[Federal Register: November 21, 2005 (Volume 70, Number 223)]
[Rules and Regulations]
[Page 70115-70476]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21no05-10]
[[Page 70115]]
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Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Part 405, et al.
Medicare Program; Revisions to Payment Policies Under the Physician Fee
Schedule for Calendar Year 2006 and Certain Provisions Related to the
Competitive Acquisition Program of Outpatient Drugs and Biologicals
Under Part B; Final Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 405, 410, 411, 413, 414, 424, and 426
[CMS-1502-FC and CMS-1325-F]
RINs 0938-AN84 and 0938-AN58
Medicare Program; Revisions to Payment Policies Under the
Physician Fee Schedule for Calendar Year 2006 and Certain Provisions
Related to the Competitive Acquisition Program of Outpatient Drugs and
Biologicals Under Part B
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule with comment.
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SUMMARY: This rule addresses Medicare Part B payment policy, including
the physician fee schedule that are applicable for calendar year (CY)
2006; and finalizes certain provisions of the interim final rule to
implement the Competitive Acquisition Program (CAP) for Part B Drugs.
It also revises Medicare Part B payment and related policies regarding:
Physician work; practice expense (PE) and malpractice relative value
units (RVUs); Medicare telehealth services; multiple diagnostic imaging
procedures; covered outpatient drugs and biologicals; supplemental
payments to Federally Qualified Health Centers (FQHCs); renal dialysis
services; coverage for glaucoma screening services; National Coverage
Decision (NCD) timeframes; and physician referrals for nuclear medicine
services and supplies to health care entities with which they have
financial relationships. In addition, the rule finalizes the interim
RVUs for CY 2005 and issues interim RVUs for new and revised procedure
codes for CY 2006. This rule also updates the codes subject to the
physician self-referral prohibition and discusses payment policies
relating to teaching anesthesia services, therapy caps, private
contracts and opt-out, and chiropractic and oncology demonstrations.
As required by the statute, it also announces that the physician
fee schedule update for CY 2006 is -4.4 percent, the initial estimate
for the sustainable growth rate for CY 2006 is 1.7 percent and the
conversion factor for CY 2006 is $36.1770.
DATES: Effective Date: These regulations are effective on January 1,
2006.
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, 2006.
ADDRESSES: In commenting, please refer to file code CMS-1502-FC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four 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 regular 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-1502-FC, P.O. Box 8017, Baltimore, MD
21244-8017.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1502-FC, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (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 (410) 786-7197 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).
Rick Ensor (410) 786-5617 (for issues related to the nonphysician
workpool and supplemental survey data).
Stephanie Monroe (410) 786-6864 (for issues related to the geographic
practice cost index and malpractice RVUs).
Craig Dobyski (410) 786-4584 (for issues related to list of telehealth
services).
Ken Marsalek (410) 786-4502 (for issues related to multiple procedure
reduction for diagnostic imaging services and payment for teaching
anesthesiologists).
Henry Richter (410) 786-4562 (for issues related to payments for end
stage renal disease facilities).
Angela Mason (410) 786-7452 or Catherine Jansto (410) 786-7762 (for
issues related to payment for covered outpatient drugs and
biologicals).
Fred Grabau (410) 786-0206 (for issues related to private contracts and
opt out provision).
David Worgo (410) 786-5919 (for issues related to Federally Qualified
Health Centers).
Dorothy Shannon (410) 786-3396 (for issues related to the outpatient
therapy cap).
Vadim Lubarsky (410) 786-0840 (for issues related to National Coverage
Decision timeframes).
Bill Larson (410) 786-7176 (for issues related to coverage of screening
for glaucoma).
Lia Prela (410) 786-0548 (for issues related to the competitive
acquisition program (CAP) for part B drugs).
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; and the physician self referral designated health
services listed in tables 32 and 33. You can assist us by referencing
the file code CMS-1502-FC and the specific ``issue identifier'' that
precedes the section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of
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the comment period are available for viewing by the public, including
any personally identifiable or confidential business information that
is included in a comment. CMS posts all comments received before the
close of the comment period on its public web site as soon as possible
after they are received. Hard copy comments received timely will be
available for public inspection as they are received, generally
beginning approximately 3 weeks after publication of a document, at the
headquarters of the Centers for Medicare & Medicaid Services, 7500
Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of
each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view
public comments, phone 1-800-743-3951.
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
areas near the top of the page. Select ``physicians'' from the drop-
down menu.
3. Under ``Billing/Payment'' 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 VI.
Table of Contents
I. Background
A. Introduction
B. Development of the Relative Value System
C. Components of the Fee Schedule Payment Amounts
D. Most Recent Changes the Fee Schedule
II. Provisions of the Final Rule
A. Resource-Based Practice Expense Relative Value Units (PE
RVUs)
1. Current Methodology
2. PE Proposals for CY 2006
3. PE Recommendations on CPEP Inputs for CY 2006
4. Payment for Splint and Cast Supplies
5. Miscellaneous PE Issues
B. Geographic Practice Cost Indices (GPCIs)
C. Malpractice RVUs
1. Five Percent Specialty Threshold
2. Specialty Crosswalk Issues
3. Cardiac Catheterization and Angioplasty Exception
4. Dominant Specialty for Low-Volume Codes
5. Collection of Premium Data
D. Medicare Telehealth Services
1. Requests for Adding Services to the List of Medicare
Telehealth Services
2. Definition of an Originating Site
3. Other Issues
E. Contractor Pricing of Unlisted Therapy Modalities and
Procedures
F. Payment for Teaching Anesthesiologists
G. End Stage Renal Disease (ESRD) Related Provisions
1. Revised Pricing Methodology for Separately Billable Drugs and
Biologicals Furnished by ESRD Facilities.
2. Adjustment to Account for Changes in the Pricing of
Separately Billable Drugs and Biologicals, and the Estimated
Increase in Expenditures for Drugs and Biologicals
3. Revisions to Geographic Designations and Wage Indexes Applied
to the ESRD Composite Payment Rate
4. Miscellaneous Comments on ESRD Issues
5. Revisions to the Composite Payment Rate Exceptions Process
H. Payment for Covered Outpatient Drugs and Biologicals
1. ASP issues
2. Payment for Drugs Furnished During CY 2006 in Connection With
the Furnishing of Renal Dialysis Services if Separately Billed by
Renal Dialysis Facilities
3. Clotting Factor Furnishing Fee
4. Payment for Inhalation Drugs and Dispensing Fee
5. Supplying Fee
6. Competitive Acquisition of Outpatient Drugs And Biologicals
Under Part B
I. Private Contracts and Opt-out Provision
J. Multiple Procedure Payment Reduction for Diagnostic Imaging
K. Therapy Cap
L. Chiropractic Demonstration Discussion
M. Supplemental Payments to FQHCs Subcontracting with Medicare
Advantage Plans
N. National Coverage Decisions Timeframes
O. Coverage of Screening for Glaucoma
P. Additional Issues
1. Corrections to Conditions for Medicare Payment (Sec. 424.22)
2. Chemotherapy Demonstration Project
III. Refinement of RVUs for CY 2006 and Response to Public Comments
on Interim RVUs for 2005
A. Summary of Issues Discussed Related to the Adjustment of RVUs
B. Process for Establishing Work RVUs for the 2005 PFS
C. Work RVU Refinements of Interim RVUs
1. Methodology (Includes Table titled ``Work Relative Value Unit
Refinements of the 2004 Interim and Related Relative Value Units'')
2. Interim 2005 Codes
D. Establishment of Interim Work RVUs for New and Revised
Physician's Current Procedural Terminology (CPT) Codes and New
Healthcare Common Procedure Coding System Codes (HCPCS) for 2006
(Includes Table titled ``American Medical Association Specialty
Relative Value Update Committee and Health Care Professionals
Advisory Committee Recommendations and CMS's Decisions for New and
Revised 2006 CPT Codes'')
E. Discussion of Codes for Which There Were No RUC
Recommendations or for Which the RUC Recommendations Were Not
Accepted
F. Establishment of Interim PE RVUs for New and Revised
Physician's Current Procedural Terminology (CPT) Codes and New
Healthcare Common Procedure Coding System (HCPCS) Codes for 2006
IV. Five-Year Refinement of RVUs -Status update
V. Physician Self-Referral Prohibition: Nuclear Medicine and Annual
Update to the List of CPT/HCPCS Codes
A. General
B. Nuclear Medicine
1. Response to Comments
2. Revisions to the List of Codes Identifying Nuclear Medicine
Services
C. Annual Update to the Code List
1. Response to Comments
2. Revisions Effective for 2006
VI. Physician Fee Schedule Update for CY 2006
A. Physician Fee Schedule Update
B. The Percentage Change in the Medicare Economic Index (MEI)
C. The Update Adjustment Factor
VII. Allowed Expenditures for Physicians' Services and the
Sustainable Growth Rate
A. Medicare Sustainable Growth Rate
B. Physicians' Services
C. Preliminary Estimate of the SGR for 2006
D. Revised Sustainable Growth Rate for 2005
E. Final Sustainable Growth Rate for 2004
F. Calculation of 2006, 2005, and 2004 Sustainable Growth Rates
VIII. Anesthesia and Physician Fee Schedule Conversion Factors for
CY 2006
A. Physician Fee Schedule Conversion Factor
B. Anesthesia Fee Schedule Conversion Factor
IX. Telehealth Originating Site Facility Fee Payment Amount Update
X. Provisions of the Final Rule
XI. Waiver of Proposed Rulemaking
XII. Collection of Information Requirements
XIII. Response to Comments
XIV. Regulatory Impact Analysis
Addendum A--Explanation and Use of Addendum B.
Addendum B--Relative Value Units and Related Information
Addendum C--Codes with Interim RVUs
Addendum D--2006 Geographic Practice Cost Indices by Medicare
Carrier and Locality
Addendum E-2006 GAFs
Addendum F--CAP: Revised Single Drug Category List
Addendum G--CAP: Revised New Drugs for CAP Bidding for 2006
Addendum H--List of CPT/HCPCS Codes Used to Describe Certain
Designated Health Services Under Section 1877 of the Social Security
Act
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In addition, because of the many organizations and terms to which
we refer by acronym in this proposed final rule with comment, we are
listing these acronyms and their corresponding terms in alphabetical
order below:
AADA American Academy of Dermatology Association
AAH American Association for Homecare
ABN Advanced Beneficiary Notice
ACC American College of Cardiology
ACG American College of Gastroenterology
ACR American College of Radiology
AFROC Association of Freestanding Radiation Oncology Centers
AGA American Gastroenterological Association
AMA American Medical Association
AMP Average manufacturer price
AOAO American Osteopathic Academy of Orthopedics
ASA American Society of Anesthesiologists
ASGE American Society of Gastrointestinal Endoscopy
ASP Average sales price
ASTRO American Society for Therapeutic Radiation Oncology
AUA American Urological 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
BNF Budget neutrality factor
BSA Body surface area
CAP Competitive Acquisition Program
CBSA Core-Based Statistical Area
CF Conversion factor
CFR Code of Federal Regulations
CMA California Medical Association
CMS Centers for Medicare & Medicaid Services
CNS Clinical nurse specialist
COBC Coordination of Benefits Contractor
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)
CRNA Certified Registered Nurse Anesthetist
CT Computed tomography
CTA Computed tomographic angiography
CY Calendar year
DAW Dispense as written
DHS Designated health services
DME Durable medical equipment
DMERC Durable Medical Equipment Regional Carrier
DSMT Diabetes outpatient self-management training services
EAC Estimated acquisition cost
ECP External counterpulsation
E/M Evaluation and management
EPO Erythopoeitin
ESRD End stage renal disease
FAX Facsimile
FDA Food and Drug Administration
FI Fiscal intermediary
FQHC Federally qualified health center
FR Federal Register
GAF Geographic adjustment factor
GAO Government Accountability Office
GPCI Geographic practice cost index
GPOs Group Purchasing Organizations
HCPAC Health Care Professional Advisory Committee
HCPCS Healthcare Common Procedure Coding System
HHA Home health agency
HHS (Department of) Health and Human Services
HIC Health Insurance Number
HIPAA Health Insurance Portability and Accountability Act of 1996,
Public Law 104-191
HOCM High Osmolar Contrast Media
HPSA Health professional shortage area
HRSA Health Resources and Services Administration (HHS)
IDTFs Independent diagnostic testing facilities
IPF Inpatient psychiatric facility
IPPS Inpatient prospective payment system
IRF Inpatient rehabilitation facility
ISO Insurance Services Office
IVIG Intravenous immune globulin
JCAAI Joint Council of Allergy, Asthma, and Immunology
JUA Joint underwriting association
LCD Local coverage determination
LTCH Long-term care hospital
LOCM Low Osmolar Contrast Media
MA Medicare Advantage
MCAC Medicare Coverage Advisory Committee
MCG Medical College of Georgia
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MMA Medicare Prescription Drug, Improvement, and Modernization Act of
2003
MNT Medical nutrition therapy
MRA Magnetic resonance angiography
MRI Magnetic resonance imaging
MSA Metropolitan statistical area
MSN Medicare summary notice
NCD National coverage determination
NCQDIS National Coalition of Quality Diagnostic Imaging Services
NDC National drug code
NECMA New England County Metropolitan Area
NECTA New England City and Town Area
NP Nurse practitioner
NPP Nonphysician practitioners
NPWP Nonphysician work pool
OBRA Omnibus Budget Reconciliation Act
OIG Office of Inspector General
OMB Office of Management and Budget
OPPS Outpatient prospective payment system
OT Occupational therapy
PA Physician assistant
PC Professional component
PE Practice Expense
PEAC Practice Expense Advisory Committee
PERC Practice Expense Review Committee
PET Positron emission tomography
PFS Physician Fee Schedule
PLI Professional liability insurance
PPAC Practicing Physicians Advisory Council
PIN Provider identification number
PPI Producer price index
PPO Preferred provider organization
PPS Prospective payment system
PRA Paperwork Reduction Act
PT Physical therapy
RFA Regulatory Flexibility Act
RIA Regulatory impact analysis
RN Registered nurse
RUC (AMA's Specialty Society) Relative (Value) Update Committee
RVU Relative value unit
SGR Sustainable growth rate
SMS (AMA's) Socioeconomic Monitoring System
SNF Skilled nursing facility
SNM Society for Nuclear Medicine
TA Technology assessment
TC Technical component
TEB Thoracic electrical bioimpedance
tPA Tissue-type plasminogen activator
UAF Update adjustment factor
UPIN Unique provider identification number
WAC Wholesale acquisition cost
WAMP Widely available market price
I. Background
A. Introduction
Since January 1, 1992, Medicare has paid for physicians' services
under section 1848 of the Social Security Act (the Act), ``Payment for
Physicians` Services.'' The Act requires that payments under the
physician fee schedule (PFS) be based on national uniform relative
value units (RVUs) based on the resources used in furnishing a service.
Section 1848(c) of the Act requires that national RVUs be established
for physician work, practice expense (PE), and malpractice expense.
Prior to the establishment of the
[[Page 70119]]
resource-based relative value system, Medicare payment for physicians'
services was based on reasonable charges.
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. Development of the Relative Value System
1. Work RVUs
The concepts and methodology underlying the PFS were enacted as
part of the Omnibus Budget Reconciliation Act (OBRA) of 1989, Public
Law 101-239, and OBRA 1990, (Public Law 101-508). The final rule
published November 25, 1991 (56 FR 59502) set forth the fee schedule
for payment for physicians' services beginning January 1, 1992.
Initially, only the physician work RVUs were resource-based, and the PE
and malpractice RVUs were based on average allowable charges.
The physician work RVUs established for the implementation of the
fee schedule in January 1992 were developed with extensive input from
the physician community. A research team at the Harvard School of
Public Health developed the original physician work RVUs for most codes
in a cooperative agreement with the Department of Health and Human
Services (HHS). In constructing the code-specific vignettes for the
original physician work RVUs, Harvard worked with panels of experts,
both inside and outside the government, and obtained input from
numerous physician specialty groups.
Section 1848(b)(2)(A) of the Act specifies that the RVUs for
radiology services are based on a relative value scale we adopted under
section 1834(b)(1)(A) of the Act, (the American College of Radiology
(ACR) relative value scale), which we integrated into the overall PFS.
Section 1848(b)(2)(B) of the Act specifies that the RVUs for anesthesia
services are based on RVUs from a uniform relative value guide. We
established a separate conversion factor (CF) for anesthesia services,
and we continue to utilize time units as a basis for determining
payment for these services. As a result, there is a separate payment
methodology for anesthesia services.
We establish physician work RVUs for new and revised codes based on
recommendations received from the American Medical Association's (AMA)
Specialty Society Relative Value Update Committee (RUC).
2. Practice Expense Relative Value Units (PE RVUs)
Section 121 of the Social Security Act Amendments of 1994 (Pub. L.
103-432), enacted on October 31, 1994, amended section
1848(c)(2)(C)(ii) of the Act and required us to develop resource-based
PE RVUs for each physician's service beginning in 1998. We were to
consider the staff, equipment, and supplies used in the provision of
various medical and surgical services. The legislation specifically
required that, in implementing the new system of PE RVUs, we apply the
same budget-neutrality provisions that are applicable to other
adjustments under the physician fee schedule.
Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L.
105-33), amended section 1848(c)(2)(C)(ii) of the Act to delay
implementation of the resource-based PE RVU system until January 1,
1999. In addition, section 4505(b) of the BBA provided for a 4-year
transition period from charge-based PE RVUs to resource-based RVUs.
We established the resource-based PE RVUs for each physician's
service in a final rule, published November 2, 1998 (63 FR 58814),
effective for services furnished in 1999. Based on the requirement to
transition to a resource-based system for PE over a 4-year period,
resource-based PE RVUs did not become fully effective until 2002.
This resource-based system was based on two significant sources of
actual PE data: The Clinical Practice Expert Panel (CPEP) data and the
AMA's Socioeconomic Monitoring System (SMS) data. The CPEP data were
collected from panels of physicians, practice administrators, and
nonphysicians (for example, registered nurses) nominated by physician
specialty societies and other groups. The CPEP panels identified the
direct inputs required for each physician's 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 PEs.
Separate PE RVUs are established for procedures that can be
performed in both a nonfacility setting, such as a physician's office,
and a facility setting, such as a hospital outpatient department. The
difference between the facility and nonfacility RVUs reflects the fact
that a facility receives separate payment from Medicare for its costs
of providing the service, apart from payment under the PFS. The
nonfacility RVUs reflect all of the direct and indirect PEs of
providing a particular service outside a facility setting.
Section 212 of the Medicare, Medicaid and State Child Health
Insurance Program Balanced Budget Refinement Act of 1999 (BBRA) (Pub.
L. 106-113) directed the Secretary to establish a process under which
we accept and use, to the maximum extent practicable and consistent
with sound data practices, data collected or developed by entities and
organizations to supplement the data we normally collect in determining
the PE component. On May 3, 2000, we published the interim final rule
(65 FR 25664) that set forth the criteria for the submission of these
supplemental PE survey data. The criteria were modified in response to
comments received, and published in the Federal Register (65 FR 65376)
as part of the November 1, 2000 final rule. The PFS final rules
published in 2001 and 2003, respectively, (66 FR 55246 and 68 FR 63196)
extended the period during which we would accept these supplemental
data.
As discussed in the January 7, 2004 physician fee schedule final
rule (69 FR 1092), section 303(a)(1)(B) of MMA amended section
1848(c)(2) of the Act by adding new subparagraph (H), ``Adjustments in
Practice Expense Relative Value Units for Certain Drug Administration
Services beginning in 2004''. Subparagraph (H)(i) requires the
Secretary to determine the practice expense RVUs for 2004 using
practice expense surveys submitted to the Secretary as of January 1,
2003 by a physician specialty organization in accordance with section
212 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act
(BBRA) of 1999 if the survey: (1) Covers practice expenses for oncology
drug administration services; and (2) meets criteria established by the
Secretary for acceptance of such surveys. Consistent with section
1848(c)(2)(H)(i) of the Act, in January 7, 2005 final rule, we
announced we would use the ASCO survey to determine the practice
expense RVUs for physician fee schedule services furnished on or after
January 1, 2004 because it: (1) Was submitted prior to January 1, 2003;
(2) includes expenses for drug administration services; and (3) meets
criteria we have established for use of surveys.
[[Page 70120]]
3. Resource-Based Malpractice RVUs
Section 4505(f) of the BBA amended section 1848(c) of the Act to
require us to implement resource-based malpractice RVUs for services
furnished on or after 2000. The resource-based malpractice RVUs were
implemented in the PFS final rule published November 2, 1999 (64 FR
59380). The malpractice RVUs are based on malpractice insurance premium
data collected from commercial and physician-owned insurers from all
the States, the District of Columbia, and Puerto Rico.
4. Refinements to the RVUs
Section 1848(c)(2)(B)(i) of the Act requires that we review all
RVUs no less often than every five years. The first 5-year review of
the physician work RVUs went into effect in 1997, published on November
22, 1996 (61 FR 59489). The second 5-year review went into effect in
2002, published on November 1, 2001 (66 FR 55246). The next 5-year
review is scheduled to go into effect in 2007.
In 1999, the AMA's RUC established the Practice Expense Advisory
Committee (PEAC) for the purpose of refining the direct PE inputs.
Through March of 2004, the PEAC provided recommendations to CMS for
over 7,600 codes (all but a few hundred of the codes currently listed
in the AMA's Current Procedural Terminology (CPT) codes).
In the November 15, 2004, PFS final rule (69 FR 66236), hereinafter
referred to as the CY 2005 final rule, we implemented the first 5-year
review of the malpractice RVUs (69 FR 66263).
5. Adjustments to RVUS Are Budget Neutral
Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments
in RVUs for a year may not cause total PFS payments to differ by more
than $20 million from what they would have been if the adjustments were
not made. In accordance with section 1848(c)(2)(B)(ii)(II) of the Act,
if adjustments to RVUs cause expenditures to change by more than $20
million, we make adjustments to ensure that expenditures do not
increase or decrease by more than $20 million.
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 3 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.
To calculate the payment for every physician service, the
components of the fee schedule (physician work, PE, and malpractice
RVUs) are adjusted by a geographic practice cost index (GPCI). The
GPCIs reflect the relative costs of physician work, PEs, and
malpractice insurance in an area compared to the national average costs
for each component.
Payments are converted to dollar amounts through the application of
a CF, which is calculated by the Office of the Actuary and is updated
annually for inflation.
The general formula for calculating the Medicare fee schedule
amount for a given service and fee schedule area can be expressed as:
Payment = [(RVU work x GPCI work) + (RVU PE x GPCI PE) + (RVU
malpractice x GPCI malpractice)] x CF.
The CF for calendar year (CY) 2005 appears in section VI, Physician
Fee Schedule Update for CY 2006. The RVUs for CY 2006 are in Addendum
B. The GPCIs for CY 2006 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. However, in accordance with the
statute, the GAF for the physician's work reflects one-quarter of the
relative cost of physician's work compared to the national average.
D. Most Recent Changes to the Fee Schedule
In the CY 2005 final rule (69 FR 66236), we refined the resource-
based PE RVUs and made other changes and clarifications to Medicare
Part B payment policy. These included:
Supplemental survey data for PE;
Updated GPCIs for physician work and PE;
Updated malpractice RVUs;
Revised requirements for supervision of therapy
assistants;
Revised payment rules for low osmolar contrast media
(LOCM);
Payment policies for physicians and practitioners managing
dialysis patients;
Clarification of care plan oversight (CPO) requirements;
Requirements for supervision of diagnostic psychological
testing services;
Clarifications to the policies affecting therapy services
provided incident to a physician's service;
Requirements for assignment of Medicare claims;
Additions to the list of telehealth services;
Changes to payments for drug administration services; and
Several coding issues.
The CY 2005 final rule (69 FR 66236) also addressed the following
provisions of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173):
Coverage of an initial preventive physical examination.
Coverage of cardiovascular screening blood tests.
Coverage of diabetes screening tests.
Incentive payment improvements for physicians in physician
shortage areas.
Changes to payment for covered outpatient drugs and
biologicals and drug administration services.
Changes to 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.
Coverage of 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.
Payment for diagnostic mammograms.
Coverage of religious nonmedical health care institution
items and services to the beneficiary's home.
In addition, the CY 2005 PFS final rule finalized the calendar year
(CY) 2004 interim RVUs for new and revised codes in effect during CY
2004 and issued interim RVUs for new and revised procedure codes for CY
2005; updated the codes subject to the physician self-referral
prohibition; discussed payment for set up of portable x-ray equipment;
discussed the third 5-year refinement of work RVUs; and solicited
comments on potentially misvalued work RVUs.
In accordance with section 1848(d)(1)(E) of the Act, we also
announced that the PFS update for CY 2005 would be 1.5 percent; the
initial
[[Page 70121]]
estimate for the sustainable growth rate for CY 2005 was 4.3; and the
CF for CY 2005 would be $37.8975.
II. Provisions of the Final Rule
In response to the August 8, 2005 proposed rule (70 FR 45764), we
received approximately 15,000 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 PE and the negative update to the
PFS, GPCIs, and Teaching Anesthesiology.
The proposed rule discussed policies that affected the RVUs on
which payment for certain services would be based and other changes to
Medicare Part B payment policy. We also discussed changes related to
payment for covered outpatient drugs and biologicals; supplemental
payments to federally qualified health centers (FQHCs); payment for
renal dialysis services; the national coverage decision (NCD) process;
coverage of screening for glaucoma; private contracts; and physician
referrals for nuclear medicine services and supplies to health care
entities with which they have financial relationships. RVU changes
implemented through this final rule with comment 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 8, 2005 proposed
rule. More detailed background information for each issue can be found
in the August 8, 2005 proposed rule.
A. Resource Based Practice Expense (PE) RVUs
Based on section 1848(c)(1)(B) of the Act, PEs are the portion of
the resources used in furnishing the service that reflects the general
categories of physician and practitioner expenses (such as office rent
and wages of personnel, but excluding malpractice expenses).
Section 121 of the Social Security 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 PE RVUs for each
physician's service. Up until that point, physicians' PEs were based on
historical allowed charges. This legislation stated that the revised PE
methodology must consider the staff, equipment, and supplies used in
the provision of various medical and surgical services in various
settings beginning in 1998. The Secretary has interpreted this to mean
that Medicare payments for each service would be based on the relative
PE resources typically involved with performing the service.
The initial implementation of resource-based PE RVUs was delayed
until January 1, 1999, by section 4505(a) of the BBA. In addition,
section 4505(b) of the BBA required the new payment methodology be
phased-in over 4 years, effective for services furnished in CY 1999,
and fully effective in CY 2002. The first step toward implementation
called for by the statute was to adjust the PE values for certain
services for CY 1998. Section 4505(d) of BBA required that, in
developing the resource-based PE RVUs, the Secretary must:
Use, to the maximum extent possible, generally accepted
cost accounting principles that recognize all staff, equipment,
supplies, and expenses, not solely those that can be linked to specific
procedures.
Develop a refinement method to be used during the
transition.
Consider, in the course of notice and comment rulemaking,
impact projections that compare new proposed payment amounts to data on
actual physician PEs.
Beginning in CY 1999, Medicare began the 4 year transition to
resource-based PE RVUs. In CY 2002, the resource-based PE RVUs were
fully transitioned.
1. Current Methodology
The following sections discuss the current PE methodology.
a. Data Sources
There are two primary data sources used to calculate PEs. The AMA's
SMS survey data are used to develop the PEs per hour for each
specialty. The second source of data used to calculate PEs was
originally developed by the CPEP. The CPEP data include the supplies,
equipment, and staff times specific to each procedure.
The AMA developed the SMS survey in 1981 and discontinued it in
1999. Beginning in 2002, we incorporated the 1999 SMS survey data into
our calculation of the PE RVUs, using a 5-year average of SMS survey
data. (See Revisions to Payment Policies and Five-Year Review of and
Adjustments to the Relative Value Units Under the Physician Fee
Schedule for CY 2002 final rule, published November 1, 2001 (66 FR
55246).) The SMS PE survey data are adjusted to a common year, 1995.
The SMS data provide the following six categories of PE costs:
Clinical payroll expenses, which are payroll expenses
(including fringe benefits) for clinical nonphysician personnel.
Administrative payroll expenses, which are payroll
expenses (including fringe benefits) for nonphysician personnel
involved in administrative, secretarial or clerical activities.
Office expenses, which include expenses for rent, mortgage
interest, depreciation on medical buildings, utilities and telephones.
Medical material and supply expenses, which include
expenses for drugs, x-ray films, and disposable medical products.
Medical equipment expenses, which include depreciation
expenses, leases, and rent of medical equipment used in the diagnosis
or treatment of patients.
All other expenses, including expenses for legal services,
accounting, office management, professional association memberships,
and any professional expenses not mentioned above.
In accordance with section 212 of the BBRA, we established a
process to supplement the SMS data for a specialty with data collected
by entities and organizations other than the AMA (that is, the
specialty itself). (See the Criteria for Submitting Supplemental
Practice Expense Survey Data interim final rule with comment period,
published on May 3, 2000 (65 FR 25664).) Originally, the deadline to
submit supplementary survey data was through August 1, 2001. This
deadline was extended in the November 1, 2001 final rule through August
1, 2003. (See the Revisions to Payment Policies and Five-Year Review of
and Adjustments to the Relative Value Units Under the Physician Fee
Schedule for CY 2002 final rule, published on November 1, 2001 (66 FR
55246).) Then, to ensure maximum opportunity for specialties to submit
supplementary survey data, we extended the deadline to submit surveys
until March 1, 2005. (See the Revisions to Payment Policies Under the
Physician Fee Schedule for CY 2002 final rule, published on November 7,
2003 (68 FR 63196).)
The CPEPs consisted of panels of physicians, practice
administrators, and nonphysicians (registered nurses, for example) who
were nominated by physician specialty societies and other groups. There
were 15 CPEPs consisting
[[Page 70122]]
of 180 members from more than 61 specialties and subspecialties.
Approximately 50 percent of the panelists were physicians.
The CPEPs identified specific inputs involved in each physician
service provided in an office or facility setting. The inputs
identified were the quantity and type of nonphysician labor, medical
supplies, and medical equipment.
In 1999, the AMA's Multi-specialty Relative Value Update Committee
(RUC) established the PEAC. Since 1999, and until March 2004, the PEAC,
a multi-specialty committee, reviewed the original CPEP inputs and
provided us with recommendations for refining these direct PE inputs
for existing CPT codes. Through its last meeting in March 2004, the
PEAC provided recommendations which we have reviewed and accepted for
over 7,600 codes. As a result of this scrutiny by the PEAC, the current
CPEP/RUC inputs differ markedly from those originally recommended by
the CPEPs. The PEAC has now been replaced by the Practice Expense
Review Committee (PERC), which acts to assist the RUC in recommending
PE inputs.
b. Allocation of Practice Expenses to Services
In order to establish PE RVUs for specific services, it is
necessary to establish the direct and indirect PE associated with each
service. Our current approach is to allocate aggregate specialty
practice costs to specific procedures and, thus, it is often referred
to as a ``top-down'' approach. The specialty PEs are derived from the
AMA's SMS survey and supplementary survey data. The PEs for a given
specialty are allocated to the services performed by that specialty on
the basis of the CPEP/RUC data and work RVUs assigned to each CPT code.
The specific process is detailed as follows:
Step 1--Calculation of the SMS Cost Pool for Each Specialty
The six SMS cost categories can be described as either direct or
indirect expenses. The three direct expense categories include clinical
labor, medical supplies and medical equipment. Indirect expenses
include administrative labor, office expense, and all other expenses.
We combine these indirect expenses into a single category. The SMS cost
pool for each specialty is calculated as follows:
The specialty PE per hour (PE/HR) for each of the three
direct and one indirect cost categories from the SMS is calculated by
dividing the aggregate PE per specialty by the specialty's total hours
spent in patient care activities (also determined by the SMS survey).
The PE/HR is divided by 60 to obtain the PE per minute (PE/MIN).
Each specialty's PE pools (for each of the three direct
and one indirect cost categories) are created by multiplying the PE/MIN
for the specialty by the total time the specialty spent treating
Medicare patients for all procedures (determined using Medicare
utilization data). Physician time on a procedure-specific level is
available through RUC surveys of new or revised codes and through
surveys conducted as part of the 5-year review process. For codes that
the RUC has not yet reviewed, the original data from the Harvard
resource-based RVU system survey is used. Physician time includes time
spent on the case before, during, and after the procedure. The
physician procedure time is multiplied by the frequency that each
procedure is performed on Medicare patients by the specialty.
The total specialty-specific SMS PE for each cost category
is the sum, for each direct and indirect cost category, of all of the
procedure-specific total PEs.
Table 1 illustrates an example of the calculation of the total SMS
cost pools for the three direct and one indirect cost categories
discussed in step 1. For this specialty, PE/HR for clinical payroll
expenses is $9.30 per hour. The hourly rate is divided by 60 minutes to
obtain the clinical payroll per minute for the specialty.
The total clinical payroll for providing hypothetical procedure
00001 for this specialty of $3,633,465 is the result of taking the
clinical payroll per minute of $0.16; multiplying this by the physician
time for procedure 00001 (56 minutes); and multiplying the result by
the number of times this procedure was provided to Medicare patients by
this specialty (418,602). The total amount spent on clinical payroll in
this specialty is $667,457,018. This amount is calculated by summing
the clinical payroll expenses of procedure 00001 and all of the other
services provided by this specialty.
[GRAPHIC] [TIFF OMITTED] TR21NO05.002
Step 2--Calculation of CPEP Cost Pool
CPEP data provide expenditure amounts for the direct expense
categories (clinical labor, supplies, and equipment cost) at the
procedure level. Multiplying the CPEP procedure-level PEs for each of
these three categories by the number of times the specialty provided
the procedure, produces a total category cost, per procedure, for that
specialty. The sum of the total expenses from each procedure results in
the total CPEP category cost for the specialty.
[[Page 70123]]
For example, in Table 2, using CPEP data, the clinical labor cost
of procedure 00001 is $65.23. Under the methodology described above in
this step, this is multiplied by the number of services for the
specialty (418,602), to yield the total CPEP data clinical labor cost
of the procedure: $27,305,408. In this example, the clinical labor cost
for all other services performed by this specialty is $831,618,600.
Therefore, the entire clinical labor CPEP expense pool for the
specialty is $858,924,008. Step 2 is repeated to calculate the CPEP
supply and equipment costs.
[GRAPHIC] [TIFF OMITTED] TR21NO05.003
Step 3--Calculation and Application of Scaling Factors
This step ensures that the total of the CPEP costs across all
procedures performed by the specialty equates with the total direct
costs for the specialty as reflected by the SMS data. To accomplish
this, the CPEP data are scaled to SMS data by means of a scaling factor
so that the total CPEP costs for each specialty equals the total SMS
cost for the specialty. (The scaling factor is calculated by dividing
the specialty's SMS pool by the specialty's CPEP pool.)
The unscaled CPEP cost per procedure value, at the direct cost
level, is then multiplied by the respective specialty scalar to yield
the scaled CPEP procedure value. The sum of the scaled CPEP direct cost
pool expenditures equals the total scaled direct expense for the
specific procedure at the specialty level.
In the Step 3 example shown in Table 3, the SMS total clinical
labor costs for the specialty is $667,457,018. This amount divided by
the CPEP total clinical labor amount of $858,924,008 yields a scaling
factor of 0.78. The CPEP clinical labor cost for hypothetical procedure
00001 is $65.23. Multiplying the 0.78 scaling factor for clinical labor
costs by $65.23 yields the scaled clinical labor cost amount of $50.69.
Individual scaling factors must also be calculated for supply and
equipment expenses. The sum of the scaled direct cost values, $50.69,
$43.90, and $139.45, respectively, equals the total scaled direct
expense of $234.04.
Table 3.--Calculation and Application of Scaling Factors
----------------------------------------------------------------------------------------------------------------
Total Scaled
direct expense
Standard methodology Clinical/Labor Supplies Equipment (Sum of A, B, and
C)
(A) (B) (C) (D)
----------------------------------
(a) Total--SMS Pool.............. $667,457,018 $344,493,945 $531,094,831
(b) Total--CPEP Pool............. 858,924,008 411,894,617 5,929,275,023
(c) Scaling Factor............... 0.78 52.49 1,556.86
Unscaled Value
(e) CPT 00001--Scaled Value...... 50.69 43.90 139.45 $234.04
(c) = (a)/(b)
(e) = (c)*(d)
----------------------------------------------------------------------------------------------------------------
Step 4--Calculation of Indirect Expenses
Indirect PEs cannot be directly attributed to a specific service
because they are incurred by the practice as a whole. Indirect costs
include rent, utilities, office equipment and supplies, and accounting
and legal fees. There is not a single, universally accepted approach
for allocating indirect practice costs to individual procedure codes.
Rather allocation involves judgment in identifying the base or bases
that are the best measures of a practice's indirect costs.
To allocate the indirect PEs to a specific service, we use the
following methodology:
The total scaled direct expenses and the converted work
RVU (the work RVU for the service is multiplied by $34.5030, the 1995
CF) are added together, and then multiplied by the number of services
provided by the specialty to Medicare patients.
The total indirect PEs per specialty are calculated by
summing the indirect expenses for all other procedures provided by that
specialty.
For example, in Table 4, the physician work RVU for procedure 00001
is 2.36. Multiplying the work RVU by the 1995 CF of $34.5030 equals
$81.43. The physician work value is added to the scaled total direct
expense from Step 3
[[Page 70124]]
($234.04). The total of $314.47 is a proxy for the indirect PE for the
specialty attributed to this procedure. The total indirect expenses are
then multiplied by the number of times procedure 00001 is provided by
the specialty (418,602), to calculate total indirect expenses for this
procedure of $132,055,728. The process is repeated across all
procedures performed by the specialty, and the indirect expenses for
each service are summed to arrive at the total specialty indirect PE
pool of $6,745,545,434.
Table 4.--Calculation of Indirect Expense
----------------------------------------------------------------------------------------------------------------
Total direct
Standard Methodology Physician Work* expense Total
(A) (B) (C)
-------------------------------------------------------
(a) CPT 00001......................................... $81.43 $234.04 $315.47
(b) Allowed Services.................................. ................. ................. 418,602
--------------------
(c) Subtotal.......................................... ................. ................. 132,055,728
(d) All Other Services................................ ................. ................. 6,613,489,706
====================
(e) Total Indirect Expense............................ ................. ................. 6,745,545,434
----------------------------------------------------------------------------------------------------------------
* Calculated by multiplying work RVU of 2.36 by 1995 CF of $34.5030.
Step 5--Calculation and Application of Indirect Scaling Factors
Similar to the direct costs, the indirect costs are scaled to
ensure that the total across all procedures performed by the specialty
equates with the total indirect costs for the specialty as reflected by
the SMS data. To accomplish this, the indirect costs calculated in Step
4 (Table 4) are scaled to SMS data. The calculation of the indirect
scaling factors is as follows:
The specialty's total SMS indirect expense pool is divided
by the specialty's total indirect expense pool calculated in Step 4
(Table 4), to yield the indirect expense scaling factor.
The unscaled indirect expense amount, at the procedure
level, is multiplied by the specialty's scaling factor to calculate the
procedure's scaled indirect expenses.
The sum of the scaled indirect expense amount and the
procedure's direct expenses yields the total PEs for the specialty for
this procedure.
In table 5, to calculate the indirect scaling factor for
hypothetical procedure 00001, divide the total SMS indirect pool,
$3,337,285,089 (calculated in Step 1-Table 1)), by the total indirect
expense for the specialty across all procedures of $6,745,545,434. This
results in a scaling factor of 0.49. Next, the unscaled indirect cost
of $315.47 is multiplied by the 0.49 scaling factor, resulting in
scaled indirect cost of $156.07. To calculate the total PEs for the
specialty for procedure 00001, the scaled direct and indirect expenses
are added, totaling $390.12.
Table 5.--Calculation of Indirect Scaling Factors and Total Practice Expenses
----------------------------------------------------------------------------------------------------------------
Specialty
specific practice
Standard methodology Indirect costs Direct cost expenses (Sum of
A, B)
(A) (B) (C)
-------------------------------------------------------
(a) Total--SMS Indirect Expense....................... $3,337,285,089
(b) Total Indirect Expense for all Procedures (from 6,745,545,434
Step 4)..............................................
(c) Scaling Factor.................................... 0.49
(d) CPT 00001--Unscaled Value......................... 315.47
(e) CPT 00001--Scaled Value........................... 156.07 $234.04 $390.12
----------------------------------------------------------------------------------------------------------------
Step 6--Weighted Average of RVUs for Procedures Performed by More Than
One Specialty
For codes that are performed by more than one specialty, a
weighted-average PE is calculated based on Medicare frequency data of
all specialties performing the procedure as shown in Table 6.
Table 6.--Weight Averaging for All Specialties
------------------------------------------------------------------------
Practice expense Percent of total
Standard methodology value allowed services
(A) (B)
-----------------------------------
(a) Specialty Total Practice $390.12 83
Expense..........................
(b) Weighted Avg.--All Other 929.87 17
Specialties......................
(c) Weighted Avg.--All Specialties 481.70 100
------------------------------------------------------------------------
[[Page 70125]]
Step 7--Budget Neutrality and Final RVU Calculation
The total scaled direct and indirect inputs are then adjusted by a
budget neutrality factor (BNF) to calculate RVUs. Section
1848(c)(2)(B)(ii)(II) of the Act provides that adjustments in RVUs may
not cause total PFS payments to differ by more than $20 million from
what they would have been if the adjustments were not made. Budget
neutrality for the upcoming year is determined relative to the sum of
PE RVUs for the current year. Although the PE RVUs for any particular
code may vary from year-to-year, the sum of PE RVUs across all codes is
set equal to the current year. The BNF is equal to the sum of the
current year's PE RVUs, divided by the sum of the direct and indirect
inputs across all codes for the upcoming year. The BNF is applied to
(multiplied by) the scaled direct and indirect expenses for each code
to set the PE RVU for the upcoming year.
In Table 7, the sum of the scaled direct and indirect expenses for
hypothetical code 00001 ($481.70) is multiplied by the BNF (0.02 in
this example) to yield a PE RVU of 10.60.
Table 7.--Calculate PE RVU
----------------------------------------------------------------------------------------------------------------
Total scaled
direct and Budget neutrality Final PE RVU
indirect inputs factor
(A) (B) (C)
--------------------------------------------------------
(a) Code 00001......................................... $481.70 0.02 10.60
----------------------------------------------------------------------------------------------------------------
c. Other Methodological Issues: Nonphysician Work Pool (NPWP)
As an interim measure, until we could further analyze the effect of
the top-down methodology on the Medicare payment for services with no
physician work (including the technical components (TCs) of radiation
oncology, radiology and other diagnostic tests), we created a separate
PE pool for these services. However, any specialty society could
request that its services be removed from the nonphysician work pool
(NPWP). We have removed some services from the NPWP if we find that the
requesting specialty provides the service the majority of the time.
NPWP Step 1--Calculation of the SMS Cost Pool for Each Code
This step parallels the calculations described above for the
standard ``top-down'' PE allocation methodology. For codes in the NPWP,
the direct and indirect SMS costs are set equal to the weighted average
of the PE/HR for the specialties that provide the services in the pool.
Clinical staff time is substituted for physician time in the
calculation. The clinical staff time for the code is from CPEP data.
Otherwise, the calculation is similar to the method described
previously for codes with physician time.
The following example in Table 8 illustrates this calculation for
hypothetical code 00002. In this example, the average clinical payroll
PE/HR for all specialties in the NPWP is $12.30 and the clinical staff
time for code 00002 is 116 minutes.
[GRAPHIC] [TIFF OMITTED] TR21NO05.004
NPWP Step 2--Calculation of Charge-Based PE RVU Cost Pool
The NPWP calculation uses the 1998 (charge-based) PE RVU value for
the code, multiplied by the 1995 CF (25.74 x $34.503 = $888.11). The
percentage of clinical labor, supplies and equipment are the percentage
that each PE category represents for all physicians relative to the
total PE for all physicians (calculated from the SMS data) as shown in
Table 9.
[[Page 70126]]
[GRAPHIC] [TIFF OMITTED] TR21NO05.005
NPWP Step 3--Calculation and Application of Scaling Factors
After the total cost pools for each code in the NPWP are
calculated, the steps to ensure the total charge-based PEs for the
procedure do not exceed the total SMS PEs for the procedure (scaling)
are the same as those described previously for codes with physician
work.
In Table 10, the SMS total clinical labor costs are $2,499,159.
This amount divided by the charge-based total clinical labor amount of
$16,613,742 yields a scaling factor of 0.15. The charge-based clinical
labor cost for hypothetical procedure 00002 is $158.08 (from NPWP Step
2--Table 9). Multiplying the 0.15 scaling factor for clinical labor
costs by $158.08 yields the scaled clinical labor cost amount of
$23.78. Individual scaling factors must be calculated for both supply
and equipment expenses. The sum of the scaled direct cost values,
$23.78, $32.57 and $2.72, respectively, equals the total scaled direct
expense of $59.07.
Table 10.--Calculation and Application of Direct Cost Scaling Factors
----------------------------------------------------------------------------------------------------------------
Total scaled
direct expense
NPWP methodology Clinical Supplies Equipment (Sum of A, B,
and C)
(A) (B) (C) (D)
--------------------------------------
(a) Total--NPWP Specialty Pool....... $2,499,159 $1,503,559 $650,188
(b) Total NPWP Charge-based Pool..... 16,613,742 4,386,775 9,986,912
(c) Scaling Factor................... 0.15 0.34 0.06
(d) CPT 00002--Unscaled Value........ 158.08 95.03 41.74
(e) CPT 00002--Scaled Value.......... 23.78 32.57 2.72 $59.07
----------------------------------------------------------------------------------------------------------------
NPWP Step 4--Calculation of Indirect Expenses
Because codes in the NPWP do not have work RVUs, indirect expenses
are set equal to direct expenses (for codes with physician work,
indirect expenses equal the sum of the scaled direct expenses and the
converted work RVU). This amount is then multiplied by the number of
times the procedure is performed.
In Table 11, the scaled total direct expense from NPWP Step 3
(Table 10) ($59.07) is also the proxy for the total indirect expense
attributed to the procedure. The total indirect expense is multiplied
by the number of services (105,095), to calculate total indirect cost
for this procedure of $6,207,961.
Table 11.--Calculation of Indirect Expenses
----------------------------------------------------------------------------------------------------------------
Total direct
NPWP methodology Physician work * expense Total
(A) (B) (C)
----------------------------------------------------------
(a) CPT 00002............................................ ................ $59.07 $59.07
(b) Allowed Services--NPWP............................... ................ ................ 105,095
(c) Total NPWP Indirect Expense.......................... ................ ................ $6,207,961
----------------------------------------------------------------------------------------------------------------
NPWP Step 5--Calculation and Application of Indirect Scaling Factors
Similar to the direct costs, the indirect costs are scaled to
ensure that the total of the charge-based PE costs across all
procedures equates with the total indirect costs as reflected by the
SMS data for the code. To accomplish this, the charge-based indirect
PEs are scaled to the SMS indirect PEs.
In Table 12, to calculate the indirect scaling factor for
hypothetical procedure 00002, the total SMS indirect PE, $9,407,404
(from NPWP Step 1--Table 8), is divided by the total charge-based
indirect expense of $6,207,961 (from NPWP Step 4--Table 11). This
results in a scaling factor of 1.51. Next, the
[[Page 70127]]
unscaled indirect charge-based cost for procedure 00002 of $59.07 (from
NPWP Step 4--Table 11) is multiplied by the 1.51 scaling factor,
resulting in scaled indirect costs for this procedure of $89.19.
