
    We contracted with a consultant to assist in obtaining the current 
price for each equipment item in our CPEP database. The consultant was 
able to determine the current prices for most of the equipment inputs 
and clarified the specific composition of each of the various packaged 
and standardized rooms or ophthalmology ``lanes'' currently identified 
in the equipment practice expense database (for example, mammography 
room or exam lane). We proposed to delete the current ``room'' 
designation for the radiopharmaceutical receiving area and, in its 
place, list separately the equipment necessary for each procedure as 
individual line items.
    Also, we proposed to replace all surgical packs and trays in the 
practice expense database with the appropriate standardized packs that 
were recommended by the PEAC, either the basic instrument pack or the 
medium pack.
    The useful life for each equipment item was also updated as 
necessary, primarily based on the AHA's ``Estimated Useful Lives of 
Depreciable Hospital Assets'' (1998 edition). We noted in the August 5, 
2004 proposed rule that AHA would be publishing updated guidelines this 
summer and that we would reflect any updates in our final rule.
    In addition, we proposed the following database revisions:

Assignment of Equipment Categories

    We proposed that equipment be assigned to one of the following six 
categories: documentation, laboratory, scopes, radiology, furniture, 
rooms-lanes, and other equipment. These categories would also be used 
to establish a new numbering system for equipment that would more 
clearly identify them for practice expense purposes.

Consolidation and Standardization of Item Descriptions

    We proposed combining items that appeared to be duplicative. For 
example, for two cervical endoscopy procedures, our contractor 
identified that the price of the LEEP system includes a smoke 
evacuation system but that system is also listed separately. We 
proposed to merge these two line items and reflect both prices in the 
price of the LEEP system.
    These changes were reflected in Addendum D of the proposed rule.
    Additionally, there were specific equipment items for which a 
source was not identified or for which pricing information was not 
found that were included in Table 2 of the August 5 proposed rule. 
Items that we proposed to delete from the database were also identified 
in this table. We requested that commenters, particularly the relevant 
specialty groups, provide us with the needed pricing information, 
including appropriate documentation. Also, we stated that if we were 
not able to obtain any verified pricing information for an item, we 
might eliminate it from the database.
    Comment: The Society of Nuclear Medicine agreed with the deletion 
of the current room designation for radiopharmaceutical area and 
designation of categories for equipment. However, the society 
recommended that the category designation of ``radiology'' be changed 
to ``imaging equipment'' and ``other equipment'' be changed to ``non-
imaging equipment'' to be inclusive of these modalities. The American 
College of Radiology also concurred with the elimination of the current 
room designation for radiopharmaceutical area.
    Response: We agree that the term ``imaging equipment'' rather than 
the term ``radiology'' more accurately reflects current practice and 
have changed the practice expense database accordingly. However, it 
would be inappropriate to change the ``other equipment'' category to 
``non-imaging equipment'' because there are items in other categories 
that would not be encompassed in the proposed title change.
    Comment: The Society of Nuclear Medicine supplied information on 
the equipment item E51076 with the requested documentation.
    Response: We have revised the practice expense database to reflect 
the information provided.
    Comment: The American Society for Therapeutic Radiology and 
Oncology (ASTRO) submitted information and the requested documentation 
for fifteen items, often supplying two or more pricing sources.
    Response: We greatly appreciate the information and have revised 
the practice expense database to reflect the information provided.
    Comment: Commenters representing manufacturers and providers 
expressed concern about the reduction in payment (9 percent) for 
external counterpulsation (ECP), G0166. The commenters questioned the 
proposed change made to the life of the ECP equipment, from seven to 
five years, used for this service. Commenters did not believe this was 
supported by the AHA information (which indicated that similar 
diagnostic cardiovascular equipment has an equipment life of five 
years) and requested that this timeframe be applied to the ECP 
equipment for this service. The American College of Cardiology also 
questioned the change to the ECP equipment life. The commenters also 
questioned the allocation for maintenance and indirect costs applied 
under the practice expense methodology

[[Page 66247]]

