FR Doc E8-14949

[Federal Register: July 7, 2008 (Volume 73, Number 130)]
[Proposed Rules]
[Page 38501-38881]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07jy08-23]

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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 Parts 405, 409, 410 et al.

Medicare Program; Revisions to Payment Policies Under the Physician Fee
Schedule and Other Revisions to Part B for CY 2009; and Revisions to
the Amendment of the E-Prescribing Exemption for Computer Generated
Facsimile Transmissions; Proposed Rule

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 409, 410, 411, 414, 415, 424, 485, and 486

[CMS-1403-P]
RIN 0938-AP18

Medicare Program; Revisions to Payment Policies Under the
Physician Fee Schedule and Other Revisions to Part B for CY 2009; and
Revisions to the Amendment of the E-Prescribing Exemption for Computer
Generated Facsimile Transmissions; Proposed Rule

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would address proposed changes to Medicare
Part B payment policy. We are proposing these changes to ensure that
our payment systems are updated to reflect changes in medical practice
and the relative value of services. This proposed rule also discusses
refinements to resource-based practice expense (PE) relative value
units (RVUs); geographic practice cost indices (GPCI) changes;
malpractice RVUs; requests for additions to the list of telehealth
services; several coding issues; payment for covered outpatient drugs
and biologicals; the competitive acquisition program (CAP); application
of health professional shortage area (HPSA) bonus payments; payment for
renal dialysis services; performance standards for mobile independent
diagnostic testing facilities; and physician and nonphysician
practitioners furnishing diagnostic testing services; a solicitation
for comments regarding the use of the Federal Payment Levy Program to
recover delinquent Federal tax debts; a proposed amendment to the
exemption for computer-generated facsimile transmissions from the
National Council for Prescription Drug Programs (NCPDP) SCRIPT standard
for transmitting prescription and certain prescription-related
information for Part D covered drugs prescribed for Part D eligible
individuals; conforming and clarifying changes for comprehensive
outpatient rehabilitation facilities (CORFs); revisions for
rehabilitation agencies; therapy-related technical corrections; the
physician quality reporting initiative; physician self-referral issues
and anti-markup; beneficiary signature for nonemergency ambulance
transport; the chiropractic services demonstration; educational
requirements for nurse practitioners and clinical nurse specialists;
qualifications of portable x-ray supplier personnel; the expiration of
provisions of the Medicare, Medicaid, and SCHIP Extension Act of 2007;
bonus payments for long ambulance transports; the annual update for
clinical laboratory fees under the clinical laboratory fee schedule;
physician certification/recertification for home health services; a
prohibition concerning providers of sleep tests; organ retrieval; a
revision to the ``Appeals of CMS or CMS contractor Determinations When
a Provider or Supplier Fails to Meet the Requirements for Medicare
Billing Privileges'' final rule; and, potentially misvalued services
under the physician fee schedule.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than August 29, 2008.

ADDRESSES: In commenting, please refer to file code CMS-1403-P. 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 this
regulation to Follow the instructions for ``Comment or Submission'' and
enter the filecode to find the document accepting comments.
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-1403-P, P.O. Box 8013, Baltimore, MD 21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1403-P, 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 either of the following addresses:
a. Room 445-G, Hubert H. Humphrey Building, 200 Independence
Avenue, SW., Washington, DC 20201.

(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.)

b. 7500 Security Boulevard, Baltimore, MD 21244-1850.

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 practice expense
methodology.
Stephanie Monroe, (410) 786-6864, for issues related to malpractice
RVUs.
Esther Markowitz, (410) 786-4595, for issues related to telehealth
services.
Craig Dobyski, (410) 786-4584, for issues related to geographic
practice cost indices.
Ken Marsalek, (410) 786-4502, for issues related to the multiple
procedure payment reduction for diagnostic imaging.
Catherine Jansto, (410) 786-7762, or Cheryl Gilbreath, (410) 786-
5919, for issues related to payment for covered outpatient drugs and
biologicals.
Edmund Kasaitis, (410) 786-0477, or Bonny Dahm (410) 786-4006, for
issues related to the Competitive Acquisition Program (CAP) for Part B
drugs.
Corrine Axelrod, (410) 786-5620, for issues related to Health
Professional Shortage Area Bonus Payments.

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Henry Richter, (410) 786-4562, for issues related to payments for
end-stage renal disease facilities.
August Nemec, (410) 786-0612, for issues related to independent
diagnostic testing facilities and enrollment issues; and the revision
to the ``Appeals of CMS or CMS contractor Determinations When a
Provider or Supplier Fails to Meet the Requirements for Medicare
Billing Privileges'' final rule.
Lisa Ohrin, (410) 786-4565, for issues related to incentive payment
and shared saving programs.
Don Romano, (410) 786-1401, for issues related to anti-markup
provisions.
Diane Stern, (410) 786-1133, for issues related to the quality
reporting system for physician payment for CY 2009.
Andrew Morgan, (410) 786-2543, for issues related to the e-
prescribing exemption for computer generated fax transmissions.
Terri Harris, (410) 786-6830, for issues related to payment for
comprehensive outpatient rehabilitation facilities (CORFs).
Lauren Oviatt, (410) 786-4683, for issues related to CORF
conditions of coverage.
Trisha Brooks, (410) 786-4561, for issues related to personnel
standards for portable x-ray suppliers.
David Walczak, (410) 786-4475, for issues related to beneficiary
signature for non-emergency ambulance transport services.
Jean Stiller, (410) 786-0708, for issues related to the prohibition
concerning providers of sleep tests
Mark Horney, (410) 786-4554, for issues related to the solicitation
for comments and data pertaining to physician organ retrieval services.
Diane Milstead, (410) 786-3355, or Gaysha Brooks, (410) 786-9649,
for all other issues.

SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
[CMS-1403-P] 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 the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://
www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.

Table of Contents

To assist readers in referencing sections contained in this
preamble, we are providing a table of contents. Some of the issues
discussed in this preamble affect the payment policies, but do not
require changes to the regulations in the Code of Federal Regulations
(CFR). Information on the regulation's impact appears throughout the
preamble, and therefore, is not exclusively in section VI. of this
proposed rule.

I. Background
A. Development of the Relative Value System
1. Work RVUs
2. Practice Expense Relative Value Units (PE RVUs)
3. Resource-Based Malpractice RVUs
4. Refinements to the RVUs
5. Adjustments to RVUs are Budget Neutral
B. Components of the Fee Schedule Payment Amounts
C. Most Recent Changes to the Fee Schedule
II. Provisions of the Proposed Regulation
A. Resource-Based Practice Expense (PE) Relative Value Units
(RVUs)
1. Current Methodology
2. PE Proposals for CY 2009
B. Geographic Practice Cost Indices (GPCIs): Locality Discussion
C. Malpractice RVUs (TC/PC issue)
D. Medicare Telehealth Services
E. Specific Coding Issues related to Physician Fee Schedule
F. Part B Drug Payment
1. Average Sales Price (ASP) Issues
2. Competitive Acquisition Program (CAP) Issues
G. Application of the HPSA Bonus Payment
H. Provisions Related to Payment for Renal Dialysis Services
Furnished by End-Stage Renal Disease (ESRD) Facilities
I. Independent Diagnostic Testing Facility (IDTF) Issues
J. Physician and Nonphysician Practitioner (NPP) Enrollment
Issues
K. Proposed Amendment to the Exemption for Computer-Generated
Facsimile Transmission from the National Council for Prescription
Drug Programs (NCPDP) SCRIPT Standard for Transmitting Prescription
and Certain Prescription-Related Information for Part D Eligible
Individuals
L. Comprehensive Outpatient Rehabilitation Facilities (CORF) and
Rehabilitation Agency Issues
M. Technical Corrections for Therapy-Related Issues
N. Physician Self-Referral and Anti-Markup Issues
O. Physician Quality Reporting Initiative
P. Discussion of Chiropractic Services Demonstration
Q. Educational Requirements for Nurse Practitioners and Clinical
Nurse Specialists
R. Portable X-Ray Issue
S. Expiring Provisions and Related Discussions
T. Other Issues
1. Physician Certification (G0180) and Recertification (G0179)
for Medicare-Covered Home Health Services under a Home Health Plan
of Care (POC) in the Home Health Prospective Payment System (HH PPS)
2. Prohibition Concerning Providers of Sleep Tests
3. Beneficiary Signature for Nonemergency Ambulance Transport
Services
4. Solicitation of Comments and Data Pertaining to Physician
Organ Retrieval Services
5. Revision to the ``Appeals of CMS or CMS contractor
Determinations When a Provider or Supplier Fails to Meet the
Requirements for Medicare Billing Privileges'' Final Rule
III. Potentially Misvalued Services under Physician Fee Schedule
IV. Collection of Information Requirements
V. Response to Comments
VI. Regulatory Impact Analysis
Regulation Text
Addendum A--Explanation and Use of Addendum B
Addendum B--2009 Relative Value Units and Related Information
Used in Determining Medicare Payments for 2008
Addendum C--[Reserved for Final Rule]
Addendum D--Proposed 2009 Geographic Adjustment Factors (GAFs)
Addendum E--Proposed 2009* Geographic Practice Cost Indices
(GPCIs) by State and Medicare Locality
Addendum F--Multiple Procedure Reduction Code List
Addendum G--FY 2009 Wage Index for Urban Areas Based On CBSA
Labor Market Areas (ESRD)
Addendum H--FY 2009 Wage Index based on CBSA Labor Market Areas
for Rural Areas (ESRD)

Acronyms

In addition, because of the many organizations and terms to
which we refer by acronym in this final rule with comment period, we
are listing these acronyms and their corresponding terms in
alphabetical order below:
ACC American College of Cardiology
ACR American College of Radiology
AFROC Association of Freestanding Radiation Oncology Centers
AHA American Heart Association

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AHRQ [HHS'] Agency for Healthcare Research and Quality
AIDS Acquired immune deficiency syndrome
AMA American Medical Association
AMP Average manufacturer price
AOA American Osteopathic Association
ASC Ambulatory surgical center
ASP Average sales price
ASRT American Society of Radiologic Technologists
ASTRO American Society for Therapeutic Radiology and Oncology
ATA American Telemedicine Association
AWP Average wholesale price
BBA Balanced Budget Act of 1997 (Pub. L. 105-33)
BBRA [Medicare, Medicaid and State Child Health Insurance Program]
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection
Act of 2000 (Pub. L. 106-554)
BLS Bureau of Labor Statistics
BN Budget neutrality
CABG Coronary artery bypass graft
CAD Coronary artery disease
CAH Critical access hospital
CAHEA Committee on Allied Health Education and Accreditation
CAP Competitive acquisition program
CBSA Core-Based Statistical Area
CCHIT Certification Commission for Healthcare Information Technology
CEAMA Council on Education of the American Medical Association
CF Conversion factor
CfC Conditions for Coverage
CFR Code of Federal Regulations
CKD Chronic kidney disease
CLFS Clinical laboratory fee schedule
CMA California Medical Association
CMP Civil money penalty
CMS Centers for Medicare & Medicaid Services
CNS Clinical nurse specialist
CoP Condition of participation
CORF Comprehensive Outpatient Rehabilitation Facility
CPAP Continuous positive air pressure
CPEP Clinical Practice Expert Panel
CPI Consumer Price Index
CPI-U Consumer price index for urban customers
CPT [Physicians'] Current Procedural Terminology (4th Edition, 2002,
copyrighted by the American Medical Association)
CRT Certified respiratory therapist
CY Calendar year
DHS Designated health services
DME Durable medical equipment
DMEPOS Durable medical equipment, prosthetics, orthotics, and
supplies
DNP Doctor of Nursing Practice
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
DSMT Diabetes self-management training
E/M Evaluation and management
EDI Electronic data interchange
EEG Electroencephalogram
EHR Electronic health record
EKG Electrocardiogram
EMG Electromyogram
EOG Electro-oculogram
EPO Erythopoeitin
ESRD End-stage renal disease
FAX Facsimile
FDA Food and Drug Administration (HHS)
FFS Fee-for-service
FMS [Department of the Treasury's] Financial Management Service
FPLP Federal Payment Levy Program
FR Federal Register
GAF Geographic adjustment factor
GAO General Accounting Office
GPO Group purchasing organization
GPCI Geographic practice cost index
HAC Hospital-acquired conditions
HCPAC Health Care Professional Advisory Committee
HCPCS Healthcare Common Procedure Coding System
HCRIS Healthcare Cost Report Information System
HH PPS Home Health Prospective Payment System
HHA Home health agency
HHRG Home health resource group
HHS [Department of] Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191)
HIT Health information technology
HITSP Healthcare Information Technology Standards Panel
HIV Human immunodeficiency virus
HPSA Health Professional Shortage Area
HRSA Health Resources Services Administration (HHS)
ICF Intermediate care facilities
ICR Information collection requirement
IDTF Independent diagnostic testing facility
IFC Interim final rule with comment period
IPPS Inpatient prospective payment system
IRS Internal Revenue Service
IVIG Intravenous immune globulin
IWPUT Intra-service work per unit of time
JRCERT Joint Review Committee on Education in Radiologic Technology
MA Medicare Advantage
MA-PD Medicare Advantage-Prescription Drug Plans
MedCAC Medicare Evidence Development and Coverage Advisory Committee
(formerly the Medicare Coverage Advisory Committee (MCAC))
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MIEA-TRHCA Medicare Improvements and Extension Act of 2006 (that is,
Division B of the Tax Relief and Health Care Act of 2006 (TRHCA)
(Pub. L. 109-432)
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173)
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L.
110-173)
MNT Medical nutrition therapy
MP Malpractice
MPPR Multiple procedure payment reduction
MQSA Mammography Quality Standards Act of 1992 (Pub. L. 102-539)
MRA Magnetic resonance angiography
MRI Magnetic resonance imaging
MS-DRG Medicare Severity-Diagnosis related group
MSA Metropolitan statistical area
NCD National Coverage Determination
NCPDP National Council for Prescription Drug Programs
NDC National drug code
NISTA National Institute of Standards and Technology Act
NP Nurse practitioner
NPI National Provider Identifier
NPP Nonphysician practitioner
NQF National Quality Forum
NTTAA National Technology Transfer and Advancement Act of 1995 (Pub.
L. 104-113)
OACT [CMS'] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act
OIG Office of Inspector General
OMB Office of Management and Budget
ONC [HHS'] Office of the National Coordinator for Health Information
Technology
OPPS Outpatient prospective payment system
OSA Obstructive Sleep Apnea
OSCAR Online Survey and Certification and Reporting
P4P Pay for performance
PA Physician assistant
PC Professional component
PCF Patient compensation fund
PDP Prescription drug plan
PE Practice expense
PE/HR Practice expense per hour
PEAC Practice Expense Advisory Committee
PECOS Provider Enrollment, Chain, and Ownership System
PERC Practice Expense Review Committee
PFS Physician Fee Schedule
PIM [Medicare] Program Integrity Manual
PLI Professional liability insurance
POC Plan of care
PPI Producer price index
PPS Prospective payment system
PQRI Physician Quality Reporting Initiative
PRA Paperwork Reduction Act
PSA Physician scarcity areas
PSG Polysomnography
PT Physical therapy
RFA Regulatory Flexibility Act
RIA Regulatory impact analysis
RN Registered nurse
RNAC Reasonable net acquisition cost
RRT Registered respiratory therapist
RUC [AMA's Specialty Society] Relative (Value) Update Committee
RVU Relative value unit
SBA Small Business Administration
SGR Sustainable growth rate
SLP Speech-language pathology
SMS [AMA's] Socioeconomic Monitoring System
SNF Skilled nursing facility
SOR System of record
TC Technical Component
TIN Tax identification number
TRHCA Tax Relief and Health Care Act of 2006 (Pub. L. 109-432)
UPMC University of Pittsburgh Medical Center
USDE United States Department of Education
VBP Value-based purchasing
WAMP Widely available market price

I. Background

[If you choose to comment on issues in this section, please include
the

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caption ``BACKGROUND'' at the beginning of your comments.]
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 relative resources used in furnishing a
service. Section 1848(c) of the Act requires that national RVUs be
established for physician work, practice expense (PE), and malpractice
expense. Before the establishment of the resource-based relative value
system, Medicare payment for physicians' services was based on
reasonable charges.

A. Development of the Relative Value System

1. Work RVUs
The concepts and methodology underlying the PFS were enacted as
part of the Omnibus Budget Reconciliation Act (OBRA) of 1989 (Pub. L.
101-239), and OBRA 1990, (Pub. L. 101-508). The final rule, published
on November 25, 1991 (56 FR 59502), set forth the fee schedule for
payment for physicians' services beginning January 1, 1992. Initially,
only the physician work RVUs were resource-based, and the PE and
malpractice RVUs were based on average allowable charges.
The physician work RVUs established for the implementation of the
fee schedule in January 1992 were developed with extensive input from
the physician community. A research team at the Harvard School of
Public Health developed the original physician work RVUs for most codes
in a cooperative agreement with the Department of Health and Human
Services (DHHS). In constructing the code-specific vignettes for the
original physician work RVUs, Harvard worked with panels of experts,
both inside and outside the Federal government, and obtained input from
numerous physician specialty groups.
Section 1848(b)(2)(B) of the Act specifies that the RVUs for
anesthesia services are based on RVUs from a uniform relative value
guide. We established a separate conversion factor (CF) for anesthesia
services, and we continue to utilize time units as a factor in
determining payment for these services. As a result, there is a
separate payment methodology for anesthesia services.
We establish physician work RVUs for new and revised codes based on
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 general categories of expenses (such as office rent and wages
of personnel, but excluding malpractice expenses) comprising PEs.
Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L.
105-33), amended section 1848(c)(2)(C)(ii) of the Act to delay
implementation of the resource-based PE RVU system until January 1,
1999. In addition, section 4505(b) of the BBA provided for a 4-year
transition period from charge-based PE RVUs to resource-based RVUs.
We established the resource-based PE RVUs for each 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 (RNs)) 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. We have since
refined and revised these inputs based on recommendations from the RUC.
The AMA's SMS data provided aggregate specialty-specific information on
hours worked and PEs.
Separate PE RVUs are established for procedures that can be
performed in both a nonfacility setting, such as a physician's office,
and a facility setting, such as a hospital outpatient department. The
difference between the facility and nonfacility RVUs reflects the fact
that a facility typically receives separate payment from Medicare for
its costs of providing the service, apart from payment under the PFS.
The nonfacility RVUs reflect all of the direct and indirect PEs of
providing a particular service.
Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA)
(Pub. L. 106-113) directed the Secretary of Health and Human Services
(the Secretary) to establish a process under which we accept and use,
to the maximum extent practicable and consistent with sound data
practices, data collected or developed by entities and organizations to
supplement the data we normally collect in determining the PE
component. On May 3, 2000, we published the interim final rule (65 FR
25664) that set forth the criteria for the submission of these
supplemental PE survey data. The criteria were modified in response to
comments received, and published in the Federal Register (65 FR 65376)
as part of a November 1, 2000 final rule. The PFS final rules published
in 2001 and 2003, respectively, (66 FR 55246 and 68 FR 63196) extended
the period during which we would accept these supplemental data through
March 1, 2005.
In CY 2007 PFS final rule with comment period (71 FR 69624), we
revised the methodology for calculating PE RVUs beginning in CY 2007
and provided for a 4-year transition for the new PE RVUs under this new
methodology. We will continue to evaluate this policy and proposed
necessary revisions through future rulemaking.
3. Resource-Based Malpractice (MP) RVUs
Section 4505(f) of the BBA amended section 1848(c) of the Act
requiring us to implement resource-based malpractice (MP) RVUs for
services furnished on or after 2000. The resource-based MP RVUs were
implemented in the PFS final rule published November 2, 1999 (64 FR
59380). The MP RVUs were based on malpractice insurance premium data
collected from commercial and physician-owned insurers from all the
States, the District of Columbia, and Puerto Rico.
4. Refinements to the RVUs
Section 1848(c)(2)(B)(i) of the Act requires that we review all
RVUs no less often than every 5 years. The first 5-Year Review of the
physician work RVUs was published on November 22, 1996 (61 FR 59489)
and was effective in 1997. The second 5-Year Review was published in
the CY 2002 PFS final rule with comment period (66 FR 55246) and was
effective in 2002. The third 5-Year Review of physician work RVUs was
published in the CY 2007 PFS final rule with comment period (71 FR
69624) and was effective on January 1, 2007. (Note: Additional codes
relating to the third 5-

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Year Review of physician work RVUs were addressed in the CY 2008 PFS
final rule with comment period (72 FR 66360).)
In 1999, the AMA's RUC established the Practice Expense Advisory
Committee (PEAC) for the purpose of refining the direct PE inputs.
Through March 2004, the PEAC provided recommendations to CMS for over
7,600 codes (all but a few hundred of the codes currently listed in the
AMA's Current Procedural Terminology (CPT) codes). As part of the CY
2007 PFS final rule with comment period (71 FR 69624), we implemented a
new methodology for determining resource-based PE RVUs and are
transitioning this over a 4-year period.
In the CY 2005 PFS final rule with comment period (69 FR 66236), we
implemented the first 5-Year Review of the MP 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.
As explained in the CY 2007 PFS final rule with comment period (71
FR 69624), due to the increase in work RVUs resulting from the third 5-
Year Review of physician work RVUs, we applied a separate budget
neutrality (BN) adjustor to the work RVUs for services furnished during
2007. This approach is consistent with the method we use to make BN
adjustments to the PE RVUs to reflect the changes in these PE RVUs.

B. Components of the Fee Schedule Payment Amounts

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

Payment = [(RVU work x budget neutrality adjustor (round product to two
decimal places) x GPCI work) + (RVU PE x GPCI PE) + (RVU malpractice x
GPCI malpractice)] x CF.