Table 12.--Calculation and Application of Indirect Cost Scaling Factors
----------------------------------------------------------------------------------------------------------------
Specialty
Standard methodology Indirect costs Direct cost specific PE RVU
(Sum of A and B)
(A) (B) (C)
-------------------------------------------------------
(a) Total--NPWP ``SMS'' Pool.......................... $9,407,404
(b) Total NPWP Indirect Expense....................... 6,207,961
(c) Scaling Factor.................................... 1.51
(d) CPT 00002--Unscaled Value......................... 59.07
(e) CPT 00002--Scaled Value........................... 89.19 $59.07 $148.26
----------------------------------------------------------------------------------------------------------------
NPWP Step 6--Budget Neutrality and Final RVU Calculation
Similar to the calculation for codes with physician work, the BNF
is applied to (multiplied by) the scaled direct and indirect expenses
for each code to set the PE RVU for the upcoming year.
In Table 13, the sum of the scaled direct and indirect expenses for
hypothetical code 00002 ($148.26) is multiplied by the BNF (0.022 in
this example) to yield a PE RVU of 3.26.
Table 13.--Budget Neutrality and Final RVU Calculation
----------------------------------------------------------------------------------------------------------------
Total scaled
direct and Budget neutrality Final PE RVU
indirect inputs factor
----------------------------------------------------------------------------------------------------------------
Code 00002............................................. $148.26 0.022 2.96
----------------------------------------------------------------------------------------------------------------
d. Facility/Nonfacility Costs
Procedures that can be performed in a physician's office as well as
in a hospital have two PE RVUs; facility and nonfacility. The
nonfacility setting includes physicians' offices, patients' homes,
freestanding imaging centers, and independent pathology labs. Facility
settings include hospitals, ambulatory surgery centers, and skilled
nursing facilities (SNFs). The methodology for calculating the PE RVU
is the same for both facility and nonfacility RVUs, but each is
calculated independently to yield two separate PE RVUs. Because the PEs
for services provided in a facility setting are generally included in
the payment to the facility (rather than the payment to the physician
under the fee schedule), the PE RVUs are generally lower for services
provided in the facility setting.
2. PE Proposals for CY 2006
The following discussions outline the specific PE related proposals
for CY 2006.
a. Supplemental PE Surveys
The following discussions outline the criteria for supplemental
survey submission as well as information we have received for approval.
(1) Survey Criteria and Submission Dates
In accordance with section 212 of the BBRA, we established criteria
to evaluate survey data collected by organizations to supplement the
SMS survey data normally used in the calculation of the PE component of
the PFS. In the final rule published November 7, 2003 (68 FR 63196), we
provided that, beginning in 2004, supplemental survey data had to be
submitted by March 1 to be considered for use in computing PE RVUs for
the following year. This allows us to publish our decisions regarding
survey data in the proposed rule and provides the opportunity for
public comment on these results before implementation.
To continue to ensure the maximum opportunity for specialties to
submit supplemental PE data, we extended until 2005 the period that we
would accept survey data that meet the criteria set forth in the
November 2000 PFS final rule. The deadline for submission of
supplemental data to be considered in CY 2006 was March 1, 2005.
(2) Submission of Supplemental Survey Data
The following discussion outlines the survey data submitted for CY
2004 and CY 2005.
(a) Surveys Submitted in 2004
As discussed in the August 8, 2005 PFS proposed rule (70 FR 45774),
we had received surveys by March 1, 2004 from the American College of
Cardiology (ACC), the ACR, and the American Society for Therapeutic
Radiation Oncology (ASTRO). The data submitted by the ACC and the ACR
met our criteria. However, as requested by the ACC and the ACR, we
deferred using their data until issues related to the NPWP could be
addressed. In the August 8, 2005 proposed rule, we proposed to use the
ACC and ACR survey data in the calculation of PE RVUs for CY 2006, but
only as specified in the proposals relating to a revised methodology
for establishing direct PE RVUs.
The survey data from ASTRO did not meet the precision criteria
established for supplemental surveys, therefore, we indicated we would
not use it in the calculation of PE RVUs for CY 2005. However, we
proposed to use these data to blend with data submitted by the
Association of Freestanding Radiation Oncology Centers (AFROC) for CY
2006, as described below.
(b) Surveys Submitted in 2005
In 2005 we received surveys from the AFROC, the American Urological
Association (AUA), the American Academy of Dermatology Association
(AADA), the Joint Council of Allergy, Asthma, and Immunology (JCAAI),
the National Coalition of Quality Diagnostic Imaging Services (NCQDIS)
and a joint survey from the American Gastroenterological Association
(AGA), the American Society of Gastrointestinal Endoscopy (ASGE), and
the American College of Gastroenterology (ACG).
[[Page 70128]]
As explained in the August 8, 2005 proposed rule, we contract with
the Lewin Group to evaluate whether the supplemental survey data that
are submitted meet our criteria and to make recommendations to us
regarding their suitability for use in calculating PE RVUs. (The Lewin
Group report on the 2005 submissions is available on the CMS Web site
at http://www.cms.hhs.gov/physicians/pfs/.) The report indicated that,
except for the survey from NCQDIS, all met our criteria and we are
proposing to accept these surveys. The survey data submitted by the
NCQDIS on independent diagnostic testing facilities (IDTFs) did not
meet the precision criterion of a 90 percent confidence interval with a
range of plus or minus 15 percent of the mean (that is, 1.645 times the
standard error of the mean, divided by the mean, is equal to or less
than 15 percent of the mean). For the NCQDIS survey, the precision
level was calculated at 16.3 percent of the mean PE/HR (weighted by the
number of physicians in the practice). However, the Lewin Group has
recommended that we accept the data from NCQDIS. The Lewin Group points
out that PE data for IDTFs do not currently exist, and suggests that
the need for data for the specialty should be weighed against the
precision requirement.
We proposed not to accept the NCQDIS data to calculate the PE RVUs
for services provided by IDTFs. As just noted, the NCQDIS data did not
meet our precision requirements. We established the minimum precision
standards because we believe it is necessary to ensure that the data
used are valid and reliable, and the consistent application of the
precision criteria is the best way to accomplish that objective.
Section 303(a)(1) of the MMA added section 1848(c)(2)(I) of the Act
to require us to use survey data that include expenses for the
administration of drugs and biologicals submitted by a specialty group
for which at least 40 percent of the Part B payments are attributable
to the administration of drugs in 2002 to adjust PE RVUs for drug
administration services. The provision applies to surveys received by
March 1, 2005 for determining the CY 2006 PE RVUs. Section 303(a)(1) of
the MMA also amended section 1848(c)(2)(B)(iv)(II) of the Act to
provide an exemption from budget neutrality for any additional
expenditures resulting from the use of this survey data to adjust PE
RVUs for drug administration services. In the Changes to Medicare
Payment for Drugs and Physician Fee Schedule Payments for CY 2004
interim final rule published January 7, 2004 (69 FR 1084), we stated
that the specialty of urology meets the above criteria, along with
gynecology and rheumatology (69 FR 1094). Because we proposed to accept
the new survey data from the AUA, we are required to exempt from the
budget neutrality adjustment any impacts of accepting these data for
purposes of calculating PE RVUs for drug administration services.
In addition, Lewin recommended blending the radiation oncology data
from this year's AFROC survey data with last year's ASTRO survey data
to calculate the PE/HR. According to the Lewin Group, the goal of the
AFROC survey was to represent the population of freestanding radiation
oncology centers only. In order to develop an overall average for the
radiation oncology PE pool, the Lewin Group recommended we use the
AFROC survey for freestanding radiation oncology centers, and the
hospital-based subset of last year's ASTRO survey. Consistent with that
recommendation, we proposed to use the new PE/HR calculated in this
manner for radiation oncology.
As discussed in the August 8, 2005 PFS proposed rule and also in
the preamble of this final rule with comment, we proposed to revise our
methodology to calculate direct PE RVUs from the current top-down cost
allocation methodology to a bottom-up methodology. Although we would
continue to use the SMS data and the incorporated supplemental survey
data for indirect PEs, we did not extend the deadline for submitting
supplemental survey data but rather requested comments on the most
appropriate way to proceed to ensure the indirect PEs per hour are
accurate and consistent across specialties.
b. Revisions to the PE Methodology
As discussed in the August 8, 2005 proposed rule, since 1997, when
we first proposed a resource-based PE methodology, we have had several
major goals for this payment system and have encouraged the maximum
input from the medical community regarding our PE data and methodology.
We also have had the following three specific goals for the
resource-based PE methodology itself, which have also been supported in
numerous comments we have received from the medical community:
To ensure that the PE payments reflect, to the greatest
extent possible, the actual relative resources required for each of the
services on the PFS. This could only be accomplished by using the best
available data to calculate the PE RVUs.
To develop a payment system for PE that is understandable
and at least somewhat intuitive, so that specialties could generally
predict the impacts of changes in the PE data.
To stabilize the PE payments so that there are not large
fluctuations in the payment for given procedures from year-to-year.
As we explained in the August 8, 2005 proposed rule, we believe
that we have consistently made a good faith effort to ensure fairness
in our PE payment system by using the best data available at any one
time. The change from the originally proposed ``bottom-up'' to the
``top-down'' methodology came about because of a concern that the
resource input data developed in 1995 by the CPEP were less reliable
than the aggregate specialty cost data derived from the SMS process.
The adoption of the top-down approach necessitated the creation of the
NPWP. The NPWP is a separate pool created to allocate PEs for codes
that have only a technical (rather than professional) component, or
codes that are not performed by physicians.
However, the situation has now changed. As we explained in the
August 8, 2005 proposed rule, refinement of the original CPEP data is
complete and the refined PE inputs now, in general, accurately capture
the relative direct costs of performing PFS services. Also, the major
specialties comprising the NPWP (radiology, radiation oncology, and
cardiology) submitted supplemental survey data that we proposed to
accept, which would eliminate the need to treat these technical
services outside the PE methodology applied to other services.
Due to the ongoing refinement by the RUC of the direct PE inputs,
we had expected that the PE RVUs would necessarily fluctuate from year-
to-year. However, it became apparent that certain aspects of our
methodology exacerbated the yearly fluctuations. The services priced by
the NPWP methodology have proven to be especially vulnerable to any
change in the pool's composition. With the CPEP/RUC refinement of
existing services virtually complete, we indicated this was an
opportunity for us to propose a way to provide stability to the PE
RVUs.
Therefore, consistent with our goals of using the most appropriate
data, simplifying our methodology, and increasing the stability of the
payment system, we proposed the following changes to our PE methodology
and also requested suggestions that would assist us in further
refinement of the indirect PE methodology.
[[Page 70129]]
(1) Use a Bottom-up Methodology To Calculate Direct PE Costs
Instead of using the top-down approach to calculate the direct PE
RVUs, where the aggregate CPEP/RUC costs for each specialty are scaled
to match the aggregate SMS costs, we proposed to adopt a bottom-up
method of determining the relative direct costs for each service. Under
this method, the direct costs would be determined by summing the costs
of the resources--the clinical staff, equipment and supplies--typically
required to provide the service. The costs of the resources, in turn,
would be calculated from the refined CPEP/RUC inputs in our PE
database.
(2) Eliminate the Nonphysician Work Pool (NPWP)
Since we proposed to incorporate new survey data for the major
specialties that comprise the NPWP, we proposed to eliminate the pool
and calculate the PE RVUs for the services currently in the pool by the
same methodology used for all other services. This would allow the use
of the refined CPEP/RUC data to price the direct costs of individual
services, rather than utilizing the pre-1998 charge-based PE RVUs.
(3) Utilize the Current Indirect PE RVUs, Except for Those Services
Affected by the Accepted Supplemental Survey Data
As described previously, the SMS and supplemental survey data are
the source for the specialty-specific aggregate indirect costs used in
our PE calculations. We then allocate to particular codes on the basis
of the direct costs allocated to a code and the work RVUs. Although we
now believe the CPEP/RUC data are preferable to the SMS data for
determining direct costs, we have no information that would indicate
that the current indirect PE methodology is inaccurate. We also are not
aware of any alternative approaches or data sources that we could use
to calculate more appropriately the indirect PE, other than the new
supplemental survey data, which we proposed to incorporate into our PE
calculations. Therefore, we proposed to use the current indirect PEs in
our calculation incorporating the new survey data into the codes
performed by the specialities submitting the surveys.
We specifically requested suggestions that would assist us in
further refinement of the indirect PE methodology. For example, we
noted in the proposed rule that we are considering whether we should
continue to accept supplementary survey data or whether it would be
preferable and feasible to have an SMS-type survey of only indirect
costs for all specialties; or whether a more formula-based methodology
independent of the SMS data should be adopted, perhaps using the
specialty-specific indirect-to-total cost percentage as a basis of the
calculation.
(4) Transition the Resulting Revised PE RVUs Over a 4-Year Period
We are concerned that, when combined with an expected negative
update factor for CY 2006, the shifts in some of the PE RVUs resulting
from our proposals could cause some measure of financial stress on
medical practices. Therefore, we proposed to transition the proposed PE
changes over a 4-year period. This would also give ample opportunity
for us, as well as the medical specialties and the RUC, to identify any
anomalies in the PE data, to make any further appropriate revisions,
and to collect additional data, as needed prior to the full
implementation of the proposed PE changes.
During this transition period, the PE RVUs would be calculated on
the basis of a blend of RVUs calculated using our proposed methodology
described above (weighted by 25 percent during CY 2006, 50 percent
during CY 2007, 75 percent during CY 2008, and 100 percent thereafter),
and the current CY 2005 PE RVUs for each existing code.
Now that the direct PE inputs have been refined, we believe that
the CPEP/RUC direct input data are generally superior to the specialty-
specific SMS PE/HR data for the purposes of determining the typical
direct PE resources required to perform each service on the PFS. First,
we have received recommendations on the procedure-specific inputs from
the multi-specialty PEAC that were based on presentations from the
relevant specialties after being closely scrutinized by the PEAC using
standards and packages agreed to by all involved specialties. Second,
the refined CPEP/RUC data are more current than the SMS data for the
majority of specialties. Third, for direct costs, it appears more
accurate to assume that the costs of the clinical staff, supplies and
equipment are the same for a given service, regardless of the specialty
that is performing it. This assumption does not hold true under the
top-down direct cost methodology, where the specialty-specific scaling
factors create widely differing costs for the same service.
We also would argue that the proposed methodology is less confusing
and more intuitive than the current approach. For instance, the NPWP
would be eliminated and all services would be priced using one
methodology, eliminating the complicated calculations needed to price
NPWP services. Also, any revisions made to the direct inputs would now
have predictable results. Changes in the direct practice inputs for a
service would proportionately change the PE RVUs for that service
without significantly affecting the PE RVUs for unrelated services.
In addition, the proposed methodology would create a system that
would be significantly more stable from year-to-year than the current
approach. We recognized that there are still some outstanding issues
that need further consideration, as well as input from the medical
community. For example, although we believe that the elimination of the
NPWP would be, on the whole, a positive step, some practitioner
services, such as audiology and medical nutrition therapy (MNT), would
be significantly impacted by the proposed change. In addition, there
are still services, such as the end stage renal disease (ESRD) visit
codes, for which we have no direct input information. Also, as
mentioned above, we do not have current SMS or supplementary survey
data to calculate the indirect costs for most specialties. Further, we
do not yet have accurate utilization for the new drug administration
codes that were created in response to the MMA provision on drug
administration. Therefore, we did not propose to change the RVUs for
these services at this time, but to include them under our proposed
methodology in next year's rule when we have appropriate data. The
proposed transition period would give us the opportunity to work with
the affected specialties to collect the needed survey or other data or
to determine whether further revisions to our PE methodology are
needed.
We requested comments on these proposed changes, particularly those
concerning additional modifications to the indirect PE methodology that
might help us further our intended goals.
Comment: There were 3 main concerns raised in comments we received
on our overall proposed PE methodology which included: (1) Many of the
proposed decreases appeared anomalous and were not explained; (2) there
was insufficient information given to allow specialties to review and
analyze the proposal and its impact; and (3) the use of the new PE data
from the seven accepted supplementary surveys caused an inequitable
redistribution of PE RVUs. As a result of these concerns, many
commenters also requested a
[[Page 70130]]
delay in the implementation of our proposed methodology.
The following are examples of the comments detailing the above
concerns.
The AMA and the RUC agreed with the goals that we have set for an
accurate, intuitive and stable methodology to use for the calculation
of PE RVUs. The RUC added that it looks forward to helping us meet
these goals. However, the AMA urged us to provide more information,
such as examples of how the new values were calculated, the PE/HR and
source of the data for each specialty and the budget neutrality
adjuster applied at the end of the process, so that the medical
community would have the opportunity to review the values and impact of
the proposal.
Medicare Payment Advisory Commission (MedPAC) stated its agreement
with the concerns regarding the current PE methodology that motivated
us to propose a change, but did request that we assess the impact of
proposed changes by groups of services--evaluation and management
services, major procedures, other procedures, laboratory tests and
imaging services, as well as by physician specialty group.
A specialty society representing obstetrics and gynecology
commended the goal of the new methodology, but suggested we offer two
or more examples of how PE is calculated, starting with the inputs that
are used and moving through the process of developing the final PE RVUs
for those codes.
An optometric association expressed regret that the proposed rule
does not provide service-specific examples of how PE RVUs would be
calculated using the current and proposed methodologies because this
made it difficult to provide detailed comments on the proposal.
Therefore, the commenter concluded that we should issue a final with a
comment period. Two emergency medicine societies also requested the
same service-specific examples.
An ophthalmology society was troubled by our failure to make the
indirect cost data used in determining the rates of change in PE values
available to all specialties for review and by the lack of analysis
explaining the significant impacts caused by the acceptance of the
supplemental survey data.
A specialty society representing cardiology urged us to provide
more data and a more detailed explanation of the methodology, along
with examples of how RVUs for specific codes were determined, so that
stakeholders can gain a thorough understanding of our proposal.
A dermatology association commented that it is pleased that we want
to transition to a bottom-up approach. The association believes that
this will result in a more easily understood and stable payment system,
but it would be helpful to have more information in the final rule on
the calculation of PE values under the new methodology. For example,
the association asks for clarification of why the PE RVUs for several
dermatology procedures decreased.
A specialty society representing physical medicine expressed
concern regarding a number of the results with respect to several
physical medicine and rehabilitation codes and requested that we
provide a more detailed description of the new methodology and address
anomalies in the final rule. The commenter suggested that we establish
a percentage decrease threshold that would trigger an opportunity for
expedited review to determine whether the direct cost inputs are
accurate.
Four organizations representing radiation oncology submitted
comments stating their concern that several radiation therapy codes,
including those for intensity modulated radiation therapy, continuing
medical physics consultation and brachytherapy, have inappropriate
proposed reductions. Two of the commenters recommended that we examine
the impact of the methodology on a code-specific basis and, if
necessary, implement an adjustment factor that limits the reduction to
no more than 15 percent of the 2005 global RVUs at the end of the 4-
year transition period. Comments from societies representing nuclear
cardiology and echocardiography also supported a cap on the maximum
reduction applied to any procedure that resulted from the decision to
adopt the new methodology.
A geriatrics society expressed concern that geriatrics will
experience a 1 percent reduction under the new methodology and stated
that the transition period is critical, as it will lessen the impact of
the proposed reduction. The society suggested that, during the
transition period, we should work with stakeholders to explain the new
methodology, to identify non-intuitive decreases in payment and to
identify better ways to pay for indirect expenses.
An association representing nursing facility medical directors
expressed concern that the new methodology will reduce the PE RVUs for
nearly all codes for nursing facility services. If we proceed with the
changes, the association suggested that we provide a more detailed
explanation of the new methodology in the final rule, with examples of
the PE RVU calculations for specific services under the old and new
methods.
A consulting company expressed concern that we failed to make
needed data available, such as the time file, utilization file and
scaling factors and pools file. The commenter also requested that, in
the future, we consider making available the same files we use to
produce the PE RVUs, the assumptions used, such as crosswalks or
projected utilization for new services and the data needed to evaluate
the methodology used to go from the survey data to a PE/HR.
The American Cancer Society expressed concern regarding the
specific reductions in payment for screening mammography, pap smears,
pelvic/breast exams and flexible sigmoidoscopies which could
potentially reduce access to cancer screenings.
An oncology nursing society strongly urged us to include drug
administration services in the phase-in of the new methodology and
exempt them from budget neutrality requirements. A cancer and blood
disorders center expressed the same concern and stated that this
omission would skirt the MMA mandate to exempt from budget neutrality
limits any 2006 fee schedule changes to drug administration codes.
An association representing medical colleges noted that, together
with the negative update, the decrease in revenue across faculty
practice groups will exceed -6 percent. The association recommended
that this warrants further review by the medical community and CMS
should make public examples of how the new values were calculated, the
actual new PE values for each code, the PE per hour and source of the
data for each specialty and the budget neutrality adjuster applied as a
final step.
A medical technology company requested that we explain how we
intend to scale PE when CPT codes, such as endogenous radiofrequency
ablation procedures, include a vascular as well as a radiology imaging
procedure. The commenter recommended we should calculate the costs
according to the primary group furnishing the procedure. In addition,
the commenter contended that a deflation factor should not be applied
to new procedures that have been valued by the RUC and CMS in late 2004
for establishment of 2005 payment.
Following are examples of the comments explicitly requesting delay.
[[Page 70131]]
A comment from specialty societies representing general surgeons,
anesthesiology, ophthalmology, hematology, emergency medicine,
neurosurgery, cataract surgery, thoracic surgery, orthopaedic surgery,
otolaryngology and hand surgery, supported by a letter from a member of
the Congress, stated agreement with our goals for a PE methodology.
However, the commenters requested that the implementation of the new
methodology and data be delayed for 1 year, citing several concerns:
First, commenters claimed that CMS did not provide sufficient data and
information or time to allow adequate review of the validity of the new
methodology, the supplementary survey data or the proposed impact. As a
result, the comment argued that physicians have not had a reasonable
opportunity to participate in the rule making process, in compliance
with the Administrative Procedure Act. In addition, the comment cited
the Practicing Physician Advisory Committee recommendation that we
delay implementation of the new data and methodology for 1 year.
An oncology society commented that a final decision on the proposed
revision to the PE methodology should be deferred 1 year until
information is available on how the proposal will affect drug
administration services. A large provider of oncology services was also
troubled by the decision to exclude drug administration services from
revisions to the PE methodology.
A psychological association stated that its primary concern is
``the proposed rule's lack of clarity regarding the impacts that the
change in methodology will have on each health care specialty.''
Because of the lack of this data, the Association requested a 1 year
delay for our proposal.
A specialty society representing surgeons stated that the proposed
methodology apparently created many aberrant PE RVUs and gave examples:
Closely related procedures with proposed RVUs that are inconsistent
with their actual costs; services that contribute significantly to the
increases in volume and intensity noted by MedPAC all receive
significant increases; within specialties that should benefit from the
higher PE/HR in their surveys, there are increases and decreases that
cannot be explained; E/M services will be increased in the office
setting, but decreased in the hospital setting. The college recommends
that we withdraw the current proposal and republish it in a future PFS
rule that includes a detailed description of the methodology.
Two specialty societies representing thoracic and chest physicians
expressed concern with the significant shifts in the PE that would
necessitate a 4-year transition and suggested that there should be no
change in PE until all specialties can complete supplemental PE
surveys.
A specialty society representing spine surgeons requested that we
suspend the proposed PE changes until 2007, not because the methodology
is flawed, but in order to allow all physicians an equal opportunity to
submit data relevant to their specialties.
A specialty society representing anesthesiologists contended that
lack of information on data and methodology behind the PE changes
requires a delay in implementation. The Society requested that we
provide information that clearly breaks out the impact of the proposed
changes by specialty on the indirect and direct PE payments.
A medical group practice association fully supported the 4-year
transition of the new PE values achieved under the new bottom-up
calculation. However, because it believed that insufficient information
has been made available, the association recommended that we delay
implementation until the provider community has time to evaluate the
methodology used to recalculate the PE RVUs.
The following commenters requested a delay in calculating the PE
RVUs for their own specific services under the new methodology.
Several comments from a specialty society representing heart rhythm
services, two manufacturers and a manufacturers association, as well as
a provider of remote cardiac monitoring services expressed concern
about the proposed cuts for remote cardiac monitoring services and
requested that we not implement these proposed reductions, pending
further study.
Two societies representing audiology and speech language pathology,
supported by a comment from two senators, expressed concern about the
large reductions in payment for audiology services and urged us to
impose a 1 year moratorium on the proposed reductions for these
services so that an equitable methodology for their services can be
developed. One commenter suggested that if we do not implement a
moratorium on payment decreases for audiology services, we should
consider an alternative, such as assigning proxy work RVUs for indirect
PE using the otolaryngology PE/HR.
The following commenters opposed any delay in implementing our
proposed methodology.
A gastroenterology association commented that, since all medical
specialties had equal opportunity to conduct supplemental PE studies,
there should not be a delay in the implementation of our proposed
changes.
A specialty society representing radiation oncology agreed that
more information on the new methodology should be provided, but is
opposed to any delay in the implementation of the proposed methodology
as the transition provides sufficient opportunity for CMS to provide
this information and resolve identified problems.
A sonography society commented that we should not delay the
implementation of the revised TC component services with a 4-year
transition. An alternative to the zero-work pool has been many years in
the making and we should fully implement the new values this year.
An association representing urology disagrees with a 4-year phase
in of the revised PE RVUs and strongly urged us to consider other
options that will allow specialties with supplemental survey data to
realize the full advantages of applying that data in 2006. The
commenter claimed that a transition will allow specialties that did not
conduct surveys to unfairly take a portion of the 4-year increases from
specialties that did.
A specialty society representing allergists expressed concern that
the RVUs based on the new accepted data will be phased in over 4 years.
The commenter contended that we have not provided any rationale for why
we are breaking with past policy or why we have decided to phase-in the
specialty survey data. The commenter is concerned in particular about
the continued applicability of the old and incorrect scaling factors
which result in the discounting of the specialty's costs.
A pharmaceuticals company requested that we consider an immediate
100 percent transition to the 2009 proposed PE values for procedures
like photodynamic therapy where access has been constrained due to the
use of scaling factors.
A society representing family physicians commented that the
original legislation mandating resource-based PE was enacted in 1994
and that we delayed the initial implementation by a year before
entering a 4-year transition under our current methodology. The
commenter therefore encouraged us to shorten or eliminate the
transition and finally complete the process of implementing resource-
based PE. However a society representing internists supported our
proposal to transition PE RVU changes resulting
[[Page 70132]]
from methodological changes in this proposed rule over a 4-year period.
Response: We very much appreciate all the thoughtful and helpful
comments we received on our proposal to revise our PE methodology. In
addition, we are pleased that so many commenters stated their agreement
with the goals that we outlined for our PE methodology in order to
implement a payment system for physician and practitioner practice
costs that is accurate, understandable, and stable. We also still
believe, despite all the concerns pointed out by commenters, that the
implementation of a methodology that bases the PE calculations on the
latest available data, that uses the PEAC-refined CPEP data to create a
bottom-up approach for direct costs and that values all services using
the same method will help us achieve those goals.
However, based on the comments we received, it appears that our PE
proposal was not as clear and intuitive as we had intended. We continue
to believe that the proposal for direct costs was straightforward; this
proposal would do away with costs pools and scaling factors and merely
add up the costs of the PEAC-refined input data assigned to each code
to arrive at the direct PE RVUs (pre-PE budget neutrality). We had not
anticipated that our indirect PE calculation would create difficulties
since we intended that, except for those services for which the
acceptance of the new supplementary survey data produced direct
increases, to utilize the current indirect PE RVUs to develop the pre-
PE budget neutrality indirect PE RVUs for 2006. However, due to an
error in our indirect PE program, the indirect costs were not
calculated as intended. As a result, almost all of the PE RVUs
published in the August 8, 2005 proposed rule were incorrect.
Therefore, we are concerned that interested parties were not
provided notice of the actual effect of the proposed changes in the PE
RVU methodology and were not given the sufficient opportunity to submit
meaningful comments on the proposal.
As a result, we are withdrawing our entire PE methodology proposal
and instead, with only three exceptions, we will use the current 2005
PE RVUs to value all services for CY 2006. First, as we usually do each
year, we will value the work and PE on an interim basis for all codes
that are new in 2006. Second, as required by section 1848(c)(2)(I) of
the Act, we will apply the PE/HR data from the urology supplementary
survey to the calculation of the PE RVUs for all the drug
administration codes performed by urology. Third, we will apply the
savings from the implementation of the multiple procedure payment
reduction for certain imaging services across all the PE RVUs that are
discussed later in the preamble of this rule.
We understand that the withdrawal of this proposal will be welcomed
by some and will be a disappointment to others, especially those
specialties that undertook PE surveys that are not being used for 2006.
We want to work with the medical community beginning now through the
next proposed rule to exchange thoughts on all of the issues raised, to
answer any questions and to provide additional data and corrected
information. We hope to hold meetings on these topics early next year
so that we can obtain maximum input from all interested parties to
ensure that our next proposal does meet the goals we have set for our
PE methodology.
Acceptance of Supplementary Surveys for 2006
Comment: Many commenters indicated their strong support for our
proposal to accept the PE data from 7 supplementary surveys. Several
specialty societies representing radiation therapy expressed approval
for the proposal to blend the survey data submitted by ASTRO and AFROC
to calculate a revised PE/HR for radiation oncology services. A
specialty society representing interventional radiology stated support
for the proposed use of the ACR's supplemental PE data for purposes of
PE RVU determination. The ACC is pleased that we proposed to
incorporate their supplemental PE survey data submitted for cardiology
and other specialties that submitted data consistent with the
acceptance criteria. The ACC commented that, given the rigorous and
detailed analysis conducted by our contractor, these data are very
likely superior to the SMS data that were used to calculate PE RVUs and
that our acceptance of the supplemental PE data has been an important
component of efforts to refine the resource-based PE RVUs. An
echocardiography society and a commenter representing cardiovascular
angiography also stated its support for use of the cardiology data. Two
societies representing gastroenterology commented that they are pleased
with our acceptance of the supplemental PE survey data for
gastroenterology. The AUA strongly urged us to finalize our proposal to
accept the AUA's supplemental survey data, as they believe language in
the section 303(a)(1)(I) of the MMA requires us to accept supplemental
data submitted by urology. In addition, the AUA stated that we are
required by the MMA to update the 2006 PE RVUs for urology drug
administration, applying the exemption from budget neutrality. A
commenter representing prosthetic urology also agreed that we should
use the urology supplemental data to allocate the indirect PE costs to
each urology procedure.
However, other commenters had concerns with the proposal. An
otolaryngology specialty society questioned the validity of the
dramatic increases in the PE/HR for the specialties that have submitted
surveys because this could create a two-tiered system between those
specialties that have submitted surveys and those which have not.
Therefore, the society recommended that use of this new PE data be
delayed until such time as a multispecialty PE survey can be conducted.
A comment from an occupational therapy association recognized the need
to use SMS aggregate data in the indirect calculations, but questioned
the impact on specialties who did not participate in the survey and
suggested that the transition period be used to examine the atypical
impact of this change. Two thoracic surgery groups commented that the
PE fluctuations and disparities caused by the acceptance of these
surveys are counter-intuitive and advantage those for whom we have
accepted data at the expense of those from whom we have not. The
specialty society representing surgeons stated that the dramatic
increase in the proposed PE/HR figures could cause significant
distortions in the relativity of PE payments across specialties and
urged that we delay implementation of the new data until a multi-
specialty PE survey, similar to the AMA's SMS survey can be conducted.
However, the society also recommended that we use the urology PE/HR
data because it would be required by the MMA. A provider group
representing remote cardiac services recommended that we should refrain
from incorporating any additional survey data until all supplemental
data is submitted.
Conversely, a society representing echocardiographers stated that
it is crucial for us to use the submitted survey meeting our criteria
in order to retain the type of trust necessary for physician specialty
groups to conduct this type of survey in the future. The commenters
from the gastroenterology groups stated that use of these data should
not be transitioned, but should be treated consistently with the manner
in which all other supplemental data have been treated. Further, the
commenter contended that, even if we agree to a delay in the
implementation
[[Page 70133]]
of our proposed methodology, the accepted supplemental PE/HR data
should be implemented immediately for both direct and indirect
expenses.
Response: We understand the considerable effort, time and money
expended by the specialty societies that submitted surveys that met our
criteria and are aware that there will be considerable disappointment
that the new data will not be used for 2006. We also understand the
concern of those specialties that have not undertaken a supplementary
survey that now fear that they could be relatively disadvantaged if the
accepted surveys are used. We would point out that for the last five
years there has been an equal opportunity for all specialties to submit
supplementary data and it could be presumed that those specialties that
did not avail themselves of the opportunity believed the effort was not
worth the probable result. In addition, all specialties had the
opportunity to comment on our proposed criteria for acceptance of
survey data and the medical community at large did not comment that the
criteria needed to be more stringent. However, we will not be using the
accepted supplementary data in our indirect PE calculations for 2006,
with the exception of the urology PE/HR data that we are applying to
the drug administration codes performed by urology as required by
section 1848(c)(2)(I) of the Act. We are not using the other accepted
supplementary PE data because, as explained above, we are not adopting
the proposed changes to our PE methodology, we did not propose to use
the survey data for calculating the direct PE RVUs and the use of the
survey data would have caused significant changes in the PE RVUs for
which there would have been no opportunity for comment.
Comment: We also received several comments with specific concerns
regarding our handling of the submitted PE survey data. A specialty
society representing radiation oncology asserted that the approach to
blending survey data has inadvertently lowered the values for certain
radiation oncology services by under-weighting the PE expenses for
freestanding facilities from the AFROC survey and by overestimating the
hours in the denominator of the PE/HR calculation. In addition, three
commenters questioned an apparent discrepancy with the PE/HR for
radiology, radiation oncology and cardiology recommended by the Lewin
Group and the PE/HR in the proposed rule and the subsequent correction
notice. The commenters requested a clarification on how we applied the
deflators in order to ensure that all specialties submitting surveys
were evaluated in the same way. A comment from specialty societies
representing most major surgical groups, as well as emergency medicine
and anesthesia, contended that over the years we have treated
supplemental survey data with different standards and have blended some
while not blending others. A medical technology company requested that
we explain how the data were evaluated, especially because we did not
accept some recommendations presented by the Lewin Group.
Response: Because we are not utilizing the new supplementary data
for indirect PE calculations for 2006, we plan to discuss all of these
issues with the relevant specialties in order to determine if
adjustments are needed to our calculations of the PE/HR data. However,
we do not believe that we have treated supplemental data with different
standards, but would request specific information from the commenters.
Currently, we are not using any blended data for any supplementary
survey that we have accepted and used. Although we rely heavily on the
analysis and evaluation of the survey data done by the Lewin Group, we
are responsible for the final decision on whether or not to accept the
data from a given survey. The Lewin Group did recommend that we accept
the data from the NCQDIS survey, which did not meet our precision
criteria, because we currently have no survey data for them. However,
we believe that it is more equitable to apply the same standards to all
who submit surveys and we proposed not to accept the survey data at
this time.
Comment: The NCQDIS expressed concern that we did not accept their
PE survey data for diagnostic imaging services in IDTFs because the
precision criteria was not met. NCQDIS pointed out that the Lewin Group
recommended that we accept the data in spite of the precision level
because PE data for IDTFs do not currently exist. The commenter stated
that, after further analysis of the data, NCQDIS determined that
inclusion of one inaccurate record skewed the findings outside the
acceptable precision range. Therefore, NCQDIS recommended that we
accept the revised analysis from the Lewin Group that includes updated
PE information for the record in question and that we allow the updated
data to be used in development of PE RVUs for 2006. The NCQDIS
recommendation was supported by a comment from a society representing
diagnostic medical sonography that contended that no alternative data
is available for these entities and the current PE data used
understates their PE.
Response: There have been further discussions between NCQDIS and
our contractor. We will be discussing this with the specialty in order
to resolve the issue for a future proposal.
Comment: A nuclear medicine society stated that it cannot respond
to our use of the radiology and cardiology surveys because it has not
seen the data as it relates to nuclear medicine. The commenter
requested that we make the nuclear medicine supplementary survey
information and impact available. A specialty society representing
radiation oncology expressed the belief that the new survey data do not
reflect the costs of brachytherapy because providers of this service
were not adequately represented in the sample.
Response: We would be willing to discuss the societies' concerns to
determine an appropriate resolution.
Comment: A long term care association urged us to use the data from
the ACR supplementary survey as the PE/HR proxy for the portable x-ray
set-up code (Q0092) to prevent inconsistencies in the application of
the new payment methodology.
Response: We do not believe it would be appropriate to use the same
indirect costs associated with a free-standing radiology center, which
incurs costs for such requirements as lead shielding and structural
reinforcements for heavy equipment, as the costs for setting up a
portable x-ray machine. Therefore, we will not apply the data from the
radiology supplementary survey to the calculations of the PE RVUs for
Q0092.
Comment: Because we had proposed to accept the supplementary survey
data for radiology, radiation oncology and cardiology, the specialties
that make up the bulk of the NPWP, we also proposed eliminating the
pool and pricing all of the services in the NPWP under the new proposed
PE methodology. We received comments from several organizations
including those representing diagnostic sonography, urology, medical
physicists, allergy geriatrics and a blood disorder center supporting
this proposal. However, the specialty society representing audiology
urged that, before we dismantle the protection provided by the NPWP, a
reasonable formula should be developed to fairly and adequately
reimburse audiologists for their services. The societies representing
audiology, speech language pathology and medical nutrition all
commented that we should assign work RVUs to their services, rather
than treating their professional work as PE.
Response: We are pleased that most commenters approved of our
proposal to
[[Page 70134]]
eliminate the NPWP. However, because we will not be using the accepted
new supplementary survey data in the calculation of PE RVUs for 2006,
we believe it would be more equitable to defer the elimination of the
pool as well. Therefore, we will not be implementing this proposal for
2006. This will also give us the additional time to work with audiology
and other specialties to ensure that our future proposal will be
equitable to all. Because we are maintaining the NPWP for 2006, we are
deferring our decision regarding work RVUs for audiology, speech
language pathology and medical nutrition pending further discussions
with the specialties.
Bottom-up for Direct PE
Comment: We received many comments on our proposal to value the
direct PE for all services by the bottom-up method, using the PEAC
refined staff, supply and equipment costs associated with each
procedure as the basis for calculating the direct PE RVUs. Almost all
of these comments favored our proposal to modify our PE methodology.
This support was expressed whether the commenter also requested a delay
in the implementation of our proposed methodology or recommended
immediate implementation with no transitioning of the new PE RVUs.
Commenters who were pleased with the resulting PE RVUs and those
concerned with specific reductions also showed support. Below are some
specific examples of the supporting comments.
Two comments from specialty societies representing family
physicians and internists agreed that the bottom-up approach will
produce a more accurate, intuitive and stable PE methodology. One of
the commenters contended that the proposed methodology would be more
accurate because the bottom-up methodology assumes that the costs of
the clinical labor, supplies and equipment are the same for a given
service, regardless of the specialty performing it.
A urological association supported switching to a bottom-up
methodology for calculating PE RVUs and believed it meets our stated
goals of using the most appropriate data, simplifying the PE
methodology and increasing the stability of the PE payments.
A major oncology center applauded our decision to implement a
bottom-up approach because of the inequities that result when PE RVUs
are set using a top-down approach which allows the frequent ``leakage''
of a specialty's costs to other specialties. This rationale was also
stated by a society representing anesthesiologists and by a patient
advocate foundation.
An oncology nursing society commented it has long advocated a
bottom-up modification to help ensure that PE payments reflect the
actual relative resources required for each service provided by
oncology nurses.
An organization representing allergy supported our proposal to
change to a bottom-up methodology for determining PE values because
this is a more rational approach. This view was shared in a comment
from a physical medicine and rehabilitation society, which added that a
bottom-up approach would result in a more direct relationship between
PE RVUs and direct costs.
A spine society commented that it welcomed the change to a
``bottom-up methodology because any movement in the direction of
stability and uniformity will have positive effects across providers.''
A specialty society representing neurology supported the proposed
change to a bottom-up methodology for calculating direct costs. The
society asserted that the top-down method is flawed as it unfairly
raises the expenses for high-end procedures. The commenter also stated
that the excellent work of the PEAC, and now the PERC, has produced
reliable data for all the codes, making CPEP complete for all the codes
and must be given primacy in any method we would chose to implement.
Two radiation therapy societies stated their strong support of the
proposed bottom-up methodology and the proposed implementation for
January 1, 2006. One society commented that eliminating the scaling
factors, at least for direct costs, is a step in the right direction
toward a simpler and more transparent PE methodology.
A respiratory care association stated support for our proposed
bottom-up approach because this methodology would minimize aberrations
that might inadvertently appear in the calculations, providing a more
accurate representation of direct PE incurred by pulmonary physicians.
A psychological association commented that the refinements approved
by the PEAC may allow CMS to utilize a more simplified PE methodology
which will make PE more understandable.
An organization representing radiology contended that using the
bottom-up methodology seems to be a simpler and easier way to make the
transition with minimal impact. A medical sonography society stated
that our efforts to help ensure a more accurate payment for healthcare
services and create more year-to-year stability are to be commended.
An occupational therapy association and a physical therapy
association both agreed that the bottom-up method would be a preferable
methodology. First, because it would rely on actual inputs from the
specialties providing each service and second because it would create a
more stable and predictable system and would reflect the actual
relative resources required for each service.
A specialty society representing hematology agreed that the top-
down method for calculating the direct PE is extremely complex and not
at all intuitive and stated that the bottom-up method will simplify the
system and reduce the complexity of the calculations.
Other organizations that supported the adoption of the bottom-up
approach to valuing direct costs included specialty societies
representing podiatry, prosthetic urology, geriatrics, infectious
diseases, chest physicians, a pharmaceutical company, and medical group
practices.
Response: We are very pleased that so many in the medical community
approve of the concept of using a bottom-up methodology to value the
direct PE RVUs. We believe, along with these commenters, that the use
of the bottom-up approach in the future would allow us to calculate
more accurately the relative direct costs for each service in the PFS.
The bottom-up approach would be simple to understand--we merely sum the
costs of the PEAC-refined clinical staff, supply and equipment inputs
that are assigned to each service. The bottom-up approach would be
intuitive--any change in direct inputs would lead to a commensurate
change in the direct PE RVUs. The bottom-up methodology should also be
more stable--with no cost pools or scaling factors to complicate the
computation, direct PE RVUs for a service would only change if there
was a revision to the inputs assigned. It was the hard work put forth
by the AMA, the PEAC, the RUC and specialty societies in refining the
CPEP inputs that made it possible to propose using a bottom-up
methodology. However, for reasons discussed in this section, we are not
implementing the bottom-up methodology for direct costs for 2006.
However, we will be working with the RUC and the medical community to
ensure that the inputs assigned to each service are correct and that
the overall methodology works as intended so that we can propose this
improvement in the future.
[[Page 70135]]
Comment: Several commenters expressed concern regarding the future
refinement of the direct PE inputs that would ensure that a bottom-up
methodology continues to lead to appropriate PE RVUs. A radiation
oncology specialty society recommended that the bottom-up methodology
be reviewed to ensure that the full input amounts are recognized
accurately. A specialty society representing podiatry commented that
the codes refined in the early stages of the PEAC may have inputs not
consistent with codes refined later and that they should be looked at
again by PEAC or PERC. The specialty society representing allergy
suggested that there needs to be a continuing mechanism, such as the
PEAC and PERC, for addressing changes in PE. A physical medicine
society asserted that it is essential that we establish a system for
updating or revising direct cost inputs based on new data or changes in
technology. A thoracic medicine society supported the bottom-up
methodology for creating direct PE inputs with continued refinement by
the PEAC or the PERC. A pharmaceutical company supported the bottom-up
method of determining the relative direct costs of each service, but
requested that we establish a system to accept and review external data
during the notice and comment period to update the direct cost inputs
as needed. A specialty society representing prosthetic urology
recommended that we adopt the bottom-up method and establish a method
to review external data to ensure that the inputs are updated
appropriately.
Response: We agree with the commenters that there needs to be a
continuing review process for the direct PE inputs to reflect changes
in practice or new technology. In addition, it will be necessary to
ensure that the clinical staff time standards and supply and equipment
packages that have been developed through the refinement process are
applied appropriately to all services. We are hopeful that the RUC will
continue to play a role in this further review and will be discussing
this with RUC staff. In addition, we will continue to encourage input
from the medical community in general regarding the accuracy of the
direct inputs and their pricing.
Comment: There were a few specific concerns raised by commenters
regarding the bottom-up methodology. A specialty society representing
radiation oncology stated that the bottom-up methodology may be
unintentionally compressing higher-cost technology. A health care
provider supported the bottom-up approach conceptually, but expressed
concerns that aggregate budget neutrality would be more difficult to
control using a bottom-up approach than using the top-down. A medical
group practice association, as well as a large multi-specialty clinic,
had concerns that the RUC recommendations we have accepted for new
technical procedures have, because of budget neutrality, eroded the
value attributed to cognitive services. MedPAC had concerns about
dealing with overvalued services and with the assumptions we use to
allocate the cost of equipment to a specific service. For example,
MedPAC questioned whether our assumption of 50 percent utilization for
all equipment is valid.
Response: We are not sure how the bottom-up methodology would
compress higher cost technology, but would be willing to discuss this
with the commenter as we develop our next proposal. For budget
neutrality, we are not certain that it is harder to control under a
bottom-up approach; it would depend on which data source--the aggregate
SMS-type data or the PEAC-refined input data--produces the most
accurate estimate of direct costs. We understand, in a budget neutral
system, the concern about the effect that adding inputs for expensive
technology has on cognitive services, but under a bottom-up methodology
there would not be the issue of scaling factors exaggerating this
effect. We would like very much to discuss the issue raised by MedPAC
as we endeavor to improve our PE methodology.
Future Indirect PE Refinement
Comment: Although we did not propose any major change to the
indirect PE methodology, other than incorporating the new PE survey
data, we did indicate our interest in receiving suggestions on ways to
continue to refine the indirect PE calculations. Most commenters
focused on the need for us to acquire up-to-date survey information for
all specialties so that the PE data for all specialties is as current
as possible. Specialty societies representing infectious disease
physicians, orthopaedists, remote cardiac services, chest physicians
and physical medicine commented that we should extend the deadline to
allow specialty societies to conduct supplemental PE surveys. A
commenter representing otolaryngologists stated this would not be a
preferred option since the high cost involved with conducting surveys
would disadvantage smaller specialties.
Other specialty societies representing cataract surgeons,
anesthesiologists, emergency medicine and otolaryngology recommended
that an unbiased SMS-type survey that cuts across all specialties would
be most appropriate for use in the future, instead of having data from
different time periods. In arguing for this multi-specialty approach,
an emergency medicine association commented that, as MedPAC reports
have indicated, only specialty societies who are likely to gain ground
have incentive to produce new surveys. The specialty society
representing otolaryngology cited the discussion in the Lewin Group
report, ``Recommendations Regarding Supplemental Practice Expense Data
Submitted for 2006,'' that suggests that the increase in the surveyed
PE/HR could indicate a ``secular trend in rising physician PEs,'' and
the need for a multi-specialty PE survey. The commenter also suggested
that a universal survey could be paid for by using funds reallocated
from the oncology demonstration. A specialty society representing spine
surgeons commented that all physicians should have the opportunity to
submit data relevant to their specialties because it would be unfair to
reduce PE reimbursement for providers such as neurosurgeons and
orthopedic surgeons without allowing those providers that opportunity
to submit accurate data. The society suggested that, as we have
established a model for survey data, we could allow societies to survey
their membership and submit the results, either directly to CMS or
through the RUC. An association representing medical group practices
recommended that a comprehensive study be initiated to accurately
balance the relativity of overhead costs of practice for each service
on a nationwide basis and that this include the costs of information
technology (IT) implementation. An emergency medicine commenter
recommended including survey questions on uncompensated care.
Response: We agree with all the commenters that, for the PE RVUs to
reflect accurately the relative indirect costs for all services, it
would be most preferable to have current data for all specialties.
However, section 212 of the BBRA required that we establish a process
to use data developed by entities and organizations to supplement the
data we normally collect in determining the PE component. We
established this process and set criteria and a timeline for submission
of this data. Although we twice extended the period during which we
would accept these supplemental data, we are not proposing to extend
this period beyond this year. We believe
[[Page 70136]]
that there has been sufficient time for individual specialties that had
sufficient member support to do a survey, and that had reason to
believe that the results of a survey would be helpful, to submit
supplementary PE data to us. Therefore, we agree with the commenters
who suggest that a multi-specialty survey done for a uniform time
period would be most helpful. We are now planning to work with the AMA
and the medical community to develop a strategy for funding and
fielding a multi-specialty indirect PE survey that will help ensure
that our PE methodology treats all specialties equitably.