as well as the time allocated for this service. As a final point, some 
of the commenters requested that we adjust the work RVUs assigned to 
this G-code to that of an echocardiogram (CPT code 93307) and include 
it in the nonphysician work pool.
    Response: Based upon review of the information provided we have 
revised the equipment life to five years. The methodology used for the 
allocation for maintenance and indirect costs is consistent with our 
methodology. For the request to adjust the work RVUs for this service, 
we refer the commenters to section VI of this final rule where we are 
soliciting comments on services where the physician work may be 
misvalued.
    Comment: The College of American Pathologists provided information 
on items listed in table 2: the DNA image analyzer (ACIS), and image 
analyzer (CAS system) code E13652. They noted that the CAS system is no 
longer marketed and that the ACIS system would be used in its place. 
Thus, they provided documentation on the price for the ACIS system.
    Response: We appreciate the information and have made the necessary 
changes to the database.
    Comment: The American College of Cardiology (ACC) agreed with the 
pricing for the ambulatory blood pressure monitor, provided prices for 
the ECG signal averaging system (E55035), but provided no documentation 
for these prices. They stated that the echocardiography digital 
acquisition ultrasound referenced in table 2 was no longer in the 
marketplace and that a digital workstation was now typically used. They 
requested that an appropriate equipment code be available for this item 
and provided a price range for this item (although without the 
supporting documentation). ACC also recommended that the pacemaker 
programmer (E55013) be removed from the equipment list because it is 
provided at no cost to the physician. Removal of this item from the PE 
database was also supported by a manufacturer that commented on the 
rule.
    Response: We have removed the pacemaker programmer from the 
practice expense database. We will temporarily retain other items and 
prices for the 2005 physician fee schedule and request that ACC forward 
the documentation as soon as possible.
    Comment: The American College of Radiology (ACR) provided partial 
information for the CAD processor unit and software. ACR also submitted 
information regarding the computer workstation for MRA and the 
mammography reporting software, but with insufficient documentation. 
For the various equipment items ACR listed for the mammography room, 
updated information was provided for a few of the items. ACR noted that 
they would submit documentation for all outstanding pieces of equipment 
when it is available. ACR did not agree with the room price for MRI and 
CT that was referenced in Addendum D and requested an extension so that 
they can work with us to accurately price these items.
    Response: We will maintain current pricing for all equipment items 
and the mammography room on an interim basis, until sufficient 
documentation is provided.
    Comment: The American Ophthalmology Association (AOA) and American 
Optometric Association both supplied pricing information along with the 
requested documentation for the computer, VDT, and software (E71013) 
listed in table 2. AOA also provided pricing information for the 
ophthalmology drill listed in this table, indicating a cost of $57. 
They expressed their appreciation for the recategorization and 
standardization of descriptions for equipment and supplies.
    Response: We appreciate the documentation forwarded by these two 
organizations and have incorporated into the practice expense database 
the pricing information provided for the computer, VDT, and software. 
Because the ophthalmology drill is less than $500 (the standard 
established for equipment), we are removing it from the equipment list 
for the practice expense database.
    Comment: The American Gastroenterological Association (AGA) 
expressed concern about the reduction in RVUs for CPT code 91065, a 
breath hydrogen test. They believe that the newer equipment listed in 
the practice expense database does not reflect the analyzer that is 
typically used, which is more expensive, and noted that the costs for 
the reagents have also increased.
    Response: We are sympathetic to the concerns of the AGA regarding 
the typical equipment used for CPT code 91065 and would like to work 
with them to ascertain updated pricing information about the equipment 
most physicians utilize for this service. However, the majority of the 
decrease (76 percent) in practice expense RVUs for this procedure is 
due to the PEAC refinement for the clinical labor time that was reduced 
by nearly 50 percent.
    Comment: The American Academy of Sleep Medicine indicated that most 
typical CPAP/BiPAP remote unit is a bilevel positive airway pressure 
unit and provided documentation for the price of this item.
    Response: This price is reflected in the practice expense database.
    Comment: The Society for Vascular Surgery (SVS), Society for 
Vascular Ultrasound and Society of Diagnostic Medical Sonography all 
expressed appreciation for the refinement to the inputs that apply to 
vascular ultrasound services. However, the commenters requested that we 
incorporate the requested refinements for the other ancillary equipment 
present in a vascular ultrasound room into other similar procedures. 
SVS specifically listed the following CPT codes: 93875-9 and 93990.
    Response: In addition to the three new CPT codes for 
cerebrovascular arterial studies CPT 93890, 93892 and 93893, we have 
added the vascular ultrasound room to the codes indicated in the SVS 
comment noted above.
    Comment: The American Psychiatric Association provided 
documentation for the cost of the ECT machine and the American 
Psychological Association provided information on the neurobehavioral 
status exam and testing, as well as the biofeedback equipment listed in 
table 2, along with the requested documentation.
    Response: We appreciate this information. The practice expense 
database was revised to reflect this cost information.
    Comment: The American Society of Clinical Oncology requested that 
the biohazard hood be substituted for the ventilator and hood blower as 
a practice expense input for the chemotherapy codes.
    Response: We revised the database to reflect this change.
    Comment: American Academy of Neurology supplied information and the 
necessary documentation on several equipment items listed in table 2 
associated with neurology services.
    Response: We have made the revisions to the prices for the 
ambulatory EEG recorder (E54008), ambulatory review station (E54009), 
and portable digital EEG monitor based on the documentation provided. 
Based on the documentation provided, we note that the price for the 
ambulatory review station was substantially reduced ($44,950 to 
$7,950).
    Comment: The American Clinical Neurophysiology Society (ACNS) 
stated that the payment for CPT code 95819, an EEG service, was 
substantially reduced. The Society believes it is due to a price 
reduction for the EEG equipment (E54006) used in this service that was 
listed in Addendum D of the

[[Page 66248]]