C. Most Recent Changes to the Fee Schedule

The CY 2008 PFS final rule with comment period (72 FR 66222)
addressed certain provisions of Division B of the Tax Relief and Health
Care Act of 2006--Medicare Improvements and Extension Act of 2006 (Pub.
L. 109-432) (MIEA-TRHCA), and made other changes to Medicare Part B
payment policy to ensure that our payment systems are updated to
reflect changes in medical practice and the relative value of services.
The CY 2008 PFS final rule with comment period also discussed
refinements to resource-based PE RVUs; GPCI changes; malpractice RVUs;
requests for additions to the list of telehealth services; several
coding issues including additional codes from the 5-Year Review;
payment for covered outpatient drugs and biologicals; the competitive
acquisition program (CAP); clinical lab fee schedule issues; payment
for end-stage renal dialysis (ESRD) services; performance standards
facilities; expiration of the physician scarcity area (PSA) bonus
payment; conforming and clarifying changes for comprehensive outpatient
rehabilitation facilities (CORFs); a process for updating the drug
compendia; physician self-referral issues; beneficiary signature for
ambulance transport services; durable medical equipment (DME) update;
the chiropractic services demonstration; a Medicare economic index
(MEI) data change; technical corrections; standards and requirement
related to therapy services under Medicare Parts A and B; revisions to
the ambulance fee schedule; the ambulance inflation factor for CY 2008;
and an amendment to the e-prescribing exemption for computer-generated
facsimile transmissions
We also finalized the calendar year (CY) 2007 interim RVUs and
issued interim RVUs for new and revised procedure codes for CY 2008.
In accordance with section 1848(d)(1)(E)(i) of the Act, we also
announced that the PFS update for CY 2008 is -10.1 percent, the initial
estimate for the sustainable growth rate (SGR) for CY 2008 is 2.2
percent and the CF for CY 2008 is $34.0682. However, subsequent to
publication of the CY 2008 PFS final rule with comment period, section
101(a) of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub.
L. 110-173) (MMSEA) was enacted on December 29, 2007 and provided for a
0.5 percent update to the conversion factor for the period beginning
January 1, 2008 and ending June 30, 2008. Therefore, for the first half
of 2008 (that is, January through June), the Medicare PFS conversion
factor was $38.0870. For the remaining portion of 2008 (July through
December), the Medicare PFS conversion factor will be $34.0682 (as
published in the 2008 PFS final rule with comment period).

II. Provisions of the Proposed Regulation

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

[If you choose to comment on issues in this section, please include
the caption ``RESOURCE-BASED PE RVUs'' at the beginning of your
comments.]
Practice expense (PE) is the portion of the resources used in
furnishing the service that reflects the general categories of
physician and practitioner expenses, such as office rent and personnel
wages but excluding malpractice expenses, as specified in section
1848(c)(1)(B) of the Act.
Section 121 of the Social Security Amendments of 1994 (Pub. L. 103-
432), enacted on October 31, 1994, required CMS to develop a
methodology for a resource-based system for determining PE RVUs for
each physician's service. Until that time, PE RVUs 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 furnishing the service.
The initial implementation of resource-based PE RVUs was delayed
from January 1, 1998, until January 1, 1999, by section 4505(a) of the
BBA. In addition, section 4505(b) of the BBA required that 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 of the statute was to adjust the PE values for
certain services for CY 1998. Section 4505(d) of the BBA required that,
in developing the resource-based PE RVUs, the Secretary must--

[[Page 38507]]

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 and actual data on equipment utilization.
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 PE.
In CY 1999, we began the 4-year transition to resource-based PE
RVUs utilizing a ``top-down'' methodology whereby we allocated
aggregate specialty-specific practice costs to individual procedures.
The specialty-specific PEs were derived from the American Medical
Association's (AMA's) Socioeconomic Monitoring Survey (SMS). In
addition, under section 212 of the BBRA, we established a process
extending through March 2005 to supplement the SMS data with data
submitted by a specialty. The aggregate PEs for a given specialty were
then allocated to the services furnished by that specialty on the basis
of the direct input data (that is, the staff time, equipment, and
supplies) and work RVUs assigned to each CPT code.
For CY 2007, we implemented a new methodology for calculating PE
RVUs. Under this new methodology, we use the same data sources for
calculating PE, but instead of using the ``top-down'' approach to
calculate the direct PE RVUs, under which the aggregate direct and
indirect costs for each specialty are allocated to each individual
service, we now utilize a ``bottom-up'' approach to calculate the
direct costs. Under the ``bottom up'' approach, we determine the direct
PE by adding the costs of the resources (that is, the clinical staff,
equipment, and supplies) typically required to provide each service.
The costs of the resources are calculated using the refined direct PE
inputs assigned to each CPT code in our PE database, which are based on
our review of recommendations received from the AMA's Relative Value
Update Committee (RUC). For a more detailed explanation of the PE
methodology see the June 29, 2006 proposed notice (71 FR 37242) and the
CY 2007 PFS final rule with comment period (71 FR 69629).
1. Current Methodology
a. Data Sources for Calculating Practice Expense
The AMA's SMS survey data and supplemental survey data from the
specialties of cardiothoracic surgery, vascular surgery, physical and
occupational therapy, independent laboratories, allergy/immunology,
cardiology, dermatology, gastroenterology, radiology, independent
diagnostic testing facilities (IDTFs), radiation oncology, and urology
are used to develop the PE per hour (PE/HR) for each specialty. For
those specialties for which we do not have PE/HR, the appropriate PE/HR
is obtained from a crosswalk to a similar specialty.
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 the CY 2002 PFS final rule with comment period (66 FR
55246).) The SMS PE survey data are adjusted to a common year, 2005.
The SMS data provide the following six categories of PE costs:
Clinical payroll expenses, which are payroll expenses
(including fringe benefits) for nonphysician clinical 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,
leases, and rent of medical equipment used in the diagnosis or
treatment of patients.
All other expenses, which include expenses for legal
services, accounting, office management, professional association
memberships, and any professional expenses not previously mentioned in
this section.
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, those
entities and organizations representing the specialty itself). (See the
Criteria for Submitting Supplemental Practice Expense Survey Data
interim final rule with comment period (65 FR 25664).) Originally, the
deadline to submit supplementary survey data was through August 1,
2001. In the CY 2002 PFS final rule (66 FR 55246), the deadline was
extended through August 1, 2003. To ensure maximum opportunity for
specialties to submit supplementary survey data, we extended the
deadline to submit surveys until March 1, 2005 in the Revisions to
Payment Policies Under the Physician Fee Schedule for CY 2004 final
rule with comment period (68 FR 63196) (hereinafter referred to as CY
2004 PFS final rule with comment period).
The direct cost data for individual services were originally
developed by the Clinical Practice Expert Panels (CPEP). The CPEP data
include the supplies, equipment, and staff times specific to each
procedure. The CPEPs consisted of panels of physicians, practice
administrators, and nonphysicians (for example, RNs) who were nominated
by physician specialty societies and other groups. There were 15 CPEPs
consisting 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's
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 RUC established the Practice Expense Advisory
Committee (PEAC). From 1999 to 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 for over 7,600 codes which we have reviewed and almost
all of which we have accepted. As a result, the current PE 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 PE to Services
The aggregate level specialty-specific PEs are derived from the
AMA's SMS survey and supplementary survey data. To establish PE RVUs
for specific services, it is necessary to establish the direct and
indirect PE associated with each service.
(i) Direct costs. The direct costs are determined by adding the
costs of the resources (that is, the clinical staff, equipment, and
supplies) typically required to provide the service. The costs of these
resources are calculated from the refined direct PE inputs in our PE
database. These direct inputs are then scaled to the current aggregate
pool of direct PE RVUs. The aggregate pool

[[Page 38508]]

of direct PE RVUs can be derived using the following formula:

(PE RVUs x physician CF) x (average direct percentage from SMS /
(Supplemental PE/HR data)).

(ii) Indirect costs. The SMS and supplementary survey data are the
source for the specialty-specific aggregate indirect costs used in our
PE calculations. Then, we allocate the indirect costs to the code level
on the basis of the direct costs specifically associated with a code
and the maximum of either the clinical labor costs or the physician
work RVUs. For calculation of the 2009 PE RVUs, we are proposing to use
the 2007 procedure-specific utilization data crosswalked to 2008
services. To arrive at the indirect PE costs--
We apply a specialty-specific indirect percentage factor
to the direct expenses to recognize the varying proportion that
indirect costs represent of total costs by specialty. For a given
service, the specific indirect percentage factor to apply to the direct
costs for the purpose of the indirect allocation is calculated as the
weighted average of the ratio of the indirect to direct costs (based on
the survey data) for the specialties that furnish the service. For
example, if a service is furnished by a single specialty with indirect
PEs that were 75 percent of total PEs, the indirect percentage factor
to apply to the direct costs for the purposes of the indirect
allocation would be (0.75 / 0.25) = 3.0. The indirect percentage factor
is then applied to the service level adjusted indirect PE allocators.
We use the specialty-specific PE/HR from the SMS survey
data, as well as the supplemental surveys for cardiothoracic surgery,
vascular surgery, physical and occupational therapy, independent
laboratories, allergy/immunology, cardiology, dermatology, radiology,
gastroenterology, IDTFs, radiation oncology, and urology. (Note: For
radiation oncology, the data represent the combined survey data from
the American Society for Therapeutic Radiology and Oncology (ASTRO) and
the Association of Freestanding Radiation Oncology Centers (AFROC)). As
discussed in the CY 2008 PFS final rule with comment period (72 FR
66233), the PE/HR survey data for radiology is weighted by practice
size. We incorporate this PE/HR into the calculation of indirect costs
using an index which reflects the relationship between each specialty's
indirect scaling factor and the overall indirect scaling factor for the
entire PFS. For example, if a specialty had an indirect practice cost
index of 2.00, this specialty would have an indirect scaling factor
that was twice the overall average indirect scaling factor. If a
specialty had an indirect practice cost index of 0.50, this specialty
would have an indirect scaling factor that was half the overall average
indirect scaling factor.
When the clinical labor portion of the direct PE RVU is
greater than the physician work RVU for a particular service, the
indirect costs are allocated based upon the direct costs and the
clinical labor costs. For example, if a service has no physician work
and 1.10 direct PE RVUs, and the clinical labor portion of the direct
PE RVUs is 0.65 RVUs, we would use the 1.10 direct PE RVUs and the 0.65
clinical labor portions of the direct PE RVUs to allocate the indirect
PE for that service.
c. Facility/Nonfacility Costs
Procedures that can be furnished in a physician's office, as well
as in a hospital or facility setting, 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
surgical centers (ASCs), and skilled nursing facilities (SNFs). The
methodology for calculating PE RVUs is the same for both facility and
nonfacility RVUs, but is applied 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 PFS), the PE RVUs are generally
lower for services provided in the facility setting.
d. Services With Technical Components (TCs) and Professional Components
(PCs)
Diagnostic services are generally comprised of two components: A
professional component (PC) and a technical component (TC), both of
which may be performed independently or by different providers. When
services have TCs, PCs, and global components that can be billed
separately, the payment for the global component equals the sum of the
payment for the TC and PC. This is a result of using a weighted average
of the ratio of indirect to direct costs across all the specialties
that furnish the global components, TCs, and PCs; that is, we apply the
same weighted average indirect percentage factor to allocate indirect
expenses to the global components, PCs, and TCs for a service. (The
direct PE RVUs for the TC and PC sum to the global under the bottom-up
methodology.)
e. Transition Period
As discussed in the CY 2007 PFS final rule with comment period (71
FR 69674), we are implementing the change in the methodology for
calculating PE RVUs over a 4-year period. During this transition
period, the PE RVUs will be calculated on the basis of a blend of RVUs
calculated using our methodology described previously in this section
(weighted by 25 percent during CY 2007, 50 percent during CY 2008, 75
percent during CY 2009, and 100 percent thereafter), and the CY 2006 PE
RVUs for each existing code. PE RVUs for codes that are new during this
period will be calculated using only the current PE methodology and
will be paid at the fully transitioned rate.
f. PE RVU Methodology
The following is a description of the PE RVU methodology.
(i) Setup File
First, we create a setup file for the PE methodology. The setup
file contains the direct cost inputs, the utilization for each
procedure code at the specialty and facility/nonfacility place of
service level, and the specialty-specific survey PE per physician hour
data.
(ii) Calculate the Direct Cost PE RVUs
Sum the costs of each direct input.
Step 1: Sum the direct costs of the inputs for each service. The
direct costs consist of the costs of the direct inputs for clinical
labor, medical supplies, and medical equipment. The clinical labor cost
is the sum of the cost of all the staff types associated with the
service; it is the product of the time for each staff type and the wage
rate for that staff type. The medical supplies cost is the sum of the
supplies associated with the service; it is the product of the quantity
of each supply and the cost of the supply. The medical equipment cost
is the sum of the cost of the equipment associated with the service; it
is the product of the number of minutes each piece of equipment is used
in the service and the equipment cost per minute. The equipment cost
per minute is calculated as described at the end of this section.
Apply a BN adjustment to the direct inputs.
Step 2: Calculate the current aggregate pool of direct PE costs. To
do this, multiply the current aggregate pool of total direct and
indirect PE costs (that is, the current aggregate PE RVUs multiplied by
the CF) by the average direct PE percentage from the SMS and
supplementary specialty survey data.
Step 3: Calculate the aggregate pool of direct costs. To do this,
for all PFS

[[Page 38509]]

services, sum the product of the direct costs for each service from
Step 1 and the utilization data for that service.
Step 4: Using the results of Step 2 and Step 3 calculate a direct
PE BN adjustment so that the proposed aggregate direct cost pool does
not exceed the current aggregate direct cost pool and apply it to the
direct costs from Step 1 for each service.
Step 5: Convert the results of Step 4 to an RVU scale for each
service. To do this, divide the results of Step 4 by the Medicare PFS
CF.
(iii) Create the indirect PE RVUs
Create indirect allocators.
Step 6: Based on the SMS and supplementary specialty survey data,
calculate direct and indirect PE percentages for each physician
specialty.
Step 7: Calculate direct and indirect PE percentages at the service
level by taking a weighted average of the results of Step 6 for the
specialties that furnish the service. Note that for services with TCs
and PCs we are calculating the direct and indirect percentages across
the global components, PCs, and TCs. That is, the direct and indirect
percentages for a given service (for example, echocardiogram) do not
vary by the PC, TC and global component.
Step 8: Calculate the service level allocators for the indirect PEs
based on the percentages calculated in Step 7. The indirect PEs are
allocated based on the three components: the direct PE RVU, the
clinical PE RVU, and the work RVU.
For most services the indirect allocator is: indirect percentage *
(direct PE RVU/direct percentage) + work RVU.
There are two situations where this formula is modified:
If the service is a global service (that is, a service
with global, professional, and technical components), then the indirect
allocator is: indirect percentage * (direct PE RVU/direct percentage) +
clinical PE RVU + work RVU.
If the clinical labor PE RVU exceeds the work RVU (and the
service is not a global service), then the indirect allocator is:
indirect percentage * (direct PE RVU/direct percentage) + clinical PE
RVU.

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

)For presentation purposes in the examples in Table 1, the formulas
were divided into two parts for each service. The first part does not
vary by service and is the indirect percentage * (direct PE RVU/direct
percentage). The second part is either the work RVU, clinical PE RVU,
or both depending on whether the service is a global service and
whether the clinical PE RVU exceeds the work RVU (as described earlier
in this step).
Apply a BN adjustment to the indirect allocators.
Step 9: Calculate the current aggregate pool of indirect PE RVUs by
multiplying the current aggregate pool of PE RVUs by the average
indirect PE percentage from the physician specialty survey data. This
is similar to the Step 2 calculation for the direct PE RVUs.
Step 10: Calculate an aggregate pool of proposed indirect PE RVUs
for all PFS services by adding the product of the indirect PE
allocators for a service from Step 8 and the utilization data for that
service. This is similar to the Step 3 calculation for the direct PE
RVUs.
Step 11: Using the results of Step 9 and Step 10, calculate an
indirect PE adjustment so that the aggregate indirect allocation does
not exceed the available aggregate indirect PE RVUs and apply it to
indirect allocators calculated in Step 8. This is similar to the Step 4
calculation for the direct PE RVUs.
Calculate the Indirect Practice Cost Index.
Step 12: Using the results of Step 11, calculate aggregate pools of
specialty-specific adjusted indirect PE allocators for all PFS services
for a specialty by adding the product of the adjusted indirect PE
allocator for each service and the utilization data for that service.
Step 13: Using the specialty-specific indirect PE/HR data,
calculate specialty-specific aggregate pools of indirect PE for all PFS
services for that specialty by adding the product of the indirect PE/HR
for the specialty, the physician time for the service, and the
specialty's utilization for the service.
Step 14: Using the results of Step 12 and Step 13, calculate the
specialty-specific indirect PE scaling factors as under the current
methodology.
Step 15: Using the results of Step 14, calculate an indirect
practice cost index at the specialty level by dividing each specialty-
specific indirect scaling factor by the average indirect scaling factor
for the entire PFS.
Step 16: Calculate the indirect practice cost index at the service
level to ensure the capture of all indirect costs. Calculate a weighted
average of the practice cost index values for the specialties that
furnish the service. (NOTE: For services with TCs and PCs, we calculate
the indirect practice cost index across the global components, PCs, and
TCs. Under this method, the indirect practice cost index for a given
service (for example, echocardiogram) does not vary by the PC, TC and
global component.)
Step 17: Apply the service level indirect practice cost index
calculated in Step 16 to the service level adjusted indirect allocators
calculated in Step 11 to get the indirect PE RVU.
(iv) Calculate the Final PE RVUs
Step 18: Add the direct PE RVUs from Step 6 to the indirect PE RVUs
from Step 17.
Step 19: Calculate and apply the final PE BN adjustment by
comparing the results of Step 18 to the current pool of PE RVUs. This
final BN adjustment is required primarily because certain specialties
are excluded from the PE RVU calculation for rate-setting purposes, but
all specialties are included for purposes of calculating the final BN
adjustment. (See ``Specialties excluded from rate-setting calculation''
below in this section.)
(v) Setup File Information
Specialties excluded from rate-setting calculation: For
the purposes of calculating the PE RVUs, we exclude certain specialties
such as midlevel practitioners paid at a percentage of the PFS,
audiology, and low volume specialties from the calculation. These
specialties are included for the purposes of calculating the BN
adjustment.
Crosswalk certain low volume physician specialties:
Crosswalk the utilization of certain specialties with relatively low
PFS utilization to the associated specialties.
Physical therapy utilization: Crosswalk the utilization
associated with all physical therapy services to the specialty of
physical therapy.
Identify professional and technical services not
identified under the usual TC and 26 modifiers: Flag the services that
are PC and TC services, but do not use TC and 26 modifiers (for
example, electrocardiograms). This flag associates the PC and TC with
the associated global code for use in creating the indirect PE RVU. For
example, the professional service code 93010 is associated with the
global code 93000.
Payment modifiers: Payment modifiers are accounted for in
the creation of the file. For example, services billed with the
assistant at surgery modifier are paid 16 percent of the PFS amount for
that service; therefore, the utilization file is modified to only
account for 16 percent of any service that contains the assistant at
surgery modifier.

[[Page 38510]]

Work RVUs: The setup file contains the work RVUs from this
proposed rule.
(vi) Equipment Cost per Minute
The equipment cost per minute is calculated as:

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

Where:

minutes per year = maximum minutes per year if usage were continuous
(that is, usage = 1); 150,000 minutes.
usage = equipment utilization assumption; 0.5.
price = price of the particular piece of equipment.
interest rate = 0.11.
life of equipment = useful life of the particular piece of
equipment.
maintenance = factor for maintenance; 0.05.

Note: To illustrate the PE calculation, in Table 1 we have used
the conversion factor (CF) of $34.0682 which was published in the CY
2008 PFS final rule with comment period.