Comment: Several commenters offered the following suggestions for
revisions to the indirect methodology.
Comments from two associations representing speech language
pathologists and audiologists argued that the current method of
assigning indirect costs to their services results in a gross
underestimation of these costs for both audiology and speech-language
pathology services. One association suggested an alternative method of
basing indirect costs on the ratio of the refined direct costs to the
total costs for all physicians or for otolaryngologists.
A specialty society representing allergy expressed concern that the
indirect costs of an allergy practice are not properly accounted for in
the current methodology because most either are not assigned work RVUs
or have very low work RVUs, but may have high actual indirect costs.
The society recommended that we should either establish a mechanism for
adjusting the indirect PE when the existing formula yields an
inequitable result, or revise the direct costs to include
administrative staff time.
A comment from a manufacturer stated that we should not use the
``All Physician'' indirect cost data for IDTFs and recommended using
the radiology PE/HR figure for IDTF radiological services and the
cardiology PE/HR for IDTF cardiology services, with the exception of
the cardiac remote monitoring services which should be paid at current
levels, pending the collection of additional data.
A comment from a clinical oncology society recommended that any
revision in the methodology for direct costs should be accompanied by a
revision in the methodology for allocating indirect costs. The society
stated that both the Lewin Group and the Government Accountability
Office have found that the current methodology for indirect costs is
biased against services that lack a physician work component.
A family physician association questioned why we use physician
work, rather than physician time, in our formula for allocating
indirect expenses. The commenter stated that there is no evidence that
PE would vary with physician intensity and recommended that we use
physician time rather than work in the allocation of indirect expenses.
A group representing cardiac services providers recommended that if
and when the new methodology is applied to remote cardiac monitoring,
indirect costs for these services should be based on a survey of their
group and not on the ``All Physician'' average PE/HR, which fails to
reflect the actual practice costs incurred. The group also recommended
that we allocated indirect costs solely on the basis of direct costs,
without regard to physician work.
Response: We thank all the above commenters for their suggestions
on improvements to our indirect PE methodology. We will certainly
consider all of the above recommendations, as we work with the medical
community to develop our next proposal for indirect PE.
Comment: The American College of Surgeons recommends that we
convene a multi-stakeholder process to address indirect PE
methodological issues so that we can make further changes before final
implementation of our new methodology.
Response: As we have mentioned previously, we agree wholeheartedly
with the above recommendation. We plan to initiate an open process with
the medical community to exchange ideas, answer questions and provide
information regarding changes to all aspects of our PE methodology
before publication of the next PFS proposed rule. We recognize that in
any payment system based on costs, indirect costs are always the most
difficult to allocate fairly and accurately. Therefore, we will welcome
all suggestions, including those recommended, to improve our indirect
PE methodology.
Other Issues
Comment: A group representing community cancer centers requested
that we review the PE RVUs for drug administration services as soon as
the needed data are available to ensure that they accurately reflect
all the costs associated with these services. The National Patient
Advocate Foundation agreed because of concern that use of the current
indirect PE RVUs will not be sufficient to reimburse oncologists for
drug administration costs.
Response: We should have the utilization data needed for the 2006
proposed rule and plan to include the drug administration services in
whatever PE methodology is proposed.
Comment: Several commenters recommended that we maintain budget
neutrality for PE RVU changes by adjusting the CF proportionately,
rather than decreasing only PE RVUs.
Response: Though there could be operational difficulties with
adjusting the CF to account for PE budget neutrality, we would like to
solicit comments on how best to reflect the budget neutrality for PE.
3. PE Recommendations on CPEP Inputs for CY 2006
Since 1999, the PEAC, an advisory committee of the AMA's RUC,
provided us with recommendations for refining the direct PE inputs
(clinical staff, supplies, and equipment) for existing CPT codes. The
PEAC held its last meeting in March 2004 and the AMA established a new
committee, the PERC, to assist the RUC in recommending PE inputs.
With the PERC's assistance, the RUC completed refinement of
approximately 200 remaining codes at its meetings held in September
2004 and February 2005. A list of these codes appeared in Addendum C of
proposed rule.
We reviewed the RUC-submitted PE recommendations and proposed to
adopt nearly all of them. We worked with the AMA staff to correct any
typographical errors and to make certain that the recommendations are
in line with previously accepted standards.
As stated in the proposed rule, we revised the PE database to
reflect these RUC recommendations which can be found on our web site.
(See the ``Supplementary Information'' section of this rule for
directions on accessing our web site.)
We disagreed with the RUC's recommendation for clinical labor time
for CPT code 36522, Extracorporeal Photopheresis. In the CY 2005 final
rule (69 FR 66236), we assigned, on an interim basis, 223 minutes of
total clinical labor for the service period based on the typical
treatment time of approximately 4 hours. The RUC, however, recommended
122 minutes total clinical labor time for the service period, which
allowed for 90 minutes of nurse ``intra service'' time for the
performance of the procedure (the society originally proposed 180
minutes). We believe that 135 minutes is a more appropriate estimation
of the clinical staff time actually needed for the intra time, as it
more closely approximates the time assigned to the other procedures in
this family of codes, including CPT codes 36514, 36515, and 36516.
Therefore, we proposed a total
[[Page 70137]]
clinical labor time of 167 minutes for the service period. We did not
receive specific comments for this revision and are finalizing this
change to the clinical labor time. While we have made the change in the
PE database, the PE RVUs for 2006 will not reflect the adjustment due
to the decision concerning the PE methodology to maintain all PE RVUs
at the 2005 level as discussed previously.
The RUC also recommended that no inputs be assigned to several
codes because the services were not performed in the office setting.
However, our utilization data shows that 4 of these codes (CPT codes
15852, 76975, 78350, and 86585) are currently priced in the office and
are performed with sufficient frequency in the office to warrant this.
Therefore, we proposed not to accept the RUC recommendations for these
services at this time, but requested comments from the relevant
specialties as to whether the recommendations should be accepted.
Comment: We received comments from one specialty society
disagreeing with the RUC's recommendation for CPT 78350, single photon
bone densitometry, as they believe this procedure is being performed in
the office. They expressed their intentions to work with CMS as they
develop appropriate PE inputs for this procedure in the nonfacility
setting. The specialty society also expressed their agreement with the
RUC's recommendation to eliminate the nonfacility PE RVUs for 76975
because virtually all of these exams are performed in the facility
setting. In addition, a national organization representing medical
directors of respiratory care, supported the retention of nonfacility
PE RVUs for CPT 86585, TB tine test, because they believe it to be a
legitimate office-based procedure. We did not receive comments on the
appropriateness of nonfacility RVUs for CPT 15852.
Response: We will maintain the nonfacility setting PE RVUs for
78350 and look forward to working with the specialty society in their
initiative to develop inputs for this procedure. We will remove the PE
inputs for the nonfacility setting for CPT codes 76976 and 15852,
although for the 2006 PFS these codes will reflect the 2005 PE RVU
amounts. CPT 86585 has been deleted from CPT 2006 and will not appear
on Addendum B.
4. Payment for Splint and Cast Supplies
In the Physician Fee Schedule (CY 2000); Payment Policies and
Relative Value Unit Adjustment final rule, published November 2, 1999
(64 FR 59379) and the Physician Fee Schedule (CY 2002); Payment
Policies and Relative Value Units Five-Year Review and Adjustments
final rule, published November 1, 2000 (66 FR 55245), we removed cast
and splint supplies from the PE database for the CPT codes for fracture
management and cast/strapping application procedures. Because casting
supplies could be separately billed using Healthcare Common Procedure
Coding System (HCPCS) codes that were established for payment of these
supplies under section 1861(s)(5) of the Act, we did not want to make
duplicate payment under the PFS for these items.
However, in limiting payment of these supplies to the HCPCS codes
Q4001 through Q4051, we unintentionally prohibited remuneration for
these supplies when they are not used for reduction of a fracture or
dislocation, but rather, are provided (and covered) as incident to a
physician's service under section 1861(s)(2)(A) of the Act.
Because these casting supplies are covered in sections 1861(s)(5)
or 1861(s)(2)(A) of the Act, we proposed to eliminate the separate
HCPCS codes for these casting supplies and to again include these
supplies in the PE database. This would allow for payment for these
supplies whether based on section 1861(s)(5) or 1861(s)(2)(A) of the
Act, while ensuring that no duplicate payments are made. In addition,
by bundling the cost of the cast and splint supplies into the PE
component of the applicable procedure codes under the PFS, physicians
would no longer need to bill Q-codes in addition to the procedure codes
to be paid for these materials.
Because these supplies were removed from the PE database prior to
the refinement of these services by the PEAC, we proposed to add back
the original CPEP supply data for casts and splints to each applicable
CPT code and we requested that the relevant medical societies review
the ``Direct Practice Expense Inputs'' on our web site and provide us
with feedback regarding the appropriateness of the type and amount of
casting and splinting supplies. We also requested specific information
about the amount of casting supplies needed for the 10-day and 90-day
global procedures, because these supplies may not be required at each
follow-up visit; therefore, the number of follow-up visits may not
reflect the typical number of cast changes required for each service.
We reincorporated the following cast and splint supplies as direct
inputs: fiberglass roll, 3 inch and 4 inch; cast padding, 4 inch;
webril (now designated as cast padding, 3 inch); cast shoe;
stockingnet/stockinette, 4 inch and 6 inch; dome paste bandage; cast
sole; elastoplast roll; fiberglass splint; ace wrap, 6 inch; and kerlix
(now designated as bandage, kerlix, sterile, 4.5 inch) and malleable
arch bars. The cast and splint supplies were added, where applicable,
to the following CPT codes: 23500 through 23680, 24500 through 24685,
25500 through 25695, 26600 through 26785, 27500 through 27566, 27750
through 27848, 28400 through 28675, and 29000 through 29750.
Because we proposed to pay for splint and cast through the PE
component of the PFS, we would no longer make separate payment for
these items using the HCPCS Q-codes.
Comment: We received a comment on behalf of the American
Osteopathic Academy of Orthopedics (AOAO) that provided specific
information for the type and number of casts needed for the 10 or 90-
day global period for each code in the relevant fracture management
series. The AOAO also noted the type and amount of casting supplies,
including stockinette, cast padding, fiberglass and post-op cast shoe,
as appropriate.
We also received a comment from the RUC expressing their
appreciation for the proposal to make coding and billing for fracture
management and casting/strapping supplies easier by reducing the number
of codes for physicians to submit. In addition, the RUC expressed
interest in reviewing the data submitted in response to our proposal so
that the resulting casts and strapping PE inputs can ``enjoy the same
level of scrutiny and cross-specialty refinement that all of the other
PE inputs have''.
Other specialty societies supported our proposal to include casting
material in the fracture care codes and the elimination of the Q codes.
However, some of these societies expressed concerns about bundling all
of the necessary casting/strapping supplies for the global period into
the fracture management codes. These commenters related that only the
initial cast/strapping supplies should be bundled into the relevant
fracture care code series and that physicians should be able to
continue to submit separate claims for the CPT codes for the
application of casts and strapping procedures during the global period.
Many commenters, primarily from orthopedic practices, expressed
concern about the proposal, but misunderstood that this proposal was
separate from the anticipated negative update for 2006 based on the SGR
methodology.
Response: We thank AOAO for submitting the information we requested
in the proposed rule. The society submitted a clear,
[[Page 70138]]
comprehensive and beautifully prepared spreadsheet detailing each CPT
code in the various fracture management series. We commend them on
their efforts to submit such a thorough and meticulous document in
response to our proposed rule request.
For the 2006 fee schedule, based on the decision concerning PE
methodology to maintain all PE RVUs at the 2005 level previously
discussed, we have removed the CPEP inputs for casts and splints from
the PE database and CMS will retain use of the Q-code fee schedule as
done in the past. In addition, we will use the interim time period
before the notice of proposed rulemaking for the 2007 fee schedule to
work with the affected specialties and the RUC to clarify issues
related to Medicare payment policy and establish more appropriate
amounts of casting/strapping materials for the relevant series of
fracture management codes and the casts and strapping application
codes. Due to the temporary status and intended limited use of the Q-
code fee schedule, it is our intention to resolve these important
payment issues in the near future. A detailed discussion of the SGR and
the update for 2006 is found later in this final rule with comment.
5. Miscellaneous PE Issues
In this section, we discuss our specific proposals related to PE
inputs.
a. Supply Items for CPT Code 95015
We proposed to change the supply inputs for CPT code 95015,
intracutaneous (intradermal) tests, sequential and incremental, with
drugs, biologicals or venoms, immediate type reaction, specify number
of tests, based on comments received from the JCAAI. JCAAI reported
that ``venom'' is the most typical test substance used when performing
this service and that ``antigen'', currently listed in the PE database,
is never used. They also suggested that the appropriate venom quantity
should be 0.3 ml (instead of the 0.1 ml listed for CY 2005) because of
the necessity to use all 5 venoms (honey bee, yellow jacket, yellow
hornet, white face hornet and wasp) to perform this sensitivity
testing; that is, 1 ml of each venom type for a total of 5 ml of venom.
The diluted venoms are sequentially administered until sensitivity is
shown, beginning with the lowest concentration of venom and
subsequently administering increasing concentrations of each venom. We
accepted the specialty's argument and proposed to change the test
substance in CPT code 95015 to venom, at $10.70 (from single antigen,
at $5.18) and the quantity to 0.3 ml (from 0.1 ml).
Comment: JCAAI expressed their appreciation for our proposal to
change the supply item input for CPT 95015 from 0.1 ml antigen to .3 ml
of venom.
Response: The appropriate changes have been made to our PE
database. However, as discussed above, because we are making only
limited, necessary changes to PE RVUs for the 2006 PFS, the PE RVUs for
this code will continue to reflect the 2005 PE RVU amounts.
b. Flow Cytometry Services
In the CY 2005 final rule (69 FR 66236), we solicited comments on
the interim RVUs and PE inputs for new and revised codes, including
flow cytometry services. Based on comments received and additional
discussions with representatives from the society representing
independent laboratories, we proposed to revise the PE inputs for the
flow cytometry CPT codes 88184 and 88185.
Based on information from the specialty society, we proposed to
change the direct inputs used for PE as follows:
Clinical Labor: Change the staff type in the service
(intra) period in both CPT codes 88184 and 88185 to cytotechnologist,
at $0.45 per minute (currently lab technician, at $0.33 per minute).
Supplies: Change the antibody cost for both CPT codes
88184 and 88185 to $8.50 (from $3.544).
Equipment: Add a computer, printer, slide strainer,
biohazard hood, and FACS wash assistant to CPT code 88184. Add a
computer and printer to the equipment for CPT code 88185.
Comment: We received comments from several organizations including
those representing professional services in clinical laboratories,
manufacturers, clinical laboratories, and clinical pathologists. These
commenters all supported our proposal to revise the PE inputs outlined
above for the flow cytometry CPT codes 88184 and 88185.
Response: We appreciate the support extended to us by these
national organizations in regards to the revision of direct inputs for
the CPT codes for flow cytometry. The PE changes have been made, as
indicated above, to the database. However, because we are making only
limited, necessary changes to PE RVUs for the 2006 PFS, the PE RVUs for
these codes will continue to reflect the 2005 PE RVU amounts.
c. Low Osmolar Contrast Media (LOCM) and High Osmolar Contrast Media
(HOCM)
HOCM and LOCM are used to enhance images produced by various types
of diagnostic radiological procedures. In the CY 2005 final rule (69 FR
66356), we eliminated the criteria for the payment of LOCM that had
been included at Sec. 414.38. Effective April 1, 2005, providers can
receive separate payment for LOCM when used with procedures requiring
contrast media through the use of separate Q-codes. Payment for HOCM is
currently included as part of the PE component under the PFS. We
proposed, effective January 1, 2006, to no longer include payment for
HOCM under the PFS and to establish Q-codes for the separate payment of
HOCM.
As noted in the proposed rule we reviewed the PE database and
proposed to remove the following two supply items which we have
identified as HOCM from the PE database:
Conray inj. iothalamate 43 percent(supply item
SH026, deleted from 64 procedures).
Diatrizoate sodium 50 percent (supply item
SH0238, deleted from 74 procedures).
We also identified 5 CPT codes (specifically CPT codes 42550,
70370, 93508, 93510 and 93526) that included omnipaque as a supply
item, and proposed to remove this supply item from these 5 CPT codes
since omnipaque is actually a type of LOCM.
Comment: We received several comments from organizations
representing radiology physicians and manufacturers on our proposal to
delete HOCM from the PE database. The commenters supported our proposal
for separate payment for both HOCM and LOCM to ensure beneficiaries
access to all the various types of medical imagining contrast media.
The commenter representing the manufacturers requested that we notify
carriers that separate payment for LOCM and HOCM is available.
Response: We thank the organizations for their comments in support
of our proposal which would permit separate payment for HOCM in 2006.
We have removed HOCM from the direct inputs in the PE database and also
deleted LOCM from the 5 procedures as noted above. However, because we
are not implementing the bottom-up methodology which utilizes the
direct inputs to determine the PE RVUs, these imaging codes will again
be valued in the NPWP where the PE RVUs are established using an
appropriate crosswalked charge-based RVU containing HOCM as an inherent
supply cost. We will delay separate payment for HOCM until such time
the direct inputs are used to determine PE RVUs. For 2006, the PE RVUs
will be retained at the 2005 level. We remind the commenters that the
average sales price
[[Page 70139]]
(ASP) quarterly values are published on our Web site at the following
address: http://www.cms.hhs.gov/providers/drugs/asp.asp.
d. Imaging Rooms
We include standardized ``rooms'' for certain services in our PE
equipment database, rather than listing each item separately. We
received pricing information from the ACR for the following rooms that
are included in the database. We accepted most of the proposed items
that met the $500 threshold for equipment and proposed to include the
items in each specific room, as follows:
because most codes assigned this room have also been assigned an
alternator (automated film viewer) or a 4-panel viewbox.
Radiographic-Flouroscopic Room: $367,664
viewbox was not included because most codes assigned this room have
also been assigned an alternator (automated film viewer) or a 4-panel
viewbox.
(densitometer, mammography reporting system, sensitometer, mammography
phantom, desktop computer, and the film processor) that duplicated
items included in the mammography room were removed from the codes
assigned the room, eliminating the reporting system, sensitometer and
phantom from the PE database.
Computed tomography (CT) Room: $1,284,000 (16-
slice CT scanner with power injector and monitoring system)
Magnetic Resonance Imaging (MRI) Room:
$1,605,000 (1.5T MR scanner with power injector and monitoring system)
Comment: We received comments from one specialty society requesting
that we add 4 cassettes to the composition and cost of the mammography
room although each cassette does not meet the $500 equipment threshold.
Another commenter representing a large radiology group practice agreed
that our cost allowance for the mammography room was appropriate for
the standard analog mammography room. However, this commenter asked us
to develop a separately identified cost for a digital mammography room,
costing approximately 3 to 4 times as much as the analog room, citing
this digital system provides better diagnostic services.
Response: We appreciate the comments regarding the cost and
composition of the mammography room. We are sympathetic to the
commenter's request for the creation of a separate digital mammography
room. However, the direct PE inputs for labor, supplies and equipment
that are included in physicians' services reflect the costs involved in
the typical procedure or service provided in the nonfacility setting.
We believe that the mammography room we proposed represents the
equipment used to provide the typical mammography service and was based
on information provided by the specialty society.
We disagree with the specialty society in regards to adding the
cost of the 4 cassettes to the room's price. The threshold for the
inclusion of equipment for PE purposes remains at $500. For this
reason, we will finalize the value of the mammography room as proposed,
at $168,214.
In addition we will finalize the proposed values for all of the
above imaging rooms in this final rule with comment. However, because
we are adopting only limited, necessary changes to PE RVUs for CY 2006,
and will continue to utilize the NPWP to value these services, the RVUs
will remain the same as those for 2005.
e. Equipment Pricing for Select Services and Procedures From the CY
2005 Final Rule (69 FR 66236)
In the August 8, 2005 proposed rule, we presented information on
pricing of equipment for select services and procedures based on
specialty information and stated we would be accepting the prices. The
specific equipment was as follows:
Equipment pricing for certain radiology services received
from the ACR were presented in table 15 of the proposed rule.
Equipment pricing on the Ultrasound color Doppler
transducers and vaginal probe received from the American College of
Obstetrics and Gynecology was presented.
For CPT 36522, extracorporeal photopheresis, we discussed
equipment pricing information specific to this procedure.
Pricing of EMG botox machine used in CPT code 92265 as
presented by the American Academy of Ophthalmology.
No comments were received on these items, therefore, the prices
discussed in the proposed rule will be used in the PE database.
However, we will continue to use the 2005 PE RVUs for each of these
codes for CY 2006.
f. Supply Item for In Situ Hybridization Codes (CPT 88365, 88367, and
88368)
As discussed in the August 8, 2005 proposed rule, we received
comments in response to the CY 2005 final rule from the College of
American Pathologists regarding the number of DNA probes assigned to
the in situ hybridization codes, CPT codes 88365, 88367, and 88368.
Currently, CPT codes 88365 and 88368 have 1.5 probes assigned, while
CPT code 88367 has only 0.75 of a probe assigned. The College of
American Pathologists requested that we assign 1.5 probes to CPT code
88367, and provided justification for this request. We accepted the
College of American Pathologists' rationale and proposed to change the
probe quantity for CPT code 88367 to 1.5.
Comment: A society representing clinical pathologists supports the
proposed change to the probe quantity for CPT 88367.
Response: We have entered the number of probes, at 1.5, to our PE
database. This change will not be expressed in the 2006 PE RVUs because
as discussed above, we will retain the 2005 PE RVUs.
g. Supply Item for Percutaneous Vertebroplasty Procedures (CPT Codes
22520 and 22525)
The Society for Interventional Radiology (SIR) provided us with
documentation for the price of the vertebroplasty kit used in CPT codes
22520 and 22525. We proposed to accept a new price of $696 for this
supply, currently listed as $660.50, a placeholder price from the CY
2005 final rule.
Comment: Commenters supported the proposed $696 cost estimate for
the vertebroplasty kit.
Response: We are finalizing our proposal to value the
vertebroplasty kit price at $696 in the supply database, although, as
discussed previously, this will not be reflected in the 2006 PE RVUs
because we will retain the 2005 PE RVUs.
h. Clinical Labor for G-codes Related to Home Health and Hospice
Physician Supervision, Certification and Recertification
As discussed in the August 8, 2005 PFS proposed rule, 4 G-codes
related to home health and hospice physician supervision, certification
and
[[Page 70140]]
recertification, G0179, 180, 181, and 182, are incorrectly valued for
clinical labor. These codes are cross-walked from CPT codes 99375 and
99378, which underwent PEAC refinement in January 2003 for the 2004 fee
schedule. However, we did not apply the new refinements to these
specific G-codes. This was an oversight on our part and we proposed to
revise the PE database to reflect the new values in the 2006 physician
fee schedule.
Comment: Commenters, including those representing the specialty
societies for home care physicians and internists, expressed concern
about the decrease in PE RVUs for the G-codes for hospice and home
health supervision and care plan oversight services. One commenter
requested that we elaborate on the sequence of events that lead to this
decrease.
Response: We appreciate the concern expressed by the commenters and
are providing additional information outlining the reason for this
change. For the 2001 PFS, these G-codes were created in order to
provide payment for these specific services. Changes made to the CPT
codes (CPT codes 99375 and 99378) for 2001 did not enable us to
recognize the CPT codes for Medicare payment purposes. Therefore, the
PE inputs that had been applied to these CPT codes were cross-walked
and used to establish the PE RVUS for the G codes that we established
for these services. Subsequent to this, the CPT codes underwent
refinement by the PEAC at its January 2003 meeting where a majority of
the other E/M services were refined. CMS accepted these PE
recommendations from the PEAC that included only a total of 36 minutes
for clinical labor. The PEAC recommendations did not include supplies
and equipment because they did not believe these were utilized in the
typical services represented by these codes. These PE inputs were
intended to be crosswalked to the G-codes for 2004, however, due to an
oversight, this did not occur. We apologize to the specialties that
this refinement was not done in a timely manner. Thus, we are
finalizing the direct inputs for these G-codes in this rule and have
changed the PE database accordingly. However in 2006, the PE RVUs for
these 4 G-codes will remain at the 2005 level, as explained above.
i. Programmers for Implantable Neurostimulators and Intrathecal Drug
Infusion Pumps
Subsequent to the CY 2005 final rule, we received comments from a
manufacturer of programmers for implantable neurostimulators and
intrathecal drug infusion pumps. The commenter indicated that the
equipment costs for these programmers are not a direct expense for the
physicians performing the programming of these devices and that the
manufacturer furnishes these devices without cost because the
programming device is considered a ``necessary, ancillary item to the
neurostimulator and drug pump and can only be used to program these
devices.'' Therefore, we proposed to remove the 2 programmers from the
PE database: EQ208 for medication pump from 2 codes (CPT 62367 and
62368) and EQ209 for the neurostimulator from 8 codes (CPT 95970-
97979). We also requested comments from the specialty societies
performing these services as to whether this reflects typical practice.
Comment: Several commenters disagreed with this proposal indicating
that not all programmers are provided without cost. Specifically, for
the one manufacturer, the practice of providing physicians with these
programmers free of charge is just a recent occurrence. In addition,
one commenter informed us that there are other PE items that are not
accounted for, including a printer, for 62367 and 62368. The RUC
commented that several specialty societies conducted an email-based
survey finding that the majority of the respondents reported paying for
these programmers. The RUC asked us to reconsider our decision to
delete the programmers from the PE direct inputs because it was based
solely on the recommendation of one manufacturer.
Response: We are sympathetic to the commenters' concerns about the
programmers used by pain medicine physicians. We have carefully
reviewed our decision to delete the programmers from the PE database in
light of the comments we received. Therefore, based on the uncertainty
as to which brand product is typical, the survey results presented to
us by the RUC, and the life, 7 years, of each programmer, we have
determined that we will retain these programmers in the database. In
addition, we have added ``with printer'' to the description of EQ208 to
match that of EQ209 in order to assuage the commenter's concern that
the price listed in the database, $1975, correctly reflects the cost of
both the programmer and the printer. Because the PE RVUs for 2005
contained the price for these programmers, the PE RVUs for 2006 will
continue to reflect their costs.
j. Pricing of New Supply and Equipment Items
As part of the CY 2005 final rule process, we reviewed and updated
the prices for equipment items in our PE database and assigned a unique
identifier to each equipment item with the first 2 elements
corresponding to one of 7 categories. It was brought to our attention
that we assigned the same category identifier (ELXXX) for both ``lanes/
rooms'' as well as ``laboratory equipment''. To correct this, we
proposed assigning laboratory equipment items the new category
identifier ``EPXXX'', but the specific numbers associated with each
item would remain the same. In addition, supply items were reviewed and
updated in the rulemaking process for the 2004 PFS. During subsequent
meetings of both the PEAC (now referred to as the PERC) and the RUC,
supply and equipment items were added that were not included in the
pricing updates. In the proposed rule we included 2 tables (Table 16:
Proposed Practice Expense Supply Items and Table 17: Proposed Practice
Expense Equipment Items) that listed the additional supply and
equipment items for 2006 and the proposed associated prices that we
would use in the PE calculation. The listing of new supplies and
equipment in the proposed rule does not guarantee that the price listed
for each item has been accepted. Rather, the new supply and equipment
tables are to make specialties aware of the descriptors and assigned
supply or equipment codes that can be used in future proposals to the
RUC and HCPAC. As discussed below, the addition of an item to the
tables for new supplies or equipment does not preclude the inclusion of
the same item on the tables that require more detailed information and
documentation from the specialty organization.
k. Supply and Equipment Items Needing Specialty Input
We also identified certain supply and equipment items for which we
were unable to verify the pricing information, reflected in Table 18:
Supply Items Needing Specialty Input for Pricing and Table 19:
Equipment Items Needing Specialty Input for Pricing of the proposed
rule. We stated that the items listed in these tables represent the
outstanding items from last year and new items added from the RUC
recommendations. Therefore, we requested that commenters, particularly
specialty organizations, provide pricing information on items in these
tables along with documentation to support the recommended price.
Tables 14 and 15 reflect the comments and documentation we received
for each item. Specialty societies are asked to review these supplies
and equipment, as
[[Page 70141]]
appropriate, to assure that the item status is accurate and forward any
necessary documentation. We would also like to reinforce the types of
documents that meet the acceptable category. The following list
includes examples of acceptable documentation:
Photocopy or actual vendor catalog listing, indicating
price, accessories or components (if applicable), available quantity,
company name, brand name, and catalog date. Scanned versions, if
readable, can also be emailed.
Photocopy of web page with specific supply or equipment
including the necessary information listed in above bullet.
Photocopy of invoice indicating the price paid for
specific supply or equipment, as well as the specific contents of kit,
pack or tray for supplies and component or accessory parts for the
equipment item.
Letter, FAX or e-mail from manufacturer, vendor or
distributor noting the ASP of the supply or equipment. The description
of the item must list all contents, accessories or component parts that
are included in the price.
The following information is not considered acceptable
documentation, including:
Web site addresses.
Vendor, manufacturer, or distributor phone number and
address.
Approximated values.
BILLING CODE 4121-01-U
[[Page 70142]]
[GRAPHIC] [TIFF OMITTED] TR21NO05.006
[[Page 70143]]
[GRAPHIC] [TIFF OMITTED] TR21NO05.007
[[Page 70144]]
[GRAPHIC] [TIFF OMITTED] TR21NO05.008
[[Page 70145]]
[GRAPHIC] [TIFF OMITTED] TR21NO05.009
[[Page 70146]]
[GRAPHIC] [TIFF OMITTED] TR21NO05.010
[[Page 70147]]
[GRAPHIC] [TIFF OMITTED] TR21NO05.011
BILLING CODE 4120-01-C
[[Page 70148]]
l. Additional PE Issues Raised by Commenters
Comment: We received a comment from an equipment distributor and
multiple comments from physicians asking us to add more clinical labor,
supplies and equipment to CPT codes 78481 and 78483 for cardiac blood
pool imaging using the first pass technique. The commenters emphasized
that the labor costs are understated, and that additional supplies and
equipment are necessary to perform these services. In particular, the
commenters requested we add a nuclear medicine gamma camera to the
equipment inputs or cross-walk the equipment listed for CPT 78465. The
distributor presented supply and equipment tables for both codes, using
direct PE inputs currently listed in the PE database, most of these are
found in the PE for CPT 78465.
Response: The direct inputs for these ``First Pass'' services were
presented by the specialty society to the PEAC at its January 2004
meeting. The RUC forwarded the PEAC's recommendations to CMS for
consideration during the rulemaking process for the 2004 fee schedule
at which time these recommendations were accepted. We do not believe
that we are in a position to make the type of changes to the PE inputs
for these 2 codes that the commenters have requested. We recommend that
the commenters and the specialty society whose members perform these
procedures, work together so that necessary changes can be considered
through the usual RUC process.
Comment: We received comments from a specialty society and a
manufacturer asking us to replace a supply item, a Tesio type dual
catheter, with the Lifesite system in CPT 36566--a procedure described
as the insertion of tunneled catheter with subcutaneous port(s). The
specialty society explained that when the RUC valued this service in
2003, the incorrect catheter was included with their PE
recommendations. The manufacturer asks for our assistance in correcting
a ``clerical error'' in our database. The commenters explain that CPT
codes 36565 and CPT 36566 are nearly identical in procedure, although
CPT 36566 requires the insertion of ``subcutaneous port(s)'' and that
the Tesio-type catheter, priced at $355, is currently listed for both
of these procedures. The Lifesite system, containing a subcutaneous
port, is priced at $1750. Both commenters noted that 2 Lifesite systems
are necessary to perform this procedure instead of one for a total
supply cost of $3500.
Response: We appreciate the commenters concerns about the specific
supplies they believe are needed to perform this service. The work and
PE values for CPT 36566 were forwarded by the RUC and accepted in our
final rule, for the 2004 fee schedule. We believe that the RUC is the
appropriate avenue to address correction of inputs to the PE database,
particularly due to the expensive nature of this replacement, and are
not revising the PE database to reflect this price change.
Comment: A specialty society commented that it believes the
nonfacility PE RVUs were mistakenly deleted from CPT codes 59812,
59840, and 59841. The specialty also requested that nonfacility PE RVUs
be added for CPT 58558.
Response: We have reviewed the specialty's request regarding
nonfacility PE RVUs for the 4 codes noted above. The ``NA'' indicator
for PE RVUs in the nonfacility setting is listed incorrectly for CPT
codes 59840 and 59841 in Addendum B of our proposed rule. Both of these
CPT codes should have PE RVUs listed in the nonfacility setting. The
specialty society is mistaken, however, regarding the appropriateness
of nonfacility PE RVUs for CPT 59812 and 58558. These codes have both
undergone refinement by the PEAC at least once and the recommendations
forwarded by the RUC clearly indicated that these procedures were not
valued in the nonfacilty setting. We have changed our database, as
appropriate, to reflect the changes for CPT 59840 and 59812.
Comment: We received comments from a specialty organization citing
that the total RVUs for CPT 19298 are too low in comparison to those
for CPT 19296--both new CPT codes for CY 2005. The specialty believes
this difference is likely due to the supply PE inputs necessary to
perform each procedure. The specialty states that the catheter supply
expenses should be similar between the 2 services, yet the nonfacility
PE RVUs for CPT 19298 (39.56) are significantly lower than those listed
for CPT 19296 (117.96). The specialty stated that while the average
number of catheters used for CPT 19298 is 25, ranging from 15-30, this
cost should be comparable to the catheter required for CPT 19296.
Finally, the specialty requests that we crosswalk the total RVUs for
the nonfacility setting from CPT 19296 to CPT 19298 for 2006 while they
gather detailed information to present to us.
Response: We have researched the specialty's concern about the
supply cost differences between the 2 new CPT codes for 2005. Whereas
the specialty contends that the catheter expenses are similar, or only
somewhat greater for CPT 19296, we found that the differences between
these 2 supply costs is significant. The mammosite tray, containing the
catheter used for CPT 19296, is priced at $2,550 while the button-end
implant catheters used for CPT 19298 are priced at $18.50 each. The PE
database indicates that the RUC-recommended typical procedure would
require 30 such catheters, opposed to 25 noted by the specialty, for a
total cost of $555. Consequently, we will not change the PE RVUs for
either procedure, although we remain puzzled as to the commenters'
specific concerns. We look forward to the specialty's clarification
regarding this issue and would urge them to address their concerns
through the usual RUC process. We would also like to remind commenters
that interim RVUs are published, for new and revised CPT codes, in our
final rule each year and are subject to a 60-day comment period at that
time. We encourage commenters to observe and utilize the respective
comment periods during our annual rulemaking process in order that we
may respond timely to issues and concerns.
Comment: We received many comments regarding the use of ``NA'' in
Addendum B when used for the ``Nonfacility PE RVUs'' column, the
``Facility PE RVUs'' column, and the occasional code with NA noted in
both PE RVU columns. These commenters asked us to provide a clear
definition of how the service is paid when the NA is affixed to either
PE RVU column in Addendum B which our rule for 2005 fee schedule had PE
RVUs listed for the nonfacility. One commenter stated that private
payors believe that payment is not made when the NA indicator is listed
in Addendum B.
Response: We appreciate the commenters remarks regarding the
uncertainty involved with interpreting Addendum B, particular regarding
the use of the ``NA'' indicator for the PE RVUs nonfacility and
facility columns. Due to the confusion expressed by the commenters
surrounding the NA designations, we have added explanations to Addendum
A in order to assist the readers of Addendum B. We are also including
these definitions here because of this issue's importance. The
following 2 explanations also appear in Addendum A of this rule:
An ``NA'' in the ``Non-facility PE RVUs'' column of
Addendum B means that CMS has not developed a PE RVU in the nonfacility
setting for the service because it is typically performed in the
hospital (that is, for example, an open heart surgery is generally
performed in
[[Page 70149]]
the hospital setting and not a physician's office).
Services that have an ``NA'' in the ``Facility PE RVUs''
column of Addendum B are typically not paid using the PFS when provided
in a facility setting. These services (which include ``incident to''
services and the technical portion of a diagnostic tests) are generally
paid under either the outpatient hospital prospective payment system or
bundled into the hospital inpatient prospective payment system payment.
Comment: Other commenters, including specialty organizations,
device manufacturers and physicians, noted that CMS had either
mistakenly removed PE RVUs in the nonfacility setting or that we had
made a decision to stop paying for services where, in Addendum B, an
``NA'' appeared in the proposed rule in the PE RVUs nonfacility column.
Another commenter believes that a series of codes for E/M services were
incorrectly marked as ``NA'' in the facility setting. These commenters
requested that the PE RVUs be restored to these codes.
Response: We apologize to those commenters who found that where,
due to the use of a new PE methodology, some of the codes listed in
Addendum B of the proposed rule were mistakenly marked with an ``NA''
in either the nonfacility or facility PE RVU column when the service is
actually valued in this setting and PE RVUs were listed previously.
These mistakes were corrected for Addendum B in this final rule with
comment. Most of the commenters requesting the restoration of
``missing'' PE RVUs in the nonfacility setting, though, were mistaken
because, in fact, we have not developed nonfacility PE RVUs for these
services and Addendum B continues to properly reflect the ``NA'' for
the nonfacility PE RVU column.
Comment: Several commenters asked us to create PE RVUs for their
services by cross-walking the direct inputs from other services.
Response: All of the requests we received to establish PE RVUs in
the nonfacility setting were for services that the PEAC/RUC had either
refined or developed without recommendations for PE nonfacility inputs.
We would like to remind the specialty organizations that the RUC has a
long standing process for the establishment and refinement of PE inputs
and encourage all organizations to follow this process.
Comment: A manufacturer requested that we add 15 minutes of
clinical labor and a tilt table to the PE database for CPT codes 36475
and 36476--both new codes for CPT 2005.
Response: We agree that the tilt table, for Trendelenberg, is
needed for these procedures and are adding this equipment, for the
respective service period minutes for each code. However, the
commenter's request for additional clinical labor is not timely because
the RVUs for these new codes were published as interim in the CY 2005
PFS final rule with comment at that time. As stated in the response
above, we remind commenters to observe and utilize the comment period
for new and revised codes at the time they are issued in our final rule
or utilize the established RUC process, as appropriate.
Comment: We received a comment from an organization representing
radiation oncology informing us that equipment for CPT codes 77333 and
77470 was missing.
Response: For CPT 77470, we disagree with the commenter that this
service should be assigned equipment. At the January 2004 PEAC meeting,
this code was valued specifically to compensate for the clinical labor
costs involved with certain high-intensity radiation procedures, such
as combined chemotherapy and radiation treatment. CPT 77470 was valued
to be billed once throughout the course of treatment, that is typically
comprised of 25 fractions. On the other hand, we agree with the
commenter that the lack of equipment for CPT codes 77333 and CPT 77332
appears to be an oversight. We believe that the PEAC, at their
September 2002 meeting, when considering equipment inputs for CPT code
77334, intended to cross-walk this equipment to the other 2 codes in
the family, CPT code 77332 and 77333. Therefore, we are adding this
equipment to 77332 and 77333, on an interim basis, and have changed the
PE database to reflect this addition for the correlating service period
time for each service. However, as explained above, because these codes
will be valued in the NPWP and the 2005 PE RVUs will be retained in
2006, this addition will be transparent until such time as the direct
inputs are used to establish the PE RVUs for the NPWP services.
Comment: We received comments from several organizations, a
specialty society, device manufacturers, IDTFs and physicians regarding
concerns about the remote cardiac event monitoring services, including
CPT codes 93012, 93226, 93232, 93271, 93733 and 93736, based on the
significant reduction in PE RVUs for these services published in our
proposed rule using the bottom-up methodology and the elimination of
the NPWP. Two of these services, CPT codes 93012 and 90271, were
reviewed by the RUC in April 2005 and forwarded as part of the PERC/RUC
recommendations in the proposed rule. The commenters noted that these
services are typically provided by IDTFs that are equipped for
continuous monitoring capabilities 24 hours a day, 7 days a week and
require highly trained staff to perform the monitoring of
transmissions. The commenters all agreed that the uniqueness of these
services makes a poor fit with the usual accounting for direct practice
expenses in the physician office. A specialty society requested CMS to
work with the involved provider community, that is, the specialty
IDTFs, to ensure that the direct and indirect costs of providing these
services are adequately reflected in the nonfacility PE RVUs.
Response: We are pleased that the commenters are in agreement that
these cardiac event monitoring services may not fit the usual PE model.
We are also happy that the specialty society has requested our
assistance to work with the specialized provider community in order to
ensure more appropriate PE inputs for these services. We look forward
to working with the provider organizations before the issuance of our
next proposed rule.
Comment: A manufacturer requested that we increase the work and PE
values for G0166, external counterpulsation (ECP), because of the
significant decrease in PE RVUs for the nonfacility setting in the
proposed rule. Specifically, the commenter asked that the labor time be
increased to include pre and post service time in addition to the 60
minutes allotted for actual ECP treatment time.
Response: We agree with the commenter that the 60 minutes is
inadequate to account for the other activities that the RN performs in
relationship to each ECP service. We have assigned some of the
standardized times for the activities previously identified by the PEAC
as appropriate to this service, as follows: 3 minutes for meet and
greet; 2 minutes to prepare the room; 2 minutes to position the
patient; 3 minutes for vitals; and 3 minutes for cleaning the room.
This extra 13 minutes has been added to the service period in the PE
database yielding a total of 73 minutes for the ECP service--although,
as discussed previously, this increase will not take effect in 2006
because, with limited exceptions, we will retain the 2005 PE RVU values
for existing codes.
Comment: Many commenters, including physicians and a device
manufacturer, requested that we increase labor, supplies, and equipment
PE values for CPT code 93701, thoracic
[[Page 70150]]
electrical bioimpedance (TEB). Their concerns arose from the proposed
reduction in PE RVUs in the proposed rule for this service. Some of the
commenters told us that the average cost of the equipment from one
manufacturer is $38,000, the electrodes are 10.95 ($8.95 with discount)
and that the labor time for the TEB procedure ranges from 15-20
minutes. The commenters requested that we adjust the PE values
accordingly.
Response: We are sympathetic to the commenters concerns regarding
the decrease in PE RVUs reflected in the proposed rule that reflected
both the elimination of the NPWP and the bottom-up methodology. For the
labor time request, the PE database does contain 20 minutes, although
this time was incorrectly cross-walked to the equipment time. We
apologize to the commenters regarding this error, and have changed the
equipment time to 20 minutes, from 10, in the database. We disagree
with the commenters about the inaccuracy of the equipment cost. During
the rulemaking process for the CY 2005 fee schedule, at which time we
revalued all equipment in the PE database, we identified 2 different
brands of equipment used for the TEB service. When the 2 prices are
averaged (using $38,000 as noted above by the commenters), the cost of
the TEB equipment is $28,625 which is the price listed in the database.
We also repriced our supply database during rulemaking for the 2004 fee
schedule. The TEB electrodes or sensors are listed at $9.95 in the
database and that amount is based solely on a phone quote from the
commenting manufacturer. TEB sensors from the other equipment
manufacturer range from $4.43 to $6.00 for each patient application.
Based on current valuation of the supplies and equipment in the PE
database, we are not changing the price of equipment or supplies for
the TEB service.
m. Additional PE Issues Raised by Commenters
Comment: We received 2 comments from specialty organizations
requesting CMS to re-evaluate the lack of physician work value for the
3 G-codes (G0237, G0238, and G0239) CMS created to describe services to
improve respiratory function to reflect the physician's work in
overseeing these incident to services. The commenters contend that the
addition of CPT 99755, assistive technology assessment, in 2004 created
a rank-order anomaly for the respiratory function G-codes. The
commenters requested that CMS ask the RUC to evaluate the work for
these G-codes.
Response: We disagree with the commenter's contention that a rank
order anomaly exists between the respiratory function G-codes and CPT
97755. We were clear when we created these codes during rulemaking for
the 2002 fee schedule that the G-codes would make billing of CPT codes
97000-97799 inappropriate for professionals involved in treating
respiratory conditions, unless these services are delivered by physical
therapists (PTs) and occupational therapists (OTs) and meet other
requirements for physical and occupational therapy services. We also
disagree that these services are always provided incident to a
physician's service because in the CORF setting, where respiratory
therapy services are statutorily delineated as a CORF service, the
physician's direct supervision is not a requirement and the incident to
provisions do not apply. The G-codes enable us to distinguish CORF
respiratory therapy and incident to services from the services provided
by PTs and OTs under the therapy benefit. Consequently, these G-codes
cannot be used to bill for services provided under the physical and
occupational benefit category at section 1861(P) of the Act and, as
such, cannot create a rank order anomaly with the 97000 series of CPT
codes. Although we have not assigned any work values for this final
rule with comment, we are still considering the merits of this request
and are happy to meet with the commenters prior to the issuance of our
next proposed rule to discuss this issue in greater detail. We remind
the specialty societies that they can make requests to the RUC to
review the G-codes with respect to work values. However, we believe the
appropriate review entity would be the HCPAC.
Comment: Several commenters expressed their concern regarding the
high-priced supply items in our practice expense database. In their
comments, the RUC requested that we consider a different approach for
payment of high-priced disposable medical supplies, particularly with
respect to new technology supply items--where prices commonly decrease
within 6-12 months after being distributed into a wider market--as
these services move into the physician's office. As an alternative, the
RUC strongly encourages CMS to review and re-price medical supplies,
priced at or above $200, on an annual basis. Another commenter noted
that our listed price of $677 for the endovenous laser kit used for CPT
36478 is apparently in error because it is readily available at $250-
$350 and listed four suppliers who distribute this supply in the noted
price range.
Response: We appreciate comments and remarks. The RUC's comments
regarding high cost medical supplies and the need to review these
prices on a more frequent basis than every 5 years. Because we are
committed to ensuring that the prices for supplies and equipment in the
PE database are accurate, we also want to account in some way for the
volatile nature of prices for new technology. We will consider options
for revaluing these high cost ``new tech'' supply items and include a
discussion of this issue in the next proposed rule
Comment: We received a comment from an organization representing
services of audiologists noting that the salary for audiologists and
the equipment for their services are too low or out of date.
Response: During the rulemaking process for the 2005 fee schedule,
we revalued all equipment in the PE database, and requested specialty
input at that time. To the extent that there have been changes since
last year, we recommend that the organization utilize the establish RUC
process. We would also encourage the commenter to supply us with
updated salary information so that we may better address their other
concern.
Revisions to CPT Code Series 21076 Through 21087
We also want to note that, at the request of the RUC, we have been
working directly with representatives of maxillofacial prosthetics to
refine the PE inputs for the CPT code series 21076 through 21087. They
have submitted spreadsheets to us for labor, supplies and equipment,
and much of this information has been entered in the PE database
although, as discussed above, the 2005 PE RVUs will be retained for
2006. We will continue to work with the specialty to refine these
inputs, verifying prices and quantities, prior to the issuance of our
next proposed rule.
B. Geographic Practice Cost Indices (GPCIs)
Section 1848(e)(1)(A) of the Act requires us 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 PE and malpractice GPCIs reflect the full
relative cost differences, section 1848(e)(1)(A)(iii) of the Act
requires that the physician work GPCIs reflect only one-quarter of the
relative cost differences compared to the national average.
[[Page 70151]]
As discussed in the August 8, 2005 proposed rule (70 FR 45783),
section 1848(e)(1)(E) of the Act, as amended by section 412 of the MMA,
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 was used
for purposes of payment for services furnished on or after January 1,
2004 and before January 1, 2007. This 1.0 floor will remain in effect
in 2006.
Section 602 of the MMA added section 1848(e)(1)(G) of the Act,
which sets a floor of 1.67 for the work, PE, and malpractice GPCIs for
services furnished in Alaska between January 1, 2004 and December 31,
2005 for any locality where the GPCI would otherwise fall below 1.67.