proposed rule. The commenter indicated that the proposed price does not 
include the review station and software which is needed for this 
service and provided documentation for appropriately pricing this item.
    Response: Based on the documentation provided, we have changed, on 
an interim basis for the 2005 fee schedule, the price for this item and 
note that this equipment price is associated only with CPT code 95819. 
We would be happy to work with ACNS in order to resolve any issues 
surrounding the RVUs for CPT code 95819. Reviewing the direct inputs 
for this code, we note that the largest contributor to the reduction of 
practice expense RVUs is the PEAC's refinement of this code's supply 
items.
    Comment: The National Association for Medical Direction of 
Respiratory Care and the American College of Chest Physicians were in 
agreement with the proposed prices for equipment except for the pulse 
oximeter (including printer), E55003. The commenters referenced a price 
that is $83 more than that listed in the table, but provided no 
documentation.
    Response: We appreciate the comments from these organizations 
regarding the repricing of the equipment items in the practice expense 
database. We have retained our price of $1,207 for the pulse oximeter 
and note that it is an average from two different available sources.
    Comment: We received a comment from a consumer regarding the price 
of the electromagnetic therapy machine for HCPCS code G0329 with 
concerns about the low payment for this modality. While no 
documentation was submitted, the commenter noted that the cost for this 
equipment ranged from $25,000 to $35,000.
    Response: We appreciate the commenter's remarks about the price of 
the electromagnetic therapy equipment, Diapulse. We have retained our 
price of $25,000 in the practice expense database because we do not 
have documentation that any higher-priced equipment is typically used. 
Similar to other modalities used in rehabilitation, including those 
used in wound care, we note that this procedure reflects comparable 
practice expense values.
    Comment: Several specialty organizations questioned our 
substitution of the two standardized packs for previously PEAC-approved 
packs and trays, as discussed in our proposed rule. One specialty 
society suggested we consult with the AMA before proceeding on this 
point.
    Response: We uniformly applied the PEAC-approved values for the 
packs and trays to all packs and trays, regardless of whether the codes 
had previously been refined by the PEAC. To the extent that a specialty 
society feels that it was disadvantaged by this policy, we would 
encourage them to bring the specific codes that should be excluded from 
this policy to the newly formed PERC (formerly PEAC) at the next RUC 
meeting in February 2005.
    Comment: Several specialty organizations indicated that they were 
in the process of obtaining pricing information on equipment items and 
would provide it as soon as possible. One commenter also asked that we 
retain the items proposed for deletion as they are necessary in 
providing their services, but provided no documentation.
    Response: In the proposed rule, we noted that we might eliminate 
those items from the database for which documented pricing information 
was not received. Due to the number of outstanding equipment prices, 
and the number of societies that are underway in their search for this 
data, we have decided to extend the submission deadline. We would 
encourage specialty societies to submit price information soon to help 
ensure that it can be used to establish practice expense RVUs in next 
year's proposed rule.
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d. Miscellaneous Practice Expense Issues

     Pricing for Seldinger Needle.
    We proposed to average two prices of this supply item to reflect a 
cost of $5.175. We requested that, if commenters disagreed with this 
change in price, the comment should provide documentation to support 
the recommended price, as well as the specific type of needle that is 
most commonly used.
    Comment: Commenters were in agreement with the proposed pricing of 
the seldinger needle.
    Response: We will use the proposed price of $5.175 for this supply 
item in the practice expense database.

[[Page 66255]]

     Hysteroscopic Endometrial Ablation.
    We proposed to assign, on an interim basis, the following direct 
practice expense inputs in the nonfacility setting for CPT code 58563, 
Hysteroscopy, surgical; with endometrial ablation. (Note: In the August 
5, 2004 proposed rule this code was erroneously identified as 56853, 
which does not exist.) We also stated we would request that the RUC 
review these inputs as part of the practice expense refinement process.
    + Clinical Staff: RN/LPN/MTA--72 minutes (18 pre-service and 54 
service)
    + Supplies: PEAC multispecialty visit supply package, pelvic exam 
package, irrigation tubing, sterile impervious gown, surgical cap, shoe 
cover, surgical mask with face shield, 3x3 sterile gauze (20), cotton 
tip applicator, cotton balls (4), irrigation 0.9 percent sodium 
chloride 500-1000 ml (3), maxi-pad, mini-pad, 3-pack betadine swab (4), 
Monsel's solution (10 ml), lidocaine jelly (1000 ml), disposable 
speculum, spinal needle, 18-24 g needle, 20 ml syringe, bupivicaine 
0.25 percent (10 ml), 1 percent xylocaine (20 ml), cidex (10 ml), 
Polaroid film-type 667 (2), endosheath, and hysteroscopic ablation 
device kit.
    + Equipment: power table, fiberoptic exam light, endoscopic-rigid 
hysteroscope, endoscopy video system, and hysteroscopic ablation 
system.
    Comment: Commenters, including many individual practitioners, were 
supportive of this proposed change. The specialty society also stated 
that they plan to present the inputs for this service at the RUC 
meeting in February 2005
    Response: With the exception of the post incision care kit that we 
deleted because this procedure does not require an incision, we will 
finalize these inputs as proposed.
     Photopheresis.
    We proposed to assign, on an interim basis, the following 
nonfacility practice expense inputs for the photopheresis service, CPT 
code 36522:
    + Clinical Staff: RN--223 minutes (treatment is for approximately 4 
hours)
    + Supplies: multispecialty visit supply package, photopheresis 
procedural kit, blood filter (filter iv set), IV blood administration 
set, 0.9 percent irrigation sodium chloride 500-1000 ml (2), heparin 
1,000 units-ml (10), povidone solution-betadine, methoxsalen (UVADEX) 
sterile solution-10 ml vial, 1 percent-2 percent lidocaine-xylocaine, 
paper surgical tape (12), 2x3 underpad (chux), nonsterile drapesheet 40 
inches x 60 inches, nonsterile Kling bandage, bandage strip, 3x3 
sterile gauze, 4x4 sterile gauze, alcohol swab pad (3), impervious 
staff gown, 19-25 g butterfly needle, 14-24g angiocatheter, 18-27 g 
needle, 20 ml syringe, 10-12 ml syringe, 1 ml syringe, 22-26 g syringe 
needle-3 ml.
    + Equipment: plasma pheresis machine with ultraviolet light source, 
medical recliner.
    We also stated we would request that the RUC review these inputs.
    Comment: One commenter supplied information on practice expense 
inputs for this code and indicated that an oncology nurse should be 
used, instead of an RN, to perform the procedure. A specialty society 
also stated that they would be providing information on this service at 
the September RUC meeting.
    Response: We appreciate the information submitted by the 
commenters. This code was discussed at the September RUC meeting and 
recommended practice expense inputs for this service were provided to 
us. We do not agree with the RUC recommended clinical staff procedure 
(intra) time of 90 minutes. We believe that this time, which is half of 
the proposed intra time, does not accurately reflect the total time 
involved in performing this procedure. Our understanding is that the 
filtration rate and the procedures performed by the nurse for 
photopheresis are similar to those that are reflected in the selective 
apheresis services, CPT code 36516, with a PEAC-approved intra time of 
240 minutes. Based on this, and the absence of specialty representation 
at the RUC familiar with the process, we are assigning 180 minutes for 
the intra time, as proposed. We are also assigning the RN/LPN staff 
type to this procedure, because we believe it is similar to other 
apheresis procedures. We will continue our examination of this issue 
and entertain ongoing dialog with all interested organizations and 
individuals, including the AMA and the RUC, the industry, and those 
physicians and individuals familiar with the photopheresis procedure in 
order to assure the accuracy of the intra time.
     Pricing of New Supply Items.
    As part of last year's rulemaking process, we reviewed and updated 
the prices for supply items in our practice expense database. During 
subsequent meetings of both the PEAC and the RUC, supply items were 
added that were not included in the supply pricing update. The August 
5, 2004 proposed rule included Table 3 Proposed Practice Expense Supply 
Item Additions for 2005, which listed supply items added as a result of 
PEAC or RUC recommendations subsequent to last year's update of the 
supply items and the proposed associated prices that we will use in the 
practice expense calculation.
    We also identified certain supply items for which we were unable to 
verify the pricing information (see Table 4, Supply Items Needing 
Specialty Input for Pricing, in the August 5, 2004 proposed rule). We 
requested that commenters provide pricing information on these items 
along with documentation to support the recommended price. In addition, 
we also requested information on the specific contents of the listed 
kits, so that we do not duplicate any supply items.
    Comment: Several commenters representing providers of these 
services stated that table 3 incorrectly associated ``gold markers'' 
with the brachtherapy intracavity codes. They were all in agreement 
that these markers are typically used in external beam treatments and 
payment is associated with unlisted procedure codes and should be paid 
for at cost.
    Response: We have deleted the gold markers from CPT codes 77761-
77763 and removed this supply from the practice expense database.
    Comment: The American Urology Association noted that we should 
exclude the vasotomy kit from CPT codes 55200 and 55250.
    Response: We have deleted the vasotomy kit from CPT codes 55200 and 
55250.
    Comment: The American College of Chest Physicians agreed with 
pricing of items used in their practices in table 3 and stated that the 
bronchogram tray does not need to be included in the practice expense 
database, as the procedure is seldom performed and, when it is, the 
procedure is performed in a facility.
    Response: We have deleted the bronchogram tray from the practice 
expense database and corrected the direct inputs for CPT code 31708 
accordingly.
    Comment: We received comments from the American College of 
Cardiology (ACC) that included price quotes and names of sources for 
supply items listed on table 3.
    Response: Unfortunately, ACC did not include the requested 
sufficient documentation, such as invoices or catalog web page links. 
We have asked ACC to forward this pricing documentation to us as soon 
as possible because it will be required for supplies to remain valued 
in the practice expense database. In the interim, for the 2005 fee 
schedule, we will maintain the prices currently in the practice expense 
database for the following supplies:

[[Page 66256]]

blood pressure recording form at $0.31, pressure bag (infuser) 500cc or 
1000cc at $8.925, sterile, non-vented, tubing at $1.99.
    Comment: Noting that a $15 supply item, needle-wire for 
localization of lesions in the breast (used preoperatively in CPT codes 
19290 and 19291) was no longer used, a manufacturer requested that we 
replace this supply with an anchor-guide device valued at $245. The 
commenters also stated that this device is used in over 70 offices and 
imaging centers.
    Response: We appreciate the comments from the manufacturer. 
However, during last year's rulemaking process we repriced all of our 
supplies, and the needle-wire price of $15 was an average of prices 
from two different sources ($17 and $13). This price was proposed and 
accepted by the medical specialty societies that we depend on to verify 
typical items in our practice expense database. We have retained the 
$15 needle-wire for localization because we believe it is typically 
used for this procedure.
    The following table lists the items on which we requested input, 
the comments received, and the action taken.
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     Addition of Supply Item to CPT 88365, Tissue In Situ 
Hybridization.
    We proposed to add, on an interim basis, a DNA probe to the CPEP 
database for CPT 88365, tissue in situ hybridization, with the 
understanding that the inclusion of the item would be subject to 
forthcoming RUC review.

[[Page 66259]]

    Comment: Commenters were supportive of this proposal. The College 
of American Pathologists also encouraged us to include updated 
information on practice expense inputs from the September RUC meeting, 
while another commenter suggested that we run the information by the 
specialty society.
    Response: The direct practice expense inputs for this code and two 
other codes in the same family were discussed at the September RUC 
after a presentation made by the specialty society. We have reviewed 
and accepted the RUC recommendations, and these practice expense inputs 
will be included in the practice expense database.
     Ophthalmology Equipment.
    In cases where both the screening and exam lanes are included in 
the equipment list for the same ophthalmology service, we proposed to 
include only one lane because the patient could only be in one lane at 
a time. We proposed defaulting to the exam lane and, thus, we proposed 
deleting the screening lane from the practice expense inputs for these 
procedures. For the services where a lane change was made, time values 
were assigned to the exam lane in accordance with our established 
standard procedure.
    Comment: The American Academy of Ophthalmology requested that we 
specifically identify the codes for which we deleted the screening 
lane, so that they can ensure that the correct lane was deleted.
    Response: This information can be obtained by comparing the direct 
inputs in the practice expense database files for the 2004 and 2005 fee 
schedules that are posted on our Web site (http://www.cms.hhs.gov/physicians/pfs
). However, we would be happy to work with the specialty 