[[Page 38511]]

Table 1.--Calculation of PE RVUs Under Methodology for Selected Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
99213 Office 33533 CABG, 93000 ECG,
Step Source Formula visit, est arterial, single 71020 Chest x-ray 71020TC Chest x- 7102026 Chest x- complete 93005 ECG, tracing 93010 ECG, report
Nonfacility Facility Nonfacility ray Nonfacility ray Nonfacility Nonfacility Nonfacility Nonfacility
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Labor cost (Lab)................. Step 1................. AMA.................... ....................... $13.32 $77.52 $5.74 $5.74 $-- $6.12 $6.12 $--
(2) Supply cost (Sup)................ Step 1................. AMA.................... ....................... $2.98 $7.34 $3.39 $3.39 $-- $1.19 $1.19 $--
(3) Equipment cost (Eqp)............. Step 1................. AMA.................... ....................... $0.19 $0.65 $8.17 $8.17 $-- $0.12 $0.12 $--
(4) Direct cost (Dir)................ Step 1................. ....................... =(1)+(2)+(3)........... $16.50 $85.51 $17.31 $17.31 $-- $7.43 $7.43 $--
(5) Direct adjustment (Dir Adj)...... Steps 2-4.............. See footnote*.......... ....................... 0.592 0.592 0.592 0.592 0.592 0.592 0.592 0.592
(6) Adjusted labor................... Steps 2-4.............. =Lab*Dir Adj........... =(1)*(5)............... $7.88 $45.88 $3.40 $3.40 $-- $3.62 $3.62 $--
(7) Adjusted supplies................ Steps 2-4.............. =Sup*Dir Adj........... =(2)*(5)............... $1.77 $4.34 $2.01 $2.01 $-- $0.71 $0.71 $--
(8) Adjusted equipment............... Steps 2-4.............. =Eqp*Dir Adj........... =(3)*(5)............... $0.12 $0.39 $4.84 $4.84 $-- $0.07 $0.07 $--
(9) Adjusted direct.................. Steps 2-4.............. ....................... =(6)+(7)+(8)........... $9.76 $50.61 $10.24 $10.24 $-- $4.40 $4.40 $--
(10) Conversion Factor (CF).......... Step 5................. MFS.................... ....................... $34.0682 $34.0682 $34.0682 $34.0682 $34.0682 $34.0682 $34.0682 $34.0682
(11) Adj. labor cost converted....... Step 5................. =(Lab*Dir Adj)/CF...... =(6)/(10).............. $0.23 $1.35 $0.10 $0.10 $-- $0.11 $0.11 $--
(12) Adj. supply cost converted...... Step 5................. =(Sup*Dir Adj)/CF...... =(7)/(10).............. $0.05 $0.13 $0.06 $0.06 $-- $0.02 $0.02 $--
(13) Adj. equip cost converted....... Step 5................. =(Eqp*Dir Adj)/CF...... =(8)/(10).............. $0.00 $0.01 $0.14 $0.14 $-- $0.00 $0.00 $--
(14) Adj. direct cost converted...... Step 5................. ....................... =(11)+(12)+(13)........ $0.29 $1.49 $0.30 $0.30 $-- $0.13 $0.13 $--
(15) Wrk RVU* Wrk Scaler............. Setup File............. MFS.................... ....................... $0.81 $29.62 $0.19 $-- $0.19 $0.15 $-- $0.15
(16) Dir--pct........................ Steps 6, 7............. Surveys................ ....................... 33.8% 32.6% 40.7% 40.7% 40.7% 37.7% 37.7% 37.7%
(17) Ind--pct........................ Steps 6, 7............. Surveys................ ....................... 66.2% 67.4% 59.3% 59.3% 59.3% 62.3% 62.3% 62.3%
(18) Ind. Alloc. formula (1st part).. Step 8................. See Step 8............. ....................... ((14)/(16))*(17) ((14)/(16))*(17) ((14)/(16))*(17) ((14)/(16))*(17) ((14)/(16))*(17) ((14)/(16))*(17) ((14)/(16))*(17) ((14)/(16))*(17)
(19) Ind. Alloc. (1st part).......... Step 8................. ....................... See (18)............... $0.56 $3.07 $0.44 $0.44 $-- $0.21 $0.21 $--
(20) Ind. Alloc. formulas (2nd part). Step 8................. See Step 8............. ....................... (15) (15) (15)+(11) (11) (15) (15)+(11) (11) (15)
(21) Ind. Alloc. (2nd part).......... Step 8................. ....................... See (20)............... $0.81 $29.62 $0.29 $0.10 $0.19 $0.25 $0.11 $0.15
(22) Indirect Allocator (1st+2nd).... Step 8................. ....................... =(19)+(21)............. $1.37 $32.69 $0.73 $0.53 $0.19 $0.47 $0.32 $0.15
(23) Indirect Adjustment (Ind Adj)... Steps 9-11............. See footnote**......... ....................... 0.364 0.364 0.364 0.364 0.364 0.364 0.364 0.364
(24) Adjusted Indirect Allocator..... Steps 9-11............. =Ind Alloc * Ind Adj... ....................... $0.50 $11.89 $0.26 $0.19 $0.07 $0.17 $0.12 $0.05
(25) Ind.Practice Cost Index (PCI)... Steps 12-16............ See Steps 12-16........ ....................... $0.973 $0.934 $1.075 $1.075 $1.075 $1.281 $1.281 $1.281
(26) Adjusted Indirect............... Step 17................ = Adj. Ind Alloc*PCI... =(24)*(25)............. $0.49 $11.11 $0.28 $0.21 $0.07 $0.22 $0.15 $0.07
(27) PE RVU.......................... Steps 18-19............ =(Adj Dir+Adj Ind) =((14)+(26)) *budn..... $0.77 $12.60 $0.59 $0.51 $0.07 $0.35 $0.28 $0.07
*budn.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\*\ The direct adj = [current pe rvus * CF * avg dir pct] / [sum direct inputs] = [Step 2] / [Step 3].
\**\ The indirect adj = [current pe rvus * avg ind pct] / [sum of ind allocators] = [Step 9]/[Step 10.
Note: Final PE RVU in Table 1, row 27, may not match Addendum B due to rounding.

[[Page 38512]]

2. PE Proposals for CY 2009
a. RUC Recommendations for Direct PE Inputs
The RUC provided recommendations for PE inputs for the codes listed
in the Table 2.

Table 2.--Codes With RUC PE Recommendations
------------------------------------------------------------------------
CPT \1\ code Description
------------------------------------------------------------------------
29805........................ Shoulder arthroscopy, dx.
29830........................ Elbow arthroscopy.
29840........................ Wrist arthroscopy
29870........................ Knee arthroscopy, dx.
29900........................ Mcp joint arthroscopy, dx.
90465........................ Immune admin 1 inj, <8 yrs.
90466........................ Immune admin addl inj, <8 y.
90467........................ Immune admin o/n, addl <8 yrs.
90468........................ Immune admin o/n, addl <8 y.
90471........................ Immunization admin.
90472........................ Immunization admin, each admin
90473........................ Immune admin oral/nasal
90474........................ Immune admin oral/nasal addl.
93510........................ Left heart catheterization.
96405........................ Chemo intralesional, up to 7.
96406........................ Chemo intralesional over 7.
96440........................ Chemotherapy, intracavitary.
96445........................ Chemotherapy, intracavitary.
96450........................ Chemotherapy, into CNS.
96542........................ Chemotherapy injection.
99174........................ Ocular photoscreening.
99185........................ Regional hypothermia.
99186........................ Total body hypothermia.
------------------------------------------------------------------------
\1\ CPT codes and descriptions are copyright 2008 American Medical
Association.

We are in agreement with the RUC recommendations, (including the
recommendation that no change be made to the direct inputs for CPT
93510, a cardiac catheterization code), except for inclusion of the
clinical staff time related to quality activities for the following
immunization codes: CPT codes 90465, 90466, 90467, 90468, 90471, 90472,
90473 and 90474. While we allow this time for mammography services due
to the specific regulatory requirements required by the Mammography
Quality Standards Act of 1992 (Pub. L. 102-539) (MQSA), such MQSA time
is not a regulatory requirement for immunization services.
b. Equipment Time-in-Use
The formula for estimating the cost per minute for equipment is
based upon a variety of factors, including the cost of the equipment,
useful life, interest rate, maintenance cost, and utilization. The
purpose of this formula is to identify an estimated cost per minute for
the equipment that can be multiplied by the time the equipment is in
use to obtain an estimated per use equipment cost to develop the
resource-based PE RVU.
In calculating the estimated cost per minute for services that are
in use 24 hours per day for 7 days per week, we have assumed that the
maximum amount of time that the equipment can be in use is
approximately 525,000 minutes (that is, 525,000 minutes = (24 hours per
day) x (7 days per week) x (52 weeks per year) x (60 minutes per
hour)).
For CY 2008, we used 525,000 minutes to calculate the per minute
equipment cost for the equipment used in CPT code 93012, Telephonic
transmission of post-symptom electrocardiogram rhythm strip(s), 24-hour
attended monitoring, per 30 day period of time; tracing only and CPT
code 93271, Patient demand single or multiple event recording with
presymptom memory loop, 24-hour attended monitoring, per 30 day period
of time; monitoring, receipt of transmissions, and analysis. Based on
information presented to us by a provider group suggesting that the
equipment was in use continuously, we determined that this equipment is
used 24 hours a day, 7 days a week. Thus, we assigned the equipment a
100 percent usage rate. However, in subsequent discussions with a
provider group, we determined that, although there may be a 100 percent
usage rate for a particular month, this does not correspond to a 100
percent usage rate for a year. Therefore, for CY 2009 we are proposing
to apply our standard utilization rate of 50 percent to the 525,000
maximum minutes of use, consistent with our utilization rate assumption
for other equipment. This results in 262,500 minutes (that is, 262,500
= 525,000 x 0.50) of average use over the course of the year.
In the CY 2008 PFS rule, we used 43,200 minutes (60 minutes per
hour x 24 hours per day x 30 days per month) to estimate the per use
cost of the equipment in these monthly services. We are continuing to
use 43,200 minutes in determining the equipment cost per use for these
codes. The PE RVUs would increase from 5.28 to 5.98 as a result of this
change.
c. Change to PE Database Inputs for Certain Cardiac Stress Tests
The direct PE inputs for CPT code 93025, Microvolt T-wave alternans
for assessment of ventricular arrhythmias, for clinical labor are not
consistent with the other cardiac stress tests, CPT codes 93015,
Cardiovascular stress test using maximal or submaximal treadmill or
bicycle exercise, continuous electrocardiographic monitoring, and/or
pharmacological stress; with physician supervision, with interpretation
and report, and 93017, Cardiovascular stress test using maximal or
submaximal treadmill or bicycle exercise, continuous
electrocardiographic monitoring, and/or pharmacological stress; tracing
only, without interpretation and report. These codes were refined by
the PEAC in January 2002, the same year that CPT code 93025 was
implemented. Because of this overlap in timing, the codes that the PEAC
refined utilize registered nurses (RNs) while CPT 93025 uses a
``blend'' of RNs and physicians.
To provide consistency across the family, we are proposing to
designate the RN as the labor type for CPT code 93025. In addition, we
are proposing to add the specific Micro-volt T-wave testing equipment,
priced at $40,000, to replace the two different cardiac stress testing
treadmill devices that are currently assigned to this code and
reflected in the PE database. We are also proposing to assign the
service period time, 53 minutes, to the exam table and the Micro-volt
T-wave testing treadmill because neither piece of equipment is
available for use by others during the testing interval. The T-wave
stress test must be done in quiet room. Using this rationale for the
other two stress testing CPT codes (that is, 93015 and 93017), we are
also proposing to revise the PE database for these services and
allocate the 55-minute service period time to the exam table and the
stress testing equipment rather than the 41 minutes currently assigned.
d. Revisions to Sec. 414.22(b)(5)(i) Concerning Practice Expense
Current regulations at Sec. 414.22(b)(5)(i) provide an explanation
of the two levels of PE RVUs--facility and nonfacility--that are used
in determining payment under the PFS. Section 414.22(b)(5)(i)(A)
discusses facility PE RVUs and Sec. 414.22 (b)(5)(i)(B) discusses
nonfacility PE RVUs. Language in each of these sections incorrectly
implies that the facility PE RVU is lower than or equal to the
nonfacility PE RVUs. However, there are some instances where the
facility PE RVUs may actually be greater than the nonfacility PE RVUs.
In order to address this inaccuracy, we are proposing to revise Sec.
414.22(b)(5)(i) (A) and (B) to remove this language.

B. Geographic Practice Cost Indices (GPCI): Locality Discussion

[If you choose to comment on issues in this section, please include
the caption ``GPCI: LOCALITY DISCUSSION'' at the beginning of your
comments.]
1. Update
Section 1848(e)(1)(A) of the Act requires us to develop separate
Geographic Practice Cost Indices

[[Page 38513]]

(GPCIs) to measure resource cost differences among localities compared
to the national average for each of the three fee schedule components
(work, PE and malpractice). While requiring that the PE and malpractice
GPCIs reflect the full relative cost differences, section
1848(e)(1)(A)(iii) of the Act requires that the physician work GPCIs
reflect only one-quarter of the relative cost differences compared to
the national average.
Section 1848(e)(1)(C) of the Act requires us to review and, if
necessary, adjust the GPCIs at least every 3 years. This section also
specifies that if more than 1 year has elapsed since the last GPCI
revision, we must phase in the adjustment over 2 years, applying only
one-half of any adjustment in each year. As discussed in the CY 2008
PFS final rule with comment period (72 FR 66243), in CY 2008 we
established new GPCIs for each Medicare locality and implemented them.
The CY 2008 adjustment to the GPCIs reflected the first year of the 2-
year phase-in.
We note that the proposed CY 2009 physician work GPCIs do not
reflect the 1.000 floor that was in place during CY 2006 through June
30, 2008. As discussed in section II.S. of this preamble, ``Expiring
Provisions and Related Discussion'', the 1.000 work GPCI floor expired
as of January 1, 2008 in accordance with section 102 of the MIEA-TRHCA.
However, section 103 of the MMSEA extended application of 1.000 floor
to the physician work GPCI through June 30, 2008. See Addenda D and E
for the proposed CY 2009 GPCIs and summarized geographic adjustment
factors (GAFs).
For a detailed explanation of how the GPCI update was developed,
see the CY 2008 PFS final rule with comment period (72 FR 66244).
2. Payment Localities
a. Background
As stated above in this section, 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 (work, PE, and malpractice).
Payments under the PFS are based on the relative resources required to
provide services, and are adjusted for differences in resource costs
among payment localities using the GPCIs. As a result, PFS payments
vary between localities. Although the PFS payment for a particular
service is actually adjusted by applying a GPCI to each fee schedule
component, for purposes of discussion and comparison, we calculate a
geographic adjustment factor (GAF) for each locality. These GAFs
reflect a weighted average of the GPCIs within the locality and can be
used as a general proxy for area practice costs. A GAF is calculated to
reflect a summarization of the GPCIs, (which is used only to make
comparisons across localities). The GAFs are not an absolute measure of
actual costs, nor are they used to calculate PFS payments. Rather, they
are a tool that can be used as a proxy for differences in the cost of
operating a medical practice among various geographic areas (for
example counties) for the purpose of assessing the potential impact of
alternative locality configurations.
Prior to 1992, Medicare payments for physicians' services were made
on the basis of reasonable charges. Payment localities were established
under the reasonable charge system by local Medicare carriers based on
their knowledge of local physician charging patterns and economic
conditions. A total of 210 localities were developed; including 22
``Statewide'' localities where all areas within a State (whether urban
or rural) received the same payment amount for a given service. These
localities changed little between the inception of Medicare in 1966 and
the beginning of the PFS. Following the inception of the PFS, we
acknowledged that there was no consistent geographic basis for these
localities and that they did not reflect the significant economic and
demographic changes that had taken place since 1966. As a result, a
study was begun in 1994 which culminated in a comprehensive locality
revision which was implemented in 1997.
The 1997 payment locality revision was based and built upon the
prior locality structure. The 22 previously existing Statewide
localities remained Statewide localities. New localities were
established in the remaining 28 States by comparing the area cost
differences (using the GAFs as a proxy for costs) of the localities
within these States. We ranked the existing localities within these
States by GAFs in descending order. The GAF of the highest locality
within a State was compared to the weighted average GAF of other
localities. If the differences between these GAFs exceeded 5 percent,
the highest locality remained a distinct locality. If the GAFs
associated with all the localities in a State did not vary by at least
5 percent, the State became a Statewide locality. If the highest
locality remained a distinct locality, the process was repeated for the
second highest locality and so on until the variation among remaining
localities fell below the 5 percent threshold. The rest of the
localities within the State were combined into a single rest-of-State
locality as their costs were relatively homogeneous. The revised
locality structure (which is the one currently in use) reduced the
number of localities from 210 to 89. The number of Statewide localities
increased from 22 to 34. The development of the current locality
structure is described in detail in the CY 1997 PFS proposed rule (61
FR 34615) and the final rule (61 FR 59494).
Although there have been no changes to the locality structure since
1997, we have considered and proposed making changes in recent years.
As we have frequently noted, any changes to the locality configuration
must be made in a budget neutral manner. Therefore, changes in
localities can lead to significant redistributions in payments. For
many years, we have not considered making changes to localities without
the support of a State Medical Association, which we believed would
demonstrate consensus for the change among the professionals who would
be affected. However, we recognize that over time changes in
demographics or local economic conditions may lead us to conduct a more
comprehensive examination of existing payment localities.
Payment Locality Approaches Discussed in the CY 2008 PFS Proposed Rule
For the past several years, we have been involved in discussions
with California physicians and their representatives about recent
shifts in relative demographics and economic conditions among a number
of counties within the current California payment locality structure.
In the CY 2008 proposed rule, we described three options for changing
the payment localities in California. A detailed discussion of the
options for changing the payment localities in California may be found
in both the CY 2008 PFS proposed rule and final rule with comment
period (72 FR 38139 and 72 FR 66245, respectively).
After evaluating the comments on these options, which included
MedPAC's two suggestions for developing changes in payment localities
for the entire country (not just California), other States expressing
interest in having their payment localities reconfigured, and the
California Medical Association's decision not to endorse any option, we
decided not to proceed with any of the alternatives we presented. We
explained in the CY 2008 final rule with comment period (72 FR 66248)
that we intend to

[[Page 38514]]

conduct a thorough analysis of potential approaches to reconfiguring
localities and would address this issue again in future rulemaking. We
also noted that some commenters wanted us to consider a national
reconfiguration of localities rather than just making changes one State
at a time.
b. Alternative Payment Locality Approaches
As a follow-up to the CY 2008 PFS final rule with comment period,
we have contracted with Acumen, LLC to conduct a preliminary study of
several options for revising the payment localities. To that end, we
are currently reviewing several alternative approaches for
reconfiguring payment localities on a nationwide basis. However, our
study of possible alternative payment locality configurations is in the
early stages of development. The discussion that follows provides a
brief description of the alternative payment locality configurations
currently under consideration. An interim report on the results of this
research will be posted on the CMS Web site following the publication
of this proposed rule.
At this time, we are not proposing to make any changes to our
payment localities. When we are ready to propose a change to the
locality configuration, we will provide extensive opportunities for
public comment (for example, town hall meetings or open door forums, as
well as soliciting public comments in a proposed rule) before
implementing any change. If we would make changes to the locality
structure, we anticipate applying any locality reconfiguration
uniformly to all States.

Option 1: CMS Core Based Statistical Area (CBSA) Payment Locality
Configuration

Option 1 would use the Office of Management and Budget (OMB's)
Metropolitan Statistical Area (MSA) designations for the payment
locality configuration. MSAs would be considered as urban core-based
statistical areas (CBSAs). Micropolitan Areas (as defined by OMB) and
rural areas would be considered as non-urban (rest of State) CBSAs.
This approach would be consistent with the inpatient hospital
prospective payment system (IPPS) pre-reclassification CBSA assignments
and with the geographic payment adjustments used in other payment
systems such as ESRD facilities, SNFs, ASCs, and home health agencies
(HHAs). Under this method, GPCI payment localities would be defined by
MSAs (urban CBSAs) and ``rest of State'' areas (non-urban CBSAs) and
the number of localities would increase.

Option 2: Separate High Cost Counties From Existing Localities

This method for reconfiguring payment localities was suggested by
MedPAC as part of its comments on the CY 2008 PFS proposed rule. Under
this approach, we would begin with the existing 89 GPCI localities and
create new localities based on an iterative comparison process using
the GAF as a proxy for costs. (As discussed above, the GAF is used as a
general proxy for area practice costs. The GAFs are used only to make
comparisons across localities or other geographic subdivision and do
not reflect an absolute measure of costs.) For example, the county with
the highest GAF in a given locality is compared to the average GAF for
all other counties in the locality. If the GAF for the highest county
exceeds the average GAF for all other counties in the locality by more
than 5 percent, the highest county is assigned its own locality. The
GAF of the second highest county is then compared to the average GAF
for all other remaining counties in the locality. If the GAF for the
second highest county exceeds the average GAF for the other remaining
counties by more than 5 percent, the second highest county is also
assigned its own locality. The process is repeated for the next highest
county(ies) until the difference between the GAF for the highest
remaining county and the average GAF for the other remaining counties
is less than 5 percent. This approach is similar to an option we
presented last year for California except that under this option, the
GAF of higher counties is compared to the average GAF of all other
remaining lower GAF counties, rather than to the entire locality's GAF.
As such, this approach would remove higher cost counties from their
existing locality structure and they would each be placed into their
own locality.

Option 3: Separate MSAs From Statewide Localities

Option 3 was also suggested by MedPAC. This alternative for payment
locality configuration begins with Statewide localities (for every
State) and creates separate localities for higher cost (higher GAF)
MSAs. Under this approach, localities are determined within each State
based on the same iterative process as described above in option 2. The
GAF of the highest MSA in a given State is compared to the average GAF
of all other areas within the State. For example, the highest cost MSA
would be compared to an average GAF for all other MSAs in the State and
the counties in the ``rest of State'' area. If the GAF of the highest
MSA is more than 5 percent greater than the average GAF for all other
areas in that State, then the highest MSA becomes a separate locality.
This iterative process continues with the second highest MSA. The
process stops when the GAF of the highest remaining MSA is not more
than 5 percent greater than the average of the other remaining areas
within the State. This option is similar to option 2; however, it
removes higher cost MSAs from the ``rest of State'' locality rather
than removing higher cost counties from their existing payment
locality.

Option 4: Group Counties Within a State Into Locality Tiers Based on
Costs

This approach combines counties within a State into tiers (or
groupings) based on similar GAFs. (This alternative is similar to an
option we considered for California last year). Under this approach,
counties in each State are sorted in descending order by GAFs. The
highest county GAF is compared to the second highest. If the difference
is less than 5 percent, the counties are included in the same locality.
The third highest county GAF is then compared to the highest county
GAF. This process continues until a county has a GAF difference from
the highest county GAF that is more than 5 percent. When this occurs,
that county becomes the highest county in a new payment locality and
the process is repeated for all counties in the State. This methodology
creates tiers of counties (within each State) that may or may not be
contiguous but share similar practice costs.
c. Solicitation of Comments
As noted earlier in this section, we will be posting an interim
report of our locality study on the CMS Web site after publication of
this proposed rule. Information on how to access the report will be
made available through the PFS home page on the CMS Web site at http://
www.cms.hhs.gov/PhysicianFeeSched/. Additionally, we plan to update our
Web site periodically as our research progresses.
We encourage interested parties to submit comments on the options
presented both here and in our interim report to the address for
comments listed on our Web site. We are also interested in receiving
comments and suggestions on other potential alternative locality
configurations (in addition to the options described in this section).
Additionally, we are requesting comments on the administrative and
operational issues associated with the various options under
consideration. As previously discussed, we are not

[[Page 38515]]

proposing any changes to the payment locality configurations at this
time. When we are ready to propose any changes to the locality
configuration, we will provide extensive opportunities for public
comment (for example, town hall meetings or open door forums) on
specific proposals before implementing any change.