Effective January 1, 2006, this provision will end. In the proposed
rule, we indicated the 2006 GPCIs for Alaska will be 1.017 for
physician work, 1.103 for PE, and 1.029 for malpractice.
Payment Localities
In the August 8, 2005 proposed rule (70 FR 45783), we stated that
we look for the support of a State medical society as the impetus for
changes to existing payment localities. Because the GPCIs for each
locality are calculated using the average of the county-specific data
from all of the counties in the locality, removing high-cost counties
from a locality will result in lower GPCIs for the remaining counties.
Because of this redistributive impact, we have refrained, in the past,
from making changes to payment localities unless the State medical
association provides evidence that any proposed change has Statewide
support.
After the publication of the CY 2005 final rule, the California
Medical Association (CMA) submitted a proposal for a demonstration
project that was the same as its proposal submitted in response to the
August 5, 2004 PFS proposed rule. The CMS proposed removing ten
counties from the existing ``Rest of California'' payment locality and
creating ten new payment localities. Additionally, reductions to the
payments to the Rest of California locality, would be balanced by
payment contributions from the other payment localities in the State.
There were several aspects of the proposal that made implementation
problematic for us under our demonstration authority. For example,
physicians whose payments would decrease under the demonstration could
challenge the validity of a new locality configuration established
without providing them the opportunity to comment through the
regulatory process (as is our normal process for making locality
changes). In particular, physicians who are not members of county
medical societies or the CMA, or did not agree to participate in the
proposed demonstration may have challenged its implementation.
Also, the Medicare PFS currently uses identical GPCIs to pay for
services provided in an area by both physicians and nonphysician
providers (such as podiatrists, optometrists, physical therapists, and
nurse practitioner). Changing the locality configuration for medical
doctors and doctors of osteopathic medicine, but not for other
professionals, would have some peculiar results that were not addressed
in the CMA proposal. For example, in areas where the GPCIs would be
reduced under the demonstration, some practitioners not participating
under the demonstration (such as physical therapists) could be paid
more than physicians in the same locality. Conversely, where the GPCIs
would be increased under the demonstration, there would likely be
complaints from the nonphysician practitioners not included in the
demonstration.
Nonetheless, we do recognize the potential impact of wide
variations in the practice costs within a single payment locality. In
the CY 2005 final rule, we noted that we received many comments from
physicians and individuals in Santa Cruz County expressing the opinion
that Santa Cruz County should be removed from the Rest of California
payment locality and placed in its own payment locality. The county-
specific GAF of Santa Cruz County is 10 percent higher than the Rest of
California locality GAF. Santa Cruz County is adjacent to Santa Clara
County and San Mateo County. Santa Clara and San Mateo Counties have
two of the highest GAFs in the nation. The published 2006 GAF for the
Rest of California payment locality is 24 percent less than the GAFs of
Santa Clara and San Mateo.
Sonoma County is also part of the Rest of California payment
locality. The county-specific GAF of Sonoma County is 8 percent higher
than the Rest of California locality GAF. Sonoma County is bordered by
Marin County and Napa County. Using published 2006 values, the payment
locality that includes Marin and Napa counties has the fourth highest
GAF in the nation, and is 13 percent higher than the GAF of the Rest of
California payment locality.
We recognize that changing demographics over time may lead to
significant payment disparities in particular circumstances. We rely
upon State medical societies to identify and propose consensus
approaches to resolving these disparities, because there are
redistributive impacts in the ``budget neutral'' process within a State
when new localities are created (or existing ones reconfigured). Yet we
also recognize our responsibility for establishing fee schedule areas.
In the proposed rule, to assure the maximum opportunity for public
discussion and comment to identify a consensus approach, we listed
alternative locality configurations that we had examined, including:
The CMA demonstration approach comparing county-specific
GAFs to the payment locality GAF, and designating any county with a
county-specific GAF at least 5 percent higher than its locality GAF as
a new locality;
An approach that sorts counties by descending GAFs and
compares the highest county to the second highest county. If the
difference between these two counties is 5 percent or less, they are
included in the same locality. The third highest county GAF is then
compared to the highest county GAF and so on, until the next county GAF
is not within 5 percent of the highest county GAF. At that point, the
county GAF that is more than 5 percent lower than the highest county
GAF becomes the comparison for the next lowest county GAF, to create a
second locality. This process is repeated down throughout all of the
counties;
An approach that compares the county with the highest GAF
to the Statewide average, removing counties that are 5 percent or more
than the Statewide average; and
An approach that bases GPCI payment localities on
Metropolitan Statistical Areas as defined by the Office of Management
and Budget.
However, because these reconfigurations would result in significant
redistributions across most California counties, we simply proposed the
approach that would have the least impact on other counties. We
proposed that Santa Cruz and Sonoma Counties (the two counties with the
most significant disparity between the assigned Rest of California GAF
and the county-specific GAF) be removed from the Rest of California
payment locality and that each would be its own payment locality. We
invited and received comments regarding this proposal and possible
alternative approaches to address this issue. We were particularly
interested in whether the CMA supported this approach. Those comments
and our responses are discussed below.
The issue of payment locality designation in light of changing
economic and population trends will be
[[Page 70152]]
of importance to us for the foreseeable future. We also indicated in
the proposed rule that we are interested in other solutions to the
problem, and with any ideas or suggestions that will help resolve the
problems associated with the designation and revision of payment
localities. We would use those ideas and suggestions in developing any
future proposal that would be subject to comment through the rulemaking
process.
Comment: Numerous comments from the beneficiaries and health care
providers in Santa Cruz and Sonoma Counties, and from several members
of the Congress, including a U.S. Senator from California, supported
our proposed change. These comments focused on the high costs of
practicing in Santa Cruz and Sonoma Counties and were appreciative of
the proposal. Most supporters referred to studies that have shown the
high costs of working in Santa Cruz and Sonoma Counties have resulted
in physicians restricting their practices or withdrawing from practice
altogether. According to the commenters, this has made it more
difficult for Medicare beneficiaries to find doctors in those counties.
These commenters feel that our proposed change will encourage
physicians to continue to treat Medicare patients in their Santa Cruz
and Sonoma County practices.
Response: These two counties currently have the most significant
disparities between their present GAFs and their county-specific GAFs.
They are also bordered by counties with significantly higher GAFs. As
we stated earlier in this section and in the proposed rule, we have
received many comments in the past expressing concern that these
disparities have led some practitioners to relocate their practices out
of these counties, creating potential access problems.
The proposal was an attempt to balance the interests of physicians
and nonphysician practitioners and their patients in Santa Cruz and
Sonoma Counties with the interests of providers and patients in the
other counties in the Rest of California. We noted in the proposed rule
that the 2006 Rest of California GAF would be 1.011, compared to the
2005 GAF of 1.012. Absent this proposal, the 2006 Rest of California
GAF would be 1.017 (2006 is the second year of the transition to the
new GPCIs and GAFs incorporating updated data).
Comment: We also received comments opposing the proposal from
numerous providers and medical associations in the current Rest of
California payment locality. In addition, several members of the
Congress wrote letters opposing the proposed change.
The CMA pointed to the fact, which is the result of the budget
neutrality requirement for administrative actions to modify GPCIs, that
the Rest of California locality would be negatively impacted. The CMA
also notes that the proposal does not address the other localities it
identified in its demonstration proposal. These views were echoed by
the other commenters objecting to the proposal.
Response: It is indicative of the difficult nature of this issue
that many of the same commenters who expressed disappointment that our
proposal did not address all of the other counties that CMA identified
in its demonstration proposal were also concerned that the proposal
would simultaneously result in a reduction of the GPCIs for the Rest of
California payment locality. Under our current statutory authority, it
is well known that changes to the payment localities must be
implemented in a budget neutral manner. Therefore, it is not possible
to fully meet both objectives without legislation to provide additional
funding for physician payments in California.
While we appreciate the situation of practitioners in Santa Cruz
and Sonoma Counties as described above, we also acknowledge the
concerns of those in the Rest of California payment locality about the
negative payment impact of removing the GPCI data for Santa Cruz and
Sonoma Counties, and the lack of support from the CMA for an
administrative solution to these payment concerns. As we mentioned
earlier in this section, our proposal was designed to balance these two
interests.
As we have stated repeatedly in the past, we believe payment
locality reconfigurations should be supported broadly across the State.
It was our belief that the proposal we presented, which actually would
have had the smallest possible negative impact on the Rest of
California's GAF, might meet that criterion. However, based on the
comments we received opposing the proposal, particularly those from the
CMA, it is apparent that this proposed change is not acceptable to the
majority of commenters at this time.
Comment: The CMA indicated that it supports a nationwide
legislative solution that would provide additional funding for
physicians in counties adversely affected by locality reconfigurations.
The CMA states ``this is the only GPCI solution that we are supporting
at this time.''
The Medicare Payment Advisory Commission (MedPAC) comments that the
locality boundaries have not had a complete review since 1997 and that
economic and population trends are likely to have changed since that
time. MedPAC is studying these issues, and encourages CMS to do so as
well, with the goal of revisiting the boundaries of all payment
localities nationwide.
We also received a comment from a member of the Congress urging us
to conduct a national examination of the definitions of payment
localities. The commenter recommended that we propose a method to
reconfigure payment localities to be effective January 1, 2008. The
commenter also recommended that we develop a process for periodically
reviewing payment localities.
Response: As we stated earlier in this section and in the proposed
rule, we are interested in all ideas that will help resolve the
problems associated with the designation and revision of payment
localities. Clearly, as illustrated by the situation discussed earlier
in this section, one of the most significant issues to be addressed is
the redistributive nature of changes to the payment localities in a
budget neutral context.
There are currently 89 separate payment localities. Of these, 34
are Statewide localities. Our last comprehensive evaluation of the
definition and composition of the payment localities was discussed in
the July 2, 1996 proposed rule (61 FR 34615) and the November 22, 1996
final rule (61 FR 59494). The localities existing at that time, which
were developed by the local Medicare contractors, served as building
blocks for the current localities (at the time, there were 210 separate
localities, 22 of them were Statewide localities).
We stated at the time that our major goals were to simplify payment
areas and payment differences among adjacent geographic areas while
maintaining accuracy in tracking input price differences among areas.
There is an inherent trade-off between these two goals. Thus, at one
extreme is a set of Statewide localities with no intra-state geographic
adjustments; very simple, but less descriptive of input price
differences. At the other extreme is a separate locality for each
county; maximum input price adjustment for geographic variation, but
operationally very cumbersome, expensive to develop and maintain, and
potentially very confusing for providers.
We do not disagree with the view that a comprehensive evaluation of
the current payment localities is due, and we look forward to working
cooperatively with MedPAC in that regard. We are examining all viable
[[Page 70153]]
options that will meet the general objectives discussed above. We would
note, however, that our goals for this analysis are very similar to
those we expressed in 1996.
Comment: A private insurer is opposed to our proposal because it
increases the number of payment localities which increases commercial
payer administrative costs. The insurer suggests we reduce the number
of California payment localities from 10 to 3.
Response: While we appreciate and, as a matter of general policy,
agree that it would be preferable to minimize the number of separate
payment localities wherever possible, we do not believe that reducing
the number of payment localities would resolve the issues discussed
above.
Comment: We received comments from a medical clinic in Wisconsin
and a research and management organization in Colorado. These
commenters stated that CMS is using improper data to create the GPCIs.
The commenters suggest we change the wage proxy categories to include
physicians and remove physician work from the GPCI calculation. They
further state that ``Medicare payments are a primary stimulus in
attracting greater numbers of physicians to high payment localities''.
The commenters also suggest we look for alternative data sources for
rent data.
Response: The CY 2005 final rule contained responses to commenters
raising the same issues related to the data used to calculate the GPCIs
as those noted above (69 FR 66260). Because the data used to calculate
the GPCIs was not part of the proposed rule, we refer the commenter to
that document rather than repeat that discussion here. We also note
that we continue to evaluate other potential sources of data to use to
calculate the GPCIs.
We are disappointed that there was limited support for the proposal
to create new, separate payment localities for Santa Cruz and Sonoma
Counties. As we noted above, the proposal was designed to balance
concerns of practitioners in higher-cost Santa Cruz and Sonoma Counties
with the concerns of those in the Rest of California payment locality
about the negative payment impact resulting from removal of the GPCI
data for Santa Cruz and Sonoma counties from the Rest of California
GPCI calculation. Because of the nearly complete lack of support for
this proposal outside the two positively impacted counties, we have
decided to withdraw this proposal at this time. As noted above, we
intend to work with MedPAC and other interested parties toward a more
comprehensive evaluation of potential refinements of the payment
localities.
Under section 1848(e)(1)(E) of the Act, the floor of 1.67 for the
work, PE, and malpractice GPCIs for services furnished in Alaska ends
as of January 1, 2006. Therefore, as of that date, the GPCIs for Alaska
will be 1.017 for physician work, 1.103 for PE, and 1.029 for
malpractice costs.
C. Malpractice Relative Value Units (RVUs)
We discussed several proposed technical changes and other issues
related to the calculation of the malpractice RVUs in the proposed
rule. These are summarized below, along with discussions of the
comments we received and our responses.
1. Five Percent Specialty Threshold
We are concerned that the malpractice RVUs could be inappropriately
inflated or deflated due to irregular data based upon incorrectly
reported specialty classifications and have examined the impact of
establishing a minimum percentage threshold for any procedure performed
by any specialty before the risk factor of that specialty is included
in the malpractice RVU calculation of a particular code. We proposed
excluding data for any specialty that performs less than 5 percent of a
particular service or procedure from the malpractice RVU calculation
for that service or procedure and discussed the code-specific impact of
implementing this proposed threshold. Our assumption was that the
infrequent instances of these specialties in our data represent
aberrant occurrences and removing the associated risk factor from the
malpractice RVU calculation would improve the accuracy and stability of
the RVUs. This was based on our belief that removing data attributable
to specialties that occur in our data less than 5 percent of the time
would most appropriately balance the objective to identify irregular
data (claims with a specialty identified that is highly unlikely to
have performed a particular procedure) while including specialties that
perform a procedure a small percentage (but at least 5 percent)of the
time.
We excluded evaluation and management (E&M) services from the
analysis. Medicare claims data show that E&M services are performed by
virtually all physician specialties. Therefore, in the case of E&M
codes, it is likely that even the low relative percentages of
performance by some specialties would accurately represent the
provision of the service by those specialties.
For all services other than E&M services, we stated our belief that
removing data attributable to specialties that occur in our data less
than 5 percent of the time would most appropriately balance the
objective to identify irregular data (claims with a specialty
identified that is highly unlikely to have performed a particular
procedure) while including specialties that perform a procedure a small
percentage of the time. The higher the threshold, the more likely it
would result in the removal of data for specialties actually performing
the procedure, while a lower threshold would be more likely to fail to
remove some irregular data, particularly for low-volume codes (fewer
than 100 occurrences, where each claim represents 1 or more percentage
points).
The overall impact of removing the risk factor for specialties that
occur less than 5 percent of the time in our data for a procedure is
minimal. There is no impact on the malpractice RVUs for over 5,280
codes, and there is an impact of less than 1 percent on the malpractice
RVUs for over 1,300 additional codes. Only 16 codes decrease by at
least 0.1 RVUs, with the biggest decrease being a negative 0.28 impact
on the malpractice RVU for CPT code 17108, Destruction of skin lesions,
from a current RVU of 0.82 to a proposed RVU of 0.54.
Conversely, there are 219 codes for which RVUs increase by at least
0.1, the largest increase being a positive 0.81 RVU increase for CPT
code 61583, Craniofacial approach, skull, from a current RVU of 8.32 to
a proposed RVU of 9.13. Among codes whose malpractice RVUs would
increase under our proposal, 646 have increases of less than 1 percent.
The impact analysis section of this proposed rule examines the effects
of this proposed change by specialty.
Comment: Numerous commenters supported the 5 percent specialty
threshold. Several commenters suggested that we apply the threshold to
the E&M codes.
Response: We appreciate the commenters' support of this change to
our methodology. Regarding the exclusion of E&M codes from our
analysis, we note our rationale as stated above in this section. The
comments we received did not address our concern that all specialties
use these codes. Therefore, we still believe it is appropriate not to
apply the 5 percent specialty threshold to the E&M codes.
Comment: We received a comment recommending the threshold be
lowered to 1 percent. The commenter is concerned that a 5 percent
threshold inappropriately removes some
[[Page 70154]]
specialties actually performing interventional radiology services. The
example of CPT code 35476 (percutaneous venous angioplasty) was
provided. The commenter noted that CMS's proposed 5 percent threshold
removed the risk factors for general surgeons and vascular surgeons,
resulting in a decrease in the malpractice RVUs for this code. The
commenter states this was contrary to our objective to remove irregular
data because both of these specialties actually perform this procedure,
and that a 1 percent threshold would better retain those specialties
actually providing the service while still removing irregular data.
Response: In the case of CPT code 35476, the risk factors for the
two specialties that were removed resulted in a decrease in the RVUs
for this code; however, we review these data on a regular basis and if,
in the future, the data support it, we will change the RVUs
accordingly. We note that the majority of commenters supported a 5
percent threshold as reasonable. We do not believe a 1 percent
threshold, as suggested by the commenter, is reasonable as this
threshold would not be an effective screen for claims with a specialty
identified that is highly unlikely to have performed a particular
procedure. However, we will continue to assess whether a different
threshold may ensure irregular data are removed without also removing
data for specialties that actually perform the service.
2. Specialty Crosswalk Issues
Malpractice insurers generally use five-digit codes developed by
the Insurance Services Office (ISO), an advisory body serving property
and casualty insurers, to classify physician specialties into different
risk classes for premium rating purposes. ISO codes classify physicians
not only by specialty, but in many cases also by whether or not the
specialty performs surgical procedures. A given specialty could thus
have two ISO codes, one for use in rating a member of that specialty
who performs surgical procedures and another for rating a member who
does not perform surgery.
Medicare uses its own system of specialty classification for
payment and data purposes. Therefore, to calculate the malpractice
RVUs, it was necessary to map Medicare specialties to ISO codes and
insurer risk classes, and in some instances to crosswalk unassigned
specialties to the most approximate existing ISO codes and risk
classes.
We stated in the CY 2005 final rule that we would continue to work
with the AMA RUC's Professional Liability Insurance (PLI) Workgroup to
address any potential inconsistencies that may still exist in our
methodology. Based upon this commitment, the RUC PLI Workgroup
forwarded various recommendations for our consideration. The RUC
developed its recommendations based upon comments submitted to them by
physician specialty organizations.
As discussed in the August 8, 2005 proposed rule, the Workgroup
believes the risk factors assigned to certain professions overestimate
the insurance premiums for these professions and, based on its
recommendations, we proposed revising the risk factor for the following
specialties to a risk factor of 1.00: clinical psychology; licensed
clinical social work; psychology; occupational therapy; opticians and
optometrists; chiropractic and physical therapy. We invited comment
from representatives of the affected specialties and others regarding
the appropriateness of this proposal, as well as other specialty
crosswalks and suggestions for reliable sources of actual malpractice
premium data for nonphysician groups.
The RUC PLI Workgroup also believed that a number of professions
that were assigned to the average for all physicians risk factor should
be removed from the calculation of malpractice RVUs altogether and
recommended excluding data from the following professions: Certified
clinical nurse specialist; clinical laboratory; multispecialty clinic
or group practice; nurse practitioner; physician assistant; and
physiological laboratory (independent). We agreed with this
recommendation and proposed to establish malpractice RVUs based upon
the mix of specialties exclusive of the above specialties and
professions.
The PLI Workgroup also made recommendations for changing the
crosswalks for risk factors for the following specialties which we did
not accept: Certified registered nurse anesthetists; colorectal
surgeons; gynecologists; and oncologists. We did not propose changes to
the current crosswalks for these specialties and professions because we
believe the current crosswalks we are using for these specialties
appropriately reflect the types of services they provide.
Comment: One commenter objected to our proposed change in the
crosswalk to the lowest current risk factor of 1.00 for opticians and
optometrists. The commenter stated that the recommendation from the RUC
was not based on examination of the premium data or any other objective
evidence. However, another commenter supported the proposal to
crosswalk optometrists and opticians to the lowest current risk factor
of 1.00, arguing this more appropriately reflects the actual level of
risk assumed during the performance of procedures.
A commenter objected to the proposed crosswalk change to 1.00 for
clinical psychologists, licensed clinical social workers, and
psychologists because the commenter believes that the malpractice
insurance costs for these nonphysician practitioners are well below
those paid by psychiatrists.
Response: The proposed changes to the risk adjustment factor
crosswalks were based on our agreement with the RUC PLI Workgroup's
assertion that these nonphysician professionals incur costs most
similar to the lowest cost physician specialty. Because we do not have
actual premium data for these professional groups, it is necessary to
select an appropriate crosswalk category. We proposed to change the
crosswalks for these specialties because, absent actual premium data,
we agree with the RUC that these groups very likely do not incur
malpractice costs on par with the average physician specialty.
In its comments, the RUC points out that each of the professions
for which we proposed to change the malpractice crosswalk is
represented on the RUC's Health Care Professional Advisory Committee
(HCPAC). The HCPAC agreed that these professions should review their
premium data and report back to the HCPAC at its September 29, 2005
meeting. Subsequently, on October 6, 2005 (after the close of the
public comment period), the RUC submitted the results of these reviews.
The RUC submitted to us after the close of the public comment
period malpractice insurance premium data from many of these
nonphysician professional groups. Because these data were received
after the close of the comment period, and we believe it is important
to allow the affected specialties the opportunity to comment on changes
to the crosswalks, we are not incorporating these data in this final
rule with comment. However, we would note that the data suggest that
the annual premiums paid by these groups are below the average amounts
paid by allergists and immunologists, the lowest premium cost physician
specialties.
We plan to continue to examine this issue in conjunction with the
RUC's PLI Workgroup before the 2007 proposed rule. Based on the fact
that commenters did not provide any alternative data to suggest the
crosswalks we proposed
[[Page 70155]]
were inappropriate, we will adopt our proposals for 2006 without
change.
Comment: One commenter supported our proposal to change the
crosswalk for services of occupational therapists to 1.00, but suggests
that the crosswalk should not be to allergy and immunology. Instead,
the commenter recommended a crosswalk to physical medicine and
rehabilitation.
Response: We appreciate the commenter's support of our proposal.
With regard to the commenter's recommendation to crosswalk to the
specialty of physical medicine and rehabilitation, we would note that
the risk factor for this specialty is 1.26 rather than 1.00. As noted
above, because the comments we received did not contain any alternative
data to suggest the crosswalks we proposed were inappropriate, we are
adopting our proposals for 2006.
Comment: Several commenters urged us to reconsider our proposal to
not accept the RUC PLI's recommendations to crosswalk: the specialty of
gynecologist/oncologist to surgical oncology; certified registered
nurse anesthetists (CRNAs) to anesthesiology; and, colorectal surgery
to general surgery.
Commenters also suggested separate surgical and nonsurgical risk
factors for urology, and that hand surgery be crosswalked to orthopedic
surgery (without spine).
Response: With respect to the commenters' recommendation to
crosswalk gynecologist/oncologist to surgical oncology, the commenters
did not substantially justify the argument that the professional
liability premiums of the specialty are similar to those of surgical
oncologists; however, we will analyze the data for this suggestion for
possible future consideration. Commenters noted that CRNAs are
currently crosswalked to general surgery, which means that CRNAs have a
higher risk factor than anesthesiologists. These commenters recommended
that CRNAs be crosswalked to anesthesiology and we accept this
recommendation.
For the request to crosswalk colorectal surgery to general surgery,
the specialty of colorectal surgery was not crosswalked. Instead, we
used actual premium liability insurance data collected for this
specialty. Consequently, we disagree that this specialty should be
crosswalked to another specialty. As stated previously and in the
proposed rule, we only crosswalked specialties for which no premium
data were collected.
With regard to the comments regarding separate surgical and
nonsurgical risk factors for urology, we would be interested in further
information regarding the appropriateness of this change.
For the request to crosswalk hand surgery to orthopedic surgery, we
note that, similar to colorectal surgery above, we used actual premium
liability insurance data collected for this specialty. Consequently, we
disagree that this specialty should be crosswalked to another
specialty.
Comment: The RUC supported our proposal to remove the risk
adjustment data for the following professions and providers: certified
clinical nurse specialist; clinical laboratory; multispecialty clinic
or group practice; nurse practitioners, physician assistants; and
physiological laboratory (independent).
Response: We appreciate these supportive comments for this proposed
change.
3. Cardiac Catheterization and Angioplasty Exception
In the November 2, 1999 final PFS rule (64 FR 59384), we applied
surgical risk factors to the following cardiology catheterization and
angioplasty codes: 92980 to 92998 and 93501 to 93536. This exception
was established because these procedures are quite invasive and more
akin to surgical than nonsurgical procedures.
In the CY 2005 (69 FR 66275), we discussed changes to the list of
codes that would fall under the exception. In response to a request
from the RUC's PLI Workgroup, we proposed to add the following CPT
codes to the existing list of codes under the exception: 92975; 92980
to 92998; and 93617 to 93641.
Comment: Several commenters supported the changes made for the
cardiac catheterization and angioplasty exception.
Response: We appreciate the supportive comments for this proposed
change.
4. Dominant Specialty for Low-Volume Codes
The final recommendation from the PLI Workgroup was to use the
dominant specialty approach for services or procedures with fewer than
100 occurrences, and to apply this approach to the list of 1,844
services supplied by the workgroup. The PLI Workgroup worked in
conjunction with various specialty organizations to identify the
dominant specialty that performs each service.
We did not propose to adopt this methodology and noted that low
volume procedures or services are not necessarily performed by only one
specialty. As noted previously, we would distinguish between excluding
data presumed to be erroneous from data reflecting utilization by
specialties that perform a service but are not the dominant specialty.
However, we acknowledge that there may be instances where irregular
data exist that would not be identified and removed by our proposed 5
percent threshold discussed previously. We will continue to work with
the RUC PLI Workgroup examine this issue in the future.
Comment: Numerous commenters opposed our policy to use actual
specialty data rather than dominant specialties and suggested that we
adopt the RUC recommendations.
Response: As we stated in the PFS proposed rule (70 FR 45786), we
believe that basing payment on all specialties that perform a
particular service ensures that the actual professional liability
insurance costs of all specialties are included in the calculation of
the malpractice RVUs. Therefore, we do not believe it would be
appropriate, even for these low-volume services, to include only the
dominant specialty if other specialties regularly provide the service.
5. Collection of Premium Data
Although this issue was not part of the proposed rule, many
commenters suggested that we use alternative sources for our premium
data.
Comment: Some commenters suggested we used data supplied by the
Physicians Insurers Association of America (PIAA) or directly from
physician providers.
Response: We are currently investigating the usefulness of the PIAA
data and once our evaluation of the data is complete we will make a
decision. We are not considering using physician provider self-reported
premium costs.
Final Decision
We are implementing the proposed 5 percent threshold and specialty
crosswalk changes discussed in the proposed rule. After considering all
of the other comments received, we are not making other changes to the
calculation of the malpractice RVUs.
D. Medicare Telehealth Services
1. Requests for Adding Services to the List of Medicare Telehealth
Services
As discussed in the August 8, 2005 PFS proposed rule (70 FR 45786),
section 1834(m) of the Act defines telehealth services as professional
consultations, office and other outpatient visits, and office
psychiatry services identified as of July 1, 2000 by CPT codes 99241
through 99275, 99201
[[Page 70156]]
through 99215, 90804 through 90809, and 90862. In addition, the statute
requires us to establish a process for adding services to or deleting
services from the list of telehealth services on an annual basis.
In the December 31, 2002 Federal Register (67 FR 79988), we
established a process for adding or deleting services to the list of
Medicare telehealth services. This process provides the public an
ongoing opportunity to submit requests for adding services. We assign
any request to make additions to the list of Medicare telehealth
services to one of the following categories:
Category 1: Services that are similar to office
and other outpatient visits, consultations, and office psychiatry
services. In reviewing these requests, we look for similarities between
the proposed and existing telehealth services for the roles of, and
interactions among, the beneficiary, the physician (or other
practitioner) at the distant site and, if necessary, the telepresenter.
We also look for similarities in the telecommunications system used to
deliver the proposed service (for example, the use of interactive audio
and video equipment.)
Category 2: Services that are not similar to the
current list of telehealth services. Our review of these requests
includes an assessment of whether the use of a telecommunications
system to deliver the service produces similar diagnostic findings or
therapeutic interventions as compared with the face-to-face ``hands
on'' delivery of the same service. Requestors should submit evidence
showing that the use of a telecommunications system does not affect the
diagnosis or treatment plan as compared to a face-to-face delivery of
the requested service.
Since establishing the process, we have added the psychiatric
diagnostic interview examination and ESRD services with 2 to 3 visits
per month and 4 or more visits per month to the list of Medicare
telehealth services (although we require at least one in-person visit a
month by a physician, clinical nurse specialist, nurse practitioner, or
physician assistant to examine the vascular access site).
Requests for adding services to the list of Medicare telehealth
services must be submitted and received no later than December 31st of
each year to be considered for the next proposed rule. For example,
requests submitted before the end of CY 2004 are considered for the CY
2006 proposed rule. For more information on submitting a request for an
addition to the list of Medicare telehealth services, visit our web
site at http://www.cms.hhs.gov/physicians/telehealth.
We received the following public requests for additional approved
services in CY 2004: (1) Individual medical nutritional therapy (MNT)
as described by HCPCS codes G0270, 97802 and 97803; (2) group MNT
(HCPCS codes G0271 and 97804); (3) individual diabetes outpatient self-
management training (DSMT) services (HCPCS code G0108); (4) Group DSMT
(HCPCS code G0109); and (5) modification of the definition of an
interactive telecommunications system for purposes of furnishing a
telehealth service.
After reviewing the public requests, we proposed to add individual
MNT as represented by HCPCS codes G0270, 97802 and 97803 to the list of
Medicare telehealth services. We also proposed to add individual MNT to
the list of Medicare telehealth services at Sec. 410.78 and Sec.
414.65. Moreover, because a certified registered dietitian or other
nutrition professional are the only practitioners permitted by law to
furnish MNT, we proposed to revise Sec. 410.78 to add a registered
dietitian and nutrition professional as defined in Sec. 410.134 to the
list of practitioners who may furnish and receive payment for a
telehealth service.
We did not propose to add any additional services to the list of
Medicare telehealth services or to make any changes to the definition
of an interactive telecommunications system for CY 2006.
For further information on our proposals, see the Federal Register
dated August 8, 2005 (70 FR 45786).
Individual MNT
Comment: Many commenters supported our proposal to approve
individual MNT for telehealth and to add a registered dietitian and
nutrition professional to the list of practitioners authorized to
furnish and receive payment for Medicare telehealth services.
Commenters stated that adding MNT to the list of Medicare telehealth
services would improve access and services for patients in remote areas
where traditional MNT services may not be readily available. For
example, a State dietetic association mentioned that in many cases,
patients need to drive for more than an hour to receive MNT services
and that the ability to furnish individual MNT as a telehealth service
will provide great benefit to rural Medicare beneficiaries.
Furthermore, a renal association stated that limited access to
nutritional therapists is problematic for patients with stage 3 and 4
kidney disease who are located in rural or isolated areas. The
commenter explained that nutritional counseling is an important tool
for helping beneficiaries improve their nutritional status and in
controlling levels of key electrolytes such as potassium and
phosphorous. Several MNT practices also urged us to adopt our proposal
to approve individual MNT for telehealth. Another commenter supported
the addition of individual MNT, however stated that more conclusive
data regarding efficacy is needed before further expansion.
Response: We agree with the commenters that approving individual
MNT for telehealth would help provide greater access to registered
dietitians and other nutritional professionals for beneficiaries in
rural and or isolated areas.
Comment: A few commenters believe that MNT should not be approved
as a Medicare telehealth service. For instance, a certified diabetes
educator (CDE) stated that it would be very difficult to accurately
assess cognitive and literacy levels, emotional state and motivation
without seeing the patient. The commenter also believes that face-to-
face interaction for assessment, establishment of goals, and reviewing
written materials is essential. The commenter expressed support for
using telehealth to furnish MNT in very limited circumstances, for
example if there was no access to an educator within 50 miles or if the
patient was homebound. One commenter contends that it would be
difficult to assess a patient's understanding of the dietary
prescription, nutrient content of each food group, portion control and
information provided by food labels, especially for beneficiaries who
cannot read and or have a vision impairment that prevents them from
reading fine print. Moreover, another commenter believes that
individual MNT includes skill-based training beyond an individual
assessment, not unlike teaching insulin administration or blood glucose
monitoring. The commenter stated that the skills taught in MNT cannot
be verbally assessed through distance education.
Response: As discussed in the proposed rule, we believe that
individual MNT is similar in nature to an office or other outpatient
visit (which is defined in the law as a Medicare telehealth service).
We believe that the components of an E/M office visit involve a similar
level of patient counseling for following a treatment plan as compared
to individual MNT. We also believe that a registered dietitian at the
distant site, along with an appropriate medical professional
[[Page 70157]]
with the beneficiary at the originating site, could adequately assess
and adjust to the beneficiary's ability to understand and follow his or
her nutritional plan.
We do not agree with the commenter that the same level of physical,
skill-based training that is required in an individual DSMT session,
(for example, teaching a Medicare beneficiary the skills necessary for
the self-injection of insulin), is a requirement for individual MNT.
Comment: One commenter requested that we clarify whether we would
pay a physician practice for individual MNT furnished as a telehealth
service when a registered dietitian or other nutrition professional
reassigns his or her right to bill for payment to the physician
practice as an employer.
Response: As discussed in the CMS claims processing manual (Pub.
100-04, chapter 1, section 30.2.6), if the employer/employee
reassignment exception is met, and the person furnishing the service
and the entity wishing to bill are both enrolled in Medicare and each
have their own billing number, then we could make payment to the
physician practice for the MNT service.
Group Medical Nutritional Therapy (MNT) and Diabetes Self-Management
Training Services (DSMT)
Comment: Some commenters agreed with our proposal not to add DSMT
to the list of Medicare telehealth services. For instance, one
commenter wrote that DSMT can not be done as a telehealth service
because in-person interaction with the client is crucial for assessing
the skill development necessary for managing diabetes. Additionally,
two certified diabetic educators (CDE) stated that DSMT can not be
adequately furnished as a telehealth service and agreed with our
proposal not to add DSMT to the list of Medicare telehealth services.
Furthermore, another commenter stated that face-to-face interaction for
assessment, establishment of goals, and reviewing written materials is
essential for DSMT.
Response: As discussed in the proposed rule, we believe that DSMT
is not similar to the current list of Medicare telehealth services and
requires conclusive evidence showing that the use of a
telecommunications system is an adequate substitute for the in-person
delivery of DSMT.
Comment: A few commenters believe group MNT and group DSMT are
similar in nature to the current list of Medicare telehealth services
and therefore should be approved for telehealth under category 1
criteria. The commenters contend that the same presentation material,
text books, manuals, DVD's and on site support staff are used whether
group DSMT or group MNT is furnished in-person or through an
interactive audio and video telecommunications system. The commenters
stated that the practitioner would conduct the same training session
for a telehealth service as they would in-person, and they believe that
the interactive differences between group MNT and group DSMT and the
current Medicare telehealth services should not be used as a basis for
denying these services. The commenters believe that the criteria for
approving group MNT and group DSMT should be based on whether the use
of a telecommunications system is equivalent to the in-person delivery
of the requested service. Moreover, commenters argue that no group
services would ever be approved if we base approval upon whether the
interactive dynamic of the requested service is similar to existing
telehealth services and requested us to add group MNT and group DSMT as
a precedent by which other future group service requests could be
measured.
Response: Category 1 requests are reviewed to ensure that the roles
of, and interaction among, the beneficiary and physician (or other
practitioner) of the requested service are similar to the current
telehealth services, for example office and other outpatient visits and
consultation services. In other words, the roles of, and interaction
among, the beneficiary and physician (or practitioner) is the criterion
used to determine whether the requested service is similar to the
current telehealth services.
Since the interactive dynamic of group MNT and group DSMT is not
similar to the current list of telehealth services, the request to add
these services was assigned to category 2. For category 2 services, we
assess whether the use of an interactive audio and video
telecommunications system to deliver the requested service is
equivalent to the in-person delivery of the service. To that end, we
review any comparative analyses submitted by the requestor illustrating
that the use of a telecommunications system is an adequate substitute
for the in-person delivery of the requested service. If the requestor
were to submit studies indicating that beneficiaries receiving group
MNT and group DSMT comprehend and apply the training material as well
by telehealth as in person, we would reconsider approving group MNT and
group DSMT for telehealth.
Comment: The same group of commenters also believe that individual
DSMT is similar to the existing list of telehealth services and should
be approved as a category 1 request. The commenters contend that a
telepresenter would be able to facilitate the ``hands on'' aspects of
training a patient how to inject insulin. For example, a telepresenter
with a patient at the originating site (who is not a certified CDE)
could assist with filling syringes, mixing doses, and showing the
injection site location through illustration or pointing to areas on
the body. Commenters also argue that the use of a large video monitor
to show gradient markings on a syringe could be beneficial for patients
with poor vision.
Response: As discussed in the proposed rule, we considered
individual DSMT as a category 2 request because the components included
in training a Medicare beneficiary to administer insulin injections are
typically not part of the services currently on the list of telehealth
services. We did not propose to add individual DSMT because the
requestors did not submit any comparative analyses illustrating that
the use of an interactive audio and video telecommunications system is
an adequate substitute for individual DSMT furnished in-person.
Comment: Several commenters submitted summaries of studies and or
articles regarding group psychiatry, individual psychotherapy, and
medication management furnished as telehealth services. Additionally,
an individual practitioner mentioned a study that compared diabetes
education furnished through telemedicine with diabetes education
furnished in-person.
Response: For category 2 services, we require evidence showing that
the requested telehealth service is equivalent to the in-person
delivery of the same service. The articles regarding mental health
services and pharmacologic management do not address whether the use of
a telecommunications system is an adequate substitute for the in-person
delivery of MNT or DSMT. Additionally, individual psychotherapy and
pharmacologic management are already on the list of Medicare telehealth
services.
The comparison study regarding diabetes education focused on
certain aspects of individual DSMT (but, as noted below, not on
training patients to inject insulin), and therefore is irrelevant to
the request to add group DSMT. The study conclusions mentioned that the
``diabetes nurse educator was even successful in
[[Page 70158]]
teaching insulin administration via telemedicine to a patient who had
very high blood glucose levels''. However, training patients on the
self-administration of injectable drugs (which typically occurs during
an individual training session) was not the focus of this study and no
conclusive evidence was provided showing that insulin administration
can routinely be taught as a telehealth service.
Comment: Some commenters suggested that we approve the majority of
DSMT for telehealth and require selected aspects of the training such
as the instruction of insulin injections to be furnished in person by a
CDE. For instance, one CDE stated that the use of telehealth would not
be appropriate for teaching selected skills (such as the administration
of self-injectable drugs, glucometer testing, or insulin pump therapy),
and should not replace the initial assessment or all follow-up visits.
Some CDE's and DSMT programs stated that a combination of in-person and
telehealth training works well for their patients. However, commenters
stated that the majority of the curriculum for an American Diabetes
Association (ADA) recognized DSMT program can be successfully provided
as a telehealth service. For instance, a CDE stated that curriculum
components such as nutritional management, foot care, ketone testing,
sick day management, use of a supplemental insulin scale, and treatment
of hypoglycemia or hyperglycemia could be furnished as a telehealth
service.
Response: DSMT is furnished either as an individual or group
service as described by HCPCS codes G0108 and G0109 respectively. As
many commenters mentioned, teaching a patient how to inject insulin is
typically furnished as part of an individual DSMT session rather than
in a group setting. Additionally, as discussed at Sec. 410.141(c)(1),
Medicare payment for initial DSMT may not exceed 10 hours of
beneficiary training in which 9 hours of the training are usually
furnished as a group service. Since teaching a patient how to inject
insulin is typically an integral component of an individual training
session, and comprises only 1 hour of a maximum of 10 hours of initial
training, we do not believe that it would be appropriate to carve out
selected skill-based training from an individual DSMT service.
We agree that skill-based training such as teaching patients how to
inject insulin would be difficult to accomplish without the physical
in-person presence of the teaching practitioner and believe this is not
a common aspect of the current list of telehealth services. Given that
teaching patients the skills required for insulin injection and blood
glucose monitoring are typically furnished during an individual DSMT
session we assigned the request to add individual DSMT to category 2.
Moreover, as discussed previously, since the interactive dynamic of
group DSMT is not similar to the current list of telehealth services,
it does not meet the criteria for category 1. Therefore, we require
evidence showing that the use of an interactive audio and video
telecommunications system in furnishing DSMT is an adequate substitute
for DSMT furnished in-person.
Comment: Some commenters believed that we compared group MNT to
group psychiatric therapy or mental health counseling. The commenters
suggest this is not a fair comparison because patients participating in
a group MNT session typically do not discuss specific personal health
information with the nutrition professional because the group
``therapy'' is a discussion of nutrition and is centered on a specific
medical disease topic (for example, diabetes). Commenters contend that
in the case of group MNT, the dietitian presents educational material
to many beneficiaries at once and that the level of intense personal
interaction found in group mental health services is not necessary in
group MNT.
Response: As discussed previously, we compared the roles of, and
interaction among, the beneficiary and physician (or other
practitioner) in furnishing MNT and DSMT to the existing telehealth
services. We did not compare group MNT to group psychiatric therapy or
to group mental health counseling.
Comment: A few commenters stated that furnishing MNT for a diabetic
patient is intended to be an adjunct to DSMT. For example, one group of
commenters stated that without receiving DSMT, patients would not have
an overall understanding of diabetes, how the disease develops and
changes, and would not be taught additional methods for controlling
glucose beyond those presented in MNT.
Response: Approving individual MNT for telehealth is one step along
the way to helping more beneficiaries gain access to a collaborative
skill-based DSMT program. As discussed earlier, we believe there should
be conclusive evidence showing that DSMT can be as effective when
furnished as a telehealth service as in a face-to-face encounter before
we approve this service for telehealth.
Additionally, we conduct and sponsor a number of innovative
demonstration projects to test and measure the effect of potential
program changes. Our demonstrations study the likely impact of new
methods of service delivery, coverage of new types of service, and new
payment approaches on beneficiaries, providers, health plans, states,
and the Medicare Trust Funds. We would encourage the commenters to take
advantage of other programs that the agency has set up to increase
medical quality and reduce cost. For more information on demonstration
projects visit our web site at http://www.cms.hhs.gov/researchers/demos.
Comment: A few commenters requested that we pay for DSMT education
provided to patients over the phone. One commenter submitted several
studies and articles regarding telephone-based interventions for
diabetes care, (for example, telephone counseling).
Response: Patient education provided over the phone is beyond the
scope of this provision. Telephone calls do not meet the definition of
an interactive telecommunications system and are not on the list of
Medicare telehealth services. Additionally, as discussed in the
Medicare benefits policy manual, publication 100-2, chapter 15, section
30, no separate payment is made for phone calls under the Medicare
program.
Comment: One commenter requested us to recognize CDE's as a
Medicare practitioner and allow them to bill the Medicare program
directly.
Response: The statute does not permit a CDE to bill and receive
direct payment for Medicare services. The statute defines a certified
DSMT provider as a physician, other individual, or entity who, in
addition to providing DSMT services, provides other items or services
for which direct payment may be made. We do not have the statutory
authority to establish a separate CDE benefit category.
Definition of an Interactive Telecommunications System
We received many comments regarding the use of an interactive audio
and one-way video telecommunications system for delivering a Medicare
telehealth consultation. Several commenters expressed qualified support
for the use of an interactive audio and one-way video telecommunication
for purposes of furnishing a telehealth consultation. For instance,
some commenters believe that allowing one-way video would be
appropriate in situations when it enables the consulting physician to
add value to the
[[Page 70159]]
diagnosis and decision making capabilities of the patient care team at
the originating site which includes, at a minimum, a treating
physician; and where observation of the consulting physician by the
patient is either unnecessary or not possible (for example, when the
patient is unconscious).
Some commenters also suggested that we allow one-way video
specifically for assessing suitability for stroke thrombolytic tissue-
type plasminogen activator (tPA) therapy and compared the remote
evaluation of a stroke patient for purposes of determining tPA
treatment to a confirmatory consultation. For instance, the treating
physician at the originating site would make a determination regarding
the use of tPA and request a consultation to confirm his or her
decision to use tPA therapy. Another commenter, who currently provides
stroke consultation as a Medicare telehealth service, believes this
service is an outpatient or inpatient consultation (where the
neurologist at the distant site determines the treatment plan rather
than offering a second or third opinion). The commenter also explained
that they use an interactive audio and video telecommunications system
that allows two-way real time video interaction between the consulting
physician at the distant site and the originating site medical team.
One organization stated that payment should be made for physicians'
services that are safe, effective, medically appropriate, and provided
under accepted standards of medical practice. The commenter believes
that the critical factor in determining whether to pay for a service
should be medical necessity rather than the technology used to furnish
the service. The commenter also compared the use of one-way video and
two-way audio to a physician furnishing a visit to a blind patient. The
commenter contends that we would not deny payment for a face-to-face
consultation on the basis that the patient could not see the physician,
and therefore we should not deny a telehealth consultation on the same
basis.
Another commenter requested that we allow the use of one-way video
equipment for delivering infectious disease telehealth consultations
for ICU patients. The commenter explained that the hospital ICU is
currently equipped with a one-way video, two-way audio
telecommunications system and contends that moving interactive audio
and video teleconferencing equipment to the ICU patient is very
cumbersome and is only possible if appropriate technical staff are
available.
We received a few comments regarding the added clinical value of
two-way video versus one-way video and whether one-way video is
appropriate for a broad range of specialty consultations. One commenter
made the point that two-way video would allow the patient to see the
physician or practitioner at the distant site when a greater degree of
interaction is necessary. One organization believes that two-way video
may add value to a telehealth consultation by allowing the patient and
presenting practitioner (if necessary) to see the body language and
other non-verbal communication of the physician or practitioner at the
distant site. However, the commenter stated that payment should not be
denied for using a one-way video telecommunications system. Another
commenter supported using one-way video in limited emergent
circumstances, but also stated that additional research should be
conducted to determine whether the use of one-way video is appropriate
for a broad range of specialty consultations.
Some commenters did not support the use of one-way video for
furnishing a telehealth consultation. For instance, one commenter
stated that face-to-face (interactive video) is a better method for
obtaining patient compliance and results in a higher level of patient
confidence with the health care team.
Response: We appreciate the comments on the use of an interactive
audio and one-way video telecommunications system for purposes of
furnishing a telehealth consultation. We intend to consider the
suggestions raised by the commenters as we continue to evaluate
conditions of payment for Medicare telehealth services. We continue to
believe that the interaction between the consulting physician and the
clinical staff at the originating site is important and it is not clear
to us that one-way video is as effective in that regard as two-way
video. With regard to the commenter who stated that the critical factor
in determining whether to pay for a telehealth service should be based
on medical necessity, we believe that the method used to furnish the
service, for example the use of an appropriate telecommunications
system, is just as critical as whether the service itself is medically
necessary.
2. Definition of an Originating Site
As discussed in the August 8, 2005 proposed rule, section 418 of
the MMA required the Health Resources Services Administration (HRSA)
within HHS, in consultation with CMS, to conduct an evaluation of
demonstration projects under which SNFs, as defined in section 1819(a)
of the Act, are treated as originating sites for Medicare telehealth
services. The MMA also required HRSA to submit a report to the Congress
that would include recommendations on ``mechanisms to ensure that
permitting a SNF to serve as an originating site for the use of
telehealth services or any other service delivered via a
telecommunications system does not serve as a substitute for in-person
visits furnished by a physician, or for in-person visits furnished by a
PA, NP or CNS, as is otherwise required by the Secretary.'' We
indicated that this report was currently under development and that if
the Secretary concludes in the report that it is advisable to include a
SNF as a Medicare telehealth originating site under section 1834(m) of
the Act, we would consider the recommendations of the report to
determine whether to add SNFs to the list of approved originating
sites. We also solicited comments on this topic.