organization to verify the accuracy of the information.
     Parathyroid Imaging, CPT code 78070.
    Based on comments received from the RUC and the specialty society 
representing nuclear medicine, we proposed to crosswalk the charge-
based RVUs from CPT 78306, Bone and/or joint imaging; whole body, to 
CPT 78070, Parathyroid imaging.
    Comment: Several specialty societies expressed appreciation for 
this proposed change.
    Response: We will finalize our proposal and crosswalk the charge-
based RVUs from CPT code 78306 to CPT code 78070.
     Additional PE concerns.
    Comment: We received information from the American Academy of 
Ophthalmology that two biometry devices (a-scan ultrasonic biometry 
unit and an optical coherence biometer) were listed as equipment for 
the ophthalmic biometry service, CPT code 92136. Only the optical 
coherence biometer should be included for this code.
    Response: As requested by the specialty society, we have deleted 
the a-scan biometry unit from the equipment list for CPT code 92136.
    Comment: We received comments from manufacturers, specialty 
societies representing renal physicians and vascular surgeons, and 
individual providers questioning the decrease in nonfacility practice 
expense RVUS for CPT code 36870, Percutaneous thrombectomy, 
arteriovenous fistula, autogenous or nonautogenous graft (includes 
mechanical thrombus extraction and intra-graft thrombolysis. Some 
commenters believe this reduction occurred because the supplies listed 
in the database for this service reflect only one method of providing 
this service. While commenters acknowledged that the database includes 
the supplies used in approximately 50 percent of the instances this 
procedure is performed, the commenters claimed that other supplies may 
be used in the remaining occasions. Commenters requested that we add 
these other specific supplies to the database.
    Response: Because there are a variety of supplies and equipment 
that can be used in performing a service, under the practice expense 
methodology, the supplies and equipment that are used in determining 
payment are those that are most typical for the procedure. Although 
there may be alternative supplies used, the inputs in the database 
reflect what is typically used (which is acknowledged by the 
commenters) and thus we are not adding the requested supplies to the 
practice expense database. However, we did note that the list of 
equipment did not reflect the cost of the angiography room that is used 
during the procedure, and this has been added to our database for this 
code.
    Comment: Societies representing dermatologic specialties expressed 
concern about the reduction in practice expense RVUs for a photodynamic 
therapy service, CPT code 96567. The commenters believe that this 
reduction is due to the application of the dermatology scaling factor 
based on updated practice expense utilization and requested that this 
be reconsidered. These commenters also expressed appreciation that 
there is now a separate HCPCS code to bill for levulan that is needed 
for this procedure, but stated that there are two medical supplies that 
need to be included in the practice expense database: bacitracin, and a 
topical anesthetic cream.
    Response: The practice expense RVUs for photodynamic therapy 
decreased only slightly in this year's proposed rule due to the 
proposed repricing of equipment. The decrease referred to by the 
commenter occurred after the first year that the code was established. 
At that time we obtained the utilization data that demonstrated that 
dermatologists performed the service and we then applied the same 
scaling factors to the code that we do for all dermatology services. 
Therefore, the scaling factor we now apply is correct. We will add the 
requested amount of bacitracin to the supply list for the code. 
Unfortunately, the topical anesthetic requested is not in our database 
and the commenters did not include pricing information so we are not 
able to include the item in our practice expense calculation.
    Comment: A society representing interventional pain physicians 
expressed concern that the practice expense RVUs for CPT code 95990, 
Refilling and maintenance of implantable pump or reservoir for drug 
delivery, spinal (intrathecal, epidural) or brain (intraventricular), 
are understated when compared to the RVUs for CPT code 95991, the same 
service administered by a physician. According to the commenter, CPT 
code 95991 includes a total of 47 minutes of nonphysician labor and 37 
minutes of physician labor or total professional time of 84 minutes. 
This is the total time spent with the patient before, during and after 
the refill. The commenter requested that the number of minutes of 
direct labor for CPT code 95990 should be a minimum of 84 minutes, 
since the nonphysician practitioner would be performing all the 
services associated with CPT code 95991 that are performed by both the 
physician and clinical staff. In addition, the commenter stated that 
CPT code 95990 should also be assigned physician work RVUs because 
there is physician oversight of the service even when performed by 
clinical staff. Two other commenters stated that both CPT codes 95990 
and 95991 should be valued the same as the chemotherapy implanted pump 
refill service, CPT code 96530. The commenters state that this was the 
code originally used to report the above services, that CPT codes 95990 
and 95991 originally were assigned higher RVUs than CPT code 96530 and 
that the MMA adjustments that increased the payment for CPT code 96530 
should be applied to CPT codes 95990 and 95991.

[[Page 66260]]