C. Malpractice RVUs (PC/TC Issue)

[If you choose to comment on issues in this section, please include
the caption ``MALPRACTICE RVUs'' at the beginning of your comments.]
In the CY 1992 PFS final rule (56 FR 59527), we described in detail
how malpractice (MP) RVUs are calculated for each physicians' service
and, when professional liability insurance (PLI) premium data are not
available, how we crosswalk or assign RVUs to services. Following the
initial calculation of resource-based MP RVUs, the MP RVUs are then
subject to review by CMS at 5-year intervals. Reviewing the MP RVUs
every 5 years ensures that the MP relative values reflect any
marketplace changes in the physician community's ability to acquire
PLI. However, there are codes that define certain radiologic services
that have never been part of the MP RVU review process. The MP RVUs
initially assigned to these codes have not been revised because there
is a lack of suitable data on the cost of PLI for technical staff or
imaging centers (where most of these services are performed).
In the CY 2008 PFS proposed rule (72 FR 38143), we noted that the
PLI workgroup, a subset of the Relative Value Update Committee (RUC) of
the AMA, brought to our attention the fact that there are approximately
600 services that have technical component (TC) MP RVUs that are
greater than the professional component (PC) MP RVUs. Suggesting that
it is illogical for the MP RVUs for the TC of a service to be higher
than the MP RVUs for the PC, the PLI workgroup requested that we make
changes to these MP RVUs.
We responded that we would like to develop a resource-based
methodology for the technical portion of these MP RVUs; but that we did
not have data to support any such change. We asked for information
about how, and if, technicians employed by facilities purchase PLI or
how their professional liability is insured. We also asked for comments
on what types of PLI are carried by facilities that perform these
technical services.
In comments submitted in response to the proposed rule, the
American College of Cardiology (ACC) suggested that we ``flip'' the MP
RVUs between the PCs and TCs. This proposal would reduce the MP RVUs
for the TC and increase the MP RVUs for the PC. We also received
comments from the American College of Radiology (ACR) suggesting that
we make the TC RVUs equal to the PC RVUs. The ACR stated that there was
clearly some professional liability associated with these codes and
using the resource-based MP RVUS of the PC maintains the resource-based
methodology and eliminates the logical inequities of the TC having more
RVUs than the PC.
The AMA's PLI workgroup recommended that we reduce the MP RVUs for
the TC for these codes to zero. The workgroup suggested that there are
no identifiable separate costs for professional liability for the TC.
The workgroup also recommended that the MP RVUs removed from the TC for
these codes be redistributed across all physicians' services.
In the CY 2008 PFS final rule with comment period (72 FR 66248), we
stated, in response to the suggestions from the AMA, ACR, and ACC, that
we that we did not believe it would be appropriate to ``flip'' the PC
and TC MP RVU values because the professional part of the MP RVUs have
undergone a resource-based review, are derived from actual data, and
are consistent with the resource-based methodology for PFS payments. We
also stated that we would not simply equalize the PC and TC RVU values
because we had no data to demonstrate that the MP costs for the
technical portion of these services are the same as the professional
portion. In response to the suggestion of the PLI workgroup, we stated
that we are not able to evaluate whether sufficient data exists or to
make a judgment on the RUC's assertion that there are no such
identifiable costs (and therefore, no data are available).
We also received several comments supporting our decision to
examine the possibility of developing a resource-based methodology for
the technical portion of the MP RVUs. The commenters supported the
collection and analysis of appropriate MP premium data before making
any changes to the MP RVU distribution. In response, in the CY 2008 PFS
final rule with comment period, we stated that we would continue to
solicit, collect, and analyze appropriate data on this subject and that
when we had sufficient information we would be better able to make a
determination as to what, if any, changes should be made, and that we
would propose any changes in future rulemaking.
The issue of assigning MP RVUs for the TC of certain services
continues to be a source of concern for several physician associations
and for CMS. We did not receive a response to our request for
additional data on this issue. This issue is one of importance to CMS
because the lack of available PLI data affects our ability to make a
resource-based evaluation of the TC MP RVUs for these codes. As part of
our work to update the MP RVUs in CY 2010, we will instruct our
contractor to research available data sources for the MP costs
associated with the TC portion of these codes. We will also ask the
contractor to look at what is included in general liability insurance
versus PLI for physicians and other professional staff. If data sources
are available, we will instruct the contractor to gather the data so we
will be ready to implement revised MP RVUs for the TC of these codes in
conjunction with the update of MP RVUs for the PCs in 2010.

D. Medicare Telehealth Services

[If you choose to comment on issues in this section, please include
the caption ``MEDICARE TELEHEALTH SERVICES'' at the beginning of your
comments.]
1. Requests for Adding Services to the List of Medicare Telehealth
Services
Section 1834(m)(4)(F) of the Act defines telehealth services as
professional consultations, office visits, and office psychiatry
services, and any additional service specified by the Secretary. In
addition, the statute required 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 services to or deleting services from
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 professional
consultations, office visits, 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.

[[Page 38516]]

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 following to the
list of Medicare telehealth services: psychiatric diagnostic interview
examination; ESRD services with two to three visits per month and four
or more visits per month (although we require at least one visit a
month to be furnished in-person ``hands on'', by a physician, clinical
nurse specialist (CNS), nurse practitioner (NP), or physician assistant
(PA) to examine the vascular access site); individual medical nutrition
therapy; and the neurobehavioral status exam.
Requests to add services to the list of Medicare telehealth
services must be submitted and received no later than December 31 of
each calendar year to be considered for the next rulemaking cycle. For
example, requests submitted before the end of CY 2007 are considered
for the CY 2009 proposed rule. For more information on submitting a
request for an addition to the list of Medicare telehealth services,
visit our Web site at www.cms.hhs.gov/telehealth/.
2. Submitted Requests for Addition to the List of Telehealth Services
We received the following requests in CY 2007 for additional
approved services to become effective for CY 2009: (1) Diabetes self-
management training (DSMT); and (2) critical care services. In
addition, in the CY 2008 PFS final rule with comment period (72 FR
66250), we committed to continuing to evaluate last year's request to
add subsequent hospital care to the list of approved telehealth
services. The following is a discussion of these requests.
a. Diabetes Self-Management Training (DSMT)
The American Telemedicine Association (ATA) and the Marshfield
Clinic submitted a request to add diabetes self-management training
(DSMT) (as represented by Healthcare Common Procedure Coding System
(HCPCS) codes G0108 and G0109) to the list of approved telehealth
services. In the CY 2006 PFS proposed rule (70 FR 45787) and final rule
with comment period (70 FR 70157), we did not approve a previous
request to add DSMT to the list of approved telehealth services. We
approved a request to add individual medical nutrition therapy (MNT) to
the list of approved telehealth services.
The current request asks us to evaluate and approve individual and
group DSMT as Category 1 services because they are comparable to MNT.
The requesters believe that MNT and DSMT are similar because both are
designed to provide education in the primary care setting and to
facilitate behavior modification on the part of the patient. The
requesters asked us to examine the clinical outcomes of providing the
service and evidence-based practice in determining whether the codes
should be added to the list of approved telehealth services. The
requesters also asked us to examine whether DSMT is appropriate care by
those standards (clinical outcomes and evidence-based practice), and
they provided evidence that DSMT has a direct effect on reducing HbA1c
levels and improves outcomes for patients.
CMS Review
The requesters specifically asked us to evaluate DSMT as a Category
1 service based on clinical outcomes and evidence-based practice. This
approach does not match the criteria we use to assign services to
Category 1. To determine whether to assign a request to Category 1, we
look for similarities between the service that is being considered for
addition 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.
Analysis of clinical outcomes and evidence-based practice alone are not
sufficient to assign services to Category 1.
The requesters believe that DSMT services can be considered and
approved for telehealth as Category 1 services because they are
comparable to MNT services approved for telehealth. Section 414.65
provides for the payment of individual MNT furnished via telehealth.
Group MNT is not an approved telehealth service, so it cannot be used
as a point of comparison for group DSMT (as represented by HCPCS code
G0109). Moreover, as noted in our previous review of DSMT, group
counseling services have a different interactive dynamic between the
physician or practitioner at the distant site and beneficiary at the
originating site as compared to services on the current list of
Medicare telehealth services (70 FR 45787 and 70 FR 70157). Since the
interactive dynamic of group DSMT is not similar to individual MNT or
any other service currently approved for telehealth, we believe that
group DSMT must be evaluated as a category 2 service.
Section 1861(qq) of the Act provides that DSMT (which can be either
a group or individual service) involves educational and training
services to ensure therapy compliance or to provide necessary skills
and knowledge to participate in managing the condition, including the
skills necessary for the self-administration of injectable drugs. We
believe individual DSMT is not analogous to individual MNT because of
the element of skill-based training that is encompassed within
individual DSMT, but is not an aspect of individual MNT (or any other
services currently approved for telehealth). Due to the statutory
requirement that DSMT services include teaching beneficiaries the
skills necessary for the self-administration of injectable drugs, we
believe that DSMT, whether provided to an individual or a group, must
be evaluated as a category 2 service.
Because we consider individual and group DSMT to be category 2
services, we need to evaluate whether these are services for which
telehealth can be an adequate substitute for a face-to-face encounter.
Most of the studies cited by the requesters focused on the value of
DSMT in helping individuals with diabetes achieve successful health-
related outcomes. Some of these studies documented clinical outcomes
and evidence-based practice of the appropriateness of DSMT in treating
diabetes, but they did not provide comparative analysis demonstrating
that DSMT provided via telehealth is equivalent to the face-to-face
delivery of such services. As such, these studies were not relevant to
this review.
One study cited by the requesters which analyzed diabetes care
provided via telehealth defined telehealth technologies to consist of
messaging and monitoring devices. The telehealth technologies utilized
in this study do not correspond with our definitions of telehealth as
specified in Sec. 410.78.
Another study cited by the requesters as examining the
effectiveness of diabetes management provided via telehealth was
intended to help diabetic participants manage their care with the help
of a home-based telehealth support system. The study's authors note
some interesting correlations that were observed without any claim of
reliability or validity, and the study's

[[Page 38517]]

authors clearly state that no causal relationships can be referred from
the data.
A third study cited by the requesters compared diabetes education
provided through telemedicine technology to diabetes education provided
in-person. The study design did not include training patients in the
self-administration of injectable drugs, which is one of the elements
of DSMT under section 1861(qq) of the Act. The success of one diabetes
educator in teaching the self-administration of insulin to one of the
participants was anecdotal; no conclusive evidence was provided that
insulin administration can routinely be taught effectively as a
telehealth service.
After reviewing these studies, we determined that we do not have
sufficient comparative analysis or other compelling evidence that
either individual or group DSMT delivered via telecommunications is
equivalent to DSMT delivered face-to-face. We do not find evidence that
providing DSMT via telehealth is an adequate substitute for the face-
to-face encounter between the practitioner and the patient. Therefore,
we are not proposing to add individual and group DSMT (as described by
HCPCS codes G0108 and G0109) to the list of approved telehealth
services.
b. Critical Care Services
The University of Pittsburgh Medical Center (UPMC) submitted a
request to add critical care services (as defined by HCPCS codes 99291
and 99292) as a ``Category 1'' service. The requester draws
similarities to the evaluation and management (E/M) consultation
services currently approved for telehealth. The requester noted that
the primary difference between critical care and other E/M services
already approved for telehealth is that critical care is specific to
patients with vital organ failure. Anecdotally, UPMC has found that the
use of telecommunications systems and software gives critically injured
or ill patients (specifically stroke patients) timely access to highly
specialized physicians. According to the request, UPMC physicians are
able to give ``an equally effective examination, spend the same amount
of time with the patient and develop the same course of treatment just
as if they were bedside.''
CMS Review
The acuity of a critical care patient is significantly greater than
the acuity generally associated with patients receiving the E/M
services approved for telehealth. Because of the acuity of critically
ill patients, we do not consider critical care services similar to any
services on the current list of Medicare telehealth services.
Therefore, we believe critical care must be evaluated as a Category 2
service.
Because we consider critical care services to be Category 2, we
need to evaluate whether these are services for which telehealth can be
an adequate substitute for a face-to-face encounter. We have no
evidence suggesting that the use of telehealth could be a reasonable
surrogate for the face-to-face delivery of this type of care. As such,
we do not propose to add critical care services (as defined by HCPCS
codes 99291 and 99292) to the list of approved telehealth services.
c. Subsequent hospital care
Prior to 2006, follow-up inpatient consultations (as described by
CPT codes 99261 through 99263) were approved for telehealth. CPT 2006
deleted the follow-up inpatient consultation codes and advised
practitioners instead to bill for these services using the codes for
subsequent hospital care (as described by CPT codes 99231 through
99233). For CY 2006, we removed the deleted codes for follow-up
inpatient consultations from the list of approved telehealth services.
In the CY 2008 PFS proposed rule (72 FR 38144) and final rule with
comment period (72 FR 66250), we discussed a request we received from
the ATA to add subsequent hospital care to the list of approved
telehealth services. Because there is currently no method for
practitioners to bill for follow-up inpatient consultations delivered
via telehealth, the ATA requested that we approve use of the subsequent
hospital care codes to bill follow-up inpatient consultations furnished
via telehealth, as well as to bill for subsequent hospital care
services furnished via telehealth that are related to the ongoing E/M
of the hospital inpatient (72 FR 66250). Since the subsequent hospital
care codes describe a broader range of services than follow-up
inpatient consultation, including some services that may not be
appropriate for addition to the list of telehealth services, we did not
add subsequent hospital care to the list of approved telehealth
services. Instead, we committed to continue to evaluate whether, and if
so, by what mechanism subsequent hospital care could be approved for
telehealth when used for follow-up inpatient consultations (72 FR
66249).
CMS Review
We considered the possibility of approving subsequent hospital care
for telehealth with specific limitations, for example, approving
subsequent hospital care for telehealth only when the codes are used
for follow-up inpatient consultations. Given the potential acuity level
of the patient in the hospital setting, we remain concerned that
practitioners could misuse the codes and provide a broader range of
subsequent hospital care services via telehealth than was formerly
approved for telehealth with the follow-up inpatient consultation
codes, including the on-going, day-to-day E/M of a hospital inpatient.
(For a discussion of these issues, see 72 FR 38144 and 66249.) We were
also concerned that it could be difficult to implement sufficient
controls and monitoring to ensure that the telehealth use of the codes
for subsequent hospital care is limited to the delivery of services
that were formerly described as follow-up inpatient consultations.
We have considered this issue further, and for CY 2009, we are
proposing to create a new series of HCPCS codes for follow-up inpatient
telehealth consultations. Practitioners would use these codes to submit
claims to their Medicare contractors for payment of follow-up inpatient
consultations provided via telehealth. The new HCPCS codes will be
limited to the range of services included in the scope of the previous
CPT codes for follow-up inpatient consultations, and the descriptions
will be modified to limit the use of such services for telehealth. The
HCPCS codes will clearly designate these as follow-up inpatient
consultations provided via telehealth, and not subsequent hospital care
used for inpatient visits. Utilization of these codes would allow us to
provide payment for these services, as well as enable us to monitor
whether the codes are used appropriately. We also propose to establish
the RVUs for these services at the same level as the RVUs established
for subsequent hospital care (as described by CPT codes 99231 through
99233). We believe this is appropriate because a physician or
practitioner furnishing a telehealth service is paid an amount equal to
the amount that would have been paid if the service had been furnished
without the use of a telecommunication system. Since physicians and
practitioners furnishing follow-up inpatient consultations in a face-
to-face encounter must continue to utilize subsequent hospital care
codes (as described by CPT codes 99231 through 99233), we believe it is
appropriate to set the RVUs for the new telehealth G codes at the same
level as for the subsequent hospital care codes.
As defined below in this section, we are proposing to create HCPCS
codes

[[Page 38518]]

specific to the telehealth delivery of follow-up inpatient
consultations solely to re-establish the ability for practitioners to
provide and bill for follow-up inpatient consultations delivered via
telehealth. These codes are intended for use by practitioners serving
beneficiaries located at qualifying originating sites (as defined in
Sec. 410.78) requiring the consultative input of physicians who are
not available for a face-to-face encounter. These codes are not
intended to include the ongoing E/M of a hospital inpatient.
Claims for follow-up inpatient telehealth consultations will be
submitted to the contractors that process claims for the service area
where the physician or practitioner who furnishes the service is
located. Physicians/practitioners must submit the appropriate HCPCS
procedure code for follow-up inpatient telehealth consultations along
with the ``GT'' modifier (``via interactive audio and video
telecommunications system''). By coding and billing the ``GT'' modifier
with the inpatient follow-up inpatient telehealth consultation codes,
the distant site physician/practitioner certifies that the beneficiary
was present at an eligible originating site when the telehealth service
was furnished. (See the CMS Internet-Only Medicare Claims Processing
Manual, Pub. 100-04, Chapter 15, Section 190.6.1 for instructions for
submission of interactive telehealth claims.)
In the case of Federal telemedicine demonstration programs
conducted in Alaska or Hawaii, store and forward technologies may be
used as a substitute for an interactive telecommunications system.
Covered store and forward telehealth services are billed with the
``GQ'' modifier, ``via asynchronous telecommunications system.'' By
using the ``GQ'' modifier, the distant site physician/practitioner
certifies that the asynchronous medical file was collected and
transmitted to him or her at the distant site from a Federal
telemedicine demonstration project conducted in Alaska or Hawaii. (See
the CMS Internet-Only Medicare Claims Processing Manual, Pub. 100-04,
Chapter 15, Section 190.6.2 for instructions for submission of
telehealth store and forward claims.)
Follow-Up Inpatient Telehealth Consultations Defined
Follow-up inpatient telehealth consultations are consultative
visits furnished via telehealth to complete an initial consultation or
subsequent consultative visits requested by the attending physician.
The initial inpatient consultation may have been provided in person or
via telehealth. The conditions of payment for follow-up inpatient
telehealth consultations, including qualifying originating sites and
the types of telecommunications systems recognized by Medicare, are
subject to the provisions of Sec. 410.78. Payment for these services
is subject to the provisions of Sec. 414.65.
We are proposing to describe follow-up inpatient telehealth
consultations to include monitoring progress, recommending management
modifications, or advising on a new plan of care in response to changes
in the patient's status. Counseling and coordination of care with other
providers or agencies would be included as well, consistent with nature
of the problem(s) and the patient's needs. The physician or
practitioner who furnishes the inpatient follow-up consultation via
telehealth may not be the physician of record or the attending
physician, and the follow-up inpatient consultation would be distinct
from the follow-up care provided by a physician of record or the
attending physician. If a physician consultant has initiated treatment
at an initial consultation and participates thereafter in the patient's
ongoing care management, such care would not be included in the
definition of a follow-up inpatient consultation and is not appropriate
for delivery via telehealth.
Payment for follow-up telehealth inpatient consultations would
include all consultation-related services furnished before, during, and
after communicating with the patient via telehealth. Pre-service
activities would include, but would not be limited to, reviewing
patient data (for example, diagnostic and imaging studies, interim lab
work) and communicating with other professionals or family members.
Intra-service activities must include at least two of the three key
elements described below for each procedure code. Post-service
activities would include, but would not be limited to, completing
medical records or other documentation and communicating results of the
consultation and further care plans to other health care professionals.
No additional E/M service could be billed for work related to a follow-
up inpatient telehealth consultation.
Follow-up inpatient telehealth consultations could be provided at
various levels of complexity. To reflect this, we propose to establish
three codes.
Practitioners taking a problem-focused interval history, conducting
a problem-focused examination, and engaging in medical decision-making
that is straightforward or of low complexity, would bill a limited
service, using HCPCS GXX14. At this level of service, practitioners
would typically spend 15 minutes communicating with the patient via
telehealth.
Practitioners taking an expanded focused interval history,
conducting an expanded problem-focused examination, and engaging in
medical decision-making that is of moderate complexity, would bill an
intermediate service using HCPCS GXX15. At this level of service,
practitioners would typically spend 25 minutes communicating with the
patient via telehealth.
Practitioners taking a detailed interval history, conducting a
detailed examination, and engaging in medical decision-making that is
of high complexity, would bill a complex service, using HCPCS GXX16. At
this level of service, practitioners would typically spend 35 minutes
or more communicating with the patient via telehealth.
We are proposing to establish the following HCPCS codes to describe
follow-up inpatient consultations approved for telehealth:
GXX14, Follow-up inpatient telehealth consultation,
limited, typically 15 minutes communicating with the patient via
telehealth.
GXX15, Follow-up inpatient telehealth consultation,
intermediate, typically 25 minutes communicating with the patient via
telehealth.
GXX16, Follow-up inpatient telehealth consultation,
complex, typically 35 minutes or more communicating with the patient
via telehealth.