Comment: We received many comments supporting the use of telehealth
in a SNF. The commenters noted that adding a SNF to the definition of
an originating site would provide increased access to specialty
physicians and practitioners, most notably mental health services, and
decrease unnecessary travel for both the beneficiary and nursing
facility staff.
For example, one mental health practitioner stated that research
studies indicate a critical shortage of psychiatrists in non-MSA areas
and a lack of appropriate mental health care in rural SNF's as compared
to their urban counterparts. As such, the commenter believes that many
rural SNFs do not provide professional psychiatric or mental health
care and that telehealth is one method that could be used to meet the
mental health needs of the rural SNF population. Furthermore, the
commenter stated that the lack of appropriate mental health care
results in higher rates of psychiatric hospitalizations and the
inability to effectively manage medications.
Another commenter believes that allowing telehealth services to be
furnished in a SNF would increase access to follow-up care and would
result in cost savings. For example, the commenter contends that
addressing acute medical conditions earlier before they develop into a
crisis could save money by reducing transportation costs and decrease
the number of hospital admissions. The commenter also mentioned that
traveling and waiting in an unfamiliar waiting room is often
[[Page 70160]]
confusing and uncomfortable for the patient. The use of telehealth for
SNF residents could result in less travel hardships for both the
patient and SNF staff.
Response: We appreciate the comments regarding the addition of SNFs
to the definition of an originating site. At this time the telehealth
report to the Congress, as required by section 418 of the MMA, is under
development within HHS. As discussed previously, we have the authority
to approve telehealth furnished in a SNF if the Secretary concludes in
the report that it is advisable to include a SNF as a Medicare
telehealth originating site under section 1834(m) of the Act.
Comment: A few commenters requested us to add other facilities in
addition to a SNF to the definition of an originating site. For
example, one organization requested that we expand the definition of an
originating site to include domiciliary care facilities and other
congregate-living arrangements if SNFs are approved as an originating
site. Another commenter requested that we expand the definition of an
originating site to allow all community hospitals regardless of their
location (for purposes of furnishing a telehealth consultation for
stroke patients). The commenter noted that a timely evaluation of a
stroke patient is crucial for effective stroke treatment and argued
that beyond three hours after onset, resuscitation of injured brain
cells becomes increasingly unlikely. The commenter contends that timely
access to a critical care neurologist remains a concern for the
majority of community hospitals. Moreover, a national society of
nephrology requested that we add a dialysis facility to the list of
originating sites.
Response: The statute defines an originating site facility as a
physician's or practitioner's office, hospital, critical access
hospital, rural health clinic, or FQHC. Additionally, the statute only
permits telehealth services to be furnished at an originating site
located in a rural health professional shortage area as defined in
section 332(a)(1)(A) of the Public Health Service Act or within a
county that is not included in a metropolitan statistical area. We do
not have the legislative authority (except for SNFs as indicated
previously) to expand the definition of an originating site facility or
to allow telehealth services to be furnished in a hospital regardless
of geographic location.
3. Other Issues
Comment: One association urged us to pay for asynchronous ``store
and forward'' dermatology consultations. The commenter explained that a
store and forward consultation involves the transmission of
dermatological photographs and other medical information to the
consulting practitioner without interaction between the patient and
practitioner at the distant site; the patient is not present for the
consultation. The commenter contends that store and forward
consultation is more convenient for the patient, originating site and
consulting physician.
Response: Medicare telehealth services include office and other
outpatient visits (99201 through 99215), professional consultations
(99241 through 99275), individual psychotherapy (90804 through 90809),
pharmacologic management (90862), psychiatric diagnostic interview
examination (90801), and ESRD-related services included in the MCP
(except for one visit per month to examine the access site). As a
condition of payment under Medicare, these services require an in-
person patient encounter. We believe that the patient's presence, and
the use of an interactive audio and video telecommunications system
permitting the distant site practitioner to interact with the patient,
provides a reasonable substitute for an in-person encounter. The
statute provides for the use of asynchronous, store and forward
technologies for delivering telehealth services only for Federal
telemedicine demonstration programs conducted in Alaska or Hawaii. We
do not have the authority to expand the use of store and forward
technology in delivering telehealth services.
Comment: Two commenters urged us to consider adding speech-language
pathologist and audiologists as practitioners allowed to furnish and
receive payment for telehealth services and noted that we have not
submitted the telehealth report to the Congress on additional sites,
geographic areas and practitioners that may be appropriate for Medicare
telehealth payment. The commenters also mentioned that the American
Speech-Hearing Association (ASHA) previously submitted a request for
consideration in the CY 2005 physician rule to add various speech and
audiology services to the list of Medicare telehealth services. The
commenters believe that we have not responded specifically to ASHA's
request to approve speech and audiology services for telehealth.
Response: The report to the Congress (as required by section 223(d)
of the Medicare, Medicaid and State Child Health Insurance Program
Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-
554)) on additional sites and settings, practitioners, and geographic
areas that may be appropriate for Medicare telehealth payment is under
development. We are considering the suggestions raised by the commenter
as we formulate our recommendations to the Congress. Moreover, since
speech language pathologists and audiologists are not permitted under
current law to provide and receive payment for Medicare telehealth
services at the distant site, we can not fully consider ASHA's request
to add speech and audiology services to the list of Medicare telehealth
services.
Comment: One commenter requested that we replace the term face-to-
face with ``in-person''. The commenter believes that the term ``in-
person'' is a better description of an encounter where the patient and
practitioner are in the physical presence of each other.
Response: The commenter's suggestion to use the term ``in-person''
to describe an encounter where the physician or practitioner and the
beneficiary are physically in the same room has been noted. We will
consider the commenter's suggestion as we discuss Medicare telehealth
payment policy.
Result of Evaluation of Comments
We will add individual MNT as represented by HCPCS codes G0270,
97802 and 97803 to the list of Medicare telehealth services. We also
will add individual MNT to the list of Medicare telehealth services at
Sec. 410.78 and Sec. 414.65. Moreover, since a certified registered
dietitian or other nutrition professional are the only practitioners
permitted by statute to furnish MNT, we will revise Sec. 410.78 to add
a registered dietitian and nutrition professional as defined in Sec.
410.134 to the list of practitioners that may furnish and receive
payment for a telehealth service.
E. Contractor Pricing of Unlisted Therapy Modalities and Procedures
We recognize that there may be services or procedures performed
that have no specific CPT codes assigned. In these situations, it is
appropriate to use one of the CPT codes designated for reporting
unlisted procedures. These unlisted codes do not typically have RVUs
assigned to them.
For services coded using these unlisted codes, the provider
includes a description of the specific procedure(s) that was furnished.
The contractor uses this information to determine an appropriate
valuation.
As explained in the August 8, 2005 PFS proposed rule (70 FR 45788),
currently, there are two unlisted CPT
[[Page 70161]]
codes with assigned RVUs, CPT 97039, Unlisted modality (specify and
time if constant attendance), and 97139 Unlisted therapeutic procedure.
To make the pricing methodology consistent with our policy for
other unlisted services, and to more appropriately match payments with
the actual resources expended to deliver the services provided, we
proposed to have our contractors value CPT codes 97039 and 97139.
We received several comments on this proposal and provide the
following summary of the comments and our response below.
Comment: Two commenters were opposed to the proposal. These
commenters stated they were concerned that contractor pricing would
create inconsistencies in the payment for these services or would lower
payment resulting in the services no longer being provided, potentially
increasing the administrative burden and resulting in delayed payments.
One of these commenters suggested that we work with interested
specialties to better understand the services billed under these codes.
Another commenter expressed concern that obtaining new CPT codes
requires a good deal of research and investigation to ensure accurate
payment.
Other commenters supported this proposed change, indicating that
because these codes are used for widely different services they should
be evaluated separately and there is no basis for assigning the code a
set fee schedule rate.
Response: While it is true that having these codes priced by the
contractors may result in some increase in administrative burden and
impact the timeliness of payments, it will not necessarily result in
lower payments. Our goal is to ensure appropriate payment for the
actual services provided and we believe that our contractors will work
with the provider community to make certain that this occurs. To the
extent that providers believe that new codes are needed they might want
to work with the specialty organizations to achieve this objective.
Final Decision: We are finalizing our proposal and our contractors
will value CPT codes 97039 and 97139. We are assigning a status
indicator of ``C'' to these two CPT codes.
F. Payment for Teaching Anesthesiologists
In the August 8, 2005 PFS proposed rule (70 FR 45789), we
summarized the current policy for the payment for services provided by
teaching anesthesiologists, including the revisions to the policy
published November 7, 2003 (68 FR 63196 through 63395), where we
revised Sec. 414.46 of our regulations to allow teaching
anesthesiologists to bill in a similar manner to teaching certified
registered nurse anesthetists (CRNAs) for the teaching
anesthesiologist's involvement in two concurrent cases involving
residents. This policy took effect for services furnished on or after
January 1, 2004 and was intended as an alternative to the ``medical
direction'' payment policy applicable to concurrent cases involving
teaching anesthesiologists and residents.
As noted in the August 8, 2005 proposed rule, despite the higher
level of payment available under this policy, the American Society of
Anesthesiologists (ASA) has informed us that it is not aware of any
teaching anesthesia programs that have arranged their practices to meet
the conditions necessary to bill under the revised policy. The ASA
suggests that the teaching physician regulations for teaching
anesthesiologists should be similar to those for teaching surgeons for
overlapping complex surgery procedures. The ASA thinks that anesthesia
is similar to complex surgery in terms of critical periods, overlap,
and availability of teaching physicians. However, as we noted in the
August 8, 2005 proposed rule, the critical portions of the teaching
anesthesia service and the critical portions of the teaching surgeon
service are not the same. The ASA believes that inadequate payment
levels have contributed to the loss of teaching anesthesiologists and
an inability to recruit new faculty.
In the August 8, 2005 proposed rule, we requested comments on a
teaching physician policy for anesthesiologists that could build on the
policy announced in the November 7, 2003 PFS final rule, but could
provide the appropriate revisions that would allow it to be more
flexible for teaching anesthesia programs. We also indicated we would
be interested in receiving data and studies relevant to this issue as
well as any offsetting savings that could be made to account for any
potential costs that could be incurred if there was a policy change.
Discussion of Comments Received
As discussed previously in this section, we did not present a
formal proposal, but asked for comments from interested stakeholders on
these issues. While we have not fully analyzed all the relevant
information and data, we have been provided anecdotal evidence that
some anesthesiologists may be leaving academic practice for better
compensated positions in private practice. While we recognize that
Medicare payment policies are an important consideration in these
decisions, they are not the only factor.
In contrast, as pointed out by a commenter, there has been an
increase in the number of nurse anesthesia programs from 83 programs in
2000 to 105 programs projected for 2006. The number of nurse anesthesia
graduates has surged from 1075 nurse anesthetists in 2000 to 2035
projected for 2006. Despite these increases, nurse anesthesia programs
had reported similar financial problems, such as levels of teachers'
salaries, in recruiting faculty to teaching nurse anesthetists.
In terms of anesthesia manpower, we did not receive any information
from surgical groups indicating difficulty in getting anesthesiologists
or CRNAs to provide anesthesia services. Additionally, we did not
receive any comments identifying areas of offsetting savings that might
be used to fund any change in the teaching anesthesia payment policy.
We will continue to review the information and relevant data
presented by the commenters and consult with the stakeholders before we
move forward with any proposal.
G. End Stage Renal Disease (ESRD) Related Provisions
On August 8, 2005, we published the Revisions to Payment Policies
Under the Physician Fee Schedule for CY 2006 proposed rule in the
Federal Register (70 FR 45789), revising payments to ESRD facilities
under the provisions of the MMA. The proposed rule implements section
1881(b) of the Act, as amended by section 623 of the MMA, which directs
the Secretary to make a number of revisions to the composite rate
payment system, as well as payment for separately billable drugs
furnished by ESRD facilities.
Under section 1881(b)(12) of the Act, the add-on adjustment must
reflect both the effect of the new payment methodology and estimate
growth in ESRD drug expenditures. We proposed an add-on adjustment of
8.1 percent to the composite payment rate to account for the difference
between previous payments for separately billed drugs and biologicals
and the revised pricing that will take effect January 1, 2006.
We updated that add-on adjustment to reflect estimated growth in
ESRD drug expenditures of 0.7 percent. We combined the add-on
adjustment of 8.1 percent that reflects the payment methodology we will
be using for ESRD drugs with the 0.7 percent increase for expenditures
in 2006 to produce one
[[Page 70162]]
proposed drug add-on adjustment for CY 2006 of 8.9 percent.
Following publication of the proposed rule, it came to our
attention that 3 codes had been omitted in our analysis of drug
payments and utilization for the top ten ESRD drugs that affected our
calculation of the proposed add-on adjustment. On September 1, 2005, we
issued a correction notice on the CMS Web site, to correct our omission
of the 3 J Codes in the estimation of the market shares for the top ten
ESRD drugs used in our calculation of the proposed drug add-on
adjustment for 2006. The ``Correction to the Proposed ESRD Drug Add-on
Adjustment: Revised Table 22'' is available at http://www.cms.hhs.gov/providers/esrd/090105_ESRD_Correction.pdf.
The corrected table shows
the revised weights compared to the weights included in the proposed
rule and resulted in a revised proposed total drug add-on adjustment to
the composite payment rate of 11.3 percent for 2006.
We also proposed to revise the drug pricing for ESRD drugs to ASP+6
percent for the top ten drugs furnished by independent facilities and
EPO furnished by hospital-based facilities.
In addition, section 1881(b)(12) of the Act as amended by section
623 of the MMA provided authority to the Secretary to revise the
geographic index applied to the composite payment rate and phase in any
changes to the index over a multi-year period. Accordingly, we proposed
to revise the geographic classifications and wage indexes currently in
effect for adjusting composite rate payments and to implement these
changes over a 2-year transition period.
We also proposed to revise the regulations applicable to the
composite rate exceptions process to reflect section 623 of the MMA
provisions that restricts exceptions to pediatric facilities.
No changes to the current case-mix adjustments were proposed.
We received a total of 37 comments from the ESRD community that
represented major organizations, pharmaceutical companies,
beneficiaries, and concerned individuals. The comments and responses
are summarized in the following sections.
1. Revised Pricing Methodology for Separately Billable Drugs and
Biologicals Furnished by ESRD Facilities
In the August 8, 2005 proposed rule, we proposed that payment for
drugs furnished in connection with renal dialysis services and
separately billed by independent renal dialysis facilities would be
based on payment amounts determined under section 1847A of the Act
which are 106 percent of the ASP. We proposed to update the payment
allowances quarterly, based on the ASP reported to us by drug
manufacturers. We also proposed to pay for EPO in hospital-based
facilities at the ASP+6 percent. We stated that we are interested in
moving to the ASP+6 percent methodology for all separately billed drugs
and solicited comments on a drug add-on estimation methodology that
would allow us pay hospital-based facilities ASP+6 percent for all
separately billable drugs.
In this final rule with comment, we are implementing payment of
ASP+6 percent for all ESRD drugs furnished by both independent and
hospital-based ESRD facilities. A discussion of the final drug payment
methodology and related comments and responses can be found in section
II.H.2.
2. Adjustment to Account for Changes in the Pricing of Separately
Billable Drugs and Biologicals, and the Estimated Increase in
Expenditures for Drugs and Biologicals
Section 1881(b)(12) of the Act, as added by section 623(d) of the
MMA, contains two provisions that describe how the drug add-on
adjustment will be implemented in the ESRD payment system. First, the
add-on adjustment must reflect the difference between the payment
methodology for separately billed drugs under the drug price in effect
in CY 2004 and current drug pricing and, second, the aggregate payments
for CY 2005 must equal aggregate payments absent this MMA provision.
Prior to 2005, separately billable ESRD drugs and biologicals other
than EPO furnished in independent facilities were paid under the
average wholesale price (AWP) methodology. In 2005, section
1881(b)(13)(A)(ii) of the Act required that we pay the acquisition cost
for separately billable ESRD drugs (including EPO) as determined by the
Office of the Inspector General (OIG). If the OIG did not determine an
acquisition cost for a separately billable drug or biological, then the
Secretary was given discretion to determine the payment rate. In the CY
2005 final rule (69 FR 66322-66323), we described the methodology that
we used for developing the drug add-on adjustment to the composite rate
to account for the difference between estimated drug payments under the
AWP payment system and the acquisition costs as determined by the OIG.
This adjustment was developed so that aggregate spending for composite
rates plus separately billed drugs would remain budget neutral for CY
2005.
Section 1881(b)(12) of the Act, as added by section 623 (d) of the
MMA, also contains two provisions related to adjustments to payments
for drugs and biologicals for CY 2006. Section 1881(b)(12)(C)(ii) of
the Act requires that we recalculate the 2005 add-on adjustment to
reflect the difference between estimated payments using the AWP payment
methodology and the payment methodology for 2006 which we proposed to
be ASP+6 percent.
In addition, section 1881(b)(12)(F) of the Act requires that,
beginning in 2006, we establish an annual update adjustment to reflect
estimated growth in expenditures for separately billable drugs and
biologicals furnished by ESRD facilities. This update would be applied
only to the drug add-on portion of the composite payment rate. In order
to meet both requirements, we proposed to develop the CY 2006 drug add-
on adjustment in two steps.
First, we proposed to recalculate the CY 2005 add-on adjustment to
reflect the difference in drug payments using 95 percent AWP pricing
and payments using ASP+6 pricing. The result of this calculation would
replace the current 8.7 percent adjustment and would be budget neutral
to CY 2005 payments. Next, we proposed to develop a proposed annual
update methodology that we would first use in CY 2006 to reflect the
estimated growth in drug expenditures each year. As stated previously,
this update would be applied only to the drug add-on portion of the
composite payment rate. For specific details regarding the proposed
adjustments, see the August 8, 2005 Federal Register (70 FR 45793
through 45800).
As noted previously, we issued a correction to the proposed ESRD
drug add-on adjustment contained in the proposed rule. In this notice
we acknowledged that our estimation of the market shares for the top
ten ESRD drugs that we used in the calculation of the proposed drug
add-on for 2006 was incorrect. After further analysis of the 2003
expenditure data used to assign weights to the top ten ESRD drugs, we
determined that our data did not account for 3 new ``J'' codes that
were implemented in 2003. As a result, the weights for Iron Sucrose,
Sodium Ferric Gluconate and Paricalcitol were understated.
In addition, we noted that the weight for EPO incorrectly included
expenditures for hospital-based facilities. Since the purpose of the
weighting was to allocate the drug spread to all other drugs paid using
the
[[Page 70163]]
proposed ASP+6 percent pricing, hospital-based data should not have
been included because we paid for other hospital-based drugs based on
cost. Table 16 shows the revised weights compared to the weights
included in the proposed rule.
Table 16.--Revised to Reflect Correction
------------------------------------------------------------------------
Published Revised proposed
Drugs proposed weights weights
------------------------------------------------------------------------
Epogen............................ 78.83 69.33
Calcitriol........................ 0.13 0.84
Doxercalciferol................... 1.74 1.48
Iron dextran...................... 0.38 0.23
Iron sucrose...................... 0.71 7.03
Levocarnitine..................... 0.89 0.77
Paricalcitol...................... 17.37 14.61
Sodium ferric glut................ 0.53 4.96
Alteplase, Recombinant............ 0.18 0.56
Vancomycin........................ 0.24 0.19
------------------------------------------------------------------------
We note that as a result of these data corrections, the top ten
drugs account for 98 percent of total ESRD drug expenditures, rather
than 92 percent as stated in the proposed rule.
Using these revised weights, the proposed recalculated 2005 drug
add-on adjustment was corrected to 10.4 percent, and the proposed 2006
update was corrected to 0.8 percent. The corrected total drug add-on
adjustment proposed for 2006 was 11.3 percent.
The proposed rule also discussed a method to estimate the drug
spread applicable to hospital-based facilities for non-EPO drugs if we
decided to implement ASP+6 percent pricing for all hospital-based
drugs. This methodology would use the weighted average drug spread
percent for independent facilities to estimate the drug spread for non-
EPO drugs furnished by hospital-based ESRD facilities.
The following sections discuss the comments we received on these
issues and provide a detailed description of the final drug add-on
adjustment to the ESRD composite payment rate that will be implemented
January 1, 2006.
Comment: We received a number of comments advocating that drug
payments to hospital based facilities should be the same as to
independent facilities. However, most of these comments raised no
concerns regarding our proposed methodology for computing the drug
spread applicable to hospital-based facilities. Two comments
specifically supported our proposal to use the drug pricing drug spread
from independent facilities to estimate the spread for hospital-based
facilities. Two comments stated we should follow MedPAC's suggestion
that we collect data to estimate hospital-based facilities' cost and
Medicare payment per unit for ESRD drugs, but did not raise concerns
with our proposed alternative method for estimating the drug spread
applicable to hospital-based facilities if we implemented ASP+6 percent
pricing. MedPAC recommended that we use the same methodology to pay for
all drugs (regardless of setting) and suggested that we could use
dosing data from independent facilities to estimate ASP+6 payments for
hospital-based facilities to compute the drug spread related to
hospital-based facility drug payments.
Response: Given both the MedPAC recommendation that ASP should be
the basis of payment for all separately billable ESRD drugs and the
overall support for providing consistent drug payments for both
hospital-based and independent facilities, we have decided, in light of
section 1881(b)(13)(A)(iii) of the Act, to implement ASP+6 percent
pricing for hospital-based facilities beginning January 1, 2006. See
section II.H.2 for a more detailed discussion of this issue. We are
adopting the methodology outlined in the proposed rule to determine the
drug spread applicable to hospital-based facilities and to calculate a
drug add-on adjustment. We are also adopting the proposed methodology
which would permit us to implement a change in payment to ASP+6 percent
for all non-EPO drugs provided by hospital-based ESRD facilities.
While we agree that the ideal approach would be to collect data
from hospital-based facilities, this data collection would
significantly delay implementation of a consistent ESRD drug payment
policy. Absent the collection of data, we believe that using the
estimation methodology described in the proposed rule brings us closer
to the actual price of hospital drugs (ASP+6 percent) than does the
policy of continuing to rely on reasonable costs.
In response to MedPAC's suggestion, we did an analysis of drug
dosing units from the billing data of independent facilities and were
unable to determine accurate monthly average units from those bills,
because facilities do not bill individual line items by date of
service. As a result, the average monthly dose we computed for some
drugs was significantly below the FDA expected monthly dose. In other
words, the average monthly dose for the top ten ESRD drugs from
independent facility data that we could use as a proxy for pricing the
hospital-based bills was problematic. We believe the statute
contemplates a single payment approach for separately billable ESRD
drugs. Therefore, using our estimation proposal is a start towards
MedPAC's principle that the same prices should be paid for the same
services across all settings which we believe is consistent with the
statute. Furthermore, moving to ASP+6 percent pricing for hospital-
based facilities evens out the effect of the drug add-on adjustment
between independent and hospital-based facilities.
Therefore, we have computed the drug spread for non-EPO hospital
based drugs using the weighted average drug spread percentage from
independent facilities. We applied that percentage to the total
hospital-based drug payments in order to estimate the amount of the
drug spread as a result of revising the drug pricing methodology to
ASP+6 percent for hospital-based facilities.
We believe this method provides a reasonable estimation of the drug
spread because, as explained previously, all drugs in both settings are
based on ASP+6 pricing. Moreover, we believe that the benefits of
implementing a consistent drug payment methodology outweighs any
potential drawbacks that may result from estimating the drug spread
without more precise data. We intend to pursue options for obtaining
additional data to more accurately
[[Page 70164]]
compute and update the drug add-on adjustment. Once more complete
hospital-based ESRD drug data become available, we will re-examine the
computation of the drug add-on adjustment and make any necessary
revisions to our estimations.
Comment: We received comments from two associations representing
ESRD facilities that expressed concern about our interpretation of the
statutory provision related to the drug add-on adjustment. These
comments presented legal arguments challenging our decision to apply a
single drug add-on adjustment that is applicable to both hospital-based
and independent ESRD facilities. Both comments indicated that as long
as separate drug payment methodologies are in place for hospital-based
facilities and independent facilities, the statutory text, structure,
and legislative history requires that we establish distinct drug add-on
adjustments. Another commenter recommended that the add-on adjustment
should be directly linked to hospital-based and independent facilities
based on the actual loss of revenue due to changes in reimbursement for
separately billed drugs.
Response: We continue to believe that our interpretation of this
statutory provision represents the best reading of the statute as we
explained, for reasons, discussed, in the CY 2005 final rule (see 69 FR
66319 through 66320). Accordingly, rather than adopting separate add-on
adjustments for independent and hospital-based ESRD facilities, we are
addressing the payment inequities expressed in the comments and pointed
out in the MedPAC report that result from differential drug payment
methodologies for hospital-based and independent facilities. As
discussed previously, we are implementing a consistent drug payment
methodology for all ESRD provider settings. In this way, we believe we
have resolved the concerns expressed by these commenters in a manner
consistent with the statute.
a. Recalculation of the CY 2005 Drug Add-on Adjustment
For CY 2006, we proposed to use the same method that we used to
develop the drug add-on adjustment for CY 2005 to recalculate the 2005
adjustment to reflect the proposed revision to the ESRD drug payment
methodology from acquisition costs to ASP+6 percent. That is, we
proposed to calculate the spread based on the difference in aggregate
payments between estimated payment based on AWP pricing and estimated
payment based on ASP+6 pricing. Although we proposed to use pricing
data from the second quarter of CY 2005, we indicated that all of the
data used to develop the proposed add-on adjustment would be updated
for the final rule with comment, as more current data would be
available.
(1) Historical Drug Expenditure Data
To develop the drug add-on adjustment for this final rule with
comment, we used historical total aggregate payments for separately
billed ESRD drugs for calendar years 2001, 2002, 2003, and 2004. For
EPO, these payments were broken down according to type of ESRD facility
(hospital-based versus independent). We also used the number of
dialysis treatments performed by these two types of facilities over the
same period.
(2) ASP+6 Percent Prices
In the proposed rule we used the ASP+6 percent prices for the
second quarter of CY 2005. However, we indicated that we would use all
four quarters of CY 2005 prices to develop the CY 2005 ASP payments.
Comment: One commenter raised concerns regarding using four
quarters of the ASP to determine an annual average. This commenter
indicated that the most recent available quarter, specifically, the
fourth quarter ASP prices of any CY represents the ASP for the entire
year. This commenter recommended that, instead of using all four
quarter of CY 2005, we use only the fourth quarter of CY 2005 ASP to
calculate the difference in the aggregate payments based on 95 percent
AWP pricing and the estimated payment based on ASP+6 percent.
Response: We do not agree with this recommendation and have used
the average of ASP prices in all four quarters of 2005 to calculate the
add-on adjustment. The fourth quarter of the ASP represents only the
most current ASP prices, and does not represent an aggregate annual
average. Therefore, our calculation for ASP+6 percent includes not only
the most current quarter (that is, the fourth quarter ASP) but also the
previous three quarters of ASP pricing data for 2005). We believe this
calculation provides the most accurate estimation of 2005 actual ASP+6
percent payments.
We used four quarters of 2005 ASP+6 percent prices for the drugs
listed in Table 17. We averaged these to develop prices representing
the average 2005 ASP payments.
Table 17
------------------------------------------------------------------------
Average sales
Drug price plus 6%
2005
------------------------------------------------------------------------
Epogen............................................... $9.30
Calcitriol........................................... 0.75
Doxercalciferol...................................... 2.19
Iron dextran......................................... 11.21
Iron sucrose......................................... 0.36
Levocarnitine........................................ 12.30
Paricalcitol......................................... 3.92
Sodium ferric glut................................... 4.74
Alteplase, Recombinant............................... 30.61
Vancomycin........................................... 2.95
------------------------------------------------------------------------
(3) Estimated Medicare Payments Using 95 Percent of AWP
In the proposed rule, we used the first quarter 2005 AWP prices and
updated them to the second quarter by applying, for drugs other than
EPO, an estimated AWP quarterly growth of approximately 0.74 percent.
In order to estimate AWP payments for this final rule with comment, we
used 4 quarters of 2005 AWP prices and averaged them to obtain prices
representative of 2005 payment amounts. This methodology was not
applied to the price for Epogen since payment was maintained at $10.00
per thousand units prior to MMA (see Table 18).
Table 18
------------------------------------------------------------------------
2005 average
estimated
Drugs medicare payments
using 95% of AWP
------------------------------------------------------------------------
Epogen............................................... $10.00
Calcitriol........................................... 1.36
Doxercalciferol...................................... 3.98
Iron dextran......................................... 17.91
Iron sucrose......................................... 0.65
Levocarnitine........................................ 36.48
Paricalcitol......................................... 5.32
Sodium ferric glut................................... 8.17
Alteplase, Recombinant............................... 31.89
Vancomycin........................................... 3.79
------------------------------------------------------------------------
(4) Dialysis Treatments
In the proposed rule, using the most complete data available at the
time, we estimated total dialysis treatments for 2005 at 34.5 million.
Comment: We received comments suggesting that our estimate of
dialysis treatments was overstated.
Response: Using more recent data that has become available since we
issued the proposed rule, we increased our projection of total number
of dialysis treatments based on actuarially projected growth in the
number of ESRD beneficiaries. Since Medicare covers a maximum of three
treatments per week, utilization growth is limited, and, therefore, any
increase in the number of
[[Continued on page 70165]]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]
[[pp. 70165-70214]] Medicare Program; Revisions to Payment Policies Under the
Physician Fee Schedule for Calendar Year 2006 and Certain Provisions
Related to the Competitive Acquisition Program of Outpatient Drugs and
Biologicals Under Part B
[[Continued from page 70164]]
[[Page 70165]]
treatments should be due to beneficiary enrollment. The actual 2004
data we used in this final rule with comment, showed higher treatment
counts than we had projected for 2004 in the proposed rule. Therefore,
for CY 2005, we estimate there will be a total of 34.7 million
treatments performed.
(5) Drug Payments
In the proposed rule, we updated drug payments for both EPO and
non-EPO drugs using the estimated trend factor for EPO of 9.0 percent.
We proposed using the EPO 9.0 percent trend factor for all drugs (not
just for EPO) because EPO constitutes the largest proportion of drugs
furnished by ESRD facilities and because we determined that the
extremely varied growth in spending for non-EPO drugs between 2000 and
2003 prohibited a reliable trend analysis. As we indicated we would do
in the proposed rule, we used later 2004 drug payment data for the
final rule with comment and trended those data forward to 2005.
Comment: We received a number of comments concerning our use of the
EPO trend factor to update drug payments to 2005. These comments
expressed concern that this resulted in understating the growth in ESRD
drug payments. We also received comments that we should correlate the
growth of EPO and other separately billable ESRD drugs.
Response: Since we now have 2004 data, we have modified the trend
factor to more accurately reflect the growth in drug payments. In
addition, we have calculated trend factors for non-EPO drugs
independently of those for EPO.
We updated the total aggregate EPO drug payments for both hospital-
based and independent facilities by using historical trend factors
using data from 2001 through 2004. For CY 2005, the CY 2004 payment
level was increased by a trend factor of 11.0 percent.
Similarly, we updated the aggregate spending for separately
billable drugs, other than EPO, for both hospital-based and independent
facilities by using a historical trend factor of 15 percent.
In addition, we deducted 50 cents for each administration of EPO
from the total EPO spending for both hospital-based and independent
facilities to account for payment for syringes that were included in
the EPO payments prior to the implementation of the MMA drug payment
provisions.
In the proposed rule, we estimated the cost of syringes at $1.6
million for hospital-based facilities and $26.8 million for independent
facilities.
Comment: We received comments that the proposed $26.8 million
dollars estimated for syringe payments to independent facilities was
too high, because the estimated number of administrations of EPO
exceeded the number of treatments.
Response: We have re-estimated the syringe payments to take into
account problems we encountered related to the administrations field on
the dialysis bills. Thus for the final rule with comment, we are
calculating syringe payments as 50 cents multiplied by 90 percent of
estimated treatments for 2005. The 90 percent represents the percent of
dialysis patients that receive EPO. Since we only pay for one
administration per treatment we applied this 90 percent to total
treatments in order to estimate the number of EPO administrations.
Using this methodology, for CY 2005, we estimate payments for these
syringes will amount to $1.8 million for hospital-based facilities and
$13.8 million for independent facilities.
For CY 2005, we estimate that total spending for separately
billable drugs will reach $462 million for drugs provided in hospital-
based facilities ($217 million for EPO and $245 million for other
drugs), and $3.102 billion for drugs provided in independent facilities
($2.082 billion for EPO and $1.019 billion for other drugs).
Comment: One comment indicated that we were eliminating separate
payments for syringes.
Response: We believe the commenter misunderstood our payment
policy. We currently pay separately for syringes used to administer
ESRD drugs, and will continue to do so. We began paying separately for
the syringes associated with administration of EPO when EPO payment was
revised from payment at $10 per 1,000 units in 2005. While the previous
$10 payment included payment for syringes, the new payment methodology
does not. We have not modified our approach to paying for syringes in
general, but now also pay separately for syringes associated with the
administration of EPO.
(6) Add-On Calculation and Budget Neutrality
In the August 8, 2005 proposed rule (70 FR 45789), we acknowledged
a mistake in our calculation of the proposed drug add-on adjustment.
The proposed 2005 recalculated add-on adjustment was 10.4 percent. In
addition, we indicated in the proposed rule that we intended to include
more recent 2004 billing data in the calculation of the final drug add-
on adjustment.
Comment: We received a number of comments commending us for
responding to industry concerns by making the corrections to the
proposed add-on calculation and urging us to use the most accurate, up-
to-date data and trends available to compute the 2005 budget-neutral
add-on adjustment.
Response: We have taken these comments into consideration and have
updated all of the data and assumptions used to calculate the add-on
adjustment as described below.
For each of the top ten drugs, we calculated the percent by which
ASP+6 percent is projected to be less than payment amounts under the 95
percent of AWP pricing system for 2005. We then calculated a weighted
average of the percentages by which ASP+6 percent would be below 95
percent of AWP payment amounts, for the top 10 ESRD drugs for
independent facilities. We weighted these percentages by using the 2005
estimated Medicare payment amounts for the top ten drugs. This
procedure resulted in a weighted average payment difference of 16
percent.
Table 19
------------------------------------------------------------------------
2005 estimated
medicare payment Percent by which
weights as a ASP+6% prices are
Drugs percentage of below 95% of AWP
total drug prices
expenditures
------------------------------------------------------------------------
Epogen............................ 67.96 7.03
Calcitriol........................ 0.45 44.74
Doxercalciferol................... 3.62 44.94
Iron dextran...................... 0.11 37.40
Iron sucrose...................... 7.79 44.50
[[Page 70166]]
Levocarnitine..................... 1.11 66.27
Paricalcitol...................... 13.38 26.44
Sodium ferric glut................ 4.64 41.96
Alteplase, Recombinant............ 0.75 4.00
Vancomycin........................ 0.20 22.20
------------------------------------------------------------------------
Since we estimate that these 10 drugs represent nearly 98 percent
of total 2005 drug payments to both hospital-based and independent
facilities, we applied the weighted average to 100 percent or all of
aggregate drug spending projections for hospital-based and independent
facilities, producing a projected difference of $585 million (the sum
of $76 million for hospital-based and $509 for independent facilities).
Since we do not currently have reliable data on dosing units from
hospital-based bills, we believe it is reasonable, as discussed above,
to proxy the drug spread for hospital-based facilities using the spread
for independent facilities. The weighted average is applied to 100
percent of drug spending projections for hospital-based and independent
facilities.
Distributing the total 2005 figure of $585 million over a total
projected 34.7 million treatments results in a revised 2005 add-on to
the per treatment composite rate of 13.1 percent. This compares to the
proposed adjustment of 10.4 percent. By making this adjustment to the
composite rate, we estimate that the aggregate payments to ESRD
facilities would be budget neutral for drug payments for 2005, as
required by the MMA. We note that, beginning January 1, 2006, this 13.1
percent adjustment replaces the 8.7 percent adjustment currently in
effect for CY 2005.
b. Calculation of the Proposed CY 2006 Inflation Update to the Drug
Add-On Adjustment
The proposed rule described the approach we proposed to use to
update the drug add-on adjustment to account for the estimated growth
in drug expenditures between 2005 and 2006. Based on the most recent,
complete data that was available at the time, we proposed a 2006
inflation adjustment of 0.8 percent to the drug add-on to the composite
payment to reflect the estimated growth in drug expenditures between
2005 and 2006. While we received no comments specific to the add-on
inflation adjustment, we did receive comment about our growth
projections used to calculate the adjustment. Those comments were
addressed in the previous section.
(1) Drug Payments and Dialysis Treatments
Similar to the above mentioned process, we updated the total
aggregate EPO drug spending for hospital-based and independent
facilities using historical trend factors. For 2006, the EPO payment
level was increased from 2005 by a trend factor of 11.0 percent. We
also updated aggregate spending for separately billable drugs, other
than EPO, for both hospital-based and independent facilities by a trend
factor of 15 percent. This procedure resulted in projected drug
expenditures of $523 million for drugs provided in hospital based
facilities ($240 million for EPO and $283 million for other drugs) and
$3.481 billion for drugs provided in independent facilities ($2.306
billion for EPO and $1.175 billion for other drugs). These numbers
include an estimated reduction for the 50 cent payment for syringes of
$1.9 million for hospital-based facilities and $14.1 million for
independent facilities. We also updated the projected number of
dialysis treatments using actuarial enrollment projections. This
resulted in total of 35.6 million treatments for 2006.
(2) Adjustment to Composite Rate Add-On
The proposed computation of the 2006 inflation adjustment to the
composite rate was 0.8 percent. We have updated our projected inflation
adjustment for the drug add-on and have included data for non-EPO
hospital-based drugs into the computation.
Since EPO is updated at an average trend of 11 percent and other
separately billable drugs are updated by a trend factor of 15 percent,
for both hospital-based and independent facilities, for 2006 we
computed a combined weighted average growth in total drug expenditures
of 12.3 percent, based on the relative proportions of EPO and non-EPO
drugs. We then applied the 12.3 percent projected growth in aggregate
drug expenditures between 2005 and 2006 to the 2005 drug add-on figure
of $585 million. This resulted in a projected incremental increase in
the drug spread for 2006 of $72 million ($9 million for drugs furnished
by hospital-based facilities and $63 million for drugs furnished by
independent facilities). We distributed the $72 million over 35.6
million projected treatments, resulting in a 1.4 percent increase to
the 2005 composite payment rate.
Comment: We received a number of comments regarding an annual
update factor. Several comments recommended that we should provide an
annual update to the composite rate. The specific recommendation
suggested an annual market basket update in the composite rate
equivalent to the MedPAC recommendation of an increase to the composite
payment rate of 2.5 percent in 2006. The comments further acknowledged
that the creation of an annual market basket update requires
Congressional action.
Response: Because Congressional action is required, there is no
specific provision in the current statute or regulations for an annual
update for the composite payment rate based on the ESRD market basket
rate of increase. However, the statute does, in effect, provide for an
annual update to the drug add-on to the composite payment rate. As
discussed previously, the statute requires that we annually update the
amount of the drug spread included in the composite payment rate, based
on the projected growth in drug expenditure between 2005 and 2006. We
are providing an inflation adjustment to the composite payment rate of
1.4 percent. Even though this inflation adjustment is part of the
overall add-on adjustment, the overall effect for 2006 is equal to an
update of 1.4 percent.
[[Page 70167]]
In addition, we note that as part of our work on the development of
a fully bundled prospective payment system (PPS) for ESRD facilities,
we will be developing an update framework that would include an ESRD
market basket factor. We expect to include a discussion of this update
framework as part of a Report to Congress on a fully bundled PPS for
outpatient ESRD facilities. This report is still under development.
Comment: One comment stated that the add-on adjustment to the
composite rate should be reflected as an absolute dollar amount rather
than a percentage, stating that there is no logical reason why the drug
add-on component should be adjusted by a wage index.
Response: Section 1881(b)(12)(A) of the Act which was added by the
MMA, required the establishment of a ``case-mix adjusted prospective
payment system for dialysis services'' that included: (1) The composite
rate; (2) case-mix adjustment for a limited number of patient
characteristics; and (3) a drug add-on adjustment to the composite rate
to account for the difference in drug payments compared to the previous
drug pricing methodology. Section 1881(b)(12)(D) requires that payments
under this system be adjusted by a geographic index. Therefore, we are
required to apply the wage index to all components of the case-mix
adjusted composite rate system.
c. Drug Add-On Adjustment for 2006
With the CY 2005 add-on to the per treatment composite rate being
13.1 percent and the additional increment for expenditures in CY 2006
being 1.4 percent, the combined drug add-on adjustment for 2006 is 14.7
percent (1.131 x 1.014).
3. Revisions to Geographic Designations and Wage Indexes Applied to the
ESRD Composite Payment Rate
Section 1881(b)(12)(D) of the Act, as added by section 623(d) of
the MMA, gave the Secretary the discretionary authority to revise the
current wage index incorporated in the ESRD composite payment rates.
That provision also requires that any revised wage index be phased in
over a multiyear period. We proposed to adopt OMB's revised geographic
definitions (announced in OMB Bulletin No. 03-04, issued June 6, 2003)
to determine urban and rural locales for purposes of calculating ESRD
composite payment rates, beginning January 1, 2006. In conjunction with
using OMB's geographic designations, we proposed to recalculate the
ESRD wage index based on acute care hospital wage and employment data
for FY 2002, as reported to us in connection with development of the
wage index used in the inpatient hospital prospective payment system
(IPPS). We also proposed to update the labor portion of the ESRD
composite rate to which the wage index is applied. Below we discuss
comments we received on these proposals and our final determinations
regarding CY 2006 revisions to the wage index adjustment as it is
applied to the ESRD composite payment rate.
a. Use of Revised OMB Geographic Area Designations To Determine Urban
and Rural Locales for ESRD Composite Payment Rates
In the August 8, 2005 proposed rule, we proposed to use OMB's
revised core-based statistical area (CBSA)-based definitions for
Metropolitan Statistical Areas, New England County Metropolitan Areas,
and Micropolitan Statistical Areas, announced in OMB Bulletin 03-04
(June 6, 2003) as the basis for revising the urban/rural locales and
corresponding wage index values reflected in the composite payment
rates. The definitions we proposed are the same urban and rural
definitions used for the Medicare IPPS, but without regard to
geographic reclassifications authorized under section 1886(d)(8) and
(d)(10) of the Act. In conjunction with adopting OMB's geographic
classifications, we proposed replacing the current weighted wage index
based on a 60/40 blend of Bureau of Labor Statistics (BLS) and hospital
wage index values with one developed exclusively from acute care
hospital wage and employment data obtained from the Medicare hospital
cost reports. We proposed to update the wage index annually. For a full
discussion of our proposals, see the August 8, 2005 proposed rule (70
FR 45793 through 45800). The following section contains a summary of
the comments that we received on the proposed wage index revisions.
Comment: Several commenters, generally those representing
independent ESRD facilities located in rural areas, opposed
implementation of the CBSA based wage index. The commenters expressed
concern that the proposed wage index would jeopardize beneficiary
access to care, and left little protection for rural facilities. Some
commenters pointed out the amount of the reduction in composite
payments that specific providers would incur based on the proposed
urban/rural definitions and revised wage index values.
Response: The current urban/rural definitions reflected in the
composite payment rates have been in effect for over 20 years, and
needed to be updated. By revising those definitions to conform with the
latest available OMB geographic designations as explained in the August
8, 2005 proposed rule, we believe that we are complying with the
express intent of the Congress permitting revision of those
designations, as set forth in section 1881(b)(12)(D) of the Act. While
our authority to revise the current ESRD wage index is discretionary,
we believe this revision is essential if the composite rates are to
reflect accurately the costs of providing ESRD services.
None of the commenters proposed an alternative to our proposed
geographic classification system. Because we must have a national
classification system built on clear objective standards, we are
adopting the CBSA based urban/rural definitions, as described in our
proposed rule. As to commenters' concerns about any reductions in the
base composite payment rates, we have taken these concerns into
consideration and have adopted a transition policy concerning the wage
index. We address commenter's comments and provide a more detailed
discussion of our transition policy in section II.3.c. of this final
rule with comment.
Comment: While several commenters supported the implementation of
the new CBSA based wage index, they expressed concern over the
potential impact on independent ESRD facilities, particularly those
located in rural areas. The most frequent recommendations to reduce the
impact of any payment reductions were to extend the proposed transition
period from 2 to 5 years, and provide annual updates of the wage index
in each of those years.
Response: We agree that the new CBSA based wage index should be
revised periodically to account for not only changes in labor market
conditions, but also any future revisions in the definitions of the
Metropolitan Statistical Areas and other geographic designations which
may be announced by OMB. We will revise the ESRD wage index annually
using the most recent Medicare cost report data as is used in the
Medicare hospital IPPS. We also agree that the proposed transition
period of 2 years may not be sufficiently long to provide ESRD
facilities with enough time to adapt to the new wage index and have
extended the transition period to 4 years. For a more complete
discussion of our policies to help ESRD facilities adapt to the OMB
geographic designations and wage index revisions
[[Page 70168]]
we have adopted for ESRD purposes (see section C of this preamble).
Comment: Several commenters endorsed our adoption of the proposed
wage index based on the revised OMB definitions. However, the
commenters were critical of what they perceived to be a lack of
transparency in the data and methodology used to develop the new wage
index, especially the budget neutrality adjustment. The commenters
requested that we provide the data and methodology used to calculate
the new wage index values and BNF.
Response: For purposes of adjusting the labor-related portion of
the CY 2006 ESRD composite rate, we are using the most recent hospital
wage data applicable to FY 2006 payments as discussed previously in
this section. We start with the wage index used by the Skilled Nursing
Home Prospective Payment System (SNF PPS) and multiply this index by a
numeric factor, which is the budget neutrality adjustment. We use the
SNF PPS wage index because we believe it reflects the most recent data,
and is consistent with all other non-acute care facility payment
systems.
As explained earlier in this section, we begin with the same wage
index values as those used by the SNF and multiply those values by the
BNF (See Tables 21 and 22). The methodology for creating this wage
index BNF is explained in further detail below.
The wage index measures relative differences in the average hourly
wage for the hospitals in each labor market area compared to the
national average hourly wage. As stated previously, for ESRD payment
purposes the wage index values are based on wage data as reported by
hospitals on their Medicare cost reports. The wage data used to
construct the wage index are updated annually, based on the most
current data available. Accordingly, 2002 wage data were used to
construct the wage index values used in this final rule with comment
and 2003 wage data will be used to construct the wage index that we
intend to use for the ESRD composite rate for CY 2007.
For each geographic area, wage data for all providers in that area
are combined. The sum of all wages for all providers in that geographic
area is divided by the total hours for all providers in that geographic
area. The result is the average hourly rate for that geographic area.
This data can be found at the following link: http://www.cms.hhs.gov/providers/hipps/ippswage.asp
.
The data will be found under the section labeled, ``FY 2006 Wage
Index Public Use Files'', and contains average hourly rate data and
wage index. The index is computed by dividing the average hourly rate
for each geographic area within the CBSA by the national average hourly
wage.
As we noted earlier, for the ESRD wage index we are using hospital
wage data without regard to any approved geographic reclassification
authorized under sections 1886(d)(8) and (d)(10) of the Act or other
provision that only applies to hospitals paid under the IPPS. For
purposes of the ESRD wage index methodology, the data we use is pre-
reclassified, pre-floor hospital data and unadjusted by occupational
mix.
The final step is to multiply each wage index value by the wage
index budget neutrality factor (BNF) (see section 4 for details about
this adjustment).
Comment: One commenter strongly objected to our proposed
implementation of the CBSA based wage index. The commenter maintained
that we have failed to examine the entire dialysis patient delivery
system taken as a whole. Specifically, we have not recognized that
rural facilities generally have lower utilization, and consequently
higher costs per treatment, especially for overhead and supplies,
compared to urban facilities. The commenter offered three options for
consideration-the establishment of one composite rate for all dialysis
facilities, the creation of a special composite rate adjustment factor
that compensates rural facilities for their higher overhead costs due
to lower utilization, or the creation of an explicit exception for
higher rural facility overhead costs.