    Response: The commenter is correct that the clinical staff times 
for CPT codes 95990 and 95991 are the same (50 minutes of clinical 
staff time), although the clinical staff is performing the procedure in 
one case and assisting the physician in the other. However, the 
assumption underlying these times is that, in the cases where it is 
necessary for the physician to personally perform the procedure, the 
nurse is assisting for the entire time. If this assumption is not 
correct, then the clinical staff time for CPT code 95991 is overstated. 
Because CPT codes 95990 and 95991 are not considered drug 
administration codes under section 303 of the MMA, we will not apply 
the adjustments made for CPT code 96530 to these services. Therefore, 
we will not be revising the staff time for either code at this time, 
but would suggest that the RUC look further at this issue. We would 
also suggest that the society bring CPT code 95990 to the 5-year 
review, if they wish to make the case that work RVUs should be 
assigned.
    Comment: The society representing interventional pain physicians 
questioned the ``professional component only'' designation we assigned 
to the codes for the analysis of an implanted intrathecal pump, CPT 
codes 62367 and 62368, and the subsequent low RVUs for these services. 
The commenter stated that if the payment is left as proposed, more 
physicians would stop offering intrathecal pumps to patients.
    Response: This was an inadvertent error on our part that we have 
corrected for the final rule. These services are physicians' services 
that do not have separate professional and technical components. We 
thank the commenter for pointing out this error.
    Comment: The Joint Council of Allergy, Asthma and Immunology 
expressed concern about the reduction in the proposed rule in practice 
expense RVUs for a number of allergy codes, in particular the venom 
therapy CPT codes, 95145 through 95149. The commenter stated that 
Medicare reimbursement for these services does not cover the 
physician's supply expense, due to the expensive venom antigens that 
are part of the service, and believes this is a result of the scaling 
factor being used.
    Response: We are sympathetic to the commenter's concern about the 
high cost of the venom antigens and the specialty's low scaling factor. 
We would be happy to work with JCAAI further to see if a remedy can be 
identified regarding this subset of the allergy codes.
    Comment: Two commenters stated that the practice expense RVUs for 
HCPCS code G0329, Electromagnetic Therapy for ulcers, were too low and 
supplied information on the supplies, equipment and clinical staff time 
for this service.
    Response: Based on the information provided by the commenters, we 
added diapulse asetips and chux to the supplies in the practice expense 
database for this service. We also increased the equipment time to 30 
minutes.
    Comment: We received comments from the North American Spine Society 
(NASS) stating that the specific needle used for CPT codes 22520 and 
22522, which was originally recommended by NASS, is the most expensive 
needle and may not be the most typical. The specialty noted that 
available needles range from $26 to $1,295, which represent the needle 
(termed vertebroplasty kit) in the practice expense database. NASS 
indicated that the specialties involved in performing these procedures 
are conducting a survey to determine the most commonly used needles and 
their costs.
    Response: We appreciate the comments from NASS and look forward to 
receiving the survey results. In the interim, we have averaged the 
needle costs for the range indicated above by the specialty and have 
entered this figure, $660.50, as a placeholder for the 2005 fee 
schedule. Because of the large disparity between the lowest and highest 
needle costs, it is not reasonable to consider $660.50 as a true 
average cost for this supply item. We will continue to work with the 
specialty organizations in order to ensure that the 2006 fee schedule 
practice expense database reflects the value for the most typical 
needle used in these procedures.
    Comment: We received comments from two medical societies with 
concerns about a decrease in practice expense RVUs for CPT code 95819, 
which is part of the EEG sleep study series of codes. These two 
organizations noted their willingness to bring this code to the 
February 2005 RUC meeting in order to rectify the direct practice 
expense inputs for this procedure.
    Response: We have reviewed the family of EEG sleep-study codes and 
believe that a rank order anomaly exists relating primarily to the 2004 
PEAC recommendation to delete the 25 reusable electrodes from CPT code 
95819. We support and encourage these organizations to bring the entire 
EEG family of codes to the February 2005 RUC to ensure that this rank 
order anomaly can be resolved and the correct direct inputs can be 
identified for these procedures.
    Comment: The Coalition for Advancement of Prosthetic Urology 
expressed concern about the continuing decline in practice expense RVUs 
for prosthetic urology procedures. They believe that this is due in 
part to the number of post service visits assigned to these services. 
They stated that information from a survey they conducted shows there 
are typically four to five post service visits rather than three as 
reflected in the database. The commenter also provided a copy of the 
survey information.
    Response: The number of post service visits for these services was 
established based on recommendations from the RUC or by using the 
Harvard data. If they believe that the information regarding the number 
of post service visits for specific procedures is incorrect, the 
Coalition must request that the codes be examined as part of the 5-year 
refinement of work RVUs. An explanation of this process and the 
information that must be provided is found in section VI. of this rule.

B. Geographic Practice Cost Indices (GPCIs)

    We are required by section 1848(e)(1)(A) of the Act to develop 
separate GPCIs to measure resource cost differences among localities 
compared to the national average for each of the three fee schedule 
components. While requiring that the practice expense 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.
    Section 1848(e)(1)(C) of the Act requires us to review and, if 
necessary, to adjust the GPCIs at least every 3 years. This section of 
the Act also requires us to phase-in the adjustment over 2 years and to 
implement only one-half of any adjustment if more than 1 year has 
elapsed since the last GPCI revision. The GPCIs were first implemented 
in 1992. The first review and revision was implemented in 1995, the 
second review was implemented in 1998, and the third review was 
implemented in 2001. We reviewed and revised the malpractice GPCIs as 
part of the November 7, 2003 (68 FR 63196) physician fee schedule final 
rule. We were unable to revise the work and practice expense GPCIs at 
the time of the publication of the November 2003 final rule because the 
U.S. Census data, upon which the work and practice expense GPCIs are 
based, were not yet available.