E. Specific Coding Issues Related to the Physician Fee Schedule

[If you choose to comment on issues in this section, please include
the caption ``CODING ISSUES'' at the beginning of your comments.]
1. Payment for Preadministration-Related Services for Intravenous
Infusion of Immune Globulin
Immune globulin 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 therefore, only a small number of manufacturers provide
commercially available products. In past years, there have been issues
reported with the supply of intravenous immune globulin (IVIG) due to
numerous factors including decreased manufacturing capacity, increased
usage, more sophisticated

[[Page 38519]]

processing steps, and low demand for byproducts from IVIG
fractionation.
The Medicare payment rates for IVIG products are established
through the Part B average sales price (ASP) drug methodology. Payment
for administration of the IVIG is made separately under the PFS. IVIG
administration is billed using the CPT codes for the first hour and, as
needed, additional hour CPT infusion codes for therapeutic,
prophylactic, and diagnostic services.
In addition, a separate payment has been made under the PFS and the
Hospital Outpatient Prospective Payment System (OPPS) for IVIG
preadministration-related services since 2006. Separate payment for the
preadministration-related services was implemented in 2006 largely
because of reported instability in the IVIG marketplace due, in part,
to the implementation of the new ASP payment methodology for IVIG
drugs.
As discussed in the CY 2006 PFS final rule with comment period (70
FR 70219 through 70220), at that time the IVIG marketplace was one in
which a significant portion of IVIG products previously available in CY
2005 were being discontinued and other products were expected to enter
the market over the next year. For CY 2006, there were only 2 HCPCS
codes describing all IVIG products based on either lyophilized
(powdered) or liquid preparation.
To continue to ensure appropriate access to IVIG, in CY 2006 during
this short-term period of market instability for IVIG, we temporarily
initiated a separate payment to physicians to reflect the additional
resources that may have been associated with locating and acquiring
adequate IVIG product and preparing for an office infusion of IVIG.
In order to address what was considered to be an impermanent period
of market instability, we created a separate G-code, G0332, IVIG
preadministration-related services for intravenous infusion of
immunoglobulin, per infusion encounter. As discussed in the CY 2006 PFS
final rule with comment period, we expected the IVIG marketplace to
stabilize through 2006 and that the atypical preadministration-related
services relating to IVIG would be temporary and no longer necessary
for physicians' offices that provided IVIG infusions to patients.
However, in the CY 2007 PFS final rule with comment period (71 FR
69678), we decided to continue the IVIG preadministration-related
services payment for an additional year to help ensure patient access
to IVIG. We stated in that rule that we were anticipating the results
of the HHS Office of Inspector General (OIG) study on the availability
and pricing of IVIG before changing this policy. In addition, we
continued to receive comments from stakeholders that some beneficiaries
were experiencing IVIG access issues such as delayed treatments and
site of service shifts.
In the CY 2008 PFS proposed rule (72 FR 38146), we proposed to
continue payment for G0332 through CY 2008 at the same level of PE RVUs
as CY 2007. We referred to the OIG final report published in April 2007
titled, ``Intravenous Immune Globulin: Medicare Payment and
Availability'' (OEI-03-05-00404). The OIG had conducted this study at
the request of the Members of the Congressional subcommittees on Health
within the House Energy and Commerce and Ways and Means Committees. The
OIG examined the current state of IVIG which included analyzing the
payment and supply. Specifically, the OIG determined whether hospitals
and physicians could purchase IVIG at prices below the Medicare payment
amounts in 2005 and 2006 and whether IVIG was readily available to
physicians and distributors in 2005 and 2006.
The OIG found that for the third quarter of 2006, just over half of
IVIG sales to hospitals and physicians were at prices below Medicare
payment amounts. Relative to the previous three quarters, this
represented a substantial increase of the percentage of sales with
prices below Medicare amounts. During the third quarter of 2006, 56
percent of IVIG sales to hospitals and over 59 percent of IVIG sales to
physicians by the largest three distributors occurred at prices below
the Medicare payment amounts. The findings of the OIG report suggest
that stability in the IVIG market had improved in late 2006. No other
comprehensive studies have been presented to show continued instability
in market conditions or systematic problems with patient access.
Recent IVIG drug coding revisions and reporting have contributed to
increased payments for IVIG products and, we believe, improved market
stability. Beginning on July 1, 2007, six new HCPCS codes for specific
IVIG products were adopted to implement separate payment for these
products. From July 2007 to April 2008, the weighted average increase
in payment, based on allowed charges by IVIG product code, was 2.9
percent for all liquid IVIG products and 3.4 percent for all IVIG
products, both liquid and powder.
IVIG utilization continues to increase. National claims history
data show allowed utilization in physicians' offices (that is, units of
IVIG paid) increased from slightly over 3,000,000 units in 2006 to
slightly over 3,600,000 units in 2007.
We continue to meet with representatives of the IVIG industry to
discuss their concerns regarding the pricing of IVIG and Medicare
beneficiary access to this important therapy. No additional studies
have been published since the OIG report of April 2007 on IVIG pricing,
supply or patient access issues with IVIG. We have reviewed national
claims data for IVIG drug utilization, as well as utilization of the
preadministration-related service codes. This data show modest
increases in the utilization of IVIG drugs and the preadministration-
related service code which suggests that pricing and access may be
improving.
The G-code payment for IVIG preadministration-related services was
intended to be a temporary stopgap policy. We continued these temporary
payments for 3 years because we had received reports of market
disruptions and were concerned about ensuring beneficiary access to
these drugs. However, we now believe that the transient market
conditions that led us to adopt the payment for IVIG preadministration-
related services have improved. Therefore, we are proposing to
discontinue separate payment for IVIG preadministration-related
services by means of code G0332 furnished on or after January 1, 2009.
The treatment of these services under the OPPS will be addressed
separately in the OPPS proposed rule.
2. Multiple Procedure Payment Reduction for Diagnostic Imaging
In general, we price diagnostic imaging procedures in the following
three ways:
The professional component (PC) represents the physician's
interpretation (PC-only services are billed with the 26 modifier).
The technical component (TC) represents PE and includes
clinical staff, supplies, and equipment (TC-only services are billed
with the TC modifier).
The global service represents both PC and TC.
Effective January 1, 2006, we implemented a multiple procedure
payment reduction (MPPR) on certain diagnostic imaging procedures (71
FR 48982 through 49252 and 71 FR 69624 through 70251). When two or more
procedures within one of 11 imaging code families are furnished on the
same patient in a single session, the TC of the highest priced
procedure is paid at 100

[[Page 38520]]

percent and the TC of each subsequent procedure is paid at 75 percent
(a 25 percent reduction). The reduction does not apply to the PC.
It is necessary to periodically update the list of codes subject to
the MPPR to reflect new and deleted codes. We are proposing to subject
several additional procedures to the MPPR. Six procedures represent
codes newly created since the MPPR list was established. Four
additional procedures have been identified as similar to procedures
currently subject to the MPPR. We are also removing CPT 76778, a
deleted code, from the list. Table 3 contains the proposed additions to
the list. After we adopted the MPPR, section 5102 of the Deficit
Reduction Act of 2005 (Pub. L. 109-171) (DRA) exempted the expenditure
reductions resulting from this policy from the statutory budget
neutrality requirement; therefore, we are proposing that expenditure
reductions resulting from these changes be exempt from budget
neutrality. (See section VI., Regulatory Impact Analysis, for a
discussion of budget neutrality.) The complete list of procedures
subject to the MPPR is in Addendum F of this proposed rule.

Table 3.--Procedures Proposed for Multiple Procedure Payment Reduction
----------------------------------------------------------------------------------------------------------------
Code Short descriptor Code family
----------------------------------------------------------------------------------------------------------------
70336....................... mri, temporomandibular Family 5 MRI and MRA (Head/Brain/Neck).
joint(s).
70554....................... Fmri brain by tech............ Family 5 MRI and MRA (Head/Brain/Neck).
75557....................... Cardiac mri for morph......... Family 4 MRI and MRA (Chest/Abd/Pelvis).
75559....................... Cardiac mri w/stress img...... Family 4 MRI and MRA (Chest/Abd/Pelvis).
75561....................... Cardiac mri for morph w/dye... Family 4 MRI and MRA (Chest/Abd/Pelvis).
75563....................... Cardiac mri w/stress img & dye Family 4 MRI and MRA (Chest/Abd/Pelvis).
76776....................... Us exam k transpl w/doppler... Family 1 Ultrasound (Chest/Abdomen/Pelvis--Non-
Obstetrical).
76870....................... Us exam, scrotum.............. Family 1 Ultrasound (Chest/Abdomen/Pelvis--Non-
Obstetrical).
77058....................... Mri, one breast............... Family 4 MRI and MRA (Chest/Abd/Pelvis).
77059....................... Mri, both breasts............. Family 4 MRI and MRA (Chest/Abd/Pelvis).
----------------------------------------------------------------------------------------------------------------

3. Proposed HCPCS Code for Prostate Saturation Biopsies
Prostate Saturation Biopsy is a technique currently described by
Category III CPT code 0137T, Biopsy, prostate, needle, saturation
sampling for prostate mapping. Typically, this service entails 40 to 80
core samples taken from the prostate under general anesthesia.
Currently, the biopsies are reviewed by a pathologist and this service
is captured under CPT code 88305, Surgical pathology, gross and
microscopic examination, which is separately billed by the physician
for each core sample taken. CPT Code 88305 has a physician work value
of 0.75 and a total nonfacility payment rate of $102.83. We believe
that paying individually for review of each core sample submitted
grossly overpays for the pathological interpretation and report for
this service.
We are proposing the following four G codes to more accurately
represent the pathologic evaluation, interpretation, and report for
this service:
GXXX1, Surgical pathology, gross and microscopic
examination for prostate needle saturation biopsy sampling, 1-20
specimens
GXXX2, Surgical pathology, gross and microscopic
examination for prostate needle saturation biopsy sampling, 21-40
specimens.
GXXX3, Surgical pathology, gross and microscopic
examination for prostate needle saturation biopsy sampling, 41-60
specimens.
GXXX4, Surgical pathology, gross and microscopic
examination for prostate needle saturation biopsy sampling, greater
than 60 specimens.
We are proposing to carrier price these codes. We will gather
information regarding the laboratory and clinical staff resources
required to value these services.

F. Part B Drug Payment

1. Average Sales Price (ASP) Issues
[If you choose to comment on issues in this section, please include
the caption ``ASP ISSUES'' at the beginning of your comments.]
Medicare Part B covers a limited number of prescription drugs and
biologicals. For the purposes of this proposed rule, the term ``drugs''
will hereafter refer to both drugs and biologicals, unless otherwise
specified. Medicare Part B covered drugs not paid on a cost or
prospective payment basis generally fall into the following three
categories:
Drugs furnished incident to a physician's service.
DME drugs.
Drugs specifically covered by statute (certain
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 furnishing fee for blood clotting factors, a
dispensing fee for inhalation drugs, and a supplying fee to pharmacies
for certain Part B drugs.
In this section, we discuss recent statutory changes to the ASP
methodology and other drug payment issues.
a. Determining the Payment Amount Based on ASP Data
The methodology for developing Medicare drug payment allowances
based on the manufacturers' submitted ASP data is specified in 42 CFR,
part 414, subpart K. We initially established this regulatory text in
the CY 2005 PFS

[[Page 38521]]

final rule with comment period (69 FR 66424). We further described the
formula we use to calculate the payment amount for each Billing code in
the CY 2006 PFS proposed rule (70 FR 45844) and final rule with comment
period (70 FR 70217) With the enactment of the MMSEA, the formula we
use changed beginning April 1, 2008. Section 112(a) of the MMSEA
requires us to calculate payment amounts using a specified volume-
weighting methodology. In addition, section 112(b) of the MMSEA sets
forth a special rule for determining the payment amount for certain
inhalation drugs.
For each billing code, we calculate a volume-weighted, ASP-based
payment amount using the ASP data submitted by manufacturers.
Manufacturers submit ASP data to us at the 11-digit National Drug Code
(NDC) level, including the number of units of the 11-digit NDC sold and
the ASP for those units. We determine the number of billing units in an
NDC based on the amount of drug in the package. For example: A
manufacturer sells a box of 4 vials of a drug. Each vial contains 20
milligrams (mg). The billing code is per 10 MG. The number of billing
units in this NDC for this billing code is (4 vials x 20 mg)/10 mg = 8
billable units.
Prior to April 1, 2008, we used the following three-step formula to
calculate the payment amount for each billing code. First, we converted
the manufacturer's 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. Then, we summed the product of the ASP per billing
unit and the number of units of the 11-digit NDC sold for each NDC
assigned to the billing code. Then, we divided this total by the sum of
the number of units of the 11-digit NDC sold for each NDC assigned to
the billing code.
Beginning April 1, 2008, we use a two-step formula to calculate the
payment amount for each billing code. We sum the product of the
manufacturer's ASP and the number of units of the 11-digit NDC sold for
each NDC assigned to the billing and payment code, and then divide this
total by the sum of the product of the number of units of the 11-digit
NDC sold and the number of billing units in that NDC for each NDC
assigned to the billing and payment code.
Prior to April 1, 2008, manufacturers' ASP data for smaller and
larger package sizes were given the same weight in our calculation of
the payment amounts; that is, the ASP for one vial was weighted the
same as the ASP for a box of 10 vials. For payment amounts in effect on
or after April 1, 2008, manufacturers' ASPs for larger package sizes
have greater impact on the payment amounts and their ASPs for smaller
package sizes have less; that is, the ASP for a box of 10 vials is
given 10 times the weight of a package containing a single vial. The
payment allowance limits published on our Web site for dates of service
on or after April 1, 2008 are determined using the new volume-weighting
methodology and include application of the special payment rule
described in the following paragraph. (See our Web site at http://
www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/01a_
2008aspfiles.asp#TopOfPage.)
In addition to the formula change, the MMSEA established a special
payment rule for certain inhalation drugs furnished through an item of
durable medical equipment (DME). The ``grandfathering'' provision in
section 1847A(c)(6)(C)(ii) of the Act requires that certain drugs be
treated as multiple source drugs for purposes of calculating the
payment allowance limits. Section 112(b) of the MMSEA requires that,
effective April 1, 2008, the payment amount for inhalation drugs
furnished through an item of DME is the lesser of the amount determined
by applying the grandfathering provision or by not applying that
provision. We reviewed our payment determinations effective January 1,
2008 to identify the drugs subject to this special rule, and
implemented this new requirement in accordance with the statutory
implementation date of April 1, 2008. We identified that albuterol and
levalbuterol, in both the unit dose and concentrated forms, are subject
to the special payment rule. At this time, we have not identified other
inhalation drugs furnished through an item of DME to which section
112(b) of the MMSEA applies.
The provisions in section 112 of the MMSEA are self-implementing
for services on and after April 1, 2008. Because of the limited time
between enactment and the implementation date, it was not practical to
undertake and complete rulemaking on this issue prior to implementing
the required changes. Inclusion of this topic in this proposed rule, is
our first opportunity to propose conforming changes to the regulatory
text at Sec. 414.904. We propose to revise paragraphs (a) and (e) to
codify the changes to the determination of payment amounts as required
by section 112 of the MMSEA. We are soliciting comments on the proposed
regulatory text that appears elsewhere in this proposed rule.
b. Average Manufacturer Price (AMP)/ Widely Available Market Prices
(WAMP)
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 WAMP for such 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 average sales price (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 percentage is specified in section
1847A(d)(3)(B)(i) of the Act as 5 percent for CY 2005. For CY 2006 and
subsequent years, section 1847A(d)(3)(B)(ii) of the Act establishes
that the applicable threshold percentage is ``the percentage applied
under this subparagraph subject to such adjustment as the Secretary may
specify for the WAMP or the AMP, or both.'' In CY 2006 through CY 2008,
we specified an applicable threshold percentage of 5 percent for both
the WAMP and AMP. We based this decision on the limited data available
to support a change in the current threshold percentage.
For CY 2009, we propose to specify an applicable threshold
percentage of 5 percent for the WAMP and the AMP. At present, the OIG
is continuing its ongoing comparison of both the WAMP and the AMP.
Furthermore, information on how recent changes to the ASP weighting
methodology may affect the comparison of WAMP/AMP to ASP is not
available at this time. Since we do not have data suggesting a more
appropriate level at this time, we believe that continuing the 5
percent applicable threshold percentage for both the WAMP and AMP is
appropriate for CY 2009.
As we noted in the CY 2008 PFS final rule with comment period (72
FR 66259), we understand that there are complicated operational issues

[[Page 38522]]

associated with potential payment substitutions. We will continue to
proceed cautiously in this area and provide stakeholders, particularly
manufacturers of drugs impacted by potential price substitutions, with
adequate notice of our intentions regarding such, including the
opportunity to provide input with regard to the processes for
substituting the WAMP or the AMP for the ASP. As part of our approach,
we intend to develop a better understanding of the issues that may be
related to certain drugs for which the WAMP and AMP may be lower than
the ASP over time.
We welcome comments on our proposal to continue the applicable
threshold at 5 percent for both the WAMP and AMP for CY 2009.
2. Competitive Acquisition Program (CAP) Issues
[If you choose to comment on issues in this section, please include
the caption ``CAP ISSUES'' at the beginning of your comments.]
Section 303(d) of the MMA requires the implementation of a
competitive acquisition program for certain Medicare Part B drugs not
paid on a cost or prospective payment system basis. The provisions for
acquiring and billing drugs under the CAP were described in the
Competitive Acquisition of Outpatient Drugs and Biologicals Under Part
B proposed rule (March 4, 2005, 70 FR 10746) and the interim final rule
(July 6, 2005, 70 FR 39022), and certain provisions were finalized in
the CY 2006 PFS final rule with comment period (70 FR 70236). The CY
2007 PFS final rule with comment period (70 FR 66260) then finalized
portions of the July 6, 2005 IFC that had not already been finalized.
The CAP is an alternative to the ASP (buy and bill) methodology of
obtaining certain Part B drugs used incident to physicians' services.
Physicians who choose to participate in the CAP obtain drugs from
vendors selected through a competitive bidding process and approved by
CMS. Under the CAP, physicians agree to obtain all of the approximately
190 drugs on the CAP drug list from an approved CAP vendor. A vendor
retains title to the drug until it is administered, bills Medicare for
the drug, and bills the beneficiary for cost sharing amount once the
drug has been administered. The physician bills Medicare only for
administering the drug to the beneficiary. The CAP currently operates
with a single CAP drug category. CAP claims processing began on July 1,
2006.
After the CAP was implemented, section 108 of the MIEA-TRHCA made
changes to the CAP payment methodology. Section 108(a)(2) of the MIEA-
TRHCA requires the Secretary to establish (by program instruction or
otherwise) a post-payment review process (which may include the use of
statistical sampling) to assure that payment is made for a drug or
biological only if the drug or biological has been administered to a
beneficiary. The Secretary is required to recoup, offset, or collect
any overpayments. This statutory change took effect on April 1, 2007.
Conforming changes were proposed in the CY 2008 PFS proposed rule (72
FR 38153) and finalized in the CY 2008 PFS final rule with comment
period (72 FR 66260).
In this section, we are proposing several refinements to the CAP
regarding the annual CAP payment amount update mechanism, the
definition of a CAP physician, the restriction on physician
transportation of CAP drugs, and the dispute resolution process. Our
proposed refinements are based on the operational experience we have
gained since the implementation of the program and we believe that they
will improve this relatively new and growing program. Although we are
currently evaluating bids for CY 2009 through CY 2011 approved CAP
vendor contracts, we do not believe that the proposals in this rule
will conflict with the evaluation of bids or the performance of the CAP
vendor contracts because we do not expect these proposals to change the
way payment is made under the CAP, to significantly change how
prospective vendors are expected to furnish drugs under the CAP, or to
significantly affect the number of participating CAP physicians.
a. Annual CAP Payment Amount Update Mechanism
Payment amounts for drugs furnished during the first year of an
approved CAP vendor's contract are set through a competitive process
using bidders' prices and limited by the ASP based payment amount. This
process was described in detail in the July 6, 2005 IFC (70 FR 39069
through 39078). Section 414.906(c) provides for updates to an approved
CAP vendor's payment amounts based on the vendor's reasonable net
acquisition costs (RNAC).
In the July 6, 2005 IFC, we described a two-step process to
recompute the single price for each drug in the single drug category if
there is a change in the costs reported by a particular vendor. We
stated that ``we would adjust the bid price that the vendor originally
submitted by the percentage change indicated in the cost information
that the vendor disclosed. Next, we would recompute the single price
for the drug as the median of all of these adjusted bid prices'' (70 FR
39076). The two-step process contemplated that there would be more than
one approved CAP vendor at the time prices were to be adjusted and that
no successful bidders would choose not to participate in the CAP.
However, during the first round of CAP contracting after offering
more than one contract, we entered a contract with only one bidder.
Thus, during the 2008 price update calculation process, we developed an
approach to account for the lack of RNAC data for bidders who chose not
to participate in the CAP. We believe that the approach we used to
adjust prices for the 2008 contract year is consistent with Sec.
414.906(c) and with the July 6, 2005 IFC because it retains a two step
calculation based on the approved CAP vendors' RNAC, as well as the
calculation of a median of adjusted bid prices.
This approach was posted on the Approved CAP Vendor page of the CMS
Web site at http://www.cms.hhs.gov/CompetitiveAcquisforBios/15_
Approved_Vendor.asp . The percent change in RNAC for 2008 was
calculated based on data supplied by the approved CAP vendor. This
percent change in RNAC was used as a proxy for the percent change in
RNAC for successful bidders that chose not to become approved CAP
vendors.
We are proposing to continue using this approach for future CAP
payment amount updates where the number of approved CAP vendors is less
than the number of successful bidders. We would continue to use the
average of the approved CAP vendor-supplied RNAC data as a proxy for
data from vendors who bid successfully but are not participating in the
CAP. For example, if the payment amounts for the first year of a CAP
contract are based on five successful bidders, but only four have
signed contracts to supply drugs under the CAP (that is, there are four
approved CAP vendors), only RNAC data collected from the four approved
CAP vendors would be used to calculate the percent change in the RNAC.
The average of the four approved CAP vendors' adjusted payment amounts
would be used as a proxy for the RNAC of the successful bidder that is
not participating in the CAP. The updated CAP payment amount would then
be calculated as the median of the five data points (one data point for
each approved CAP vendor's updated payment amount, and one data point
calculated using the average of the approved CAP vendor's RNAC).
Similarly, if there were five successful bidders but only three chose