Response: We recognize that large chain dialysis providers operate
with the benefit of economies of scale, and may be better able to adapt
to the impact of policy changes to the composite payment rates.
However, we have no evidence to indicate that rural facilities have
higher overhead and supply costs per treatment. Payments to rural
facilities are lower compared to urban facilities because rural
facility composite rate costs, including labor costs, are generally
lower. We do not believe our use of a CBSA-based wage index would
change our conclusion, however, as noted below, we will continue to
monitor provider cost data.
Moreover, section 623(b) of the MMA and section 422(a)(2) of BIPA
prohibit the granting of new exceptions for the composite rate, except
for pediatric ESRD facilities.
b. Revised Labor-Related Portion
The current composite rate wage index is applied to two different
labor-related shares, 40.65 percent for independent facilities and
36.78 percent for hospital-based facilities. Given the age of the cost
data used to develop these shares, we proposed revising the labor-
related portion of the composite rate based on the ESRD composite rate
market basket contained in our May 2003 Report to Congress on
developing a bundled outpatient ESRD payment system. We proposed the
use of a single labor-related share of 53.711 percent that would apply
to both hospital-based and independent facilities. This proportion was
based on the sum of the labor-related categories of costs that comprise
the ESRD market basket. (70 FR 45796 through 45798). We received the
following comments on this proposal.
Comment: One commenter criticized our use of the ESRD composite
rate market basket developed from CY 1997 data to revise the labor
related-portion of composite rate costs subject to wage index
adjustment. The commenter maintained that the use of more recent cost
report data to develop a revised labor-related share would be more
reflective of current economic realities. Another commenter recommended
that we use the hospital market basket, which was developed from fiscal
year 2002 data, instead. The commenter reasoned that the hospital
market basket would be a more appropriate measure, not only because it
reflects more recent data, but also because ESRD facilities compete
with hospitals for labor and use the same vendors for supplies.
Response: Calendar year 1997 was the most recent year for which
relatively complete data were available when the ESRD composite rate
market basket was developed in 2003. Until the ESRD market basket is
rebased to incorporate later data, we believe it is proper to use the
1997-based ESRD composite rate market basket to determine the labor-
related share because it reflects the cost structures of ESRD
facilities serving Medicare beneficiaries. We will continue to evaluate
the available data on ESRD facilities and expect to periodically rebase
the ESRD market basket when appropriate.
We disagree with the commenter's recommendation to use the 2002-
based hospital market basket to determine the labor-related share for
ESRD facilities. We believe the 1997-based ESRD market basket best
reflects the types of medical services and cost structures used by ESRD
facilities. This is consistent with other payment systems that use
individually tailored market baskets to determine their labor-related
share.
Comment: One commenter attempted to replicate the basic composite
payment rate (that is, the payment rate
[[Page 70169]]
prior to application of the drug add on and patient specific case-mix
adjustments) for the Orlando, Florida MSA. The commenter inquired
whether the proposed revised wage index for each urban/rural area is
applied to 40 percent or 100 percent of the wage adjustment reflected
in the current composite payment rates.
Response: The published wage index applicable to each urban/rural
area is neither applied to 40 percent nor 100 percent of the composite
payment rate's current wage adjustment. We currently multiply the
current wage index by one of two different labor-related portions of
the composite payment rates, depending on the type of ESRD facility.
The portion is 40.65 percent for independent facilities and 36.78
percent for hospital-based facilities. However, the composite rate wage
index itself is a blend of two separate wage index values. Of the
current measure, 40 percent, is based on the hospital wage index
calculated from fiscal year 1986 data, and 60 percent is based on the
hospital wage index calculated from 1980 BLS data.
However, in our August 8, 2005 proposed rule, we proposed making
the labor-related portion the same for both hospital-based and
independent ESRD facilities. That proportion (53.711 percent) was
developed from the labor-related components of the ESRD composite rate
market basket. Moreover, the proposed wage index is not a blended
measure. It was developed exclusively from hospital wage and employment
data for fiscal year 2002 obtained from the Medicare hospital cost
reports. We proposed to apply the proposed wage index values to 100
percent of the 53.711 percent labor-related share. The revised labor-
related shares applicable to hospital-based and independent ESRD
facilities were contained in Table 26 of our proposed rule. Using data
contained in Table 26 in our proposed rule, we calculated that the
basic composite payment rate for hospital-based ESRD facilities in the
Orlando MSA would have been $71.12 x 0.9677 + $61.29 or $130.11. For
independent facilities the rate would have been $68.94 x 0.9677 +
$59.41 or $126.12.
c. Adoption of Floor/Ceiling Wage Index Values and Transition Policies
for Implementation of Revised Wage Index
The wage index values in the current composite payment rates
reflect a floor of 0.90 and a cap of 1.30. In the August 8, 2005 rule,
we proposed eliminating the cap because of the effect it has had on
restricting payments in high wage areas. While we stated that we would
like to remove the floor as well, we were concerned that its immediate
elimination could adversely affect beneficiary access to dialysis. To
mitigate any potential adverse impact, we proposed a gradual reduction
in the floor to 0.85 for 2006 and 0.80 in 2007, with a reevaluation of
continued need for the floor in 2008.
We also proposed a 2-year transition for implementation of the new
composite payment rates, but only for those facilities whose CBSA based
payment decreased. Under the proposed transition, facilities would be
paid the higher of the new wage adjusted composite rate, or a 50-50
blend of the current wage adjusted rate and the new wage adjusted rate
(70 FR 45798 through 45799). We received the following comments
regarding the proposed ceiling and floor wage index values and the 2-
year transition period.
Comment: Several commenters representing facilities whose payment
rates would increase as a result of the revised urban/rural definitions
and wage index values, endorsed the immediate introduction of the new
basic composite payment rates. Other commenters either supported the
proposed 2-year transition period, or recommended longer transitions of
varying duration to mitigate further the impact of reduced composite
payments.
Response: Most commenters endorsed our proposal to provide for a
transition period to mitigate the impact of the revised CBSA based
composite payment rates, but believed that a 2-year transition was too
short. The recommended transition periods, generally ranged from 3 to 5
years, with several commenters supporting a transition period of 5
years. We agree that a longer transition period is appropriate to allow
ESRD facilities sufficient time to adjust to the new CBSA based wage
index, and have selected 4 years as a reasonable compromise among the
recommended alternatives. While a 4-year transition is longer than the
transition in other payment systems, we believe it is justified in the
case of ESRD facilities because the wage data currently used for the
wage index is over 20 years old. Thus, facilities need more than the
usual transition. However, we will apply the 4-year transition period
to all ESRD facilities, those whose base composite payment rates
compared to those currently in effect increase as well as decrease.
This represents a change from our proposed policy of applying a
transition period only to those facilities whose composite payment
rates decreased. We believe that a transition period of 4 years applied
to all ESRD facilities achieves a reasonable balance between cushioning
the impact for providers whose CBSA based composite payment rates
decrease, and implementing the CBSA based wage index as quickly as
possible.
Comment: We received several comments on our proposal to reduce
gradually the wage index floor from its current level of 0.90, to 0.85
in 2006 and 0.80 in 2007. The comments included keeping the floor at
0.90, maintaining the floor at 0.90 but simultaneously increasing the
ceiling from its current level of 1.30 to 1.40, and phasing out the
floor as proposed, but also extending the phase out to the wage index
ceiling as well.
Response: We recognize that only immediate elimination of the 0.90
floor could substantially reduce composite payments in locales where
prevailing labor costs are lower. Although ESRD facilities in areas
with wage levels below 0.90 have benefited from the application of the
floor, we are concerned that its sudden elimination could adversely
affect ESRD beneficiary access to care.
In the August 8, 2005 rule, we proposed lifting the wage index cap
of 1.30 entirely in 2006 because it has restricted payments in areas
with high labor costs. Under our proposal ESRD facilities whose base
composite payment rate increased would receive the full payment amount
per treatment without regard to the cap.
We have carefully reconsidered our proposal in light of concerns
over the potential impact of the use of new CBSA-based geographic
designations and wage index values on ESRD facilities that will
experience a decrease in their composite payments. We believe that it
would be more consistent and equitable for all ESRD facilities if we
phased out the wage index floor and eliminated the ceiling.
Accordingly, we are implementing a 4-year transition period that will
apply to all ESRD facilities, those experiencing either an increase or
decrease in their base composite payment rate for 2006. Although the
present wage index ceiling of 1.30 will be eliminated in 2006,
facilities whose payments have been restricted by the ceiling would not
receive 100 percent of their otherwise applicable base composite
payment per treatment without the ceiling until 2009. This occurs as a
result of blending the proportion of old MSA and new CBSA based wage
adjusted composite rates over the 4-year transition period as shown in
Table 20. By applying blended shares during the 4-year transition
period to all ESRD facilities, we believe we can achieve a balance
between our goals of preserving access to care in low
[[Page 70170]]
wage areas and the ultimate elimination of constraints on the wage
index. The wage index floors, caps, and blended shares of the base
composite payment rates applicable to all ESRD facilities for CYs 2006
through 2009 are detailed in Table 20.
Table 20.--Wage Index Transition Blend
----------------------------------------------------------------------------------------------------------------
CY payment Floor Ceiling Old MSA New CBSA
----------------------------------------------------------------------------------------------------------------
2006.............................. 0.85 *............... None................. 75 25
2007.............................. 0.80 *............... None................. 50 50
2008.............................. Reassess............. None................. 25 75
2009.............................. Reassess............. None................. 0 100
----------------------------------------------------------------------------------------------------------------
* Each wage index floor is multiplied by a budget neutrality adjustment factor. For CY 2006 the budget
neutrality adjustment is 1.045287 resulting in an actual wage index floor of .8885.
We plan to reassess the continuing application of the wage index
floor in connection with the 2008 update to the composite payment
rates.
An example of how the base composite payment rates would be blended
during the 4 year transition period to reflect the old MSA and new CBSA
based geographic designating follows.
Assume an ESRD facility whose base composite payment rate (that is,
without regard to any case-mix adjustments) is $135.00 per treatment in
2005. Based on the new CBSA wage index designations, its base composite
payment rate is $145.00 for 2006. This facility's blended rate during
each year of the 4 year transition period would be as follows:
CY 2006--.75 x $135.00 + .25 x $145.00 = $137.50
CY 2007--.50 x $135.00 + .50 x $145.00 = $140.00
CY 2008--.25 x $135.00 + .75 x $145.00 = $142.00
CY 2009--0 x $135.00 + 1.0 x $145.00 = $145.00
Of course, this hypothetical assumes that the calculated rate of
$145.00 for 2006 will not change in 2007 and the following years. In
actuality, it would because of annual revisions to the wage index.
However, the example serves to illustrate how the new CBSA-based
composite payment rates will be phased-in during the 4 year transition
period, regardless of whether an ESRD facility's base composite payment
increases or decreases in 2006 compared to 2005.
Comment: One commenter endorsed our proposed elimination of the
wage index cap, but was concerned that isolated rural ESRD facilities,
whose wage levels are generally lower than those prevailing in urban
locales, could be adversely affected, even with the proposed floor wage
index values. The commenter recommended that these facilities continue
to be permitted to receive the isolated essential facility exception to
their otherwise applicable composite payment rate under Sec. 413.186.
Response: ESRD facilities which have been granted exceptions to
their composite payment rates, including those granted under the
authority of Sec. 413.186, have the option of either retaining their
exceptions, or becoming subject to the case-mix adjusted composite
payments, at any time. Beyond this option, we have no discretion to
grant new exceptions under Sec. 413.186. Section 422(a)(2) of BIPA, as
amended by section 623(b) of the MMA, eliminated the granting of new
exceptions to the composite payment rates except for ESRD facilities
qualifying as pediatric facilities. We believe that the wage index
floors of 0.85 for 2006 and 0.80 for 2007, the extension of the
transition period from 2 to 4 years, and affording facilities the
option of retaining previously granted exceptions, should help cushion
any potential adverse impact to ESRD facilities located in isolated
rural areas.
Comment: Several commenters expressed particular concern over the
relatively large reduction in payment rates for dialysis facilities in
certain rural areas and in certain States. While most of these locales
were unspecified, some commenters used Ohio out as an example, noting
that implementation of the revised wage index would reduce payment
rates in Ohio by more than $14.00 per treatment. The commenters
requested that we provide a State specific impact analysis, delay
implementation of the proposed revised composite payment rates for a 6-
month period, and engage in dialysis community discussions to determine
whether changes to the proposed wage index floor values and
modification of the proposed 2-year transition period, would be
necessary.
Response: We strive to engage in discussions with the dialysis
community concerning ESRD payment policies, such as our open door
forums where the dialysis community can provide input to CMS on ESRD
issues. Moreover, as noted previously, based in part on the comments
received we are implementing revisions to our proposed policies
regarding continuation of the wage index floor and ceiling, and the
duration of the transition period. These changes should lessen the
impact of our adoption of CBSA-based geographic designations and
revised wage index values for ESRD services. We believe that no 6-month
delay in implementing the revised composite payment rates is necessary.
To respond to the commenter's suggestion that we provide a State-
specific impact analysis, we have provided this information in Table
52. We are extending the proposed 2-year transition to a 4-year
transition to allow affected facilities to adjust to the revised wage
indices.
Comment: We received several comments which endorsed a phase in of
the new CBSA based wage index based on a 50/50 split, similar to the
wage index adopted in connection with the FY 2006 SNF PPS.
Response: The FY 2006 SNF PPS, published in the Federal Register on
August 4, 2005 (70 FR 45026), adopted a wage index consisting of a
blend of 50 percent of the FY 2006 MSA-based wage index, and 50 percent
of the FY 2006 CBSA-based wage index, both of which were developed from
FY 2002 hospital wage data (70 FR 45041). This blended wage index is
effective for a 1 year period. As the current ESRD wage index is
obsolete, we see no reason to use it as a part of a blended measure
which would then reflect an outdated wage index as part of a transition
mechanism.
4. ESRD Wage Index Budget Neutrality
Section 623(d) of MMA added section 1881(b)(12)(E)(i) to the Act
which requires that any revisions to the ESRD composite rate payment
system as a result of the MMA provision (including the geographic
adjustment) be made in a budget neutral manner. This means that
aggregate payments to ESRD facilities in CY 2006 should be the same
aggregate payments that would have
[[Page 70171]]
been made if we had not made any changes to the geographic adjusters.
We proposed to apply a budget neutrality adjustment factor directly to
the revised ESRD wage index values, rather than applying the adjustment
to the base composite payment rates. We believe this is the simplest
approach since it allows us to maintain a base composite rate for
hospital-based facilities and one for independent facilities during the
transition from the current wage adjustments to the revised wage
adjustments. The proposed budget neutrality adjustment was 1.023024.
For CY 2006, we will apply the budget neutrality adjustment factor
directly to the revised ESRD wage index values. Since we will be
transitioning to the new wage index over a 4-year period, the
computation of the adjustment factor varies slightly from our proposal.
However, the basic method and concept is still the same as we proposed.
In order to compute the proposed wage index BNF, we used treatment
counts from CY 2004 billing data and facility-specific CY 2005
composite payment rates. For purposes of adjusting the labor-related
portion of the CY 2006 ESRD composite rate, we are using the most
recent hospital wage data applicable to FY 2006 payments as discussed
previously in this section.
Using treatment counts from the 2004 claims and facility-specific
CY 2005 composite payment rates, we computed the estimated dollar
amount each ESRD provider would have received had there been no changes
to the ESRD wage index. This becomes the target amount of expenditures
for all ESRD facilities. Then we computed the estimated dollar amount
that would have been paid to the same ESRD facilities using the revised
ESRD wage index (including the 4-year transition). In the first year of
the transition, ESRD facilities receive 25 percent of the CBSA wage
adjusted composite rate and 75 percent of the current composite rate.
This becomes the first year new amount of expenditures for all ESRD
facilities.
After comparing these two dollar amounts (target amount divided by
first year new amount), we calculate an adjustment factor that, when
multiplied by the ESRD wage index, will result in the target amount of
expenditures for all ESRD facilities. Since the ESRD wage index is only
applied to the labor-related portion of the composite rate payment, we
computed the adjustment based on that proportion (53.711 percent). We
apply the estimated budget neutrality adjustment factor to the revised
wage index values for CY 2006 to ensure that estimated aggregate
payments to ESRD facilities would remain budget neutral. The final wage
index BNF adjustment factor is 1.045287.
Applying this budget neutrality to the wage index floor of 0.8500,
results in a wage index floor for 2006 of 0.8885.
As stated earlier, the data used to compute the BNF are the wage
index values in Table 21 and 22, the 2004 100 percent Outpatient
Standard Analytic File (SAF) Claims, and geographic location
information for each facility which may be found through Dialysis
Facility Compare.
Comment: Several commenters requested that we provide the data and
methodology used to compute the wage index BNF.
Response: The purpose of the wage index BNF is to achieve budget
neutrality as required by section 623(d) of the MMA, which added
section 1881(b)(12)(E)(i) to the Act. That provision of the Act
requires that any revisions to the ESRD composite rate payment system
(including the geographic adjustment) must be made in a budget neutral
manner. This means that aggregate payments to ESRD facilities in CY
2006 should be the same as aggregate payments that would have been made
if we had not made any changes to the geographic adjusters. The
methodology for computing the wage index BNF is described earlier in
this section.
The data used to compute the BNF are the wage index values in
Tables 21 and 22, the 2004 100 percent Outpatient Standard Analytic
File (SAF) Claims, and geographic location information for each
provider which may be found through Dialysis Facility Compare. Dialysis
Facility Compare can be found by going to the following link: http://www.medicare/Download/DOWNLOADDB.asp
.
d. Wage Index Table
The following two tables show the ESRD wage indexes for urban areas
(Table 21) and rural areas (Table 22).
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4. Miscellaneous Comments on ESRD Issues
We propose to make no changes to the existing case-mix adjustment
system. We proposed to maintain the existing system as established in
the CY 2005 final rule (69 FR 66238) and implemented on April 1, 2005.
Comment: One commenter recommended that we stop the implementation
of the basic case-mix adjustment. The commenter was critical of the
case-mix adjustment because this commenter could not calculate the
impact on their payment of one of the case-mix variables, specifically,
weight. This commenter did not want to report weight as a case-mix
variable because of the fluctuations in this variable, that is, weight
changes.
Response: Section 623(d)(1) of the MMA added section 1881(b)(12)(A)
of the Act requiring that the outpatient dialysis services included in
the composite rate be case-mix adjusted. Case-mix variables are
characteristics of the patients served that enable payment systems to
reflect the resources needed by patients. The statute required
adjustments to the composite payment rate for a limited number of
patient characteristics. We implemented the case-mix adjustments
required by the statute in April 2005, using research on case-mix
variables to support our selection of a limited number of case-mix
adjusters. A report on that research, entitled, ``Methodology for
Developing a Basic Case-mix Adjustment for the Medicare ESRD
Prospective Payment System'' is available on http://www.sph.umich.edu/kecc.
The selected case-mix adjusters are age, low body mass index (BMI), and
body surface area (BSA). BSA and low BMI were selected because they are
a better predictor of cost of care than using weight alone. Height and
weight are the case-mix variables that we use to calculate BMI and BSA
adjusters. For this reason, and because we think that facilities should
be easily able to report a case-mix variable that should be part of
each patient's ongoing care plan, we will continue to require reporting
of the patient's weight for purposes of calculating the case-mix
adjusters.
Comment: There were several comments recommending that we explore
the option of adding variables to the existing basic case-mix
adjustments. Commenters recommended including variables that measured
improved survival rates, creating a new code for ESRD patients with
diabetes, and adding measures that reflect improvements in the quality
of life for ESRD patients. Comments indicated that the current case-mix
adjustments do not adequately compensate providers for resources used
or the intensity of care that is required to provide services to the
frail elderly, and patients with ambulatory limitations or selected
comorbid conditions. In addition, commenters recommended that we should
consider a variable that adjusts for time in treatment; specifically
recommending that we consider the potential predictive power of a
variable that exported the interval following the initial 6 months of
ESRD treatments because the intensity of care and resources could
increase.
Response: We indicated in the proposed rule that we anticipated
maintaining the basic case-mix adjustment as established in the CY 2005
final rule (69 FR 66238) and implemented on April 1, 2005. Although we
understand the comments that we explore additional case-mix variables,
we do not currently have the data that would be necessary to analyze
the current case-mix adjustment variables and refine the basic system.
Therefore, we believe that it is premature at this time to add
additional variables to the basic case-mix adjustment system. Several
of the variables recommended, including intensity of care, survival
rates and quality of life improvement, are excellent recommendations as
variables for exploration.
As we stated in the CY 2005 final rule, the basic case-mix system
is adjusts for a limited number of patient characteristics, consistent
with the provisions of section 1881(b)(12)(A) of the Act as added by
section 623 of the MMA. The MMA legislation anticipated that work would
continue toward the development of a more fully bundled case-mix
payment system for ESRD. We are continuing to work towards a more fully
bundled case-mix system through ongoing research and development of a
demonstration project required by the MMA.
We have a contract with the University of Michigan to continue the
research that was initiated in 2001 to explore a number of variables
that could be predictive of resource use in a fully bundled case-mix
adjusted system. This research will include exploring the predictive
potential of variables available from existing data sources, including
assessing the potential impact of comorbid conditions to predict
payments. Several of the suggestions, specifically, survival rates,
assessing improvements in the quality of life for ESRD patients,
developing frailty/ambulatory limitation measures, require the
construction of classification measures of functioning for disability
and health. These are beyond the scope of our existing research
efforts; however, over time, HHS may include efforts to develop
classifications of functioning for disability and health measures, as
well as add quality measurements as part of our payment systems.
In addition, we will be assessing the data submitted under the
existing basic case-mix system. As the analysis of this data
progresses, we will consider potential refinements to the basic case-
mix system.
We are also working on a demonstration project that will assess the
use of a fully case-mix adjusted payment system. Both the demonstration
and the ongoing research will examine the impact of comorbid conditions
on case-mix and payment.
Regarding the comment that we should create a reimbursement code
for ESRD patients with diabetes, we note that we did analyze comorbid
conditions as part of the research for the basic case-mix system. At
that time diabetes was not found to be a significant predictor. In
addition, our staff found that the reporting of comorbid conditions,
including diabetes, was frequently limited. Therefore, as part of our
training effort, we have encouraged facilities to report all comorbid
conditions, and plan to use the reported data in our ongoing research
related to refining the basic case-mix system. Thus, we will continue
to assess the impact of diabetes as a case-mix variable and a predictor
of resource use, but we will not be requesting, at this time, the
creation of a new code for diabetic ESRD patients for payment.
Comment: One commenter expressed concern regarding the reporting of
height and weight for individuals who are double amputees. The comments
indicated because of the case-mix adjustments for these individuals,
the average reimbursement was reduced by an average of $20 per
treatment even though these patients generally require the same or
additional treatment because they could be in a wheel chair or possibly
transported by stretcher.
Response: We concur that there may be issues surrounding the
reporting of the height and weight variables associated with double
amputees. We have explored a number of reporting options for these
patients in an attempt to resolve both clinical and operational issues
related to the reporting of these values. We agree that requiring that
the height for double amputees be measured ``as they present'' may not
accurately measure the necessary dialysis dose, we also believe that
the reported weight for
[[Page 70214]]
these patients would require adjusting if we instructed facilities to
report height ``pre-amputation.''
Based on the available literature related to height and weight
measurements for double amputees, we believe there is sufficient data
from which to appropriately adjust weight if height is reported pre-
amputation. We relied on the methodology in the K-DOQI ``Guidelines for
Peritoneal Dialysis Adequacy.'' Appendix E, Guideline 9 contains
instructions related to adjustments to weight for amputees. Based on
those guidelines, we are adopting the following formula for adjusting
weight using the adjustment factor for below the knee (BKA) double
amputees which is the most common type of double amputation:
Pre-Amputation Weight = Actual Weight x 1.15
Therefore, for dialysis treatments provided on or after January 1,
2006, we will revise our claims processing instructions related to the
reporting of height and weight for double amputee dialysis patients.
Height would be reported ``pre-amputation'' and weight would be
adjusted by 1.15 to reflect the ``pre-amputation'' weight.
Comment: We received a number of comments from ESRD patients
expressing concern regarding the impact that any reductions in payment
could have on their care. One ESRD patient expressed concern that if
there were payment cuts, the facilities could be adversely impacted
resulting in facilities closing.
Response: The intent of the changes in payments to ESRD facilities
was to appropriately pay facilities based on the characteristics of the
patients they treat, as well as the wage levels for the areas in which
they are located. We note that all of the changes in payments as a
result of the MMA legislation were done in a budget neutral manner.
That is, aggregate payments to ESRD facilities remain constant. While
the result of the changes we have made to the wage adjustment will
result in redistributing payments to individual facilities, these
changes more accurately pay facilities based on local wage levels. We
understand the concerns expressed by these patients and have provided
for a transition from the old, outdated wage adjustment to the revised
adjustment to help mitigate any adverse impact to individual
facilities. In addition, we have provided a 1.4 percent increase to the
payment facilities receive for 2006 based on the projected increase in
drug expenditure between 2005 and 2006.
5. Revisions to the Composite Payment Rate Exceptions Process
In response to the changes made by section 422 of BIPA and section
623 of MMA, in the August 8, 2005 proposed rule (70 FR 45840 through
45842), we proposed changes to the existing regulations at Sec.
413.180 through Sec. 413.192 (42 CFR Part 413, Subpart H) regarding
criteria and application procedures for requesting an exception to the
ESRD composite rate payment. We also proposed to revise Sec.
413.170(b) to specify that subpart H provides procedures and criteria
under which only a pediatric ESRD facility as specified in the statute
may receive an exception.
a. Pediatric ESRD Facility Exception
Existing exception rates are protected under section 422(a)(2)(C)
of BIPA. The ``protection'' clause for existing exception rates
provides that exception rates in effect on December 1, 2000 (or
approved based on an application by July 1, 2001) remain in effect as
long as the facility's exception rate is higher than the updated
composite rate. Pediatric ESRD facility exception rates granted under
the provisions of section 623 of the MMA (hereinafter referred to as
``pediatric facility exception rates'') are not subject to the
``protection'' clause for existing exception rates. However, we
proposed to change our regulations to continue pediatric facility
exception rates in the same way as existing nonpediatric exception
rates. Specifically, we proposed that both nonpediatric and pediatric
facility exception rates would remain in effect until the facility
notifies its fiscal intermediary that it wishes to give up its rate
because its case-mix adjusted composite rate is higher. As section
422(a)(2)(B) of BIPA allows existing nonpediatric exception rates to
continue in effect as long as the exception rate exceeds the facility's
updated composite payment rate, we expected that each facility would
compare its existing exception rates to its basic case-mix adjusted
composite rates to determine which is the higher rate. We believe the
determination as to whether an ESRD facility's exception rate per
treatment will exceed its average case-mix adjusted composite rate per
treatment is best left to the affected entity.
In the past, an ESRD facility could request an exception to its
prospective composite payment rate within 180 days of the effective
date of its new composite rate (s) or the date on which we opened a
specific exception window. We proposed to revise Sec. 413.180(d) to
remove the requirement that an application for an exception must be
filed within the 180-day window because we believe that the small
volume of applications will make it feasible for us to accept
applications on a rolling basis. Therefore, we proposed to revise Sec.
413.180(d) to state that a pediatric ESRD facility may request an
exception to its composite payment rate at any time after it has been
in operation for at least 12 consecutive months. For a full discussion
of our proposal, see the August 8, 2005 proposed rule (70 FR 45840
through 45842). We received the following comments on these issues:
Comment: Several commenters asked for clarification that CMS will
continue to recognize the exceptions status of non pediatric ESRD
facilities. The commenters stated that the proposed rule presents
conflicting statements about the continuing validity of these
exceptions.
Response: We agree, and we are revising proposed Sec. 413.180(i)
to include the statement that ``ESRD facilities electing to retain
their nonpediatric or pediatric exception rates (including self-
dialysis training) do not need to notify their intermediaries.'' An
ESRD facility may notify its fiscal intermediary at any time if it
wishes to give up its nonpediatric or pediatric exception rate. Thirty
days after written notice is received by the intermediary, the facility
will become subject to the new basic case-mix adjusted composite
payment rate methodology. A facility's decision to give up its
exception rate can not be subsequently rescinded or reversed.
Comment: One commenter is concerned that the composite rate as
modified by the MMA will be maintained for patients under age 18 in
many facilities that do not qualify for a pediatric exception because
the pediatric population is below 50 percent of all patients dialyzed.
Patients under age 18 require additional resources. The commenter
recommends that a facility should qualify for a pediatric exception if
25 percent of its patients are under 21 years of age.
Response: Section 623 of the MMA amended BIPA to allow a pediatric
ESRD facility that did not have an approved exception rate as of
October 1, 2002, to file for an exception to its updated prospective
payment rate. To apply for the exception rate, the MMA requires that
the pediatric facility has to demonstrate that at least 50 percent of
its patients are individuals under 18 years of age.
We believe the statute is very specific regarding the criteria a
pediatric ESRD facility must satisfy in order to apply for
[[Continued on page 70215]]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]
[[pp. 70215-70264]] Medicare Program; Revisions to Payment Policies Under the
Physician Fee Schedule for Calendar Year 2006 and Certain Provisions
Related to the Competitive Acquisition Program of Outpatient Drugs and
Biologicals Under Part B
[[Continued from page 70214]]
[[Page 70215]]
an exception rate. We have incorporated these statutory provisions in
our proposed regulatory changes to Sec. 413.170, Sec. 413.182, and
Sec. 413.184. However, we note, that regardless of whether the
pediatric exception is available to a facility, pediatric ESRD patients
(defined as those under the age of 18) receive a specific case-mix
adjustment factor when the composite payment rate is determined. None
of the other case-mix adjustors that apply to nonpediatric patients
(that is, the five age groups, low BMI, and BSA) is applicable to
pediatric ESRD patients.
Comment: We received two comments supporting the proposed change to
allow pediatric ESRD facilities to file an exception at anytime after
it is in operation for at least 12 consecutive months.
Response: Previously, a pediatric ESRD facility that has been
denied its exception would have to wait until a subsequent exception
request. We have revised Sec. 413.180(d) to provide that a pediatric
ESRD facility that has been denied an exception may immediately file
another exception request. However, a subsequent exception request must
address the deficiencies cited in our determination letter.
b. Pediatric Facility Exception Request Process
Section 422 of BIPA prohibited CMS from providing exceptions to
ESRD facilities on or after December 31, 2000. Section 623 of the MMA
amended BIPA by restoring the exception process, but only for pediatric
facilities that that did not have an approved exception rate as of
October 1, 2002. To file for an exception, the pediatric facility would
have to demonstrate that at least 50 percent of its patients are
individuals under 18 years of age. Since the MMA restored the exception
process only for pediatric facilities, we proposed to remove existing
exception criteria that are not applicable to the newly defined
pediatric facilities, including exceptions for isolated essential
facilities, extraordinary circumstances, and frequency of dialysis as
specified in regulations at Sec. 413.182(b), (c), and (e). However, we
proposed to retain the exception criterion for self-dialysis training
costs under Sec. 413.182(d) because some pediatric facilities may
qualify for an exception on that basis. For a full discussion of our
proposal, see the August 8, 2005 proposed rule (70 FR 45841). The
comments received on these issues and our response to those comments
are as follows:
Comment: Several commenters asked that we retain the exceptions
process for all five previous exception criteria in order to preserve
access to care for dialysis patients and to foster evolution in the
patterns of dialysis care. Commenters pointed out that the recent
experience with Hurricane Katrina underscores the need for an exception
process to provide for continuity of dialysis care during extraordinary
circumstances. Commenters included a recommendation that self-dialysis
and more frequent dialysis should be preserved as exception options,
noting that patients with congestive heart failure may require four
dialysis treatments per week, and this is a growing segment of the ESRD
population. Finally, the commenters stated that the exception for
isolated essential facilities should be retained because of the
potential impact on access to care resulting from the proposed changes
in the composite payment rate wage index and reimbursement for ESRD
drugs.
Response: We have determined that pediatric facilities would not
qualify for an exception under most of the existing exception criteria
because of the uniqueness of their patient population (at least 50
percent under age 18). In the past, ESRD facilities with high
percentages of pediatric patients only qualified for exceptions under
the ``atypical patient mix'' criterion specified at Sec. 413.182(a)
and Sec. 413.184. We have, therefore, proposed to replace the
``atypical patient mix'' criteria with a more specific ``pediatric
patient mix'' criteria and to retain this exception at proposed
Sec. Sec. 413.182 and 413.184. We proposed to eliminate the exception
criteria that we believe do not apply to facilities with large numbers
of pediatric patients (that is, exceptions on the basis of isolated
essential facilities, extraordinary circumstances, and frequency of
dialysis). Based on our experience in granting ESRD exceptions, we do
not believe that a situation exists where any newly defined pediatric
facility with the required volume of pediatric patients would qualify
for an exception under the isolated essential facilities criterion.
Further, we note that previous exception requests for ``frequency of
dialysis'' were granted to ESRD facilities that dialyzed their patients
less frequently than 3 times a week and not more frequently as
suggested by the commenter. However, we proposed to retain the
exception criterion for self-dialysis training costs under Sec.
413.182(d) because we have found that some pediatric facilities may
qualify for an exception on that basis.
With respect to Hurricane Katrina, we have taken into consideration
that, in this type of emergency (an extraordinary circumstance),
alternatives exist to ensure that ESRD patients will have continuing
access to services in other ESRD facilities. Any ESRD facility that has
adequate treatment capacity, and is located close to a displaced
patient's home, would be glad to offer its dialysis services. However,
if there are no remaining ESRD facilities nearby to voluntarily accept
displaced patients, dialysis service will be made available to these
patients that have been temporarily relocated to a local shelter or to
another town. Displaced patients relocated to another town that are
healthy enough to drive or to be driven to a dialysis facility, will
receive dialysis services there. Displaced patients in temporary
shelters will receive dialysis from providers or suppliers that will
send the necessary equipment, personnel, and supplies to the shelter.
We are finalizing the changes to Sec. 413.180 through Sec.
413.192 as proposed. However, we have added language to Sec. 413.180
regarding the intermediary notification discussed above. In addition,
we are adding a technical clarification to proposed Sec. 413.170 to
cross-reference Sec. 413.184 which specifies pediatric patient-mix
requirements that pediatric ESRD facilities must meet to qualify for an
exception.
H. Payment for Covered Outpatient Drugs and Biologicals
Medicare Part B covers a limited number of prescription drugs and
biologicals. For the purposes of this rule, the term ``drugs'' will
hereafter refer to both drugs and biologicals. Medicare Part B covered
drugs not paid on a cost or prospective payment basis generally fall
into three categories:
Drugs furnished incident to a physician's service.
DME drugs.
Drugs specifically covered by statute (immunosuppressive
drugs, for example).
Beginning in CY 2005, the vast majority of Medicare Part B drugs
not paid on a cost or prospective payment basis are paid under the ASP
methodology. The ASP methodology is based on data submitted to us
quarterly by manufacturers. In addition to the payment for the drug,
Medicare currently pays a dispensing fee for inhalation drugs, a
furnishing fee for blood clotting factors, and a supplying fee for
certain Part B drugs.
In this section of the preamble we discuss the August 8, 2005 (70
FR 45843) proposed changes and issues related to the determination of
the payment amounts for covered Part B drugs and the separate payments
[[Page 70216]]
allowable for dispensing inhalation drugs, furnishing blood clotting
factor, and supplying certain other Part B drugs. We also discussed
proposed changes in how manufacturers calculate the ASP and in the ASP
data reported to us.
1. ASP Issues
Section 303(c) of the MMA amended Title XVIII of the Act by adding
new section 1847A. This new section establishes the use of the ASP
methodology for payment for most drugs and biologicals not paid on a
cost or prospective payment basis furnished on or after January 1,
2005. The ASP reporting requirements are set forth in section 1927(b)
of the Act. Manufacturers must submit ASP data to us quarterly. The
manufacturers' submissions are due to us not later than 30 days after
the last day of each calendar quarter. The methodology for developing
Medicare drug payment allowances based on the manufacturers' submitted
ASP data is specified in the regulations in part 414, subpart K. Based
on the data we receive, we update the Part B drug payment amounts
quarterly.
In this section of the preamble, we discuss: Our proposed changes
related to the methodology manufacturers use to calculate the ASP and
apply the estimate of lagged price concessions in the ASP calculation;
the reporting of ASP data; the weighting methodology we follow to
establish the Medicare payment amounts using the ASP data; the comments
received and our responses; and our final policy with respect to these
issues.
a. Estimation Methodology for Lagged Price Concessions
Section 1847A(c)(5)(A) of the Act states that the ASP is to be
calculated by the manufacturer on a quarterly basis. As a part of that
calculation, manufacturers are to take into account price concessions
such as--
Volume discounts.
Prompt pay discounts.
Cash discounts.
Free goods that are contingent on any purchase
requirement.
Chargebacks.
Rebates (other than rebates under the Medicaid drug rebate
program).
If the data on these price concessions are lagged, then the
manufacturer is required to estimate costs attributable to these price
concessions. Specifically, the manufacturer sums the price concessions
for the most recent 12-month period available associated with all sales
subject to the ASP reporting requirements. The manufacturer then
calculates a percentage using this summed amount as the numerator and
the corresponding total sales data as the denominator. This results in
a 12-month rolling average price concession percentage that is applied
to the total in dollars for the sales subject to the ASP reporting
requirement for the quarter being submitted to determine the price
concession estimate for the quarter. The methodology is specified in
Sec. 414.804(a)(3).
We identified a refinement of the ASP calculation and lagged price
concession estimation methodology related to chargebacks that we
believe improves the accuracy of the estimate. As a result, we proposed
to clarify the ASP calculation in the August 8, 2005 proposed rule (70
FR 5843).
b. Price Concessions: Wholesaler Chargebacks
Wholesaler chargebacks are a type of price concession, generally
paid on a lagged basis, that apply to sales to customers (for example,
physicians) via a wholesaler (or distributor). Wholesaler chargeback
arrangements may vary in scope and complexity. Under the current
estimation methodology for lagged price concessions, total lagged price
concessions, including lagged wholesaler chargebacks, for the 12-month
period are divided by total sales for that same period to determine a
ratio that is applied to the total sales for the reporting period. The
ratio of lagged price concessions to sales is calculated over all
sales, both indirect sales (sales to wholesalers and distributors and
other similar entities that sells to others in the distribution chain)
and direct sales (sales directly from manufacturer to providers, such
as hospitals or HMOs). To the extent that the relationship between
total dollars for indirect sales and total dollars for all sales is
different for the reporting quarter and the 12-month period used, the
current ratio methodology for estimating lagged price concessions may
overstate or understate wholesaler chargebacks expected for the
reporting period. A more accurate estimation of lagged price
concessions would minimize the effect of quarter to quarter variations
in the relationship between indirect sales and all sales. As a result,
we proposed to revise Sec. 414.804 to require manufacturers to
calculate the ASP for direct sales independently from the ASP for all
other sales subject to the ASP reporting requirement (indirect sales).
Then, the manufacturer would calculate a weighted average of the direct
sales ASP and the indirect sales ASP to submit to us.
We believed that the weighted average of direct sales ASP and
indirect sales ASP would improve the overall accuracy of the ASP
calculation, particularly for NDCs with significant fluctuations in the
percentage of sales that are direct sales.
We proposed conforming changes to Sec. 414.804 for the methodology
for calculating the lagged price concessions percentage. We also
proposed to revise the regulation to clarify that the estimation ratio
methodology relates to lagged price concessions and also define
``direct sales'' and ``indirect sales'' in Sec. 414.802. In addition,
we requested comments about the advisability and potential effects of
requiring manufacturers to calculate the ASP for direct sales,
including price concessions, independently from the ASP for indirect
sales and then calculating a weighted average of these ASPs to submit
to us, as well as the proposed definitions of direct sales and indirect
sales.
Comment: We received many comments on our proposed refinement to
the ASP calculation. Nearly all of these commenters opposed this
proposal and many asked for clarification of the proposed terminology.
All but one of the comments received from drug manufacturers stated
that the proposed change to the ASP calculation would require
significant modifications to manufacturers' accounting and reporting
data systems while resulting in minimal change or benefit to the ASP-
based payment. Many commenters stated that the proposed modification to
the ASP calculation would not result in more accurate payments.
Further, comments from groups representing drug and biological
manufacturers stated that they do not believe the proposed methodology
will have a material impact on the overall ASP or the accuracy of the
calculation. Many of the commenters opposing the proposal stated that
the expense and burden of implementing the proposed change to the ASP
calculation would be unjustified because direct and indirect sales and
price concessions for a given product are stable over time,
particularly for generic products, and further breakdown of the
calculation would not have a significant impact on the ASP calculation.
Many commenters also noted that implementing the proposed weighted
average approach would increase both the complexity of the ASP
calculation and the potential for calculation error.
We received comments from manufacturers of oncology, inhalation,
contrast media, and other drugs and biologicals that included estimates
of the potential impacts of the proposed
[[Page 70217]]
modification to the ASP calculation for a limited number of NDCs chosen
as examples. These estimates ranged from a slight decrease (less than
one half of a percent) to a 4.3 percent increase in the overall ASP for
the NDC. One manufacturer estimated that sales would have to vary 20
percent from the 12-month lag period to change the ASP by more than 1
percent. Notwithstanding the potential change in the overall ASP, all
but one manufacturer, which reports ASP for a single product,
recommended that we not adopt the proposed change. However, some of
these commenters suggested that the weighted average approach be
voluntary or applicable only in cases where significant fluctuations
exist in the proportion of sales that are direct and indirect and there
is a compelling need to apply the proposed methodology. Other
commenters from the manufacturing community were concerned about
consistency across manufacturers and recommended that we not leave it
up to each manufacturer to choose whether to use the proposed
methodology or not. One commenter suggested that the proposed
methodology be mandatory for a manufacturer that has at least one NDC
with direct sales of 33 percent or more of gross sales for the prior
year. The manufacturer would then be required to calculate the ASP for
all of its NDCs using the proposed methodology.
Several commenters expressed concern that the proposed definitions
of direct and indirect sales were unclear and required further
clarification to ensure consistent application across manufacturers.
Several commenters noted that our use of the term supplier was
confusing; that it was unclear whether GPO sales would be considered
direct or indirect; and it was unclear how utilization rebates to PBMs
should be categorized. Several commenters noted that certain purchasers
(for example, specialty pharmacies) may purchase both directly and
indirectly during a given reporting period. Similarly, we received a
comment from a drug manufacturer requesting greater clarification on
how to allocate price concessions across direct and indirect sales when
a customer purchases under both of these channels. Several
manufacturers noted that their current data systems were not capable of
capturing data at the level of detail necessary to accurately segregate
sales into the direct and indirect categories. Other commenters noted
that, in general, manufacturers do not track price concessions
associated with direct or indirect sales. As a result, several
commenters recommended that, if the proposed methodology is adopted, we
implement the change prospectively to allow for a phase-in period and
to delay implementation until April 2006 or later to provide time for
systems changes to be implemented and tested.
We received a few comments from drug manufacturers expressing their
belief that other market issues cause fluctuation in the ASP, and that
it would be more beneficial to receive guidance on how to resolve these
issues.
A few commenters were concerned with the time frame for
implementation of the proposed modification of the ASP calculation.
These commenters recommended that we consider delaying implementation
until after a trial period or at least until April 2006.
We also received comments from providers who have experienced
difficulty acquiring drugs at or below the payment amount. These
commenters, as well as comments from physician organizations, support
changes to the ASP calculation insofar as they will result in more
appropriate reimbursements for Part B drugs.
Response: Our goal is to ensure continued beneficiary access to
care through implementation of accurate and sufficient payment systems.
To this end, we proposed to refine the ASP calculation because the
weighted average of direct sales ASP and indirect sales ASP could
potentially improve the overall accuracy of the ASP calculation. We
greatly appreciate the efforts undertaken by commenters to examine the
potential impacts of the proposed method on the overall ASP
calculation. Based on the comments received, we find compelling the
commenters' concerns about the challenges and increased burden
associated with calculating the ASP independently for direct and
indirect sales and then calculating the weighted average ASP. Although
we continue to have interest in the potential impacts of quarter to
quarter variations in estimates of price concessions, we will not adopt
the proposed change at this time.
In reaching our decision, we noted that all of the drug
manufacturers that submitted comments reported that the impact of the
proposed refinement of the ASP calculation would be minimal or not
material. We note that these commenters are in a position to assess the
impacts of the proposed methodology on their customers and to weigh the
potential benefits and burdens inherent with the proposed change. In
all but one case (a manufacturer which reports ASP for only one
product), they did not support the proposal because they believe the
burden would outweigh the benefit.
Among the comments received that specified potential percentage
changes in the overall ASP, a range of potential impacts was reported.
One of the examples submitted suggested that the impact could extend to
upwards of a 4 percent increase in the ASP for an NDC, while another
example showed a slight decrease. We cannot determine whether the
reported examples are representative of other or all NDCs subject to
the ASP reporting requirements.
We also noted the concerns expressed by manufacturers regarding the
significant additional burdens associated with the proposed
methodology, the potential for inconsistent application of the proposed
methodology across manufacturers, and the potential effects of the
proposed methodology on manufacturers' systems. In addition, we
carefully considered the comments from the physician community in
support of refinements to the ASP calculation that would increase
payments.
Although we are not implementing the proposed refinement to the ASP
calculation at this time, we will continue to work with manufacturer to
better understand the instances in which the proposed methodology may
benefit the program and the potential for appropriate use of that
methodology for certain or all NDCs, and whether such an approach would
be sustainable.
We did not receive any comments on our proposal to revise the
regulations at Sec. 414.804 to clarify that the estimation ratio
methodology published on September 16, 2004 (69 FR 55763), relates to
lagged price concessions; therefore, we will implement the revised
regulatory language as proposed.
c. Determining the Payment Amount Based on ASP Data
As explained in the August 8, 2005 proposed rule (70 FR 45844) in
response to inquiries we have received related to the formula we use to
calculate the payment amount for each billing code we posted
information on our web site (http://www.questions.cms.hhs.gov) earlier
this year. We included this information (which follows) in the proposed
rule to ensure greater public access to this information.
For each billing code, we calculate a weighted ASP using
the ASP data submitted by manufacturers.
Manufacturers submit ASP data at the 11-digit NDC level.
Manufacturers submit the number of units of the 11-digit
NDC sold and the ASP for those units.
[[Page 70218]]
We convert the manufacturers' ASP for each NDC into the
ASP per billing unit by dividing the manufacturer's ASP for that NDC by
the number of billing units in that NDC. For example, a manufacturer
sells a box of 4 vials of a drug. Each vial contains 20 milligrams
(mg). The billing code is per 10 mg. The conversion formula is:
manufacturer's ASP/[(4 vials x 20 mg)/10 mg = 8 billable units per
NDC].
Then, the ASP per billing unit and the number of units
(11-digit NDCs) sold for each NDC assigned to the Billing Code are used
to calculate a weighted ASP for the billing code. We sum the ASP per
billing unit times the number of 11-digit NDCs sold for each NDC
assigned to the billing code, and then divide by the total number of
NDCs sold. The ASP per billing unit for each NDC is weighted equally
regardless of package size.
Comment: Several manufacturers and other commenters representing
the manufacturing community recommended that the formula be revised so
that the payment limit is calculated based on the weighted ASP of the
number of billing units sold rather than the number of NDCs sold. These
commenters noted that products are available in different package sizes
and that a billing code may encompass multiple NDCs. As a result, these
commenters contend that weighting the ASP payment amount by NDCs sold
does not reflect the true weighted average price per billing unit.
Several commenters, including manufacturers and their trade
associations, noted that altering the formula to weight by the number
of billing units sold may increase or decrease the overall ASP.