[[Page 66261]]

    In addition, section 412 of the MMA amended section 1848(e)(1) of 
the Act and established a floor of 1.0 for the work GPCI for any 
locality where the GPCI would otherwise fall below 1.0. This 1.0 work 
GPCI floor is used for purposes of payment for services furnished on or 
after January 1, 2004 and before January 1, 2007. Section 602 of the 
MMA further amended section 1848(e)(1) of the Act for purposes of 
payment for services furnished in Alaska under the physician fee 
schedule on or after January 1, 2004 and before January 1, 2006, and 
sets the work, practice expense, and malpractice expense GPCIs at 1.67 
if any GPCI would otherwise be less than 1.67.
    In the August 5, 2004 proposed rule, we proposed to revise the work 
and practice expense GPCIs for 2005 through 2007 based on updated U.S. 
Census data and Department of Housing and Urban Development (HUD) fair 
market rental (FMR) data. The same data sources and methodology used 
for the development of the 2001 through 2003 GPCIs were used for the 
proposed 2005 through 2007 work and practice expense GPCIs.
    The relative respective weights for the 2004 work, practice expense 
and malpractice GPCIs, as well as the proposed 2005 through 2007 GPCI 
revisions, were derived using the same weights that were used in the 
Medicare Economic Index (MEI) revision discussed in the November 2003 
physician fee schedule final rule (68 FR 63245).
1. Work Geographic Practice Cost Indices
    As explained in the August 5, 2004 proposed rule, we used data from 
the 2000 decennial U.S. Census, by county, of seven professional 
occupations (architecture and engineering; computer, mathematical, and 
natural sciences; social scientists, social workers, lawyers; 
education, library, training; registered nurses; pharmacists; writers, 
artists, editors) in the development of the proposed work GPCIs. 
Physicians' wages are not included because Medicare payments are 
determinant of the physicians' earnings. Including physician wages in 
the physician work GPCI would, in effect, make the index dependent upon 
Medicare payments. Based on analysis performed by Health Economics 
Research, we believe that, in the majority of instances, the earnings 
of physicians will vary among areas to the same degree that the 
earnings of other professionals vary.
    The U.S. Census Bureau has very specific criteria that tabulations 
must meet in order to be released to the public. To maximize the 
accuracy and availability of the data collection, the nonphysician 
professional wage data were aggregated by county and a median wage by 
county was calculated for each occupational category. These median 
wages were then weighted by the total RVUs associated with a given 
county to ultimately arrive at locality-specific work GPCIs. This 
geographic aggregation of Census data is the same methodology that was 
used in previous updates to the GPCIs.
    The proposed work GPCIs reflected one-fourth of the relative cost 
differences, as required by statute, with the exception of those areas 
where MMA requires that the GPCI be set at no lower than 1.00 and that 
the Alaska GPCIs be set at 1.67.
2. Practice Expense GPCIs
    As in the past, we proposed that the practice expense GPCI would be 
comprised of several factors that represent the major expenses incurred 
in operating a physician practice. The impact of each individual factor 
on the calculation of the practice expense GPCI is based on the 
relative weight for that factor consistent with the calculation of the 
MEI. The specific factors included:
     Employee Wage Indices--The employee wage index is based on 
special tabulations of 2000 Census data and is designed to capture the 
median wage by county of the professional labor force. The employee 
wage index uses the median wages of four labor categories that are most 
commonly present in a physician's private practice (administrative 
support, registered nurses, licensed practical nurses, and health 
technicians). Median wages for these occupations were aggregated by 
county in the same manner as the data for the work GPCI.
     Office Rent Indices--The HUD FMR data for the residential 
rents were again used as the proxy for physician office rents as they 
are in the current practice expense GPCIs. The proposed 2005 through 
2007 practice expense GPCIs reflect the final fiscal year 2004 HUD FMR 
data. We believe that the FMR data remain the best available source for 
constructing the office rent index. The FMR data are available for all 
areas, are updated annually, and retain consistency from area-to-area 
and from year-to-year. A reduction in an area's rent index does not 
necessarily mean that rents have gone down in that area since the last 
GPCI update. Since the GPCIs measure area costs compared to the 
national average, a decrease in an area's rent index means that that 
area's rental costs are lower relative to the national average rental 
costs. Addendum X illustrates the changes in the rental index based 
upon the new FMR data.
     Medical Equipment, Supplies, and other Miscellaneous 
Expenses--The GPCIs assume that items such as medical equipment and 
supplies have a national market and that input prices do not vary among 
geographic areas. We were again unable to find any data sources that 
demonstrated price differences by geographic areas. As mentioned in 
previous updates, some price differences may exist, but these 
differences are more likely to be based on volume discounts rather than 
on geographic areas. The medical equipment, supplies, and miscellaneous 
expense portion of the practice expense geographic index will continue 
to be 1.000 for all areas in the proposed GPCIs, except for Alaska 
which will have an overall practice expense GPCI set at 1.67 for 2005 
and 2006.
3. Fee Schedule Payments
    All three of the indices for a specific fee schedule locality are 
based on the indices for the individual counties within the respective 
fee schedule localities. As in the past, fee schedule RVUs are again 
used to weight the county indices (to reflect volumes of services 
within counties) when mapping to fee schedule areas and in constructing 
the national average indices.
    Fee schedule payments are the product of the RVUs, the GPCIs, and 
the conversion factor. Updating the GPCIs changes the relative position 
of fee schedule areas compared to the national average. Because the 
changes represented by the GPCIs could result in total payments either 
greater than or less than what would have been paid if the GPCIs were 
not updated, it is necessary to apply scaling factors to the proposed 
GPCIs to ensure budget neutrality (prior to applying the provisions of 
MMA that change the work GPCIs to a minimum of 1.0 and increase the 
Alaska GPCIs to 1.67 because these provisions are exempted from budget 
neutrality). We determined that the proposed work and practice expense 
GPCIs would have resulted in slightly higher total national payments. 
Because the law requires that each individual component of the fee 
schedule--work, practice expense, and malpractice expense--be 
separately adjusted by its respective GPCI, we proposed to scale each 
of the GPCIs separately. To ensure budget neutrality prior to applying 
the MMA provisions, we have made the following adjustments:
     Decreased the proposed work GPCI by 0.9965;