[[Page 38523]]

to become approved CAP vendors, the average of the three approved CAP
vendors' RNAC would be the proxy for the RNAC of the two bidders who
did not participate. The median of those five data points would become
the updated CAP payment amount.
We believe this approach would provide us with a flexible method
for updating CAP prices that is consistent with our original policy as
stated in the July 6, 2005 IFC, but that accounts for bidders or
approved CAP vendors who are not participating in the program at the
time the price updates are calculated. This would include bidders who
choose not to participate at the beginning of a contract and those who
drop out later. Our proposal clarifies the approach used to calculate
the RNAC and does not seek to alter the general approach to the payment
calculation update described in the July 6, 2005 IFC and existing
regulation text. We welcome comments on this approach.
b. Definition of a CAP Physician
In the July 6, 2005 IFC, we stated that section 1847B of the Act
most closely describes a system for the provision of and the payment
for drugs provided incident to a physician's service (70 FR 39026). In
the CY 2006 PFS final rule with comment period (70 FR 70258), we stated
that for the purposes of the CAP, a physician includes all
practitioners that meet the definition of a ``physician'' in section
1861(r) of the Act. This definition includes doctors of medicine,
osteopathy, dental surgery, dental medicine, podiatry, and optometry,
as well as chiropractors. However, this definition does not include
other health care professionals, such as NPs, CNSs, and other
professions such as PAs who may be able to legally prescribe
medications and enroll in Medicare. Our 2005 CAP definition was not
intended to exclude these practitioners who are appropriately billing
Medicare for legally prescribed medications administered in a capacity
that would be classified as incident to a physician's services if the
medications were administered by a physician. We are concerned that the
existing CAP definition of a physician is unnecessarily restrictive and
could potentially affect access to the CAP for a small segment of
providers that should be eligible for participation in the CAP in
situations where they currently bill Medicare separately and
appropriately.
Therefore, we are proposing to further clarify that, for the
purposes of the CAP, the definition of a physician includes all
practitioners that meet the definition of a ``physician'' in section
1861(r) of the Act, as well as practitioners (such as NPs, CNSs and
PAs) described in section 1861(s)(2)(K) of the Act and other
practitioners who legally prescribe drugs associated with services
under section 1861(s) of the Act if those services and the associated
drugs are covered when furnished incident to a physician's service.
While we believe that most practitioners described in section
1861(s)(2)(K) of the Act would bill under specific physician provider
numbers, it is not our intent to exclude practitioners who are able to
bill independently for drugs associated with services that are covered
when provided by a physician and legally authorized to be performed.
Our proposal is specific to the Part B Drug CAP and does not affect
the definition of physician in section 1861(r) of the Act, or the
definition of Medical and Other Health Services described in section
1861(s) of the Act. This proposal also does not seek to expand the
scope of the CAP beyond what has been described in previous rules,
other than to clarify that a small number of providers who are enrolled
in Medicare, and who legally prescribe drugs associated with services
under section 1861(s) of the Act and can be paid by Medicare may elect
to participate in the CAP if billing independently. In short, the CAP
remains at this time a program that provides Part B drugs furnished
incident to a physician's services.
We anticipate that a small number of NPs, CNSs, and PAs would be
affected by the implementation of this proposal. We seek comment on how
this clarification would affect the various professions that bill
Medicare for drugs furnished incident to services that are typically
provided by a physician. If this provision is implemented, we believe
that the total number of CAP participants would not increase by more
than 1 percent, and we seek comment on level of interest associated
with the implementation of this proposal.
c. Easing the Restriction on Physician Transport of CAP Drugs Between
Practice Locations
Although section 1847B(b)(4)(E) of the Act provides for the
shipment of CAP drugs to settings other than a participating CAP
physician's office under certain conditions, in initially implementing
the CAP, we did not propose to implement the CAP in alternative
settings. In the July 6, 2005 IFC (70 FR 39047), we described both
comments that supported the idea of allowing participating CAP
physicians to transport drugs to multiple office locations, and
comments that raised concerns about the risk of damaging a drug that
has not been kept under appropriate conditions while being transported.
Specifically, one commenter pointed out that a physician may have
several practice locations. If the beneficiary should change his or her
site of treatment from the one to which the vendor originally shipped
the drug, the physician would need an appropriate way of transporting
the drugs from one location to another. Some potential vendors stated
that, while drugs were being transported to an alternate location,
spoilage and breakage could occur. They expressed concern that because
the vendor retains ownership of the drug until it is administered to
the beneficiary, they could be held liable if the drug deteriorates and
is administered to the beneficiary in substandard condition.
Ultimately, we implemented the CAP with a restriction that CAP
drugs be shipped directly to the participating CAP physician, as stated
in Sec. 414.906(a)(4), and that participating CAP physicians may not
transport CAP drugs from one location to another, as stated in Sec.
414.908(a)(3)(xii).
However, we were aware that physicians may desire to administer
drugs in alternative settings. Therefore, in the July 6, 2005 IFC, we
sought comment on how this could be accommodated under the CAP in a way
that addresses the potential vendors' concerns about product integrity
and damage to the approved CAP vendors' property (70 FR 39048). We
discussed comments submitted in response to the July 6, 2005 IFC in the
CY 2008 PFS proposed rule (72 FR 38158). Several comments suggested
either easing or removing the restriction on transporting drugs to
other locations. Commenters believed that physicians, particularly
those who specialize in oncology, and their staff are knowledgeable
about drug stability and handling, and therefore, were capable of
assuming this responsibility. Other commenters indicated that
transporting the drug to another office location may allow for
flexibility in scheduling patient visits.
We also received several comments discussing the impact of CAP
delivery times on rural clinics and offices with satellite locations.
Many of these responses discussed how easing the restriction on
transporting CAP drugs between locations would be welcome in rural
areas and for satellite offices with limited hours where personnel may
not always be available to receive CAP drug shipments.
We also requested comments in the CY 2008 PFS proposed rule (72 FR
38157) on the potential feasibility of easing the restriction on
transporting

[[Page 38524]]

CAP drugs where this is permitted by State law and other applicable
laws and regulations. We asked commenters to consider how such a policy
could be constructed so that the approved CAP vendor could retain
control over how the drugs that it owns are handled. We also requested
comments on other issues that we should take into account concerning
transportation of CAP drugs between the practice locations listed on a
physician's CAP election agreement form. Additionally, we also
solicited comments on the following areas for consideration in the
possible development of future proposals:
How to structure requirements so that drugs are not
subjected to conditions that will jeopardize their integrity, stability
or sterility while being transported, and steps to keep transportation
activities consistent with all applicable laws and regulations;
Whether any agreement allowing participating CAP
physicians to transport CAP drugs to alternate practice locations
should be voluntary. This means that approved CAP vendors would not be
required to offer such an agreement and physicians who participate in
the CAP would not be required to accept such an offer; and
Whether such an agreement should be documented in writing,
and whether it is necessary to create any restrictions on which CAP
drugs could be transported.
We responded to submitted comments in the CY 2008 PFS final rule
with comment period (72 FR 66268). Several comments supported the
concept of easing the restriction on transporting CAP drugs if this
could be done safely, and if changes were consistent with applicable
rules, regulations, and within the limitations of product stability and
integrity. The restriction on transporting CAP drugs was perceived as a
barrier to physician participation in the program. One commenter stated
that elimination of the restriction would result in the same
flexibility as the ASP (buy and bill) method of acquiring drugs.
Another commenter expressed a strong desire to implement these changes
promptly.
A few commenters also cautioned us to implement appropriate
safeguards if we chose to ease the transportation restriction. One
commenter asked that the safeguards be available for public scrutiny
before they are implemented. Conversely, other commenters stated that
the risk of damage to CAP drugs would be minimal since a physician and
his or her staff are knowledgeable about a given drug's stability,
handling, and transportation requirements.
We are mindful of the concerns expressed by the commenters and are
now proposing to permit transport of CAP drug between a participating
CAP physician's practice locations subject to voluntary agreements
between the approved CAP vendor and the participating CAP physician. We
propose that such agreements must comply with all applicable State and
Federal laws and regulations and product liability requirements, and be
documented in writing.
We would like to reiterate the voluntary nature of these proposed
agreements. Approved CAP vendors would not be required to offer and
participating CAP physicians would not be required to accept such
agreements when selecting an approved CAP vendor. An approved CAP
vendor may not refuse to do business with a participating CAP physician
because the participating CAP physician has declined to enter into such
an agreement with the approved CAP vendor. Furthermore, we are not
seeking to define which CAP drugs may be subject to the proposed
voluntary agreements. In other words, each approved CAP vendor could
specify which CAP drug(s) could be transported.
However, our proposal contains certain limitations. In previous
rulemaking, we have described requirements for voluntary agreements
between approved CAP vendors and participating CAP physicians. In the
July 6, 2005 IFC (70 FR 39050) and the CY 2006 PFS final rule (70 FR
70251 through 70252), we stated that we will not dictate the breadth of
use or the specific obligations contained in voluntary arrangements
between approved CAP vendors and physicians, other than to note that
they must comply with applicable law and to prohibit approved CAP
vendors from coercing participating CAP physicians into entering any of
these arrangements. Parties to such arrangements must also ensure that
the arrangements do not violate the physician self-referral (``Stark'')
prohibition (section 1877 of the Act), the Federal anti-kickback
statute (section 1128B(b) of the Act), or any other Federal or State
law or regulation governing billing or claims submission. We propose to
apply these standards to any agreement for the transport of CAP drugs.
We are also particularly concerned about opportunities for
disruption in the drug's chain of custody and appropriate storage and
handling conditions that may ultimately affect patient care or increase
the risk of drug theft or diversion. Therefore, in order to maintain
safety and drug integrity in the CAP and to protect against the
fraudulent diversion of CAP drugs, we propose that any voluntary
agreements between an approved CAP vendor and a participating CAP
physician regarding the transportation of CAP drug must include
requirements that drugs are not subjected to conditions that will
jeopardize their integrity, stability, and/or sterility while being
transported. We welcome comments on these issues, including the
identification who may transport the drugs, how documentation of
transportation activities could be accomplished, and how the oversight
of such agreements will be carried out.
In conclusion, we believe that this proposal to ease the
restriction on transporting CAP drugs between a participating CAP
physician's practice locations--when agreed upon by the participating
CAP physician and the approved CAP vendor--will make the CAP more
flexible and ultimately more appealing to participating CAP physicians.
Additionally, we believe that this proposal will facilitate the
participation of CAP physicians who have office locations in rural
areas and/or have satellite offices with limited hours. Moreover, we
believe that this proposal will promote beneficiary care, particularly
for beneficiaries who live in rural locations. Since physicians would
be able to transport CAP drugs to another office location in accordance
with a voluntary agreement with their approved CAP vendor,
beneficiaries would have more flexibility in scheduling the location of
their appointments. We invite comments about this proposal.
d. Dispute Resolution Process
Section 1847B of the Act is generally silent with regard to the
treatment of disputes surrounding the delivery of drugs and the denial
of drug claims. However, section 1847B(b)(2)(A)(ii)(II) of the Act does
contain a reference to a grievance process that is included among the
quality and service requirements that must be met by approved CAP
vendors. In the July 6, 2005 IFC (70 FR 39054 through 39058), we
described the process for the resolution of participating CAP
physicians' drug quality and service complaints and vendors' complaints
regarding noncompliant participating CAP physicians. We encouraged
participating CAP physicians, beneficiaries, and vendors to use
informal communication as a first step to resolve service-related
administration issues. However, we recognized that certain disputes
would require a more structured approach, and therefore, we established
processes under Sec. 414.916 and Sec. 414.917.

[[Page 38525]]

1. Termination of CAP Drug Shipments to Suspended CAP Physicians
Section 414.916 provides a mechanism for approved CAP vendors to
address noncompliance problems with CAP physicians. As stated at Sec.
414.916(a), ``Cases of an approved CAP vendor's dissatisfaction with
denied drug claims are resolved through a voluntary alternative dispute
resolution process delivered by the designated carrier, and a
reconsideration process provided by CMS.'' Once the decision is made to
suspend a participating CAP physician's CAP election agreement, the
participating CAP physician will be suspended from the CAP as described
in Sec. 414.916(b)(3).
Physicians whose participation in the CAP has been suspended are
not eligible to receive CAP drugs. This is implied in Sec.
414.906(a)(4), which speaks of approved CAP vendors providing CAP drugs
directly to ``[a] participating CAP physician.'' However, we believe
that the clarity of our dispute resolution regulations would be
improved if this drug delivery issue were stated explicitly. Therefore,
we are proposing to revise Sec. 414.916 to specify that approved CAP
vendors shall not deliver CAP drugs to participating CAP physicians
whose participation in the CAP has suspended after an initial
determination by CMS. This suspension in drug shipment would also apply
to physicians engaged in the reconsideration process outlined in Sec.
414.916(c). We are also making a conforming change in the regulation
text in Sec. 414.914(f)(12). These changes are in accord with the
underlying intent of Sec. 414.916, namely to provide a mechanism for
vendors to address noncompliance problems with CAP physicians, and we
believe that these changes will increase the clarity of our
regulations. We note that the participating CAP physicians who are
suspended from participation in the CAP will be able to obtain drugs
and bill for them under the ASP payment system provided they have not
been excluded from participation in Medicare and/or their billing
privileges have not been revoked. We welcome comments about this
proposal.
2. Approved CAP Vendor's Status During the Reconsideration Process
Section 414.917 pertains to the dispute resolution process for
participating CAP physicians. As discussed in the July 6, 2005 IFC (70
FR 39057 through 39058), if a physician finds an approved CAP vendor's
service or the quality of a CAP drug supplied by the approved CAP
vendor to be unsatisfactory, then the physician may address the issues
first through the approved CAP vendor's grievance process, and second
through an alternative dispute resolution process administered by the
designated carrier and CMS. In turn, the designated carrier would
gather information about the issue as outlined in Sec. 414.917(b)(2)
and make a recommendation to CMS on whether the approved CAP vendor has
been meeting the service and quality obligations of its CAP contract.
We would then review and act on that recommendation after gathering any
necessary, additional information from the participating CAP physician
and approved CAP vendor. If we suspend an approved CAP vendor's CAP
contract for noncompliance or terminate the CAP contract in accordance
with Sec. 414.914(a), the approved CAP vendor may request a
reconsideration in accordance with Sec. 414.917(c).
In the July 6, 2005 IFC (70 FR 39058), we indicated that the
approved CAP vendor's participation in the CAP would be suspended while
the approved CAP vendor's appeal of our decision is pending. This
suspended status is also implied in Sec. 414.917(c)(9), which states
that the ``approved CAP vendor may resume participation in CAP'' if the
final reconsideration determination is favorable to the approved CAP
vendor. In order to improve the clarity of our regulations, we propose
to indicate that the approved CAP vendor's contract will remain
suspended during the reconsideration period in Sec. 414.917. We
believe this proposed technical change is consistent with basic
contracting concepts and with our current practices for the CAP. We
invite comments regarding this proposed clarification.

G. Application of the HPSA Bonus Payment

[If you choose to comment on issues in this section, please include
the caption ``HPSA BONUS PAYMENT'' at the beginning of your comments.]
Section 1833(m) of the Act provides for an additional 10 percent
bonus payment for physicians' services furnished in a year to a covered
individual in an area that is designated as a geographic Health
Professional Shortage Area (HPSA) as identified by the Secretary prior
to the beginning of such year. The statute indicates that the HPSA
bonus payment will be made for services furnished during a year in
areas that have been designated as HPSAs prior to the beginning of that
year. As a result, the HPSA bonus payment is made for physicians'
services furnished in an area designated as of December 31 of the prior
year, even if the area's HPSA designation is removed during the current
year. However, for physicians' services furnished in areas that are
designated as geographic HPSAs after the beginning of a year, the HPSA
bonus payment is not made until the following year, if the area is
still designated as of December 31 of that year.
In the CY 2005 PFS final rule with comment period (69 FR 66297), we
stated that determination of zip codes for automatic HPSA bonus payment
will be made on an annual basis and that there would be no updates to
the zip code file during the year. We also stated that physicians
furnishing covered services in ``newly designated'' HPSAs may add a
modifier to their Medicare claims to collect the HPSA bonus payment
until our next annual posting of zip codes for which automatic payment
of the bonus will be made.
In Sec. 414.67, we are proposing to revise our regulations to
clarify that physicians who furnish services in areas that are
designated as geographic HPSAs as of December 31 of the prior year but
not included on the list of zip codes for automated HPSA bonus payments
should use the AQ modifier to receive the HPSA bonus payment.

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

[If you choose to comment on issues in this section, please include
the caption ``ESRD PROVISIONS'' at the beginning of your comments.]
Since August 1, 1983, payment for dialysis services furnished by
end-stage renal disease (ESRD) facilities has been based on a composite
rate payment system that provides a fixed, prospectively determined
amount per dialysis treatment, adjusted for geographic differences in
area wage levels. In accordance with section 1881(b)(7) of the Act,
separate composite rates have been established for hospital-based and
independent ESRD facilities. The composite rate is designed to cover a
package of goods and services needed to furnish dialysis treatments
that include, but not be limited to, certain routinely provided drugs,
laboratory tests, supplies, and equipment. Unless specifically included
in the composite rate, other injectable drugs and laboratory tests
medically necessary for the care of the dialysis patient are separately
billable. Effective on August 1, 1983, the base composite rates per
treatment were $123 for independent ESRD facilities and $127 for
hospital-based ESRD facilities. The Congress has enacted a number of

[[Page 38526]]

adjustments to the composite rate since that time. The current 2008
base composite rates are $132.49 for independent ESRD facilities and
$136.68 for hospital-based ESRD facilities.
Section 623 of the MMA amended section 1881 of the Act to require
changes to the composite rate payment methodology, as well as to the
pricing methodology for separately billable drugs and biologicals
furnished by ESRD facilities.
Section 1881(b)(12) of the Act, as added by the MMA, requires the
establishment of a basic case-mix adjusted prospective payment system
(PPS) that include services comprising the composite rate and an add-on
to the composite rate component for the difference between current
payments for separately billed drugs and the revised drug pricing
specified in the statute. In addition, section 1881(b)(12) of the Act
requires that the composite rate be adjusted for a number of patient
characteristics (case-mix) and section 1881(b)(12)(D) of the Act gives
the Secretary discretion to revise the wage indices and the urban and
rural definitions used to develop them. Finally, section 1881(b)(12)(E)
of the Act imposes a budget neutrality (BN) adjustment, so that
aggregate payments under the basic case-mix adjusted composite payment
system for CY 2005 equals the aggregate payments for the same period if
section 1881(b)(12) of the Act does not apply.
Before January 1, 2005, payment to both independent and hospital-
based facilities for the anti-anemia drug, erythropoietin (EPO) was
established under section 1881(b)(11) of the Act at $10.00 per 1,000
units. For independent ESRD facilities, payment for all other
separately billable drugs and biologicals are based on the lower of
actual charges or 95 percent of the average wholesale price (AWP).
Hospital-based ESRD facilities were paid based on the reasonable cost
methodology for separately billed drugs and biologicals (other than
EPO) furnished to dialysis patients. Changes to the payment methodology
for separately billed ESRD drugs and biologicals that were established
by the MMA effective January 1, 2005, are described in sections II.H.1.
and II.H.2. These changes affected payments in both CY 2005 and CY
2006.
In addition, section 623(f)(1) of the MMA directs the Secretary to
submit a Report to Congress detailing the elements and features for the
design and implementation of a bundled PPS for services furnished by
ESRD facilities to Medicare beneficiaries. This bundled PPS is a
different way of payment for ESRD services since it includes not only
composite rate services, but could also include separately billable
drugs (including EPO), laboratory tests, and other separately billable
items into one PPS payment rate. The Report to Congress was released
February 20, 2008.
1. CY 2005 Revisions
In the CY 2005 PFS final rule with comment period (69 FR 66319
through 66334), we implemented section 1881(b) of the Act, as amended
by section 623 of the MMA, and revised payments to ESRD facilities.
These revisions were effective January 1, 2005, and included
implementation of a case-mix adjusted payment system that incorporated
services that comprise the composite rate; an update of 1.6 percent to
the composite rate component of the payment system; and a drug add-on
adjustment of 8.7 percent to the composite rate to account for the
difference between pre-MMA payments for separately billable drugs and
payments based on revised drug pricing for 2005 which used acquisition
costs. Effective April 1, 2005, the CY 2005 PFS final rule with comment
period also implemented case-mix adjustments to the composite rate for
certain patient characteristics (that is, age, low body mass index, and
body surface area).
In addition, to implement section 1881(b)(13) of the Act, we
revised payments for drugs billed separately by independent ESRD
facilities, paying for the top 10 ESRD drugs based on acquisition costs
(as determined by the OIG) and for other separately billed drugs at the
average sales price +6 percent (hereafter referred to as ASP+6
percent). Hospital-based ESRD facilities continued to receive cost-
based payments for all separately billable drugs and biologicals except
for EPO which was paid based on average acquisition costs.
2. CY 2006 Revisions
In the CY 2006 PFS final rule with comment period (70 FR 70161), we
implemented additional revisions to payments to ESRD facilities under
section 623 of the MMA. For CY 2006, we further revised the drug
payment methodology applicable to drugs furnished by ESRD facilities.
All separately billed drugs and biologicals furnished by both hospital-
based and independent ESRD facilities are now paid based on ASP+6
percent.
We recalculated the 2005 drug add-on adjustment to reflect the
difference in payments between the pre-MMA AWP pricing and the revised
pricing based on ASP+6 percent. The recalculation did not affect the
actual add-on adjustment applied to payments in 2005, but provided an
estimate of what the adjustment would have been had the 2006 payment
methodology been in effect in CY 2005. The drug add-on adjustment was
then updated to reflect the expected growth in expenditures for
separately billable drugs in CY 2006.
As of January 1, 2006, we also implemented a revised geographic
adjustment authorized by section 1881(b)(12) of the Act. As part of
that change, we--
Revised the labor market areas to incorporate the Core-
Based Statistical Area (CBSA) designations established by the Office of
Management and Budget (OMB);
Eliminated the wage index ceiling and reduced the floor to
0.8500; and
Revised the labor portion of the composite rate to which
the geographic adjustment is applied.
We also provided a 4-year transition from the previous wage-
adjusted composite rates to the current wage-adjusted rates. For CY
2006, 25 percent of the payment is based on the revised geographic
adjustments, and the remaining 75 percent of payment is based on the
old metropolitan statistical area-based (MSA-based) payments.
In addition, section 5106 of the DRA provided for a 1.6 percent
update to the composite rate component of the basic case-mix adjusted
payment system, effective January 1, 2006. As a result, the base
composite rate was increased to $130.40 for independent ESRD facilities
and $134.53 for hospital-based facilities. For 2006, the drug add-on
adjustment (including the growth update) was 14.5 percent.
3. CY 2007 Updates
In the CY 2007 PFS final rule with comment period (71 FR 69681), we
implemented the following updates to the basic case-mix adjusted
payment system:
An update to the wage index adjustments to reflect the
latest hospital wage data, including a BN adjustment of 1.052818 to the
wage index for CY 2007.
A method to annually calculate the growth update to the
drug add-on adjustment required by section 1881(b)(12) of the Act, as
well as a growth update to the drug add-on adjustment of 0.5 percent
for CY 2007. Therefore, effective January 1, 2007 the drug add-on
adjustment was increased to 15.1 percent.
In addition, section 103 of the MIEA-TRHCA established a 1.6
percent update to the composite rate portion of the payment system,
effective April 1, 2007.