Nonetheless, these commenters recommend adoption of their recommended
alternative formula. One commenter suggested that the alternative
formula be adopted along with an exception process that would be
applicable to billing codes that represent therapies of differing
weights or dosage. We also received comments from manufacturers that
supported continued use of the current formula.
Response: In establishing the formula used to calculate the payment
amounts based on the manufacturers' ASP data, we considered various
approaches, including the alternative approach recommended by some
commenters. For the initial implementation of the ASP methodology, we
operationalized the calculation of ASP by weighting the formula by the
number of NDCs sold. As we gain more experience with the ASP data and
other sources of information become available about the purchasing
patterns of providers and their acquisition costs, we may consider
altering the methodology or establishing exceptions, if we find good
reason to do so. If we decided such a change is warranted, we would
implement the change at the next quarterly update.
Comment: Although not directly related to the formula used to
calculate the ASP payment amounts, we received several comments from
oncology physician practices and other commenters related to the
adequacy of the ASP+6 percent payment methodology and other topics. We
received several comments from oncology and other providers contending
that the Medicare payment amount does not always cover their
acquisition costs for certain drugs. A mid-sized oncology practice
reported that it is unable to obtain nearly half of the drugs it
administers at a price below the Medicare reimbursement rate. This
commenter believes that larger practices may not face drug acquisition
costs that exceed ASP+6 percent. One oncology practice reported that
the ASP+6 percent payment would cover its drug costs if beneficiaries
could always afford their cost sharing amounts. A large oncology
practice stated that its average Medicare reimbursement, which is 2
percent more than its acquisition costs, was insufficient and would
cause it to discontinue treatment for beneficiaries.
On the topic of price concessions, several commenters, including a
drug manufacturer, suggested that prompt pay and other discounts given
to wholesalers and distributors should not be included in the
calculation of the manufacturers' ASP so that the payment amounts would
be increased.
Response: It is true for all payment systems based on averages that
the payment amount may not equal a specific provider's cost for every
service. Section 1847A of the Act specifies that the Medicare payment
is at 106 percent of ASP for the majority of Part B drugs and
biologicals not paid on a cost or prospective payment basis. The
statute requires use of the ASP+6 percent payment methodology except in
limited instances. Although several commenters (most of which represent
oncology practices) reported that the ASP+6 percent methodology was
insufficient to cover their drug acquisition costs for certain drugs,
these commenters also acknowledged that the Medicare payment exceeds
their drug acquisition costs for other drugs. This is consistent with
the findings of recent studies by the General Accountability Office
(GAO) (GAO-05-142R), Office of Inspector General (OIG) (``Adequacy of
Medicare Part B Drug Reimbursement to Physician Practices for the
Treatment of Cancer Patients'', (A-06-05-00024), and MedPAC (October 6,
2005, public meeting report on oncology site visits). These studies
have found that physicians generally can obtain oncology drugs for
prices below Medicare reimbursement.
We did not propose a change to the price concessions manufacturers
must include in the ASP calculation. Section 1847A(c)(3) of the Act
specifically identifies prompt pay discounts as a type of price
concession that must be included in the manufacturer's calculation of
the ASP.
Comment: We received comments from a few drug manufacturers
requesting clarification and more detailed guidance on the treatment of
administrative fees, service fees, and data fees in the ASP
calculation.
Response: These issues are beyond the scope of this rule. We will
continue to work with manufacturers to more fully understand these
issues. We expect to publish a final rule on the ASP reporting
requirements and will consider these comments in the course of
preparing that rule.
Comment: We received comments from oncology practices, ESRD
facilities and retail pharmacies, as well as IVIG manufacturers and
stakeholders, indicating that manufacturer price increases are not
reflected timely in the ASP+6 percent payment amounts due to the
necessary lag time for calculating the rates and updating the payment
systems. One commenter suggested that we implement a ``true up''
mechanism that immediately reconciles the historic reimbursement rate
to reflect manufacturer price increases. Several IVIG stakeholders
suggested that we issue payment rates on a retroactive basis.
Response: Section 1847A(c)(5)(B) specifies a prospective update in
the payment amounts. We agree with the commenters' observations that
there is a necessary time frame after the close of a calendar quarter
for manufacturers to calculate and submit the ASP data to CMS, for CMS
to prepare and issue the payment rates, and for the claims processing
contractors to implement the updated payment files. As we stated in the
CY 2005 final rule (69 FR 66300), we implement these new prices through
program instructions or otherwise at the first opportunity after we
receive the data, which is the calendar quarter after receipt.
Comment: Several commenters, including patient and industry
representatives and physicians as well as manufacturers, requested that
we take steps to improve the availability of IVIG. Many of these
commenters noted their
[[Page 70219]]
ongoing collaboration with the Congress, HHS, CMS and others to better
understand the market forces and dynamics influencing the current IVIG
situation. These commenters reported that numerous patients and
physician practices have been adversely impacted by the change in
reimbursement to the ASP+6 percent methodology. These impacts include
postponed infusions, increasing intervals between infusions, having to
receive treatment in the hospital setting rather than in the physician
office, possible unintended reactions as a result of switching brands
of IVIG, and increased level of effort to obtain product and schedule
services. Several commenters restated suggestions previously
communicated to us, including concerns about our proposed changes for
IVIG reimbursement in the outpatient setting. Comments from an industry
group referenced its new study that it is conducting to help clarify
the marketplace and provide insight into the costs for providing IVIG
services. The study will examine IVIG acquisition costs and related
services. Citing the adverse effects of patients migrating from
physician offices to hospitals for treatment, several commenters
requested that we consider an interim add-on payment for the complex
activities related to furnishing IVIG until the industry study is
completed. These commenters noted that the add-on payment would ensure
that providers are paid sufficiently for IVIG under Part B so that
their provision of IVIG remains viable and beneficiaries' access to
IVIG is not reduced.
Response: We will continue to work with the IVIG community,
manufacturers, the Congress, and other entities to seek better
understanding of the supply and market issues influencing the current
IVIG market. We look forward to learning of the industry's study
findings as that work progresses. We have discussed the accuracy of the
ASP data with the manufacturers and have been assured by these
manufacturers that their ASPs have been developed in accordance with
applicable guidance and that the resulting price reflects the current
IVIG market in aggregate. At the same time, the IVIG manufacturers'
association, the Plasma Protein Therapeutics Association, reports that
the overall supply of IVIG is adequate and has improved in the past
several months. However, based on the comments received and our ongoing
work with manufacturers, patient groups, and other stakeholders, we
continue to be concerned about reports of patients experiencing
difficulties in accessing timely IVIG treatments and reports of
providers experiencing difficulties in obtaining adequate amounts of
IVIG products on a consistent basis to meet their patients' needs in
the current marketplace. Most brands of IVIG have been put on
allocation by manufacturers and some manufacturers have reported
allocating products to a smaller number of distributors and reducing
the size of inventories. In addition, there have been reports of
diversion of products to the secondary market and secondary
distributors raising prices markedly. The Secretary's Advisory
Committee on Blood Safety and Availability has recommended immediate
steps be taken to ensure access to IVIG so that patients' needs are
being met. However, the complexity of the IVIG marketplace makes it
unclear what particular systematic approaches would be most effective
in addressing the many individual circumstances that have been shared
with us while not exacerbating what appears to be a temporary
disruption in the marketplace.
IVIG is a complicated biological product that is purified from
human plasma obtained from human plasma donors. Its purification is a
complex process that occurs along a very long timeline, and only a
small number of manufacturers provide commercially available products.
Historically, numerous factors, including decreased manufacturing
capacity, increased usage, more sophisticated processing steps, and low
demand for byproducts from IVIG fractionation have affected the supply
of IVIG. For CY 2006, there are 2 HCPCS codes that describe all IVIG
products, based on their lyophilized versus liquid preparation.
The recent patterns of utilization of IVIG also are unusual in
comparison with most other drugs and biologicals. Different IVIG
products are FDA-approved in a number of therapeutic areas for various
specific conditions which include: anti-infective therapy (bone marrow
transplant); immune globulin replacement therapy (primary immune
deficiencies and chronic lymphocytic leukemia); anti-inflammatory
therapy (Kawasaki disease); and immunomodulation therapy (idiopathic
thrombocytopenic purpura). IVIG therapy, which has been available for
about 25 years, was initially reserved for the treatment of these FDA-
approved indications. More recently, IVIG has been increasingly used
off-label so that off-label uses now significantly exceed on-label
uses. Many of these off-label uses are for autoimmune, neurological, or
systemic inflammatory conditions. Some off-label uses of IVIG are
supported by a robust evidence base, while for other medical conditions
the evidence has not demonstrated that IVIG infusions are of
significant therapeutic benefit. There are also new emerging
indications for IVIG treatment, including those based on
recommendations from various professional associations and advisory
groups. In addition, despite the growing uses of IVIG there are
definite risks associated with IVIG treatment, including both early
inflammatory reactions and more rare but serious renal and
thromboembolic complications, as well as the inherent risk associated
with receipt of any biological product even with the ongoing
improvements in the safety of these types of products.
Medicare currently has one national coverage determination in place
since CY 2002 regarding IVIG infusions to treat autoimmune blistering
diseases, and there are numerous local coverage policies that describe
Medicare coverage for specific off-label indications. In the context of
these national and local coverage policies, IVIG use in hospital
outpatient departments has climbed steeply over the most recent years
for which data are available, from about 40,000 infusion days in CY
2002, to 60,000 days in CY 2003, and again to over 70,000 days in CY
2004. The infusion of IVIG in physician offices increased from about
2.3 million grams in CY 2003 to 4.0 million grams in CY 2004. In the
face of growing demand for IVIG in the absence of significant changes
in the prevalence of medical conditions for which there is high quality
evidence regarding the effectiveness of IVIG therapy, we are concerned
that all patients with medical need for IVIG continue to have access to
this expensive and valuable therapy. Over the upcoming year, we will be
using our historical claims databases to study the epidemiology of IVIG
treatment of Medicare beneficiaries in outpatient settings. We expect
that the health system as a whole should encourage an accountable and
scientifically-grounded use of IVIG, and we welcome discussions with
industry, providers, and other interested entities regarding efforts to
ensure that IVIG is responsibly utilized for evidence-based clinical
indications so that optimal benefit is obtained.
Commenters have indicated to us that the infusion of IVIG in
physician offices is more complex and resource intensive, particularly
during the actual infusion, than many other types of infusions
currently reported using the same drug administration CPT codes. They
have described the specific resources
[[Page 70220]]
required for initiating and monitoring infusions of IVIG for patients
under various clinical circumstances. We encourage commenters to
discuss their concerns with the CPT Editorial Panel to assess whether
alternative coding or additional CPT guidance would be appropriate. In
addition, they may wish to discuss their resource concerns with the
AMA/Specialty Society RVS Update Committee that provides advice
regarding the resources associated with physician services.
Based on the potential access concerns, the growing demand for
IVIG, and the unique features of IVIG detailed above, as we seek to
gain improved understanding of the contemporary volatile IVIG
marketplace, we will employ a two-pronged approach during CY 2006 to
help ensure the availability of IVIG to physicians and hospital
outpatient departments who care for Medicare beneficiaries and will be
paid ASP+6 percent for the IVIG products.
First, in addition to the ongoing monitoring and outreach
activities within the HHS, the Office of the Inspector General (OIG) is
studying the availability and pricing of IVIG as part of its monitoring
of market prices pursuant to section 1847A(d)(2)(A) of the Act. We
expect the OIG's work to provide a significant contribution to the
analysis of the current situation with respect to the specific
activities of manufacturers and distributors that may be contributing
to possible access problems for IVIG as we move to the ASP methodology
in both physician office and hospital outpatient settings. We hope to
understand those particular market behaviors that may have led to such
public alarm about the availability of IVIG and the adequacy of our
payment rate of ASP+6 percent, concerns that have been particularly
strong and persistent for IVIG in comparison with other drugs paid
under the same ASP methodology.
Second, we will provide additional payment in CY 2006. Presently
the IVIG marketplace is a dynamic one, where a significant portion of
IVIG products previously available in CY 2005 are being discontinued
and other products are expected to enter the market over the next year.
In light of this temporary market instability, we understand that
manufacturers have continued allocation procedures aimed at stabilizing
the supply of IVIG. Even so, we understand that providers may face
purchasing whichever brand of IVIG is available, even if it is not a
brand the patient is known to tolerate. Many patients treated with IVIG
receive regular infusions on a predictable schedule. To meet this need,
physicians' office staff must conduct significant preadministration
services prior to IVIG infusions to monitor and manage their inventory,
locate available IVIG products, reschedule infusions according to
product availability and patients' needs, and implement physicians'
determinations regarding whether the available formulations are
appropriate for patients and whether specific dosing adjustments are
required. Product-specific factors must be evaluated in light of
patients' clinical indications for the IVIG infusions, their underlying
medical conditions, and their past reactions to various IVIG products,
and office staff must locate appropriate doses of IVIG products in
light of these considerations. If the appropriate IVIG product
formulations were more widely and reliably available, we do not believe
that routine IVIG infusions would require these extensive
preadministration-related services prior to each infusion.
To continue to ensure appropriate patient access to IVIG in CY 2006
during this short-term period of market instability for IVIG, beginning
for dates of service on or after January 1, 2006 through December 31,
2006, we will temporarily allow a separate payment to physicians to
reflect the substantial additional resources that are associated with
locating and acquiring adequate IVIG product and preparing for an
office infusion of IVIG in the current environment. We expect that
making separate payment for these additional necessary services will
help insure that physicians are able to continue to provide IVIG
infusions to their patients who depend upon them. We will also provide
an additional payment to hospital outpatient departments for these
special services, to ensure that patients continue to have access to
IVIG infusions in the most medically appropriate settings, without
undesirable shifts in sites of service for their care.
Because the resources associated with the preadministration-related
services for intravenous infusion of immunoglobulin are not accounted
for in the physician office practice expense associated with the CY
2006 drug administration codes that will be billed for IVIG infusions,
we are creating a temporary G-code to describe these additional
preadministration services related to the intravenous infusion of
immunoglobulin. We have established the following G-code for physician
office billing for CY 2006:
G0332; Preadministration-related services for intravenous infusion
of immunoglobulin, per infusion encounter (This service is to be billed
in conjunction with administration of immunoglobulin).
Physicians may bill this service once per day in association with a
patient encounter for administration of IVIG, in addition to billing
for the appropriate drug administration service(s) and for appropriate
units of the HCPCS code that describes the IVIG product infused. In
addition, physicians may also bill for any significant and separately
identifiable evaluation and management (E/M) service they perform at a
level 2 through 5 in association with the infusion encounter, appending
modifier -25 to the E/M service. We have established the payment level
for this service in physician offices by cross-walking the RVUs for the
new G-code to the practice expense RVUs of 1.90 for G0319, ESRD related
services during the course of treatment, for patients 20 years of age
and over; with 1 face-to-face physician visit per month. We do not
believe there is increased preadministration physician work associated
with preparation for intravenous infusion of immunoglobulin, so we have
not allocated the physician work RVUs assigned to G0319 to G0332.
Physician work associated with preparation for the intravenous infusion
of immunoglobulin is already included in the physician work allocated
to the drug administration services associated with the infusion and to
the evaluation and management services (including the pre- and post-
work already included in the relative values for evaluation and
management services) provided to patients receiving intravenous
immunoglobulin treatments. However, we think G0332 requires additional
resources from the physician practice, particularly clinical labor,
that are comparable to the practice expense for the ESRD management
code. We expect that in many cases IVIG infusions will be provided once
per month, with activities in preparation for the infusion, including
consulting with patients and distributors, conducted over the course of
a month as are the ESRD related services described by G0319. In
addition, preparation for the IVIG infusion will generally not require
a face-to-face visit with the patient prior to the infusion, so we have
selected the ESRD related services G code that includes only one
physician visit for the practice expense crosswalk.
We believe that this temporary separate payment provided through
G0332 in CY 2006 for the physician office and hospital outpatient
resources associated with additional IVIG preadministration-related
services due to the present significant fluctuations in
[[Page 70221]]
the IVIG marketplace will ensure that Medicare beneficiaries depending
on IVIG experience no adverse health consequences from the market
instability for IVIG products. In the meantime, we will continue to
evaluate the market factors affecting the pricing and availability of
IVIG products in the context of our ASP+6 percent payment methodology
and our separate payment for G0332 in CY 2006. We expect that in CY
2006 with continued collection of updated ASP data for IVIG; improved
understanding of the IVIG marketplace; more focused attention on the
medical necessity of the utilization of IVIG; ongoing collaboration
between CMS, the IVIG community, manufacturers, providers, and other
interested entities; and this temporary separate payment for hospital
and physician office resources required for the intensive
preadministration services related to IVIG infusion, the IVIG
marketplace should stabilize over the upcoming year. Substantial
preadministration-related services for IVIG infusions should no longer
be required of physician offices and hospital outpatient departments
that provide IVIG infusions to patients who need them. Therefore, this
additional payment for G0332 is effective for CY 2006 only. Thus, we
will be closely monitoring this issue once again in the context of our
rulemaking for CY 2007.
Comment: Several commenters representing providers of community
cancer care and manufacturers noted that physicians do not receive
separate payment for pharmaceutical management and related pharmacy and
handling costs (such as drug inventory, disposal of toxic waste, and
spillage and breakage), and that in the 2006 proposed rule for HOPD we
proposed a 2 percent add-on payment to the ASP+6 percent payment for
drugs. These commenters stated the costs for handling pharmaceuticals
are similar across settings and that physicians should receive the same
add-on.
Response: The costs for handling pharmaceuticals are paid through
the PE RVUs for the drug administration code.
d. Reporting WAC
As explained in the August 8, 2005 proposed rule (70 FR 45844) we
have provided information on our web site (http://www.questions.cms.hhs.gov
) concerning reporting WAC. We state that
manufacturers must report the WAC for a single source drug or
biological if it is less than the ASP for a quarter and in cases where
the ASP during the first quarter of sales is unavailable. Upon further
review, we have determined that the WAC must be reported each quarter
if required for payment to be made under section 1847A of the Act, in
addition to the ASP, if available.
Section 1927(b)(3)(A)(iii) of the Act specifies the ASP data
manufacturers must report. Section 1927(b)(3)(A)(iii)(II) of the Act
specifies that the manufacturer must report the WAC, if it is required
in order for payment to be made under section 1847A of the Act. Under
section 1847A of the Act, the payment is based on WAC (as opposed to
ASP) in the following cases:
For a single source drug or biological, when the WAC-based
calculated payment is less than the ASP-based calculated payment for
all NDCs assigned to such drug or biological product. (See section
1847A(b)(4) of the Act.)
During an initial period in which data on the prices for
sales for the drug or biological is not sufficiently available from the
manufacturer to compute an ASP. (See section 1847A(c)(4) of the Act.)
In these instances, we must make the determination of whether the
payment amount is based on ASP or WAC. Therefore, WAC is required for
payment in all of these instances.
As explained in the August 8, 2005 proposed rule (70 FR 45844), we
had previously published a template which manufacturers must use to
report ASP data to us; however, the WAC was not included in that
template. Therefore, because of the requirement to report the WAC and
the confusion manufacturers have experienced in submitting the WAC data
we proposed, in a separate information collection notice published
August 19, 2005 (70 FR 48770), to revise the reporting template to
include a place to report WAC.
To clarify the instances when manufacturers are required to report
the WAC, in the August 8, 2005 proposed rule (70 FR 45844), we stated
that manufacturers are required to report quarterly both the ASP and
the WAC for NDCs assigned to a single source drug or biological billing
code. Manufacturers are also required to report the WAC for use in
determining the payment during the initial period under section
1847A(c)(4) of the Act. That is, the WAC is reported for the reporting
period prior to reporting the ASP based on a full quarter of sales.
Because the WAC could change during a reporting period, we proposed
that in reporting the WAC, manufacturers would be required to report
the WAC in effect on the last day of the reporting period.
Comment: Some commenters noted that requiring manufacturers to
report WAC for all single source drugs each quarter encompasses the
requirement for manufacturers to report WAC for new drugs during the
initial period. Separately specifying these instances in the preamble
led some commenters to request clarification of how the proposed policy
differs from the existing requirements posted on our web site. Several
manufacturers requested that we clarify in the final rule with comment
that the WAC in effect on the last day of the reporting period is the
value to be submitted for that reporting period.
Response: We agree with the commenters who noted that new drugs are
a subset of single source drugs. We separately specified the
requirements for reporting WAC in these two instances so that
manufacturers would be aware of the reporting requirement and because
we have discussed these instances separately in past rulemaking.
The proposed change is different from existing guidance previously
posted on our web site in that we clarify that submission of the WAC in
these instances is always necessary for payment to be made. The
manufacturer does not decide if the WAC is to be submitted and the WAC
is not submitted only if it is less than the ASP as previously posted
on our web site. We interpret section 1927(b)(3)(A)(iii)(II) of the Act
to apply to all NDCs of single source drugs.
Final Decision
Manufacturers must report WAC for all single source drugs
(including new drugs) each reporting period. In submitting the WAC,
manufacturers must report the WAC in effect on the last day of the
reporting period. We will update our web site to include this decision.
e. Revised Format for Submitting ASP Data
The August 8, 2005 proposed rule (70 FR 45845) included a
discussion of the format manufacturers are required to use to report
the ASP data to us. However, as discussed above, the current template
does not provide adequate instructions for manufacturers to report both
the ASP and the WAC. Therefore, we published a separate information
collection notice on August 19, 2005 (70 FR 48770) and proposed to
revise the ASP reporting format to accommodate submission of both, the
ASP and the WAC as well as collect the following additional
information:
Drug name.
[[Page 70222]]
Package size (strength of product, volume per item, and
number of items per NDC).
Expiration date for last lot manufactured.
Date the NDC was first marketed (for products first
marketed on or after October 1, 2005).
Date of first sale for products first sold on or after
October 1, 2005.
Comment: We received several comments in response to the proposed
rule related to our separate information collection notice on the
proposed changes to the ASP reporting format (CMS-10110; see 70 FR
48770). The commenters generally supported inclusion of the WAC and
drug name within the reporting format. Some commenters expressed
concerns related to the level of burden that would be necessary to
report some of the proposed additional data elements, particularly the
date the NDC was first marketed. Some commenters suggested refinements
to the definitions of the proposed data elements and the frequency of
their collection. In addition, commenters suggested that we consider
using data elements collected by Medicaid in lieu of the proposed data
elements pertaining to first marketing date, first date of sale, and
expiration date. In addition, commenters stated that they were
uncertain when the proposed changes to the reporting requirements would
be effective.
Response: We appreciate receiving the comments on the proposed
additional data elements and the proposed revisions to Addendum A used
to report ASP data. To be considered timely, comments on the proposed
modification to ASP reporting format must have been mailed within 60
days of that notice (by October 18, 2005). All timely comments were not
available for consideration at the time of the preparation of this
final rule with comment. Changes to the ASP information collection
(CMS-10110; OMB control number 0938-0921), if adopted by CMS and
approved by the OMB, would be effective as of the approval date of the
information collection submission Manufacturers would begin reporting
the additional data elements with the next reporting deadline.
f. Limitations on ASP
Section 1847A(d)(1) of the Act states that ``the Inspector General
of HHS shall conduct studies, which may include surveys to determine
the widely available market prices (WAMP) of drugs and biologicals to
which this section applies, as the Inspector General, in consultation
with the Secretary determines to be appropriate.'' Section 1847A(d)(2)
of the Act states that ``Based upon such studies and other data for
drugs and biologicals, the Inspector General shall compare the ASP
under this section for drugs and biologicals with--
The widely available market price (WAMP) for these drugs
and biologicals (if any); and
The average manufacturer price (AMP) (as determined under
section 1927(k)(1) of the Act for such drugs and biologicals.''
Section 1847A(d)(3)(A) of the Act states that ``The Secretary may
disregard the ASP for a drug or biological that exceeds the WAMP or the
AMP for such drug or biological by the applicable threshold percentage
(as defined in subparagraph (B)).'' The applicable threshold is
specified as 5 percent for CY 2005. For CY 2006 and subsequent years,
section 1847A(d)(3)(B) of the Act establishes that the applicable
threshold is ``the percentage applied under this subparagraph subject
to such adjustment as the Secretary may specify for the WAMP or the
AMP, or both.''
For CY 2006, we proposed to specify an applicable threshold
percentage of 5 percent for both the WAMP and AMP. We did not receive
the OIG's final report in time for consideration before developing the
proposed rule. Thus, we believe that continuing the CY 2005 threshold
percentage applicable to both the WAMP and AMP is most appropriate.
Comment: One commenter stated its support of credible drug rates
that are based upon widely accepted health care industry standards, and
that are established using methodologies that are clear and readily
understood by persons with health care industry knowledge. In this
context, the commenter expressed concern about how well the terms WAMP
and AMP are understood across the health care industry. Several
commenters supported our proposal to retain 5 percent as the applicable
threshold for 2006, while strongly urging that we not implement the
provisions relating to substitution of the ASP until notice and comment
rulemaking is conducted. Many commenters referred to the language in
the Conference Report accompanying the MMA that discusses rulemaking in
connection with this issue and requested that we follow the intent of
that language and provide the public the opportunity to evaluate the
validity of the processes used and the data obtained by OIG.
Response: We appreciate the commenter's acknowledgement that we are
required to specify the threshold percentage applicable in 2006.
Section 1847A(d)(3)(B)(i) of the Act specified the applicable threshold
percentage for 2005. Section 1847A(d)(1) of the Act requires that the
OIG conduct studies to determine the WAMPs, and the OIG began its study
activities shortly after the passage of the MMA. Upon completion, the
OIG's findings and methodology will be available to the public. We are
aware of the Conference Report language; however, given the statutory
requirements in section 1847A(d), we do not believe rulemaking is
appropriate at this time.
Final Decision
We will establish 5 percent as the applicable threshold for 2006.
2. Payment for Drugs Furnished During CY 2006 in Connection With the
Furnishing of Renal Dialysis Services if Separately Billed by Renal
Dialysis Facilities
Section 1881(b)(13)(A)(iii) of the Act indicates that payment for a
drug furnished during CY 2006 and subsequent years in connection with
the furnishing of renal dialysis services, if separately billed by
renal dialysis facilities, will be based on the acquisition cost of the
drug as determined by the OIG report to the Secretary as required by
section 623(c) of the MMA or, the amount determined under section 1847A
of the Act for the drug, as the Secretary may specify. In the report
entitled, ``Medicare Reimbursement for Existing End Stage Renal Disease
Drugs,'' the OIG obtained the drug acquisition costs for the top 10
ESRD drugs for the 4 largest ESRD chains as well as a sampling of the
remaining independent facilities. Based on the information obtained
from this report, for CY 2005, payment for the top 10 ESRD drugs billed
by freestanding facilities and payment for EPO billed by hospital-based
facilities was based on acquisition costs as determined by the OIG. Due
to the lag in the data obtained by the OIG, we updated the acquisition
costs for the top 10 ESRD drugs to 2005 by the PPI. The separately
billable ESRD drugs not contained in the OIG report were paid at the
ASP+6 percent for freestanding facilities. The payment allowances for
these remaining drugs were updated on a quarterly basis during 2005.
Section 1881(b)(13)(A)(iii) of the Act gives the Secretary the
authority to establish the payment amounts for separately billable ESRD
drugs beginning in 2006 based on acquisition costs or the amount
determined under section 1847A of the Act. As discussed in the proposed
rule, we do not believe that it is appropriate to continue to use
[[Page 70223]]
2002 acquisition costs updated by the PPI for another year as the basis
for payment. The acquisition costs are based on 2002 data which,
despite updates by the PPI do not necessarily reflect current market
conditions. Thus, the chances increase that Medicare payments will
either overpay or underpay for drugs resulting in payments that are
inconsistent with the goal of making accurate payments for drugs. We
also considered whether actual acquisition cost data could be
periodically updated. However, we do not believe that it would be
feasible to base Medicare payments over the long term on continually
acquiring data on actual acquisition costs from ESRD facilities. This
approach would provide incentives for manufacturers and facilities to
increase acquisition costs without constraint. It also would not
necessarily provide data regarding current market rates. Therefore, we
proposed that the payment methodology for all ESRD drugs when
separately billed by freestanding ESRD facilities during CY 2006 be the
amount determined under section 1847A of the Act. This payment amount
is the ASP+6 percent rate.
Based on an analysis of the 2002 acquisition costs for the top 10
separately billable ESRD drugs, when updated by the PPI for CY 2006, it
is our contention that relying on 2002 acquisition cost data updated
for a number of years as would be necessary to establish a payment
amount for 2006 is not the most appropriate option for determining
Medicare payment rates when other drug-specific pricing is available.
Further, we contend that relying on the ASP+6 percent as the payment
rate for all separately billable ESRD drugs when billed by freestanding
ESRD facilities for CY 2006 is a more reliable indicator of the market
transaction prices for these drugs. The ASP is reflective of
manufacturer sales for specific drug products and is more indicative of
market and sales trends for those specific products than the 2002 OIG
acquisition cost data.
We also note MedPAC's recommendation in its June 2005 report that
the ASP be the basis of payment for all separately billable ESRD drugs
provided by both freestanding and hospital-based facilities in CY 2006
(MedPAC, ``Report to the Congress: Issues in a Modernized Medicare
Program,'' June 2005). In making this recommendation, MedPAC states
that the ASP data are more current (updated quarterly) and more likely
to reflect actual transaction prices when compared with acquisition
cost data which are not regularly collected by the OIG or CMS.
Furthermore, the report indicated that utilizing the same payment
policy for both freestanding and hospital-based facilities would ensure
uniformity across the various settings irrespective of the site of
care. In addition, MedPAC recommends in its report that we obtain, ``*
* * data to estimate hospitals'' costs and Medicare's payment per unit
for these drugs. No published source identifies the unit payment for
these drugs because Medicare pays hospitals their reasonable costs.''
MedPAC further states: ``We attempted to calculate the unit payment
from 2003 claims data, but the accuracy of the data fields we needed to
make this calculation was unclear, particularly the number of units
furnished and Medicare's payment to the hospital.'' MedPAC also
recommends that CMS or the OIG collect acquisition cost data
periodically in the future to gauge the appropriate percentage of ASP
for the payment amount.
We acknowledged MedPAC's recommendations regarding uniformity
across the various settings irrespective of the site of care and
believe it is more appropriate to pay for separately billed drugs
furnished in hospital-based facilities under the ASP+6 percent
methodology rather than on a reasonable cost basis.
Therefore, for CY 2006, we proposed that payment for a drug
furnished in connection with renal dialysis services and separately
billed by freestanding renal dialysis facilities and EPO billed by
hospital-based facilities be based on section 1847A of the Act. We
proposed to update the payment allowances quarterly based on the ASP
reported to us by drug manufacturers. We sought comment on our proposed
decision to revise the payment methodology for separately billable ESRD
drugs and about the potential method we have discussed in other
sections of this final rule with comment which would permit us to pay
hospital-based facilities under the ASP+6 percent methodology for 2006.
We also sought comment on how this proposed decision could affect
beneficiaries' or providers' access to these drugs.
We received numerous comments regarding our proposal to pay for
drugs furnished in connection with renal dialysis services and
separately billed by free-standing renal dialysis facilities as well as
EPO billed by hospital-based facilities at the ASP+6 percent payment
methodology. We also received comments on our proposal to continue to
pay hospital-based facilities reasonable cost for separately billable
ESRD drugs. Those comments and responses are provided below.
Comment: Several commenters agreed with our proposal to use the
ASP+6 percent methodology as the basis for payment for drugs furnished
in connection with renal dialysis services and separately billed by
free-standing renal dialysis facilities as well as EPO billed by
hospital-based facilities and our decision to update the payment
allowances on a quarterly basis. These commenters viewed the ASP+6
percent payment methodology as superior to the average acquisition
payment methodology as the ASP+6 percent methodology enables payment to
reflect the actual market transaction prices for ESRD drugs. Commenters
stated that reliance on the ASP+6 percent methodology will lead to a
more uniform payment policy across care settings. These commenters
strongly recommended that we finalize our proposal to pay all ESRD
drugs when separately billed by freestanding ESRD facilities, as well
as EPO when furnished in hospital-based facilities at ASP+6 percent. It
was noted that the ASP+6 percent methodology is easier for us to
administer as we already collect and update ASP data on a quarterly
basis. Other commenters were cautious in regards to the ASP system,
indicating that although the shift from average acquisition cost to
ASP+6 percent appeared rational, the ASP would be largely influenced by
the lower large provider price. As a result, the ASP prices would not
reflect the acquisition costs for all providers. Small dialysis
facilities would be unable to purchase ESRD drugs at the proposed
prices and would be at risk of being paid well below their acquisition
costs, as they lack the same buying power or economics of scale that
larger facilities possess. Some commenters focused on statements we
made in the past in which we stated that we expected smaller providers
to join buying groups in order to reduce acquisition costs. These
commenters stated that although almost all small dialysis providers
belong to such buying groups, such arrangements have not reduced the
disparity between the large providers' acquisition prices and the small
providers' acquisition prices. Commenters suggested that this ``market
dynamic'' with extremely different buying power among providers does
not exist in any other market where we have established drug payment
policies.
Response: We agree with the commenters who suggested that we
establish the 2006 payment rates for drug furnished in connection with
renal dialysis services and separately billed
[[Page 70224]]
by freestanding renal dialysis facilities and EPO billed by hospital-
based facilities using the ASP, rather than use the 2002 average
acquisition costs updated by the PPI. We also agree for 2006 to apply
the quarterly update of ASP data to payment for drugs furnished by
freestanding renal dialysis facilities and EPO billed by hospital-based
facilities.
After consideration of the feasibility of continuing to use 2002
acquisition costs updated by the PPI for another year, we have
determined that the ASP+6 percent methodology is the most accurate
measure for paying for EPO furnished in hospital-based facilities and
for separately billable ESRD drugs provided in freestanding dialysis
facilities.
Implemented in 2005 by the MMA of 2003, the ASP methodology is
based on data submitted by manufacturers of Medicare Part B drugs. The
ASP for all drug products included within the same billing and payment
code is the volume-weighted average of the manufacturers' ASPs reported
to us across all the NDCs assigned to the billing or payment code.
Therefore, the ASP is a more accurate indicator of market trends for
specific drugs.
We do not agree with commenters who suggest that varying buying
power only exists among providers of ESRD drugs. Other purchasers of
Part B drugs have expressed concerns to us regarding a variation in
buying power. We will continue to support groups representing Medicare
Part B drug purchasers, especially small and rural purchasers, to help
them identify the most favorable drug prices possible.
Comment: Many commenters requested that if we implemented the ASP-
based methodology for separately billable ESRD drugs, we should utilize
the most recently available ASP data and update that data quarterly.
These commenters expressed concern about the significant lag time
apparent in the current ASP methodology, indicating the lag time
results in a decrease in payment that no dialysis facility has the
ability to make up. Commenters encouraged us to provide retrospective
payments to dialysis facilities, particularly small or independent
dialysis providers to prevent such facilities from reducing services or
from closing. One large drug manufacturer suggested that we consider an
alternative drug payment option for small providers and we assure that
these providers are not negatively affected by changes in the payment
policy for drugs. Commenters suggested that we utilize a methodology
that uses average acquisition price for small providers as the marker
for ESRD drug reimbursement, citing section 1881(b)(13)(A)(ii) of the
Act as the authority. Under this system, we would collect acquisition
cost data from small providers, update the data for the current year
and establish payment rates on these acquisition costs. Other
commenters suggested that we consider establishing an exception process
whereby rural or inner city ESRD facilities could request an alternate
payment based on their actual drug acquisition costs as a result of
unique economic circumstances. Some commenters suggested that we
exclude EPO from the ASP payment methodology, stating that EPO has only
one manufacturer and accounts for a large proportion of drug payment to
independent dialysis facilities. Some commenters suggested that
contracts of large providers are able to influence the ASP for EPO and
for these providers; the acquisition price will be close to ASP. The
inclusion of EPO in the ASP methodology will create disparity in
patient care.
Response: In response to concerns regarding the significant lag
time apparent in the ASP methodology, the ASP methodology is based on
ASPs reported by manufacturers quarterly. Manufacturers must report to
us no later than 30 days after the close of the quarter. We implement
these new prices through program instructions or otherwise at the first
opportunity after we receive the data, which is the calendar quarter
after receipt.
We do not agree with commenters who suggested that we permit small,
rural, or inner city ESRD facilities to request an alternate payment
based on their actual drug acquisition costs, or that we exclude EPO
from the ASP payment methodology. We do not have that authority.
Section 1881(b)(13)(A)(iii) of the Social Security Act states that the
Secretary chooses the methodology to determine payment rates for all
drugs separately billed by ESRD facilities. The language refers to the
choice of acquisition costs as determined by the Inspector General of
the ASP rates. Section 1881(b)(13)(A)(ii) does not provide authority
for individual providers to choose whether to be paid on the basis of
costs or the ASP method.
Comment: Several organizations stated that payment differences
should be eliminated for separately billable drugs furnished in
independent and hospital-based facilities and the ASP payment
methodology should be used for all drugs provided in hospital-based
facilities. One commenter agreed with our concerns regarding the lack
of available data from hospital claims and recommended that the
Secretary collect data on the acquisition cost and payment per unit for
drugs furnished by hospital-based providers, or consider using the unit
dosing information obtained from claims submitted by freestanding
dialysis facilities and consult with clinical experts regarding the
appropriateness of the dose data.
Response: We agree with commenters who suggested that we utilize
the same payment methodology for separately billable drugs furnished in
independent facilities and hospital-based facilities. For reasons
discussed in the ESRD section of this final rule with comment, we
believe it is appropriate to implement the ASP payment methodology for
all drugs provided in hospital-based facilities.
Comment: Prompt pay discounts are included in the calculation of
the ASP; however, commenters stated that small customers do not
normally receive such discounts. Rather, these customers are charged an
additional service fee to the price of the product. Thus, by including
prompt pay discounts in the calculation of the ASP, the ASP is lowered,
but the small providers are not privy to such discounts. Commenter also
stated that sales to cutomers outside of independent dialysis
facilities are included in the calculation of the ASP and thus,
contribute to the difference between manufacturer-provided ASPs and
provider acquisition costs. They stated that we have established a
distinct methodology for drug payment for hospital-based dialysis
facilities, and therefore, it is inappropriate to include such
customers in the ASP payment system for independent dialysis
facilities.
Response: In the calculation of the ASP, as specified in Section
1847A(c)(3), a manufacturer should include volume discounts, prompt pay
discounts, cash discounts, free goods that are contingent on any
purchase requirements, chargebacks, and rebates (other than rebates
under the Medicaid rebate statute). We lack the statutory authority to
permit manufacturers to exclude prompt pay discounts from the
calculation of the ASP. Further, the statute does not permit the
exclusion of or differentiation by classes of trade in the calculation
of the ASP payment rates, except for the specific statutory exceptions
described in the Medicaid best price calculation under sections
1927(c)(1)(C)(i) and 1927(c)(1)(C)(ii)(III) of the Act.
Comment: Several commenters stated that the ASP methodology does
not take into consideration provider costs for storage, handling, and
wastage. Small
[[Page 70225]]
providers will be disadvantaged as they have less efficient and more
costly systems for storage and handling.
Response: The ASP+6 percent payment methodology was not intended to
cover the handling and storage of drugs.
3. Clotting Factor Furnishing Fee
Section 303(e)(1) of the MMA added section 1842(o)(5) of the Act
which requires the Secretary, beginning in CY 2005, to pay a furnishing
fee in an amount the Secretary determines to be appropriate to
hemophilia treatment centers and homecare companies for the items and
services associated with the furnishing of blood clotting factor. In
the CY 2005 final rule (69 FR 66236), we established a furnishing fee
of $0.14 per unit of clotting factor for CY 2005. Section 1842(o)(5) of
the Act specifies that the furnishing fee for clotting factor for years
after CY 2005 will be equal to the fee for the previous year increased
by the percentage increase in the consumer price index (CPI) for
medical care for the 12-month period ending with June of the previous
year. The percent increase for the 12 months ending June 2005 is 4.2
percent. Consequently, the furnishing fee will be $0.146 per unit
clotting factor for CY 2006. While the furnishing fee payment rate is
calculated at 3 digits, the actual amount paid to providers and
suppliers is rounded to 2 digits. The requests to publish the 2006
furnishing fee in the final rule with comment were the only comments we
received on the clotting factor section in the proposed rule.
4. Payment for Inhalation Drugs and Dispensing Fee
Medicare Part B pays for inhalation drugs administered via a
nebulizer, a covered item of DME. Beginning in CY 2006, coverage for
inhalation drugs administered through metered dose inhalers will
generally be available through the Medicare Part D benefit. This
represents an important expansion in the options available to
beneficiaries for inhalation drug coverage under Medicare. We expect
that both modes of inhalation drug delivery will play an important role
in the Medicare program in the years to come.
Prior to CY 2004, most Medicare Part B covered drugs, including
inhalation drugs administered by a nebulizer (hereafter referred to as
inhalation drugs), were paid at 95 percent of the AWP. Numerous studies
by the OIG and GAO indicated that 95 percent of AWP substantially
exceeded suppliers' acquisition costs for Medicare Part B drugs,
particularly for the high volume inhalation drugs, albuterol and
ipratropium bromide.\1\ The MMA changed the Medicare payment
methodology for many Part B covered drugs, including inhalation drugs.
As an interim step, in CY 2004, Medicare paid a reduced percentage of
AWP, 80 percent of AWP in the case of albuterol and ipratropium
bromide. Beginning with CY 2005, Medicare paid for inhalation drugs at
106 percent of the average sales price (ASP+6 percent).
---------------------------------------------------------------------------
\1\ GAO, ``Medicare Payment for Covered Outpatient Drugs Exceed
Providers' Costs,'' September 2001. OIG, ``Excessive Medicare
Reimbursement for Albuterol,'' March 2002.
---------------------------------------------------------------------------
In addition to making payment for the drug itself, Medicare also
pays a dispensing fee to suppliers of inhalation drugs. Prior to CY
2005, Medicare paid a monthly $5 dispensing fee for each covered
inhalation drug or combination of drugs used. In the August 5, 2004
proposed rule (69 FR 47488), we sought comment on an appropriate
dispensing fee level to cover the shipping, handling, compounding, and
other pharmacy activities required to get these medications to
beneficiaries. We received many comments asserting that a substantial
fee was needed to compensate suppliers for a wide range of costs
associated with dispensing drugs to beneficiaries, with many citing a
2004 report prepared by a consultant for the American Association for
Homecare (AAH) that recommended a $68 fee.\2\ The 2004 AAH report
provided information for 10 cost categories: clinical intake;
establishing/revising the plan of care; delivery of services;
compliance monitoring/refill calls; billing/collections; other direct
costs; patient education; caregiver training; care coordination; and
in-home visits. In addition, as discussed in the August 8, 2005,
proposed rule, a 2004 study by the GAO showed substantial variation in
supplier costs of dispensing inhalation drugs.\3\ With the wide
variation in the reported costs and services provided by inhalation
drug suppliers suggested by the comments and the GAO study, we stated
in the CY 2005 final rule (69 FR 66338) that we would establish an
interim dispensing fee for inhalation drugs applicable for CY 2005 and
reconsider the issue for CY 2006. The 2005 dispensing fee for a 30-day
supply of inhalation drugs was based on the industry recommended $68
fee from the 2004 AAH study, excluding certain costs that Medicare
generally does not reimburse regardless of the Medicare Part B benefit
category (that is, sales and marketing, bad debt, and an explicit
profit margin). The resulting fee established for a 30-day supply of
inhalation drugs was $57 for CY 2005. Because the 2004 AAH study did
not establish a fee for a 90-day supply, we applied the methodology
used in the 2004 GAO report to convert the 30-day fee to a 90-day fee.
Accordingly, the 2005 fee established for a 90-day supply was $80. In
establishing the dispensing fee rates for 2005, we indicated in the CY
2005 final rule that although the AAH study contained costs related to
services that may be of potential benefit to our beneficiaries, we were
concerned that these services may be outside the scope of a dispensing
fee. We indicated that we would consider this issue further in order to
establish an appropriate dispensing fee for CY 2006.
---------------------------------------------------------------------------
\2\ Muse & Associates Report for the American Assoication for
Homecare, ``The Cost of Delivering Inhalation Drug Services to
Medicare Beneficiaries,'' August 2004.
\3\ GAO, ``Appropriate Dispensing Fee Needed for Suppliers of
Inhalation Therapy Drugs,'' GAO-050-72, October 2004.
---------------------------------------------------------------------------
As discussed in the August 8, 2005 proposed rule (70 FR 45847), we
indicated that we intend to establish a dispensing fee amount for 2006
that is appropriate to cover the costs of those services that fall
within the scope of a dispensing fee. Furthermore, we indicated that we
thought this fee amount likely would be lower than the current fee of
$57 per 30-day period in 2005. In the proposed rule we solicited public
comments and information on a number of issues including the following:
What services appropriately fall within the scope of a
dispensing fee; the cost of providing those services; and, whether any
of the services being provided by inhalation drug suppliers may be
covered through another part of the Medicare program, such as the PFS
or the DME benefit.
An appropriate dispensing fee level for 2006 as well as
data and information on the various services inhalation drug suppliers
are currently providing to Medicare beneficiaries and the associated
costs, and typical dispensing costs for an efficient, high-quality
supplier.
The extent to which inhalation drug suppliers have
utilized the newly available 90-day scripts in order to reduce unit
shipping costs and any reasons as to why 90-day supplies may not have
been utilized.
How revised guidelines regarding the timeframe for
delivery of refills has affected the need for overnight delivery
services as well as the extent to which suppliers have shifted their
shipping to ground services.
Comments on the potential impact on beneficiaries and
providers of possible changes to the inhalation drug dispensing fee in
2006, as well as the
[[Page 70226]]
impact of the new drug benefit on inhalation drug access.
Comment: Many commenters suggested that dispensing inhalation drugs
to Medicare beneficiaries involves a wide range of services that should
be compensated through the dispensing fee. A number of commenters
referenced a 2005 report by an industry consultant sponsored by the
AAH.\4\ The 2005 AAH report indicated that suppliers provide services
in seven broad categories: Intake; compounding, dispensing, and
pharmacy assessment; delivery, set-up, and patient education; follow-up
and compliance monitoring; quality assurance, accreditation, licensing,
and regulatory compliance; Medicare billing and compliance; and other
direct and indirect costs and expenses. Within these seven categories,
the 2005 AAH report indicated that there were ``117 discrete services''
provided to or on behalf of Medicare beneficiaries. The 2005 report
surveyed 82 homecare pharmacies. The vast majority of survey
respondents thought the 117 discrete services outlined by the
consultant fell within the scope of a dispensing fee, and the vast
majority of respondents indicated they were providing these services.
Several commenters suggested that the survey demonstrated there was
widespread agreement that the standard of care for inhalation drug
suppliers involved a wide range of services. In addition, one commenter
asserted that the 117 services identified in the 2005 AAH report
encompassed all of the functions identified in the 2004 AAH report
prepared by the same consultant, which formed the basis of the 2005
fee.
---------------------------------------------------------------------------
\4\ Muse Associates Report Prepared for the American Association
for Homecare, ``Examination of Inhalation Drug Services to Medicare
Beneficiaries Under the Average Sales Price Reimbursement
Methodology In Response to the CMS Notice of Proposed Rule Making
(CMS-1502-P),'' September 2005.
---------------------------------------------------------------------------
Response: We established the interim dispensing fee for 2005 based
on cost data from the 2004 AAH report. That report provided cost data
for 10 service categories: Clinical intake; establishing/revising the
plan of care; delivery of services; compliance monitoring/refill calls;
billing/collections; other direct costs; patient education; caregiver
training; care-coordination; and in-home visits. In using this data to
establish the 2005 fee in the CY 2005 final rule, we indicated that we
were concerned that some of the services in the industry cost data may
be outside the scope of a dispensing fee and we would revisit this
issue further in order to establish an appropriate dispensing fee for
CY 2006. As discussed in the August 8, 2005, proposed rule, we continue
to have concerns with respect to what services should be included
within the dispensing fee payment.