[[Page 66262]]

     Decreased the proposed practice expense GPCI by 0.9930; 
and
     Increased the malpractice GPCIs that were published in the 
November 7, 2003 final rule by 1.0021.
    Because all geographic payment areas will receive the same 
percentage adjustments, the adjustments do not change the new relative 
positions among areas indicated by the proposed GPCIs. After the 
appropriate scaling factors are applied, the MMA provision setting a 
1.0 floor has been applied to all work GPCIs falling below 1.0. 
Additionally, the GPCIs for Alaska have been set to 1.67 in accordance 
with MMA.
    Comment: A specialty society representing family physicians 
recommended that we work with the Congress to eliminate the GPCIs or 
set them all at 1.00. The society stated that they understand the 
statutory requirement to apply the GPCIs, but that all geographic 
adjustment factors should be eliminated from the physician fee 
schedule, except for those designed to achieve a specific policy good, 
such as adjustment to encourage physicians to practice in underserved 
areas. The commenter contended that elimination of the GPCIs would have 
a positive effect on the availability of medical care to rural 
beneficiaries. Other commenters suggested that we should no longer 
apply the work GPCI to the work RVUs.
    We also received numerous comments on the subject of the source of 
the data we use in the development of the GPCIs. Commenters suggested 
that we find data sources other than Census Bureau data. They believe 
the census data become obsolete very quickly and want us to use data 
that reflect up-to-date prices for inputs. This would, they argue, make 
the GPCI values more realistic.
    A medical specialty group commented that the index is flawed 
because--
     It is based on the tenuous assumption that the relative 
differences in the prices of the input proxies accurately reflect 
relative changes in prices of corresponding physician practice cost 
components; and,
     It applies uniform weights to practice cost components, 
despite evidence of geographic variation in component shares.
    Several commenters had specific concerns about the proxies used for 
the work and practice expense GPCIs, for example--
     Using data for four employee classes to measure relative 
compensation differences for all physicians' office staff which does 
not reflect the changes in medical practice that have occurred since 
the index was developed;
     Using residential real estate prices to reflect relative 
differences in physicians' office costs; and
     Using nationally uniform prices for supplies, equipment, 
and other expenses.
    Another particular concern among commenters is the use of HUD 
apartment rental data as the source of costs for physicians' rents. 
Instead, they argue, we should find, or carry out, a national study of 
retail and business rents.
    Another commenter asserts that these indices have not been verified 
by peer-reviewed published research since they were instituted and that 
we should replace the indices with data from nationwide studies that 
validate and update actual cost of practice data.
    Response: As noted by a commenter, we are required by the Congress 
to adjust for geographic differences in the operational cost of 
physicians' practices by applying geographic price indices to each 
component of the Physician Fee Schedule. However, we also believe it 
appropriate in our resource based payment system to account for real 
differences in physicians' costs in different geographical areas. We 
share the concern about access to care for our rural beneficiaries and, 
in this rule, we are finalizing our proposals on payment adjustments to 
physicians in underserved areas through the HPSA Incentive Payment 
Program. For the commenters who object to the GPCI adjustment to the 
work RVUs, we would note that for 2005 and 2006 the floor for the work 
GPCI will be 1.00.
    With reference to the issue of the GPCI data source, we are always 
open to suggestions about possible data sources; however, we believe 
the most reliable source of national, comparable data at the county 
level is the Census Bureau. Other data sources that we have examined 
either fail to produce the data at the county level, cannot be compared 
nationally, or offer no means of comparability over time.
    We believe that the proxies, while not perfect, are the best tools 
available for the development of the GPCIs. For example, if we were to 
eliminate all proxies, we would have to collect actual physicians' 
office data from a sufficiently large sample in each locality to 
calculate the GPCIs. This would place a substantial burden on the 
office staff and would be prohibitively expensive. Also, the benefits 
from that approach would be uncertain.
    The question of applying uniform weights to practice components is 
an area where more research could lead to better information about the 
variation attributable to case mix and the availability of other health 
resources, input prices, and practice styles. However, it is important 
to note that much of the variation associated with case and specialty 
mix is accounted for by the varying RVUs for different services. 
However, we are open to exploring this issue.
    On the issue of which employee categories are included in the 
employee wage index component of the practice expense GPCI calculation, 
we included those that have been determined in the past to be most 
commonly present in a physician's private practice. We are considering 
the suggestion that we include a broader group of employment categories 
in the future.
    While we recognize that apartment rents are not a perfect proxy for 
physician office rents, there are no existing national studies that 
present reliable retail and business rentals data. We would welcome any 
nationally consistent data that could be used for this purpose.
    We noted in the proposed rule that we were unable to find any data 
sources that demonstrate price differences by geographic areas for 
medical equipment and supplies. Once again, however, we welcome any 
nationally consistent data for this purpose.
    We appreciate the concern expressed by the commenter who suggested 
our GPCI methodology has not been subjected to peer-review validation 
since its inception, but we are not aware of any currently available 
data that could replace our methodology. Furthermore, we believe the 
process of updating the GPCIs periodically through notice and comment 
rulemaking affords an opportunity for a thorough review of the GPCI 
calculation methodology.
    Comment: A member of a medical society suggested that we make the 
floor of 1.00 permanent for the work GPCI and incrementally increase 
both the practice expense GPCI and the professional liability insurance 
GPCI to 1.00 over the next ten years.
    Response: We have no authority to extend the floor of the work 
GPCI, or to create a 1.00 floor for the practice expense and 
professi