[[Page 38527]]

Therefore, the current base composite rate is $132.49 for independent
facilities and $136.68 for hospital-based facilities. Also, the effect
of this increase in the composite rate portion of the payment system
was a reduction in the drug add-on adjustment to 14.9 percent,
effective April 1, 2007. Since the statutory increase only applied to
the composite rate, this adjustment to the drug add-on percent was
needed to maintain the drug add-on amount constant.
4. CY 2008 Updates
In the CY 2008 PFS final rule with comment period (72 FR 66280), we
implemented the following updates to the basic case-mix adjusted
payment system:
A growth update to the drug add-on adjustment of 0.5
percent. As a result, the drug add-on adjustment to the composite
payment rate increased from 14.9 percent to 15.5 percent.
An update to the wage index adjustments to reflect the
latest hospital wage data, including a BN adjustment of 1.055473 to the
wage index for CY 2008.
For CY 2008, consistent with the transition blends announced in the
CY 2006 PFS final rule with comment period (70 FR 70170), we
implemented the third year of the transition to the CBSA-based wage
index. In addition, the wage index floor was reduced from 0.8000 to
0.7500. After applying a BN adjustment of 1.055473, the wage index
floor was 0.7916.
5. Provisions of This Proposed Rule
For CY 2009, we are proposing the following updates to the
composite rate payment system:
A growth update to the drug add-on adjustment to the
composite rates;
An update to the wage index adjustment to reflect the
latest available wage data, including a revised BN adjustment;
The completion of the 4-year transition from the previous
wage-adjusted composite rates to the CBSA wage-adjusted rates, where
payment will be based on 100 percent of the revised geographic
adjustments; and
A reduction of the wage index floor from 0.7500 to 0.7000.
a. Proposed Growth Update to the Drug Add-on Adjustment to the
Composite Rates
Section 623(d) of the MMA added section 1881(b)(12)(B)(ii) of the
Act which requires establishing an add-on to the composite rate to
account for changes in the drug payment methodology stemming from
enactment of the MMA. Section 1881(b)(12)(c) of the Act provides that
the drug add-on must reflect the difference in aggregate payments
between the revised drug payment methodology for separately billable
ESRD drugs and the AWP payment methodology. In 2005, we generally paid
for ESRD drugs based on average acquisition costs. Thus the difference
from AWP pricing was calculated using acquisition costs. However, in
2006 when we moved to ASP pricing for ESRD drugs, we recalculated the
difference from AWP pricing using ASP prices.
In addition, section 1881(b)(12)(F) of the Act requires that,
beginning in CY 2006, we establish an annual update to the drug add-on
to reflect estimated growth in expenditures for separately billable
drugs and biologicals furnished by ESRD facilities. This growth update
applies only to the drug add-on portion of the case-mix adjusted
payment system.
The CY 2008 drug add-on adjustment to the composite rate is 15.5
percent. The drug add-on adjustment for CY 2008 incorporates an
inflation adjustment of 0.5 percent. This computation is explained in
detail in the CY 2008 PFS final rule with comment period (72 FR 66280
through 66282).
(i) Estimating Growth in Expenditures for Drugs and Biologicals for CY
2009
Section 1881(b)(12)(F) of the Act specifies that the drug add-on
update must reflect ``the estimated growth in expenditures for drugs
and biologicals (including erythropoietin) that are separately billable
* * *'' By referring to ``expenditures'', we stated previously that we
believe the statute contemplates that the update would account for both
increases in drug prices, as well as increases in utilization of those
drugs.
In the CY 2007 PFS final rule with comment period (71 FR 69682), we
established an interim methodology for annually estimating the growth
in ESRD drugs and biological expenditures that uses the Producer Price
Index (PPI) for pharmaceuticals as a proxy for pricing growth in
conjunction with 2 years of ESRD drug data to estimate per patient
utilization growth. We indicated that this methodology would be used to
update the drug add-on to the composite rate until such time that we
had sufficient ESRD drug expenditure data to project the growth in ESRD
drug expenditure beginning in CY 2010.
However, upon further contemplation, we believe that a better
interpretation of the statutory reference to growth in expenditures
contemplates that we would consider any change in drug pricing or
utilization, not only increases, as we develop the update to the drug
add-on adjustment. We have completed an analysis of ASP prices for ESRD
drugs from 2006 through 2008, which shows a declining trend in ASP
pricing for ESRD drugs. Accordingly, we are concerned that the use of
the PPI as a proxy for ESRD drug pricing growth may no longer be
appropriate. This is because the PPI is a general measure for all drugs
and does not reflect price changes specific to ESRD drugs. We continue
to lack sufficient expenditure data for trend analysis purposes. Given
that we do have sufficient ASP pricing information on ESRD drug prices
to establish a price forecast specific to ESRD drugs, and since this
forecast is based on actual ESRD drug pricing data, we believe it is a
more accurate measure of the price component changes for purposes of
estimating the growth in total expenditures for ESRD drugs for 2009.
Accordingly, for CY 2009, we propose revising the interim methodology
for estimating the growth in ESRD drug expenditures by using ASP
pricing to estimate the price component of the update calculation.
As detailed below in this section, we are proposing for CY 2009 to
estimate price growth using historical ASP pricing data for ESRD drugs
for CY 2006 through CY 2008 and to estimate growth in per patient
utilization of drugs by using ESRD facility historical drug expenditure
data for CY 2006 and CY 2007.
(ii) Estimating Growth in ESRD Drug Prices
To estimate price growth we used ASP pricing data for the four
quarters of 2006 and 2007, and the two available quarters of 2008. We
anticipate having at least three quarters of 2008 data available in
time for the final rule. We calculated the weighted price change, for
the original top ten ESRD drugs for which we had acquisition pricing,
plus Aranesp. Tables 4 and 5 show the average ASP drug prices and the
2007 weights used. In CY 2006 and CY 2007 we calculated a weighted
average price reduction of 1.8 percent. We also calculated a weighted
average price reduction of 2.1 percent between CY 2007 and CY 2008. The
overall average price reduction is 1.9 percent over the 3-year period,
thus, the proposed weighted average ESRD drug pricing change projected
for CY 2009 is a reduction of 1.9 percent.

[[Page 38528]]

Table 4.--CY 2006, 2007 and 2008 ESRD Drug ASP Prices
------------------------------------------------------------------------
Independent drugs 2006 2007 2008
------------------------------------------------------------------------
EPO....................................... 9.46 9.17 9.02
Paricalcitol.............................. 3.81 3.79 3.86
Sodium-ferric-glut........................ 4.88 4.76 4.82
Iron-sucrose.............................. 0.36 0.37 0.36
Levocarnitine............................. 9.44 8.07 5.81
Doxercalciferol........................... 2.97 2.68 2.60
Calcitriol................................ 0.55 0.54 0.38
Iron-dextran.............................. 11.94 11.69 11.61
Vancomycin................................ 3.23 3.43 3.29
Alteplase................................. 31.63 33.21 33.28
Aranesp................................... 3.01 3.29 2.83
------------------------------------------------------------------------

Table 5.--CY 2007 Drug Weights for ESRD Facilities
------------------------------------------------------------------------
2007 weights
Independent drugs (percent)
------------------------------------------------------------------------
EPO..................................................... 69.5
Paricalcitol............................................ 11.7
Sodium-ferric-glut...................................... 2.5
Iron-sucrose............................................ 6.1
Levocarnitine........................................... 0.2
Doxercalciferol......................................... 2.8
Calcitriol.............................................. 0.1
Iron-dextran............................................ 0.0
Vancomycin.............................................. 0.1
Alteplase............................................... 1.0
Aranesp................................................. 6.0
------------------------------------------------------------------------

(iii) Estimating Growth in Per Patient Drug Utilization
To isolate and project the growth in per patient utilization of
ESRD drugs for CY 2009, we must remove the enrollment and price growth
components from the historical drug expenditure data and consider the
residual utilization growth. As discussed previously in this section,
we propose to use ESRD facility drug expenditure data from CY 2006 and
CY 2007 to estimate per patient utilization growth for CY 2009.
First we had to estimate the total drug expenditures for all ESRD
facilities. For this proposed rule, we used the final CY 2006 ESRD
claims data and the latest available CY 2007 ESRD facility claims,
updated through December 31, 2007 (that is, claims with dates of
service from January 1 through December 31, 2007, that were received,
processed, paid, and passed to the National Claims History File as of
December 31, 2007). For the CY 2009 PFS final rule, we plan to use
additional updated CY 2007 claims with dates of service for the same
time period. This updated CY 2007 data file will include claims
received, processed, paid, and passed to the National Claims History
File as of June 30, 2008.
While the December 2007 update of CY 2007 claims used in this
proposed rule is the most current available claims data, we recognize
that it does not reflect a complete year, as claims with dates of
service towards the end of the year have not all been processed. To
more accurately estimate the update to the drug add-on, aggregate drug
expenditures are required. Based on an analysis of the 2006 claims
data, we inflated the CY 2007 drug expenditures to estimate the June
30, 2008 update of the 2007 claims file. We used the relationship
between the December 2006 and the June 2007 versions of 2006 claims to
estimate the more complete 2007 claims available in June 2008 and
applied that ratio to the 2007 claims data from the December 2007
claims file. We did this separately for EPO, the other top 10
separately billable drugs, and the remaining separately billable drugs
for independent and hospital-based ESRD facilities. We are using the
top 11 drugs since they represent 99.7 percent of total expenditures in
CY 2007 for separately billable drugs furnished to ESRD patients. All
components were then combined to estimate aggregate CY 2007 ESRD drug
expenditures. The net adjustment to the CY 2007 claims data was an
increase of 12.6 percent to the 2007 expenditure data. This adjustment
allows us to more accurately compare the 2006 and 2007 data to estimate
utilization growth.
The next step is to remove the enrollment and price growth
components from that total. As discussed previously in this section, in
developing the per patient utilization growth for this proposed rule,
we limited our analysis to the latest 2 years of available ESRD
facility drug data (that is, 2006 and 2007). We believe that per
patient utilization growth between these years would be a better proxy
for future growth, as it best represents current utilization trends.
To calculate the per patient utilization growth, we removed the
enrollment component by using the growth in enrollment data between CY
2006 and CY 2007. This was approximately 3 percent. To remove the price
effect we used the calculated weighted change between CY 2006 and CY
2007 ASP pricing for the top eleven ESRD drugs. We weighted the
differences using 2007 ESRD facility drug expenditure data. Table 4
shows the CY 2007 weights for each of the top eleven ESRD drugs billed
by ESRD facilities.
This process led to an overall 1.8 percent reduction in price
between CY 2006 and CY 2007.
After removing the enrollment and price effects from the
expenditure data, the residual growth would reflect the per patient
utilization growth. To do this, we divided the product of the
enrollment growth of 3 percent (1.03) and the price reduction of 1.8
percent (1.00 - 0.018 = 0.982) into the total drug expenditure change
between 2006 and 2007 of 0 percent (1.00 - 0.00 = 1.00). The result is
a utilization factor equal to 0.99 (1.00/(1.03 * 0.982) = 0.99).
Since we observed a 1 percent drop in per patient utilization of
drugs between 2006 and 2007, we are projecting a 1 percent drop in per
patient utilization for ESRD facilities in CY 2009.
b. Applying the Proposed Growth Update to the Drug Add-on Adjustment
In CY 2006, we applied the projected growth update percentage to
the total amount of drug add-on dollars established for CY 2005 to
establish a dollar amount for the CY 2006 growth update. In addition,
we projected the growth in dialysis treatments for CY 2006 based on the
projected growth in ESRD enrollment. We divided the projected total
dialysis treatments for CY 2006 into the projected dollar amount of the
CY 2006 growth to develop the per treatment growth update amount. This
growth update amount, combined with the CY 2005 per treatment drug add-
on amount, resulted in an average drug add-on amount per treatment of
$18.88 (or a 14.5 percent adjustment to the composite rate) for CY
2006.
In the CY 2007 PFS final rule with comment period (71 FR 69684), we

[[Page 38529]]

revised our update methodology by applying the growth update to the per
treatment drug add-on amount. That is, for CY 2007, we applied the
growth update factor of 4.03 percent to the $18.88 per treatment drug
add-on amount for an updated amount of $19.64 per treatment (71 FR
69684). For CY 2008, the per treatment drug add-on amount was updated
to $20.33.
As discussed in detail below, for CY 2009, we are proposing no
update to the per treatment drug add-on amount of $20.33 established in
CY 2008.
c. Proposed Update to the Drug Add-on Adjustment
As discussed previously in this section, we estimate a 1 percent
reduction in per patient utilization of ESRD drugs for CY 2009. Also,
using historical ESRD drug pricing data specific to ESRD drugs, we
project a 1.9 percent reduction in ESRD drug prices for CY 2009. To
compute this estimate, we used ASP pricing data for the four quarters
of 2006 and 2007, and the two available quarters of 2008. We calculated
the weighted price change for the top ten ESRD drugs plus Aranesp over
the period. Tables 4 and 5 show the average ASP drug prices and the
2007 weights used. As shown in Table 4, to the extent there were price
changes during the trending period, increases as well as decreases have
been reflected in the overall weighted average price reduction of 1.9
percent over the 3-year period. Had we continued to use the PPI for
prescription drugs in our computation of the drug add-on update, the
price component would have been a projected increase of 3.8 percent.
Given the observed decline in ASP pricing for ESRD drugs, we believe
the continued use of the PPI as a price proxy would have significantly
overstated the price component of our computation of the projected
change in per patient ESRD drug expenditures for CY 2009. This is
because the PPI is a more general measure of price change for all drugs
and does not reflect price changes specific to the drugs provided by
ESRD facilities.
Therefore, we are projecting that the combined growth in per
patient utilization and pricing for CY 2009 would result in a negative
update equal to -2.9 percent. (0.99 * 0.981 = 0.971). However, as
indicated above, we are proposing no update to the drug add-on
adjustment.
We believe this approach is consistent with the language under
section 1881(b)(12)(F) of the Act which states in part that ``the
Secretary shall annually increase'' the drug add-on amount based on the
growth in expenditures for separately billed ESRD drugs. Our
understanding of the statute contemplates ``annually increase'' to mean
a positive or zero update to the drug add-on. Therefore, we propose to
apply a zero update and to maintain the $20.33 per treatment drug add-
on amount for CY 2009 that reflects a proposed 15.5 percent drug add-on
adjustment to the composite rate for CY 2009.
However, we also believe that an alternative reading of the statute
is possible. We believe that the Congress may not have intended to
provide an increase in the drug add-on adjustment in a year where the
projected growth in expenditures for separately billable ESRD drugs is
declining. There is potentially a gap in the statute, which specifies
an ``increase'' to the drug add-on adjustment based upon the
``estimated growth in expenditures for drugs and biologicals'' that are
separately billed ESRD drugs. However, an ``increase'' cannot be
implemented when estimated ``growth'' is negative.
To resolve this seeming contradiction, another approach to the zero
percent update that we are proposing would be to apply an adjustment of
less than 1.0 to the drug add-on adjustment. Under this approach, for
CY 2009, we would ``increase'' the drug add-on adjustment by 0.971.
Applying the 0.971 increase to the $20.33 per treatment adjustment
would yield a drug add-on amount of $19.74 per treatment, which
represents a 0.4 percent decrease in the CY 2008 drug add-on percentage
of 15.5 percent. As such, the proposed drug add-on adjustment to the
composite rate for CY 2009 would be 15.0 percent.
We are seeking public comment on our proposal of a zero update, as
well as the alternative approach presented above, so that we can make
an informed decision with respect to the final update to the CY 2009
drug add-on adjustment to the composite rate.
Had we selected the other option of continuing to use the PPI for
prescription drugs as a proxy for ESRD drug prices instead of using ASP
pricing data, the resulting update factor would have been a 2.6 percent
increase to the CY 2008 average per treatment drug add-on amount of
$20.33, resulting in a weighted average increase to the composite rate
of $0.57 or a 0.4 percent increase in the CY 2008 drug add-on
percentage of 15.5 percent. As discussed above, however, we believe the
PPI overstates the changes in ESRD drug prices given the observed trend
in declining prices for those drugs over the past several years.
We note that for the CY 2010 update to the drug add-on adjustment
we expect to estimate the growth in ESRD drug expenditures using 3
years' worth of ASP-based historical ESRD drug expenditure data that
will be available at that time. This data will be used to conduct a
trend analysis to estimate the growth in ESRD drug expenditures for CY
2010. As we discussed earlier with respect to computing the 2009
estimated growth in drug prices, to the extent there are price changes
during the trending period, past increases as well as decreases would
be reflected in future trend analyses and in future updates to the drug
add-on adjustment.
d. Proposed Update to the Geographic Adjustments to the Composite Rates
Section 1881(b)(12)(D) of the Act, as amended by section 623(d) of
the MMA, gives the Secretary the authority to revise the wage indexes
previously applied to the ESRD composite rates. The purpose of the wage
index is to adjust the composite rates for differing wage levels
covering the areas in which ESRD facilities are located. The wage
indexes are calculated for each urban and rural area. In the CY 2006
PFS final rule with comment period (70 FR 70167), we announced our
adoption of the OMB CBSA-based geographic area designations to develop
revised urban/rural definitions and corresponding wage index values for
purposes of calculating ESRD composite rates. In addition, we generally
have followed wage index policies related to these definitions as used
under the inpatient hospital prospective payment system (IPPS), but
without regard to any approved geographic reclassification authorized
under sections 1886(d)(8) and (d)(10) of the Act or other provisions
that only apply to hospitals paid under the IPPS (70 FR 70167). For
purposes of the ESRD wage index methodology, the hospital wage data we
use is pre-classified, pre-floor hospital data and unadjusted for
occupational mix.
i. Updates to Core-Based Statistical Area (CBSA) Definitions
In the CY 2006 PFS final rule with comment period (70 FR 70167), we
announced our adoption of the OMB's CBSA-based geographic area
designations to develop revised urban/rural definitions and
corresponding wage index values for purposes of calculating ESRD
composite rates. OMB's CBSA-based geographic area designations are
described in OMB Bulletin 03-04, originally issued June 6, 2003, and is
available online at http://www.whitehouse.gov/omb/bulletins/b03-
04.html. In addition, OMB has published subsequent bulletins

[[Page 38530]]

regarding CBSA changes, including changes in CBSA numbers and titles.
We wish to point out that this and all subsequent ESRD rules and
notices are considered to incorporate the CBSA changes published in the
most recent OMB bulletin that applies to the hospital wage index used
to determine the current ESRD wage index. The OMB bulletins may be
accessed online at http://www.whitehouse.gov/omb/bulletins/index.html.
ii. Updated Wage Index Values
In the CY 2007 PFS final rule with comment period (71 FR 69685), we
stated that we intended to update the ESRD wage index values annually.
The current ESRD wage index values for CY 2008 were developed from FY
2004 wage and employment data obtained from the Medicare hospital cost
reports. As we indicated, the ESRD wage index values are calculated
without regard to geographic classifications authorized under sections
1886(d)(8) and (d)(10) of the Act and utilize pre-floor hospital data
that is unadjusted for occupational mix. To calculate the ESRD wage
index, hospital wage index data for FY 2004 for all providers in each
urban/rural geographic area are combined. The sum of the wages for all
providers in each geographic area was divided by the total hours for
all providers in each area. The result is the average hourly hospital
wage for that geographic locale. The ESRD wage index was computed by
dividing the average hourly hospital wage for each geographic area by
the national average hourly hospital wage. The final step was to
multiply each wage index value by the ESRD wage index budget neutrality
factor.
We propose to use the same methodology for CY 2009, with the
exception that FY 2005 hospital data will be used to develop the CY
2009 wage index values. The CY 2009 ESRD wage index budget neutrality
factor is 1.056672. (See section H.5.d.iii. of this proposed rule for
details about this adjustment.) For a detailed description of the
development of the proposed CY 2009 wage index values based on FY 2005
hospital data, see the FY 2009 ``Proposed Changes to the Hospital
Inpatient Prospective Payment Systems (IPPS) and Fiscal Year 2009
Rates'' proposed rule (73 FR 23630). Section III G. (Computation of the
Proposed FY 2009 Unadjusted Wage Index) of the preamble to that
proposed rule describes the cost report schedules, line items, data
elements, adjustments, and wage index computations. The wage index data
affecting ESRD composite rates for each urban and rural locale may also
be accessed on the CMS Web site at http://www.cms.hhs.gov/
AcuteInpatientPPS/WIFN/list.asp. The wage data are located in the
section entitled, ``FY 2009 Proposed Rule Occupational Mix Adjusted and
Unadjusted Average Hourly Wage and Pre-reclassified Wage Index by
CBSA.''
(A) Fourth Year of the Transition
In the CY 2006 PFS final rule with comment period (70 FR 70169), we
indicated that we would apply a 4-year transition period to mitigate
the impact on the composite rates resulting from our adoption of CBSA-
based geographic designations. Beginning January 1, 2006, during each
year of the transition, an ESRD facility's wage-adjusted composite rate
(that is, without regard to any case-mix adjustments) is a blend of its
old MSA-based wage-adjusted payment rate and its new CBSA-based wage
adjusted payment rate for the transition year involved. For each
transition year, the share of the blended wage-adjusted base payment
rate that is derived from the MSA-based and CBSA-based wage index
values is shown in Table 6. In CY 2006, the first year of the
transition, we implemented a 75/25 blend. In CY 2007, the second year
of the transition, we implemented a 50/50 blend. In CY 2008, the third
year of the transition, we implemented a 25/75 blend. Consistent with
the transition blends announced in the CY 2006 PFS final rule with
comment period (70 FR 70170), in CY 2009, we are proposing that each
ESRD facility's composite payment rate will be based entirely on the
CBSA-based wage index.
In CY 2006, we eliminated the wage index cap of 1.30 and stated
that we would implement a gradual reduction in the wage index floor of
0.90. Prior to January 1, 2006, the wage indexes were restricted to
values no less than 0.90 and no greater than 1.30, meaning that
payments to facilities in areas where labor costs fell below 90 percent
of the national average, or exceeded 130 percent of that average, were
not adjusted beyond the 90 percent or 130 percent level. Although we
stated that the ESRD wage index values should not be constrained by the
application of floors and ceilings, we also expressed concern that the
immediate elimination of the floor could adversely affect ESRD
beneficiary access to care. Therefore, we reduced the floor to 0.85 in
CY 2006, to 0.80 in CY 2007, and to 0.75 in CY 2008.
For CY 2009, we are proposing to reduce the wage index floor to
0.70. For this final year of the transition (CY 2009), we believe that
a reduction to 0.70 is appropriate as we continue to reassess the need
for a wage index floor in future years. We believe that a gradual
reduction in the floor is still needed to ensure patient access to
dialysis in areas that have low wage index values, especially Puerto
Rico, and to prevent sudden adverse effects to the payment system.
However, we note that our goal is the eventual elimination of all wage
index floors.
The wage index floors, caps, and blended shares of the composite
rates applicable to all ESRD facilities for CY 2006 through CY 2008,
and the proposed floor and blended share applicable for CY 2009, are
shown in Table 6. They are identical to the values shown in Table 10 of
the CY 2007 PFS final rule with comment period (71 FR 69686) for the
applicable years.