Authority for a dispensing fee for inhalation drugs is based on
section 1842(o)(2) of the Act, which provides that if payment is made
to a licensed pharmacy for a drug or biological under Medicare Part B,
the Secretary may pay a dispensing fee (less the applicable deductible
and coinsurance) to the pharmacy. The statute did not define the term
dispensing fee or set parameters as to what activities should be
included within the scope of that definition. However, as discussed
below, we do not believe the Congress intended us to adopt the broad
reading of dispensing fee suggested by commenters.
We are not persuaded by suggestions that Medicare should broadly
define the definition of dispensing fees for inhalation drugs to
include pharmacy care management services such as patient education,
caregiver training, care coordination, and in-home visits. A number of
commenters suggested the dispensing fee be based on the total costs of
supplying inhalation drugs indicated by the 2004 AAH report data. That
data indicated that suppliers expend on average 63.5 minutes per new
patient and 50 minutes per established patient per month on patient
education, caregiver training, care coordination, and in-home visits.
Such services represent pharmacy care management services, which (if
included in dispensing fee payments) would extend the definition of
dispensing fee beyond what we believe should be reasonably included
within the scope this benefit. As an initial matter, we do not believe
that there is any indication that the Congress intended these care
management activities to be included in the definition of dispensing
fees. Where the Congress wished for us to cover the costs of such
training and management services under Medicare, it specifically
directed us to do so (for example, by amending the statute to recognize
diabetes outpatient self management training under Medicare Part B and
medication therapy management programs under Medicare Part D (see
sections 1861(qq) and 1860D-4(c) of the Social Security Act).
Therefore, in accordance with our interpretation of the statute, we do
not believe it is reasonable for us to define the term dispensing fee
under Medicare Part B to include the costs of such services.
In addition, we also believe that the inclusion of beneficiary
education and training about use of nebulizers would raise duplicate
payment issues. Payment for DME is based on fee schedule amounts which
include, in part, amounts for training beneficiaries on the use of
nebulizer equipment. Thus, the equipment supplier is responsible for
educating the beneficiary on the use of the DME or ensuring that
``another qualified party'' has done so as specified in Sec.
424.57(c)(12). In addition, under the physician fee schedule Medicare
makes a separate payment for beneficiary training by a physician or
physician's staff regarding use of a nebulizer (CPT code 94664,
demonstration and/or evaluation of patient utilization of an aerosol
generator, nebulizer, metered dose inhaler or IPPB device). We believe
that physicians can play an important role in beneficiary training
concerning the use of nebulizers, as they are ultimately responsible
for directing beneficiary care, and determining what drug treatment
regimen is most effective for an individual patient. Accordingly,
because payment for education, training, and management concerning use
of nebulizer equipment may be separately recognized under Medicare, we
are concerned that the inclusion of such services within the definition
of dispensing fee would increase the potential for double billing.
We are also not persuaded by commenters' suggestions that the 2005
AAH report demonstrates that the standard of care for supplying
inhalation drugs includes a broad range of services. The 2005 AAH
report presented results from a survey of homecare companies, in which
the companies were asked whether 117 activities or overhead items
should be included in the dispensing fee and whether the companies
currently provide or undertake each activity/item (although the
frequency and extent to which each activity/item was provided was not
asked). The 2005 report identified services provided but failed to
provide any information on the proportion of beneficiaries actually
receiving various services (for example, patient education, caregiver
training, in-home visits). It also did not provide any information on
the cost of various services (other than delivery), or the amount of
time involved in providing these services to the typical beneficiary.
Consequently, the 2005 AAH report fails to demonstrate that the 117
activities/overhead items outlined in the 2005 report translate into an
average of 63.5 minutes per new patient and 50 minutes per established
patient each month for the care management services of patient
education, caregiver training, in-home visits, and care coordination in
the 2004 AAH report. Since the 2005 report did
[[Page 70227]]
not include information on costs, the 2004 AAH report is the only
information we have on average cost and time per activity. However,
even the 2004 AAH report does not contain information on the proportion
of beneficiaries that actually receive the care management services.
Accordingly, given the data identified in the reports, we are not
persuaded by the AAH reports that the standard of care for supplying
inhalation drugs includes extensive care management services for
patient education, caregiver training, in-home visits, and care
coordination.
Furthermore, a September 2005 OIG study entitled ``Review of
Services Provided by Inhalation Drug Suppliers'' \5\ found little
evidence that inhalation drug suppliers provide care management
services to many beneficiaries. The OIG report sought to ascertain the
nature and extent of services provided by inhalation drug suppliers.
The OIG examined services such as clinical intake, revising the plan of
care, patient/caregiver education, responding to patient/caregiver
inquiries about the drug, contacting the physician's office, contacting
a patient for a refill, reviewing medication compliance, and other
certain services. The OIG did not focus on certain core activities such
as filling prescriptions, delivery, and billing that they indicated
were necessary for suppliers to dispense drugs and receive
reimbursement. They also indicated that they excluded equipment related
services because Medicare pays suppliers separately for equipment.
---------------------------------------------------------------------------
\5\ Office of the Inspector General, ``Review of Services
Provided by Inhalation Drug Suppliers,'' September 2005, OEI-01-05-
00090.
---------------------------------------------------------------------------
The OIG report concluded that beneficiaries receive few services
from their inhalation drug supplier beyond calls to ask if they need a
drug refill. The OIG report found that among beneficiaries with at
least 2 months of claims in 2003, 16 percent received no services (that
is, no educational services, refill calls, or other adjunct services
the OIG examined) from their inhalation drug supplier during the entire
year. The OIG found that refill calls accounted for the majority of
services provided by inhalation drug suppliers. In addition, the OIG
found that only 16 percent of beneficiaries received an educational
service from their drug supplier, 8 percent made a non-billing inquiry
to their drug supplier, 8 percent received an in-home visit, 5 percent
had a care plan revision, and 3 percent received a respiratory
assessment from their drug supplier at least once during 2003.
Furthermore, the OIG report indicated that only 27 percent of
beneficiaries had their medication compliance reviewed by drug supplier
at least once in 2003, with 89 percent of these reviews occurring
during refill calls. Accordingly, in light of the OIG findings
regarding services actually provided, we remain unconvinced regarding
the standard of care contentions set forth in comments concerning the
2004 and 2005 AAH reports.
As mentioned previously, we do not believe it is appropriate to
include care management services such as patient education, caregiver
training, care coordination, and in-home visits in the inhalation drug
dispensing fee. Furthermore, the OIG found that few care management
services were actually provided to a typical beneficiary. While it is
possible that some types of care management services may be of
potential benefit to some beneficiaries, at this time there is not
clear evidence that such services are widely provided to beneficiaries
nor have there been studies evaluating the effect of such services on
beneficiary outcomes. Given such concerns, we do not believe it is
appropriate for us to define dispensing fee under Medicare Part B to
include care management services. However, we believe it is very
important that the Medicare program support better patient care
outcomes, particularly for beneficiaries with chronic respiratory
conditions. We plan to explore how the Medicare program can engage
physicians and their partners on issues of quality and performance to
foster high quality of care for Medicare beneficiaries using
respiratory drugs. For example, we believe there may be an opportunity
under our demonstration authority to implement a demonstration program
to test whether care management and care coordination services by
physicians and their partners can improve health outcomes and reduce
Medicare costs for beneficiaries who use inhalation drugs.
Comment: Some commenters criticized the OIG report as being too
narrow in scope. A few commenters suggested that the OIG study excluded
many essential services such as drug deliveries and billing activity
that account for the bulk of services and costs. Another commenter
suggested that the study did not capture all the services inhalation
drug suppliers provide, including many that are required by State and
Federal regulations (for example, Food and Drug Administration and
State Pharmacy Boards), and standards of care for pharmacy practice.
The commenters also criticized the OIG report for excluding billing
services and not taking into account the substantial amounts of time
spent doing the following: Collecting and processing the relevant
billing information from the beneficiary and beneficiary's physician,
which the commenter indicated often requires multiple on-site visits to
doctors offices; verifying eligibility and processing reimbursement
from secondary insurers responsible for payment of coinsurance; and
researching and on-site verification of beneficiary financial and
living circumstances in order to validate a waiver of coinsurance for
hardship. The commenters also criticized the OIG report for not taking
into account non-payment of coinsurance by Medicaid, the costs of
Medicare billing requirements, and costs of oversight by multiple
carriers. Furthermore, several commenters suggested that the OIG study
undercounted services because the OIG survey instrument requested
documentation for each service provided and the report focused on
documented services. Some commenters suggested that this approach left
out those services for which suppliers did not have documentation,
either because they had discarded the documentation after it was no
longer useful or because they had not documented services since there
was no requirement to do so. Some commenters indicated that the
mandatory refill calls require two telephone contacts on average before
contact is made with the beneficiary. One commenter indicated that it
maintains documentation of failed call attempts only for several
months, and is not required to maintain long-term documentation of
repeated calls and visits to patient homes and physicians' offices to
gather documentation and information. In addition, one commenter noted
that the OIG report expanded the categories of services it analyzed in
its report based on information submitted by respondents in the survey
instrument's ``other'' category. The commenter believed that this meant
participants in the OIG report may not have always been explicitly
asked about certain types of services. This commenter also criticized
the OIG report for not conducting field work to observe the activities
of inhalation drug suppliers, and indicated its belief that the GAO and
2004 AAH report included a more thorough analysis. Another commenter
stated that the OIG report does not address the issue that the costs of
dispensing drugs are higher than the current $57 fee for high quality
suppliers in compliance with applicable requirements. Furthermore, the
commenter stated that
[[Page 70228]]
the service levels suggested in the OIG report are not representative
of high quality suppliers. The commenter also stated that the behavior
of noncompliant suppliers should not serve as a basis for reducing the
fee because they contend the various services are required to comply
with the regulations of Medicare, other government entities, and
accrediting or quality assurance organizations.
Response: We do not find the criticisms of the OIG report
persuasive. While a number of commenters criticized the methodology and
findings of the OIG study, we believe that the results of the OIG study
are credible. The OIG study examined the extent to which certain
services such as patient/caregiver education, responding to patient/
caregiver inquiries about drugs, revising the plan of care, contacting
the physician's office, contacting a patient for a refill, reviewing
medication compliance, and certain other services were actually being
provided to beneficiaries by inhalation drug suppliers. The OIG failed
to find evidence that many beneficiaries received such services from
their inhalation drug suppliers, with the exception of drug refill
calls.
Although some commenters criticized the OIG report for not
including core dispensing activities such as filling the prescription
and billing, the OIG report indicated that it did not focus on those
activities because it did not have cause to question that they are
necessary to dispense drugs and be reimbursed. The OIG instead focused
on those services where less was known about the extent to which the
services were actually being provided to beneficiaries. The OIG report
examined a set of services that accounted for 60 percent of costs
included in the 2004 AAH data. In addition, some costs cited by one
commenter as being improperly excluded from the OIG study, such as non-
payment of coinsurance by Medicaid, costs associated with waivers of
coinsurance for indigent beneficiaries, and assessment of the
beneficiary's situation for coinsurance waiver, are not generally
reimbursed under Medicare Part B as a matter of general policy.
We are not persuaded by those commenters who suggested that the OIG
study should be disregarded because the OIG undercounted the number of
services suppliers actually provide due to the OIG's focus on
documented services. Although the OIG focused its analysis on
documented services, the OIG report indicated that if they had included
undocumented services reported by suppliers in their analysis, the
average number of services per beneficiary would still have been low
(increasing from an average of 1.2 to 1.59 services per beneficiary per
month). In addition, if various services are essential to dispensing
these drugs to beneficiaries as some have suggested, we would have
expected that suppliers would have documented the content and frequency
of the services in patient records in order to track patient progress
and maintain continuity of care. Furthermore, although some contend
that the OIG study suggests that some suppliers are non-compliant in
their provision of required services, as commenters pointed out, the
OIG study did not generally collect information on the core services
required to furnish inhalation drugs, with the exception of refill
recalls. The OIG report found that not all beneficiaries who should
have received a refill call actually got one. We plan to study the
issue of refill call compliance further, and we believe it is important
to reflect the costs of refills call in the dispensing fee.
In terms of the comment that the OIG study added several service
categories based on information submitted by commenters, the survey
instrument included an ``other'' category under which suppliers could
report any services that were not captured by the categories provided.
We do not view the opportunity for suppliers to elaborate on the types
of services provided to be a weakness but rather a strength of the
study. Although the OIG study was criticized by some for not conducting
field work, the OIG adopted a methodology that was designed to provide
information on a representative sample of beneficiaries receiving
inhalation drugs.
While the OIG report does not provide information on supplier
costs, that was not the objective of the OIG study. The OIG report
provides information on the percent of beneficiaries that received
various services from their drug suppliers, and as a result, and we
believe it offers helpful information in our consideration of the
inhalation drug dispensing fee.
Comment: We received a number of comments recommending either an
increase or no reduction in the dispensing fee for 2006. Several
commenters suggested the 2005 AAH report provided an appropriate fee
for 2006. For that report, a consultant surveyed homecare pharmacies
about what fee level they thought was appropriate for 2006. Survey
respondents on average suggested a fee of $66.55 for a 30-day supply
and a fee of $138.80 a 90-day supply. Suggested fees from other
commenters ranged from $57 to $68, with a few commenters suggesting an
inflation adjustment on top of those levels. One insurer commented that
the current dispensing fee appears high.
Some commenters provided cost information as part of their
contention that the fee should not be reduced or should be increased.
One large supplier indicated that its costs were about $75 per
beneficiary for a 30-day period, with the 3 cost categories accounting
for the largest share being delivery, setup, and patient education
($20); clinical intake ($15); and compounding, dispensing, and
assessment ($14). Another supplier indicated its costs broke out as
follows: delivery, set-up, and patient education (27.3 percent);
compounding, dispensing, pharmacy assessment (19.0 percent); patient
intake (17.8 percent); follow-up and compliance monitoring (11.6
percent); quality assurance, accreditation, licensing and regulatory
compliance (9.1 percent), other direct and indirect costs (4.2
percent). The supplier indicated that its costs were largely for
salaries, freight and other delivery charges, and business
infrastructure.
A number of commenters stated that the dispensing fee should not be
based on retail pharmacy costs, stating that retail pharmacies do not
provide the array of services that homecare pharmacies do. One retail
pharmacy clarified its comments from the prior year cited in the
proposed rule. By suggesting a fee of 5 to 6 times the current fee last
year, the retail pharmacy said they meant 5 to 6 times the $10 proposed
supplying fee (for immunosuppressive, oral anticancer, and oral anti-
emetic drugs) for 2005 (that is, $50 to $60). In addition, a
respiratory company stated that a comment received on the August 5,
2004 proposed rule from another retail pharmacy, which was cited in the
August 8, 2005 proposed rule, may have been intended to mean $25 per
prescription rather than $25 per 30-day period. Also, the commenter
stated that the prior cost data was irrelevant because it preceded
experience with the ASP system. Comments from retail pharmacies and a
pharmacy association indicated support for the dispensing fee level
urged by the 2005 AAH report.
A number of commenters stated there would be adverse effects on
beneficiary access to inhalation drugs if the fee were reduced. Some
suppliers asserted that they would reduce the services offered to
beneficiaries or cease supplying inhalation drugs to Medicare
beneficiaries. A number of commenters pointed to the 2005 AAH survey,
which indicated that 45 percent of providers
[[Page 70229]]
would not accept Medicare patients if the dispensing fee were reduced
more than a nominal amount, while 50 percent indicated they would
reduce services provided to beneficiaries, and 2.5 percent indicated
they would close. One commenter maintained that some providers had
already closed or are seeking acquisition by other companies under
current reimbursement rates. Another commenter speculated that a
reduction in the dispensing fee would cause a shift away from small
home care pharmacies to retail pharmacies, and asserted that these
pharmacies would have to gear up by increasing inventories or directing
patients to their mail order pharmacies. Some commenters suggested that
a fee reduction could lead to adverse health effect for beneficiaries,
reduced quality, or use of more intensive Medicare services. Others
raised concerns that a reduction could create adverse incentives for
substituting MDIs for nebulizers, even for patients where nebulizers
are the preferred delivery mechanism.
Some commenters suggested that it is premature to reduce the
dispensing fee. Some of these commenters asserted that CMS did not
provide any new cost data in the proposed rule that would warrant a
reduction. Several commenters stated costs had increased due to higher
fuel prices, unforeseen natural disasters, and wage inflation. Several
commenters pointed to the 2005 AAH study which indicated that the
average cost of shipping increased from $12.13 in 2004 to $14.41 in
2005. One commenter indicated that its overnight shipping costs were
between $27 to $40 per shipment. Another commenter cited a 12.5 percent
increase in the fuel surcharge cap for one large shipping company,
which they indicated would cause their delivery costs to increase an
additional 4 percent on top of prior increases. One commenter indicated
that its cost per shipment had increased by $0.40 due to increased fuel
costs in 2005, and it expected additional future increases. In urging
an increase in the fee to take into account inflation, another
commenter mentioned that it had consolidated the number of pharmacies
it operated to increase efficiency, but indicated that the number of
costs that could be reduced was limited. Another commenter stated that
we should not reduce the fee because the agency indicated in a October
8, 2004 letter to GAO that a fee of $55 to $64 was a reasonable range
for a 2005 fee. Other commenters asserted that experience with the ASP
system and the current dispensing fee is too limited to conclude there
are overpayments. One commenter stated that the payment reduction in
2005 was greater than the Congressional Budget Office or the CMS
Actuaries Office had projected prior to passage of the Medicare
Modernization Act. This commenter suggested actual levels in 2005
claims data be compared to original estimates before taking any action.
Response: As noted previously, we established the 2005 dispensing
fee using data from the 2004 AAH report. That report included costs for
a wide range of services beyond basic dispensing, such as patient
education, caregiver training, care coordination, and in-home visits.
As discussed previously, we believe these activities represent care
management services that should not fall within the scope of a
dispensing fee. Furthermore, the September 2005 OIG report found little
evidence that many beneficiaries receive these care management
services. Consequently, we are establishing a dispensing fee for 2006
using the 2004 AAH cost data excluding separable costs for care
management services. We believe this interpretation represents an
appropriate reading of the statute. Based on the 2004 AAH data for
homecare pharmacies, excluding costs for care coordination, in-home
visits, patient education, and caregiver training (as well as sales,
marketing, bad debt and profit which were also excluded last year
because Medicare does not generally reimburse those costs with respect
to Part B services), we are establishing a dispensing fee of $33 for a
30-day supply of inhalation drugs. Because greater levels of effort may
be involved in dispensing inhalation drugs when a patient begins these
drugs for the first time, we have decided to maintain the current $57
dispensing fee for the first 30-day period in which an individual uses
inhalation drugs as a Medicare beneficiary. Thus, beginning in 2006, we
will pay a dispensing fee of $57 for the first month an individual uses
inhalation drugs as a Medicare beneficiary, and $33 for a 30-day supply
of inhalation drugs for all other months.
Although some commenters urged an inflation adjustment, we do not
believe it is warranted for 2006 because we do not believe it is clear
that total dispensing costs have increased since the 2004 industry cost
data was collected. Although data from the 2004 industry report may not
reflect wage inflation or increased delivery costs due to fuel price
increases, it would also not include any efficiencies that providers
may have achieved as they have adjusted to the new payment system in
2005. The 2005 AAH report did not provide updated cost data for the
service categories included in the 2004 AAH report. Given that the 2004
AAH cost data would not reflect inflationary pressures, nor increased
efficiencies in business operations, it is uncertain whether an upward
or downward adjustment to the 2004 cost data should be made. As a
result, we believe it is best to use the 2004 AAH data as is. We will
consider the appropriateness of an inflation adjustment for the future.
Regarding concerns raised by some commenters about beneficiary
access, we believe, as discussed previously, that the fee level we are
establishing is appropriate to cover suppliers' dispensing costs, and
beneficiaries will maintain good access to inhalation drugs. The fee
amount is based on the 2004 AAH cost data for clinical intake,
establishing/revising the plan of care, delivery of services, refill
calls/compliance monitoring, billing/collections, ``other'' direct
costs, and indirect costs, excluding sales, marketing, bad debt, and
profit which are not reimbursed by Medicare. Having based the 2006
dispensing fee on industry cost data for those activities that we
believe fall within the scope of a dispensing fee, we believe the fees
are appropriate to cover providers' costs and will not impair access.
In addition, we will continue to monitor access to care.
Regarding concerns raised by some commenters about CMS lowering the
fee without the benefit of new cost data, we believe it is our
fiduciary responsibility to establish an appropriate payment for 2006.
As discussed previously, our decision is based on our determination
that certain services should not fall within the scope of the
dispensing fee and the OIG report which found that these services are
furnished infrequently to beneficiaries. We believe our decision to
lower the fee for 2006 is consistent with our October 8, 2004 letter to
the GAO, in which we stated that a dispensing fee in the range of $55
to $64 would be appropriate for the interim 2005 fee. Regarding the
comment that the savings from the ASP system are greater for inhalation
drugs than the savings projected by CBO or the CMS actuaries prior to
enactment of the MMA, we recognize the concerns regarding the shift
from a payment system based on AWP; however, we do not believe such
concerns are an appropriate consideration in determining the dispensing
fee for 2006. Medicare does not generally establish payment rates based
on budget projections. Rather, we use the most reliable cost data
available to establish
[[Page 70230]]
a payment rate that is consistent with the statute and appropriate for
Medicare covered services.
Comment: In response to our request for comments on providers'
experience with the dispensing fee for a 90-day supply, we received a
number of comments. One commenter pointed to the 2005 AAH survey, which
found that most respondents (77 percent) do not provide a 90-day
supply, and among those that do it represents 3 percent of their
business. Reasons cited by survey respondents for non-use of a 90-day
supply included--(1) 30-day supply promotes more contact with patients
and compliance monitoring; (2) patient prescriptions often change; and
(3) many suppliers believed the 90-day dispensing fee ($80 in 2005) was
not adequate to cover costs. Less than 1 percent indicated they do not
provide a 90-day supply because it is less profitable than a 30-day
supply. A few other commenters raised concerns about the 90-day
dispensing fee and provided similar reasons for non-use of the 90-day
supply as the 2005 AAH survey. In addition, one commenter cited
Medicare's refund requirements for unused drugs as being another reason
for non-use of the 90-day supply. However, one commenter suggested that
the 90-day supply is not used because it receives less reimbursement
overall than using the 30-day supply. A physician specialty group
supported the 90-day prescription because it reduces paperwork and
redundant efforts by patients, physicians, and DME suppliers.
Response: We agree with the physician specialty group that
dispensing a 90-day supply has merit; thus, we have continued the 90-
day dispensing fee for 2006. As cited by respondents to the 2005 AAH
study, a 30-day supply may be most appropriate for certain
beneficiaries such as those with changing prescriptions. However, for
those situations where it is medically appropriate, we believe it is
important to have a 90-day option available.
In the CY 2005 final rule, we calculated the 90-day dispensing fee
by taking direct costs for the 30-day fee and tripling indirect costs
(which was based on the methodology used in the October 2004 GAO
report). However, as discussed, some commenters voiced concern about
the adequacy of the 2005 90-day dispensing fee. Some commenters
supported the reimbursement amounts suggested by respondents in the
2005 AAH survey. In that survey, respondents suggested an average fee
for a 90-day supply ($138.80) that was roughly twice the amount they
suggested for a 30-day supply ($66.55). For 2006 using a 2 to 1 ratio
for the 90-day versus 30-day fee would yield a 90-day fee about 40
percent higher than our previous methodology. We believe it is
important that adequate reimbursement be available for the 90-day
option, as well as, the 30-day option. Therefore, using the 2 to 1
ratio recommended by commenters for the 90-day versus 30-day supply
payment rates, we are establishing a fee of $66 for a 90-day supply of
inhalation drugs for 2006.
Although we established two levels of dispensing fees for a 30-day
supply, an initial 30-day fee of $57 and a 30-day fee of $33 for all
other months, we do not believe a higher initial fee is warranted for a
90-day supply given that we do not believe a 90-day supply is generally
used when a beneficiary first begins inhalation drugs. A number of
commenters noted that the 90-day supply is not well-suited for patients
whose prescriptions are likely to change. We recognize that
beneficiaries who begin using inhalation drugs for the first time are
more likely than established patients to experience changes in drugs or
dosages, or to discontinue use altogether. Accordingly, we do not
believe it is appropriate to encourage use of a 90-day supply when a
beneficiary first begins using inhalation drugs by establishing a
higher initial 90-day fee. Consequently, given such concerns, we have
not provided two levels of dispensing fees with the 90-day option.
Comment: Some commenters noted that refill calls are a service
required by Medicare.
Response: We agree that Medicare requires that a supplier confirm
that a beneficiary needs a refill before sending a new shipment, and we
have included the costs of refill calls from the 2004 AAH report within
the dispensing fee.
Comment: A few commenters suggested that many of the activities
they carry out are required to maintain compliance with FDA, Medicare,
and State regulations, and with standards imposed by accrediting bodies
such as JCAHO. Some commenters noted that CMS has issued draft supplier
quality standards, and that they are required to provide certain
services as part of those standards. The commenters suggested that the
dispensing fee should accommodate their costs in these areas.
Response: With the exception of certain guidelines concerning
compounding, we do not believe that the requirements applicable to
inhalation drug suppliers are in general substantially different from
the requirements applicable to pharmacies dispensing other drugs.
Furthermore, we view costs such as regulatory compliance and quality
assurance as part of overhead, which we have included in the dispensing
fee based on the 2004 AAH cost data for overhead and other direct
costs. We also do not believe that the costs associated with regulatory
requirements applicable to equipment suppliers should be compensated
through the inhalation drug dispensing fee. The Medicare program makes
separate payments to equipment suppliers for rental/purchase of
nebulizers and maintenance, and regulatory requirements applicable to
equipment suppliers would be covered through the basic payment rates
for the equipment, not the Medicare payment rate for drugs or
dispensing.
Regarding the draft supplier quality standards that have been
released for comment, we note that the agency has adopted a two-step
process for developing those standards. An initial document with draft
quality standards for suppliers of several types of durable medical
equipment has been released for public comment. We expect to release a
second document that will clarify which quality standards apply to
inhalation drug suppliers. We expect that the standards applying to
inhalation drug suppliers will be consistent with accepted quality
standards for pharmacies. Furthermore, the standards will establish
minimum requirements for being a supplier, which we consider to be part
of the standard cost of doing business that is covered through our
basic payment rates. As with conditions of participations (COP) for
providers, we do not increase our payment rate as a result of a change
in COP requirements.
Comment: One commenter stated that section 1842(b)(3) of the Act
requires Medicare payments be reasonable. The commenter asserted that
the agency has established in Sec. 405.502(a) criteria for determining
what is reasonable, and stated that Medicare has a history of
recognizing and reimbursing services related to patient care.
Response: We recognize the commenter's concern regarding the
reasonableness of Medicare payments. We have based the dispensing fee
payment rates on industry cost data from the 2004 AAH report, which was
submitted as part of comments by AAH on the CY 2005 proposed rule, and
used in the CY 2005 final rule, to establish the 2005 dispensing fee.
To establish the 2006 dispensing fee, we have used the 2004 AAH cost
data excluding those services that fall outside the scope of a
dispensing fee.
[[Page 70231]]
Comment: Some commenters cited Medicare's drug payment rates (ASP+6
percent) as a reason the dispensing fee should remain the same or be
increased. One homecare pharmacy indicated that it could not obtain
drugs at ASP+6 percent. A few commenters stated that their costs exceed
reimbursement for drugs in cases where a physician writes brand
medically necessary and the drug is in a billing code that contains
both brand and generic drugs. An inhalation drug supplier indicated
that for three inhalation drugs its acquisition costs exceeded Medicare
reimbursement. Some commenters indicated Medicare drug payments (ASP+6
percent) were inadequate for a variety of reasons such as exclusion of
wholesaler markup from ASP, the lag time between sales for a quarter
and the inclusion of such information in the Medicare ASP+6 drug
payment rates, volatility in ASP+6 reimbursement from quarter to
quarter, and class of trade differences in pricing. One commenter
suggested that Medicare had addressed concerns about the adequacy of
ASP+6 percent reimbursement for oncology patients by implementing the
Demonstration of Improved Quality of Care for Cancer Patients
Undergoing Chemotherapy. They also suggested that the ASP+6 percent cap
on reimbursement for the upcoming Part B drug competitive acquisition
program (CAP) was a reason for its delay, because they asserted vendors
did not want to commit to a program where ASP+6 percent was the
reimbursement limit. The commenter stated that the issues it has
encountered with ASP+6 percent are similar to the issues faced by
oncologists and vendors under CAP program and therefore should be
addressed through the inhalation drug dispensing fee.
In addition, a few commenters suggested that Medicare payments for
equipment were inadequate, necessitating a substantial dispensing fee.
Response: Although some commenters stated that the dispensing fee
should account for drug acquisition costs in excess of the ASP+6
percent payment, we disagree. Section 1847A of the Act specifies that
the Medicare payment for inhalation drugs is at 106 percent of the ASP.
We believe the Congress established the ASP based payment for
inhalation drugs and separate authority for dispensing of these drugs
for good reason, namely to pay appropriately for each service and to
eliminate cross subsidization of services. Similarly, we believe
payment for nebulizer equipment is a distinct policy separate from the
dispensing fee, and one should not cross subsidize the other. In
establishing the dispensing fee of $33 for a 30-day supply of
inhalation drugs (and higher first month payment), we are focusing on
what we believe is the appropriate scope and payment for the dispensing
fee.
Although one commenter suggested that we had addressed perceived
issues about ASP+6 percent payment adequacy by implementing the
Demonstration of Improved Quality of Care for Cancer Patients
Undergoing Chemotherapy, we disagree. The purpose of the demonstration
program is to promote improvements in quality by measuring patient
outcomes in several areas of concern often cited by patients undergoing
chemotherapy, which can then be traced to treatments and outcomes. In
addition, we believe that the commenter's statement that the change in
the timeframe for implementation of the Medicare Part B drug CAP was a
result of the ASP+6 percent cap on vendor reimbursement is not accurate
and not related to the inhalation drug dispensing fee.
Comment: A few commenters expressed concern that the 30-day
dispensing fee is the same regardless of the number of prescriptions
dispensed. They noted that if a prescription is changed in the middle
of the 30-day period they do not receive an additional fee. They
suggested CMS consider a per script fee.
Response: The dispensing fee amount we have established is based on
the 2004 AAH report data, which presented average costs for a month.
Consequently, we believe our payment rate should be adequate to cover
situations where multiple prescriptions are provided. We will consider
the suggestion of a per script fee in future rulemaking, as necessary.
Comment: Several commenters indicated that our revised guidelines
concerning the timeframe for shipping refills had not reduced their
need to use of overnight shipping. An industry association indicated
that several factors often force overnight shipping such as hospitals
giving beneficiaries only a one or two dose supply and beneficiaries
waiting until they are out of medication to reorder. The 2005 AAH
survey indicated that the percent of shipments that were overnight
increased slightly from 56.3 percent in 2004 to 56.9 percent in 2005.
One commenter indicated that 60 percent of its shipments occur on an
overnight basis because of several factors such as needing multiple
calls to reach a beneficiary and new prescriptions reportedly needing
to be shipped overnight. The commenter urged us to permit refill calls
as needed to be ready to ship refill orders at least 7 days before the
patient's medication runs out. The commenter believes that this would
allow for ground shipping in most cases, including refill dates that
fall on weekends and 3-day holidays. One commenter suggested that the
30-day dispensing fee reimbursement guideline had reduced the amount of
drugs that they could ship in a month, necessitating more use of
overnight shipping. In addition, one commenter asserted if
beneficiaries come in for a refill before the end of the month, then
the pharmacy would receive no fee. While most commenters indicated that
the revised delivery timeframes had not had a substantial impact on
their delivery practices, one commenter indicated that 70 percent of
its shipment through the third quarter of 2005 were ground deliveries,
and they hoped to transition an additional 20 percent of shipments to
ground delivery in the fourth quarter of 2005 as a result of Medicare's
extension of the patient notification and shipment window.
Response: In the CY 2005 final rule, we made several administrative
changes aimed at reducing inhalation drug supplier costs, including
providing more flexible refill timeframes. We currently allow refills
to be sent up to approximately 5 days before the end of the current
usage period. To further facilitate the use of ground delivery, we are
in the process of working to expand this timeframe to allow refills to
be sent up to 7 days before the end of the current usage period. Under
this new delivery timeframe, we will allow a dispensing fee to be paid
up to 7 days before the end of current usage period, with up to 12
months of dispensing fees payable per year per beneficiary.
In addition, we note that for 2006, we are establishing a
dispensing fee of $57 for the first month an individual uses inhalation
drugs as a Medicare beneficiary because greater levels of effort may be
involved in dispensing inhalation drugs when a patient begins these
drugs for the first time, for example, following hospital discharge.
Comment: Many commenters responded to our request for comments on
the impact of Medicare Part D coverage of metered dose inhalers on
beneficiary access to care. A number of commenters asserted that they
did not believe there would be a substantial shift to MDIs when they
become covered under Medicare Part D. One commenter said that MDIs are
not a substitute for nebulizers, as many patients require nebulizers
due to inability to use MDIs properly, or physicians' experience has
shown nebulizers are more effective than MDIs.
[[Page 70232]]
Another commenter said that although research has not been able to
demonstrate the superiority of nebulizers to MDIs, nebulizers are the
standard of care for COPD and chronic lung diseases in the moderate to
severe stages. Other reasons commenters cited for their belief that
there would not be a substantial shift to MDIs include: Physician
inability to properly train patients on MDIs; patient familiarity with
nebulizer use gained during hospital stays; research suggesting patient
preference for nebulizers; potential use of nebulizers and MDIs by the
same patient; and potential differences in cost-sharing across Medicare
Part B and Part D. However, one physician specialty group said that it
anticipates many Medicare beneficiaries will migrate to MDIs, and those
that remain on nebulizers will be more frail and in need of more
personalized service.
Response: We believe expansion of Medicare coverage of inhalation
drugs to include MDIs under Medicare Part D will provide additional
options for treatment and positively impact access to care. As we
indicated in the proposed rule, we recognize that nebulizers are
required by many beneficiaries because of their individual
circumstances. We believe that physicians will choose the treatment
option that best meets a beneficiary's needs, and both nebulizers and
MDIs will play an important role in the Medicare program in the years
to come.
Comment: A health professional association asserted that
individuals that provide patient education on use of nebulizers, MDIs,
and dry powder inhalers (DPIs) should be qualified by virtue of
education, training, and competency testing. It also urged CMS to pay a
separate education fee to physicians when prescribing an MDI or dry
powder inhaler. The commenter also proposed various levels of fees for
initial and follow-up services.
Another commenter raised concerns about what it asserts is a trend
toward drop shipping respiratory related devices. The commenter
expressed concern that contact between a respiratory patient and
provider may disappear, raising potential concerns about correct usage
of the respiratory device.
Response: We agree that it is important that beneficiaries are
properly trained in the use of nebulizers. The Medicare program
provides that equipment suppliers either directly train the beneficiary
in the use of the nebulizer or ensure that the beneficiary has been
trained by other qualified individuals (Sec. 424.57(c)(12)). In
addition, under the physician fee schedule, Medicare will pay
physicians to train the beneficiary in the use of a nebulizer, MDI, or
inhalation device (CPT code 94664, demonstration and/or evaluation of
patient utilization of an aerosol generator, nebulizer, metered dose
inhaler or IPPB device).
Comment: One commenter stated that CMS evaded its notice and
comment rulemaking obligations under the Administrative Procedures Act
(APA) to collect meaningful data in support of an appropriate
dispensing fee. The commenter urged us to publish data in a subsequent
rule, and seek comment, before publishing a final payment rate for
2006.
Response: In the August 8, 2005 proposed rule, we identified and
reviewed available studies and data on the cost of providing inhalation
drugs, sought comment as well as additional data and information
concerning an appropriate payment amount and scope, and indicated that
we thought it likely that the payment amount for 2006 would be lower
than the current amount. Furthermore, in establishing the 2006
dispensing fee, we analyzed the available studies and data in response
to comments received on the proposed rule and based on that analysis
have continued to use the 2004 AAH data that was identified in the
proposed rule and also used to establish the 2005 fee. Furthermore, as
discussed previously, it is our opinion that the rates established in
this rule are appropriate in light of the statute and our understanding
of Congressional intent. We believe, therefore, this met our
obligations under the APA.
Comment: One commenter took issue with our description in the
proposed rule of inhalation drugs as supplies.
Response: Medicare coverage of inhalation drugs is derived from
their use in covered nebulizers. For Medicare coverage purposes, they
are considered covered supplies.
Comment: A few commenters expressed concern about precedents
Medicare Part B will set for Medicare Part D. They asserted that 90-day
scripts are not appropriate for nursing home patients.
Response: The Medicare Part B policy concerning a 90-day dispensing
fee does not carry over to Medicare Part D.
Comment: Although the assignment of benefits form (AOB) has been
eliminated, one commenter noted that the requirement to obtain a
payment authorization signed by the beneficiary before submitting the
claim diminishes the benefit of eliminating the AOB. The commenter
urged CMS to eliminate the requirement for signed payment authorization
for providers and those reimbursed based on assignment only.
Response: We thank the commenter for the comment. CMS is reviewing
the beneficiary signature requirement for claims submission in light of
the elimination of the AOB form in instances of mandatory assignment.
However, CMS currently requires a beneficiary signature for claims
submission.
Comment: One drug manufacturer suggested that compounding that
attempts to mimic production of commercially available products
threatens patient safety. The commenter urged CMS to structure the
dispensing fee to reduce the likelihood of inappropriate compounding.
The commenter also suggested code modifiers for pharmacy-compounded
medications to help identify their occurrence. Another drug
manufacturer suggested that reducing the dispensing fee could spur
suppliers to provide compounded versions of commercially available
products without physician or patient authorization. The commenter
suggested that we review supplier documentation to ensure compounded
solutions are only furnished where documentation supports medical
necessity of a customized product.
Response: The inclusion of costs for pharmacy compounding in the
dispensing fee is not in any way an endorsement of compounding that is
inconsistent with FDA guidelines. Furthermore, Medicare expects that
pharmacies comply with FDA guidelines irrespective of the dispensing
fee payment amount established. We understand the concerns the
commenters raised and will consider the issues further.
Comment: One commenter urged us to require code modifiers for
claims associated with patient compounding of inhalation drugs. The
commenter asserts that when a physician writes a prescription for a
compounded drug, the inhalation drug supplier has an incentive to
dispense the drugs separately in order to obtain two dispensing fees.
The commenter asserts that implementing the modifiers would allow us to
pay only one dispensing fee, instead of two, under these circumstances.
Response: Medicare pays only one dispensing fee per 30-day (or 90-
day) period, regardless of the number of drugs dispensed. As a result,
these modifiers would not affect Medicare expenditures.
Comment: We received some comments in response to our request for
information about why there is substantial variation in costs across
[[Page 70233]]
suppliers. A few commenters suggested that many beneficiaries receive
services from small providers who may have higher costs.
Response: We appreciate the comments. We note that the GAO report,
which showed wide cost variation, found that larger suppliers did not
necessarily have lower costs than small suppliers. We continue to
believe that this is an issue that might benefit from further study.
5. Supplying Fee
Section 303(e)(2) of the MMA added section 1842(o)(6) of the Act
which requires the Secretary to pay a supplying fee (less applicable
deductible and coinsurance) to pharmacies for certain Medicare Part B
drugs and biologicals, as determined appropriate by the Secretary. The
types of Medicare Part B drugs and biologicals eligible for a supplying
fee are immunosuppressive drugs described in section 1861(s)(2)(J) of
the Act, oral anticancer chemotherapeutic drugs described in section
1861(s)(2)(Q) of the Act, and oral anti-emetic drugs used as part of an
anticancer chemotherapeutic regimen described in section 1861(s)(2)(T)
of the Act.
Beginning with CY 2005, Medicare established a supplying fee of $24
per prescription for these categories of drugs, with a higher fee of
$50 for the initial oral immunosuppressive prescription supplied in the
first month after a transplant. When multiple drugs are supplied to a
beneficiary, a separate supplying fee is paid for each prescription,
except when different strengths of the same drug are supplied on a
single day. When we established the $24 supplying fee in the CY 2005
final rule (69 FR 66236), we indicated that we were establishing a rate
higher than that of other payers due to the additional costs associated
with Medicare Part B's lack of online claims adjudication.
As part of the August 8, 2005 proposed rule (70 FR 45848), we
proposed changes to the supplying fee for multiple prescriptions
supplied during the same month. We proposed to continue paying $24 for
the first prescription supplied during a month (or $50 for the first
oral immunosuppressive prescription supplied in the first month after a
transplant) and a supplying fee of $8 for each additional prescription
the pharmacy supplied to the beneficiary during the same month. Each
pharmacy supplying these drugs to a beneficiary during a month would be
entitled to one $24 supplying fee per beneficiary during that month. In
making this proposal, we indicated that when a pharmacy supplies
multiple drugs to a beneficiary during the same month, many of which
are likely to be supplied on the same day, we were concerned that we
were overpaying for the costs associated with our lack of online claims
adjudication. Furthermore, we indicated that we believe that the $24
supplying fee for the first prescription would adequately compensate a
supplier for the billing costs associated with the lack of on-line
claims adjudication, and that the cost of supplying additional
prescriptions in the same month should be comparable to that of other
payers.
We also proposed to expand the circumstances under which we pay
supplying fees for multiple prescriptions filled on the same day.
Currently, we pay a supplying fee for each prescription supplied on the
same day as long as the prescriptions are for different drugs. We
proposed to pay a supplying fee for each prescription, even if the
prescriptions are for different strengths of the same drug.
We requested comments about the appropriateness of our proposed
supplying fee for multiple prescriptions supplied during a single month
along with data and information about the incremental costs of
supplying additional prescriptions to a Medicare beneficiary during a
single month. We also asked for comments about how pharmacy costs and
reimbursement for supplying oral drugs under Medicare compares to that
of other payers.
We received numerous comments regarding our supplying fee
proposals. Those comments and responses are provided below.
Comment: Numerous commenters were supportive of our proposal to
expand the circumstances under which we pay a supplying fee to include
paying separate fees when multiple strengths of the same drug are
supplied on the same day. However, many commenters expressed concern
about our proposal to pay a supplying fee of $24 to a pharmacy for the
first prescription and $8 for all subsequent prescriptions supplied in
a 30-day period. Commenters generally urged no reduction in the
supplying fee when multiple prescriptions are provided in the same
month, and a few urged a payment increase. In opposing the $8
subsequent fee, some commenters stated that the agency had included no
new cost data in the proposed rule to support a reduction. At the same
time, some commenters provided cost information as part of their
comments.
A few commenters indicated that the cost of supplying a drug for an
insurer with online claims adjudication had increased from $8 (as cited
in the proposed rule) to $9 to $10 based on new studies. An association
representing chain drug stores provided information from a few large
chains indicating that the average cost to supply a Medicare Part B
prescription was between $19 and $21, noting that small chains or
independent pharmacies may have higher costs. The association asserted
that the current $24 fee was reasonable considering the fact that
Medicare currently does not pay separate supplying fees for different
strengths of the same drug supplied on the same day. The association
urged us to consider an increase in the $24 fee to take into account
inflation, and an increase in the $50 fee for the first prescription
after a transplant to compensate for the intense patient monitoring
that the association indicated was needed. A large chain pharmacy
indicated its average cost of supplying a Medicare prescription was
$19.02, which included $5.54 for bad debt.
An association for specialty transplant pharmacies submitted data
suggesting that Medicare's reimbursement (combined payment for the drug
and supplying fee) to these pharmacies for 2 large volume
immunosuppressive drugs is comparable or lower than that of Medicaid or
private payers. This association pointed to a 2004 report prepared by a
consultant, which indicated that specialty pharmacy costs for
immunosuppressive drugs for Medicare patients averaged about $35. This
association also indicated that transplant pharmacies have higher costs
because they offer more extensive services, routinely stock specialty
medicines and maintain regular and consistent contact with their
Medicare clients. The association suggested that these services should
be compensated through the supplying fee. In addition, this association
also claimed that chain pharmacy data collected in a similar manner to
the specialty pharmacy data yield costs of $21. The group asserted that
the chain costs appear lower than the specialty pharmacy costs in part
because chains supply items such as diabetic test-strips, which they
indicate cost less to supply.
In opposing a reduction in the supplying fee for subsequent
prescriptions in a month, a number of commenters took issue with the
rationale provided in the proposed rule for the reduction, saying that
there are not economies of scale in processing Medicare claims when
multiple prescriptions are provided in the same month. Many commenters
outlined costs associated with billing Medicare.
[[Page 70234]]
Because of the lack of online claims adjudication, some stated that
there was more bad debt associated with Medicare Part B claims. Other
commenters indicated that it takes longer to process a Medicare claim
because of the requirement of a signed order from the physician as well
as the lack of online claims adjudication. Some commenters indicated
that without online claims adjudication, pharmacies must call the DMERC
to check the beneficiary's deductible as well as verify whether the
beneficiary is still enrolled in traditional Medicare as opposed to
Medicare Advantage. Other commenters indicated that the lack of online
claims adjudication and automatic cross over claims means that they may
have to refund a beneficiary's coinsurance if it is later determined
that the beneficiary has supplemental insurance. Other billing
activities and requirements that commenters cited as creating added
costs include: contracting with a special entity to convert Medicare
Part B claims from the NCPDP format to ANSI X837; working with
physicians to determine whether oral anticancer or anti-emetic drugs
are being prescribed for Medicare Part B covered indications; having to
submit the unique physician identifying number (UPIN) on the claim; and
Medicare's requirement that the date of service and date of
prescription be the same.
Although most commenters did not support the proposal for a reduced
fee when multiple prescriptions are supplied in a month, one health
insurer commented that the current supplying fee payment amounts appear
high, and put upward pressure on commercial rates.
Response: As we indicated in the CY 2005 final rule (69 FR 66236),
we recognize that the cost of supplying Medicare Part B drugs is
somewhat higher than that of other payers because of the lack of on-
line claims adjudication for Medicare Part B claims. We believe it is
appropriate for Medicare's supplying fee to compensate for the Medicare
billing costs associated with the lack of online claims adjudication.
However, as we indicated last year, we do not believe the supplying fee
for these drugs should be higher than other payers for reasons other
than the lack of on-line claims adjudication.
The comments included information on the costs of supplying
Medicare Part B drugs for some chain pharmacies. One chain reported
Medicare costs of $14.48 ($19.02 - $5.54 non-reimbursed bad debt). A
retail pharmacy association commented that a few chains had indicated
that their costs of supplying a Medicare Part B prescription were
between $19-$21 per prescription (without indicating whether bad debt
was included). Furthermore, as we indicated in the August 14, 2004
final rule (69 FR 66236), our analysis of data from a 2004 survey of
specialty pharmacies yields a supplying fee in the range of $13-$27
depending on the proportion of personnel costs assumed to be associated
with Medicare billing. This range was developed by using a figure of $5
or $10 for the payment rates of payers with on-line adjudication, and
adding to that Medicare claims processing costs from the specialty
pharmacy data ($8), and a portion of personnel costs from the specialty
pharmacy data (total was $9) assumed to be related to Medicare billing.
This results in supplying fee between $13 ($5 + $8) and $27 ($10 + $8 +
$9), depending on the portion of personnel costs associated with
Medicare billings.
Based on this information from chains and specialty pharmacies, we
agree that an $8 fee for subsequent prescriptions is too low. However,
as discussed in more detail subsequently, our analysis of the cost
information from the comments has led us to believe that a subsequent
prescription supplying fee that is slightly lower than $24 would be
appropriate. Based on our analysis, we believe that a $24 fee for the
first prescription in a 30-day period, and a $16 fee per prescription
for all subsequent prescriptions in the 30-day period would be
consistent with the cost information included in the comments. Under
this fee structure, reimbursement to a pharmacy for the supplying fee
would average $24 for a patient with 1 prescription in a 30-day period,
$20 per prescription for patients with 2 prescriptions, $18.67 per
prescription for a patient with 3 prescriptions, and $18 per
prescription for a patient with 4 pres