Table 6.--Wage Index Transition Blend
----------------------------------------------------------------------------------------------------------------
Old MSA New CBSA
CY payment Floor Ceiling (percent) (percent)
----------------------------------------------------------------------------------------------------------------
2006......................................... 0.85 None........................... 75 25
2007......................................... 0.80 None........................... 50 50
2008......................................... 0.75 None........................... 25 75
2009......................................... * 0.70 None........................... 0 100
----------------------------------------------------------------------------------------------------------------
* Each wage index floor is multiplied by a BN adjustment factor. For CY 2009 the BN adjustment is 1.056672
resulting in an actual wage index floor of 0.7397.

[[Page 38531]]

Because CY 2009 is the final year of the 4-year transition period,
each ESRD facility's composite payment rate will be based entirely on
its applicable new CBSA-based wage index value.
(B) Wage Index Values for Areas With No Hospital Data
In CY 2006, while adopting the CBSA designations, we identified a
small number of ESRD facilities in both urban and rural geographic
areas where there are no hospital wage data from which to calculate
ESRD wage index values. The affected areas were rural Massachusetts,
rural Puerto Rico, and the urban area of Hinesville, GA (CBSA 25980).
For CY 2006, CY 2007, and CY 2008, we calculated the ESRD wage index
values for those areas as follows:
For rural Massachusetts, because we had not determined a
reasonable wage proxy, we used the FY 2005 wage index value in CY 2006
and CY 2007.
For rural Puerto Rico, the situation was similar to rural
Massachusetts. However, because all geographic areas in Puerto Rico
were subject to the wage index floor in CY 2006, CY 2007, and CY 2008,
we applied the ESRD wage index floor to rural Puerto Rico as well.
For the urban area of Hinesville, GA, we calculated the CY
2006, CY 2007, and CY 2008 wage index value based on the average wage
index value for all urban areas within the State of Georgia.
For CY 2008, we adopted an alternative methodology for establishing
a wage index value for rural Massachusetts. Because we used the same
wage index value for 2 years with no update, we believed it was
appropriate to establish a methodology which employed reasonable proxy
data for rural areas (including rural Massachusetts) and also permitted
annual updates to the wage index based on that proxy data. For rural
areas without hospital wage data, we used the average wage index values
from all contiguous CBSAs as a reasonable proxy for that rural area.
In determining the imputed rural wage index, we interpreted the
term ``contiguous'' to mean sharing a border. In the case of
Massachusetts, the entire rural area consists of Dukes and Nantucket
Counties. We determined that the borders of Dukes and Nantucket
counties are contiguous with Barnstable and Bristol counties. We are
proposing to use the same methodology for CY 2009. Under this
methodology, the CY 2009 proposed wage index values for the counties of
Barnstable (CBSA 12700, Barnstable Town, MA-1.2624) and Bristol (CBSA
39300, Providence-New Bedford-Fall River, RI-MA-1.0573) were averaged
resulting in an imputed proposed wage index value of 1.1599 for rural
Massachusetts in CY 2009.
For rural Puerto Rico, we continued to apply the wage index floor
in CY 2008. Because all areas in Puerto Rico that have a wage index
were eligible for the ESRD wage index floor of 0.75, we applied that
floor to ESRD facilities located in rural Puerto Rico. For CY 2009, all
areas in Puerto Rico that have a wage index are eligible for the
proposed ESRD wage index floor of 0.70. Therefore, we propose to
continue applying the proposed ESRD wage index floor of 0.70 to
facilities that are located in rural Puerto Rico.
For Hinesville, GA (CBSA 25980), which is an urban area without
specific hospital wage data, we propose to apply the same methodology
used to impute a wage index value that we used in CY 2006, CY 2007, and
CY 2008. Specifically, we utilize the average wage index value for all
urban areas within the State of Georgia. That results in a proposed CY
2009 wage index value of 0.9123 for the Hinesville-Fort Stewart GA
CBSA.
In the CY 2008 PFS final rule with comment period (72 FR 66283), we
stated that we would continue to evaluate existing hospital wage data
and possibly wage data from other sources such as the Bureau of Labor
Statistics, to determine if other methodologies might be appropriate
for imputing wage index values for areas without hospital wage data for
CY 2009 and subsequent years. To date, no data from other sources,
superior to that currently used in connection with the IPPS wage index
has emerged. Therefore, for ESRD purposes, we continue to believe this
is an appropriate policy.
(C) Evaluation of Wage Index Policies Adopted in the FY 2008 IPPS Final
Rule
We also stated that we planned to evaluate any policies adopted in
the FY 2008 IPPS final rule (72 FR 47130, 47337 through 47338) that
affect the wage index, including how we treat certain New England
hospitals under section 601(g) of the Social Security Amendments of
1983 (Pub. L. 98-21). This is relevant for the ESRD composite payment
system, because the ESRD wage index is calculated using the same urban/
rural classification system and computation methodology applicable
under the IPPS, except that it is not adjusted for occupational mix and
does not reflect geographic classifications authorized under sections
1886(d)(8) and (d)(12) of the Act. We use the hospital wage index with
this modification because it is the best available measure effective of
urban and rural differences in labor costs among dialysis facilities.
Accordingly, in the following sections, we summarize the wage index
changes implemented in connection with the IPPS, as they affect the
ESRD wage index used under the composite payment system.
(1) CY 2009 Classification of Certain New England Counties
We are addressing the change in the treatment of ``New England
deemed counties'' (that is, those counties in New England listed in
Sec. 412.64(b)(1)(ii)(B) that were deemed to be part of urban areas
under section 601(g) of the Social Security Amendments of 1983), that
were made in the FY 2008 IPPS final rule with comment period (72 FR
47337 through 47338). These counties include the following: Litchfield
County, Connecticut; York County, Maine; Sagadahoc County, Maine;
Merrimack County, New Hampshire; and Newport County, Rhode Island. Of
these five ``New England deemed counties'', three (York County,
Sagadahoc County, and Newport County) are also included in the MSAs
defined by OMB, and therefore, used in the calculations of the urban
hospital wage index values reflected in the ESRD composite payment
rates. The remaining two, Litchfield County and Merrimack County, are
geographically located in areas that are considered ``rural'' under the
current IPPS and ESRD composite payment system labor market
definitions, but have been previously deemed urban under the IPPS in
certain circumstances, as discussed below.
In the FY 2008 IPPS final rule with comment period, for purposes of
IPPS, Sec. 412.64(b)(1)(ii)(B) was revised such that the two ``New
England deemed counties'' that are still considered rural under the OMB
definitions (Litchfield County, CT and Merrimack County, NH) are no
longer considered urban effective for discharges occurring on or after
October 1, 2007, and therefore, are considered rural in accordance with
Sec. 412.64(b)(1)(ii)(C). However, for purposes of payment under the
IPPS, acute-care hospitals located within those areas are treated as
being reclassified to their deemed urban areas effective for discharges
occurring on or after October 1, 2007 (see 72 FR 473337 through 47338).
We note that the ESRD composite payment system does not provide for
such geographic reclassification. Also, in the FY 2008 IPPS final rule
with comment period (72 FR 47338), we explained that we have limited
this policy change for the ``New England deemed counties'' only to IPPS
hospitals, and any change to non-IPPS provider wage indexes would be

[[Page 38532]]

addressed in the respective payment system rules. Accordingly, we are
taking this opportunity to clarify the treatment of ``New England
deemed counties'' under the ESRD composite payment system in this
proposed rule.
As discussed above, for purposes of the ESRD wage index, we have
recognized the OMB's CBSA designations, as well as generally following
the policies under IPPS with regard to the definitions for ``urban''
and ``rural'' for the wage index. Historical changes to the labor
market area/geographic classifications and annual updates to the wage
index values under the composite payment system are made effective
January 1 each year. When we established the most recent composite
payment system update, effective for dialysis services provided on or
after January 1, 2008, we considered the ``New England deemed
counties'' (including Litchfield County, CT and Merrimack County, NH)
as urban for CY 2008, as evidenced by the inclusion of Litchfield
County as one of the constituent counties of urban CBSA 25540
(Hartford-West Hartford-East Hartford, CT), and the inclusion of
Merrimack County as one of the constituent counties of urban CBSA 31700
(Manchester-Nashua, NH).
Litchfield County, CT and Merrimack County, NH are not considered
``urban'' under Sec. 412.64(b)(1)(ii)(A) through (B) as revised under
the FY 2008 IPPS final rule and, therefore, are considered ``rural''
under Sec. 412.64(b)(1)(ii)(C). Accordingly, to reflect our general
policy for ESRD wage index, these two counties will be considered
``rural'' under the ESRD composite payment system effective with the
next update of the payment rates on January 1, 2009, and will no longer
be included in urban CBSA 25540 (Hartford-West Hartford-East Hartford,
CT) and urban CBSA 31700 (Manchester-Nashua, NH), respectively. We note
that this policy is consistent with our other policy of not taking into
account IPPS geographic reclassifications in determining payments under
the composite payment system.
(2) Multi-Campus Hospital Wage Index Data
In the CY 2008 ESRD composite payment system final rule (72 FR
66280), we established ESRD wage index values for CY 2008 calculated
from the same data (collected from cost reports submitted by hospitals
for cost reporting periods beginning during FY 2004) used to compute
the FY 2008 acute care hospital inpatient wage index, without taking
into account geographic reclassification under sections 1886(d)(8) and
(d)(10) of the Act. However, the IPPS policy that apportions the wage
data for multi-campus hospitals was not finalized before the ESRD
composite payment system final rule. Therefore the CY 2008 ESRD wage
index values reflected the IPPS wage data are based on a hospital's
actual location without regard to the urban or rural designation of any
related or affiliated provider. Accordingly, all wage data from
different campuses of a multi-campus hospital were included in the
calculation of the CBSA wage index of the main hospital. The ESRD wage
index values applicable for services provided on or after January 1,
2008 through December 31, 2008 are shown in Addendum G for urban areas
and Addendum H for rural areas (72 FR 66552 through 66574) of the CY
2008 PFS final rule with comment period.
We are continuing to use IPPS data for CY 2009 because we believe
that in the absence of dialysis facility specific wage data, using the
hospital inpatient wage data is appropriate and reasonable for the ESRD
composite payment system. We note that the IPPS wage data used to
determine the proposed CY 2009 ESRD wage index values were computed
from wage data submitted by hospitals for cost reporting periods
beginning in FY 2005 and reflect our policy adopted under the IPPS
beginning in FY 2008, which apportions the wage data for multi-campus
hospitals located in different labor market areas, CBSAs, to each CBSA
where the campuses are located (see the FY 2008 IPPS final rule with
comment period (72 FR 47317 through 47320)). Specifically, for the
proposed CY 2009 ESRD composite payment system, the wage index was
computed using IPPS wage data (published by hospitals for cost
reporting periods beginning in 2005, as with the FY 2009 IPPS wage
index), which allocated salaries and hours to the campuses of two
multi-campus hospitals with campuses that are located in different
labor areas; one in Massachusetts and the other is Illinois. The ESRD
wage index values proposed for CY 2009 in the following CBSAs are
affected by this policy: Boston-Quincy, MA (CBSA 14484), Providence-New
Bedford-Falls River, RI-MA (CBSA 39300), Chicago-Naperville-Joliet, IL
(CBSA 16974), and Lake County-Kenosha County, IL-WI (CBSA 29404).
Please refer to Addendums G and H of this proposed rule.
In summary, for CY 2009, we propose to use the FY 2009 wage index
data (collected from cost reports submitted by hospitals for cost
reporting periods beginning during FY 2005) to compute the ESRD
composite payment rates effective beginning January 1, 2009. These data
reflect the multi-campus and New England deemed counties policies
discussed above.
iii. Budget Neutrality Adjustment
Section 1881(b)(12)(E)(i) of the Act, as added by section 623(d) of
the MMA, requires 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 2008 should be the same as
aggregate payments that would have been made if we had not made any
changes to the geographic adjusters. We note that this BN adjustment
only addresses the impact of changes in the geographic adjustments. A
separate BN adjustment was developed for the case-mix adjustments
currently in effect. As we are not proposing any changes to the case-
mix measures for CY 2009, the current case-mix BN adjustment will
remain in effect for CY 2009. As in CY 2008, for CY 2009, we again
propose to apply a BN adjustment factor (1.056672) directly to the ESRD
wage index values. As explained in the CY 2007 PFS final rule with
comment period (71 FR 69687 through 69688), we believe this is the
simplest approach because it allows us to maintain our base composite
rates during the transition from the current wage adjustments to the
revised wage adjustments described previously in this section. Because
the ESRD wage index is only applied to the labor-related portion of the
composite rate, we computed the BN adjustment factor based on that
proportion (53.711 percent).
To compute the proposed CY 2009 wage index BN adjustment factor
(1.056672), we used the FY 2005 pre-floor, pre-reclassified, non-
occupational mix-adjusted hospital data to compute the wage index
values, 2007 outpatient claims (paid and processed as of December 31,
2007), and geographic location information for each facility which may
be found through the Dialysis Facility Compare Web page on the CMS Web
site at http://www.cms.hhs.gov/DialysisFacilityCompare/. The FY 2005
hospital wage index data for each urban and rural locale by CBSA may
also be accessed on the CMS Web site at http://www.cms.hhs.gov/
AcuteInpatientPPS/WIFN/list.asp. The wage index data are located in the
section entitled, ``FY 2009 Proposed Rule Occupational Mix Adjusted and
Unadjusted Average Hourly Wage and Pre-Reclassified Wage Index by
CBSA.''

[[Page 38533]]

Using treatment counts from the 2007 claims and facility-specific
CY 2008 composite rates, we computed the estimated total dollar amount
each ESRD provider would have received in the CY 2008 (the 3rd year of
the 4-year transition). The total of these payments became the target
amount of expenditures for all ESRD facilities for CY 2009. Next, we
computed the estimated dollar amount that would have been paid to the
same ESRD facilities using the proposed ESRD wage index for CY 2009
(the 4th year of the 4-year transition). The total of these payments
became the fourth year new amount of wage-adjusted composite rate
expenditures for all ESRD facilities.
After comparing these two dollar amounts (target amount divided by
the 4th year new amount), we calculated an adjustment factor that, when
multiplied by the applicable CY 2009 ESRD proposed wage index value,
would result in aggregate payments to ESRD facilities that will remain
within the target amount of composite rate expenditures. When making
this calculation, the ESRD wage index floor value of 0.7000 is used
whenever appropriate. The proposed BN adjustment factor for the CY 2009
wage index is 1.056672.
To ensure BN, we also must apply the BN adjustment factor to the
proposed wage index floor of 0.7000 which results in a proposed
adjusted wage index floor of 0.7397 (0.7500 x 1.056672) for CY 2009.
iv. ESRD Wage Index Tables
The proposed 2009 wage index tables are located in Addenda G and H
of this proposed rule.
v. Application of the Hospital-Acquired Conditions Payment Policy for
IPPS Hospitals to Other Settings
Value-based purchasing (VBP) ties payment to performance through
the use of incentives based on measures of quality and cost of care.
The implementation of VBP is rapidly transforming CMS from being a
passive payer of claims to an active purchaser of higher quality, more
efficient health care for Medicare beneficiaries. Our VBP initiatives
include hospital pay for reporting (the Reporting Hospital Quality Date
for the Annual Payment Update Program), physician pay for reporting
(the Physician Quality Reporting Initiative), home health pay for
reporting, the Hospital VBP Plan Report to Congress, and various VBP
demonstration programs across payment settings, including the Premier
Hospital Quality Incentive Demonstration and the Physician Group
Practice Demonstration.
The preventable hospital-acquired conditions (HAC) payment
provision for IPPS hospitals is another of our value-based purchasing
initiatives. The principal behind the HAC payment provision (Medicare
not paying more for healthcare-associated conditions) could be applied
to the Medicare payment systems for other settings of care. Section
1886(d)(4)(D) of the Act requires the Secretary to select for the HAC
IPPS payment provision conditions that are: (1) High cost, high volume,
or both; (2) assigned to a higher paying MS-DRG when present as a
secondary diagnosis; and (3) could reasonably have been prevented
through the application of evidence-based guidelines. Beginning October
1, 2008, Medicare can no longer assign an inpatient hospital discharge
to a higher paying MS-DRG if a selected HAC condition was not present
on admission. That is, the case will be paid as though the secondary
diagnosis was not present. Medicare will continue to assign a discharge
to a higher paying Medicare Severity-Diagnosis Related Group (MS-DRG)
if a selected condition was present on admission.
The broad principle articulated in the HAC payment provision for
IPPS hospitals--Medicare not paying for healthcare-associated
conditions--could potentially be applied to other Medicare payment
systems for conditions that occur in settings other than IPPS
hospitals. Other possible settings of care include, but are not limited
to: Hospital outpatient departments; SNFs; HHAs; ESRD facilities; and
physician practices. The implementation would be different for each
setting, as each payment system is different and the reasonable
preventability through the application of evidence-based guidelines
would vary for candidate conditions over the different settings.
However, alignment of incentives across settings of care is an
important goal for all of our VBP initiatives, including the HAC
provision.
A related application of the broad principle behind the HAC payment
provision for IPPS hospitals could be considered through Medicare
secondary payer policy by requiring the provider that failed to prevent
the occurrence of a preventable condition in one setting to pay for all
or part of the necessary follow up care in a second setting. This would
help shield the Medicare program from inappropriately paying for the
downstream effects of a preventable condition acquired in the first
setting but treated in the second setting.
We note that we are not proposing new Medicare policy in this
discussion of the possible application of HACs payment policy for IPPS
hospitals to other settings, as some of these approaches may require
new statutory authority. We are seeking public comment on the
application of the preventable HACs payment provision for IPPS
hospitals to other Medicare payment systems. We look forward to working
with stakeholders in the fight against healthcare-associated
conditions.

I. Independent Diagnostic Testing Facility (IDTF) Issues

[If you choose to comment on issues in this section, please include
the caption ``INDEPENDENT DIAGNOSTIC TESTING FACILITIES'' at the
beginning of your comments.]
In the CY 2007 and 2008 PFS final rules with comment period, we
established performance standards for suppliers enrolled in the
Medicare program as an IDTF (71 FR 69695 and 72 FR 66285). These
standards were established to improve the quality of care for
diagnostic testing furnished to Medicare beneficiaries by a Medicare
enrolled IDTF and to improve our ability to verify that these suppliers
meet minimum enrollment criteria to enroll or maintain enrollment in
the Medicare program. These performance standards were established at
Sec. 410.33. In this proposed rule, we are again proposing to expand
on the quality and program safeguard activities that we implemented
previously.
1. Improving Quality of Diagnostic Testing Services Furnished by
Physician and Nonphysician Practitioner Organizations
During the CY 2008 PFS proposed rule comment period, we received
comments requesting that we require that the IDTF performance standards
adopted in Sec. 410.33, including prohibitions regarding the sharing
of space and leasing/sharing arrangements, apply to physicians and
nonphysician practitioners (NPPs) who are performing diagnostic testing
services for Medicare beneficiaries, and who have enrolled in the
Medicare program as a clinic, group practice, or physician office. The
commenters stated that standards for imaging services were not applied
consistently for all imaging centers and that two distinct compliance
and regulatory standards would emerge depending on how the similarly
situated imaging centers were enrolled. In addition, one commenter
stated that we should not prohibit space sharing when done with an
adjoining physician practice or radiology group that is an owner of an
IDTF.

[[Page 38534]]

In response to the public comments, we are concerned that--
Certain physician entities, including physician group
practices, and clinics, can enroll as a group practice or clinic and
provide diagnostic testing services without the benefit of qualified
nonphysician personnel, as defined in Sec. 410.33(c), to conduct
diagnostic testing.
Some physician entities expect to furnish diagnostic
testing services for their own patients and the general public and are
making the decision to enroll as a group or clinic thereby
circumventing the performance standards found in the IDTF requirements
in Sec. 410.33.
Some physician organizations are furnishing diagnostic
tests using mobile equipment provided by an entity that furnishes
mobile diagnostic services.
We are proposing certain exceptions to the established performance
standards found in Sec. 410.33(g) because we believe that physician
organizations already meet or exceed some of these standards. For
example, their liability insurance coverage usually far exceeds the
$300,000 per incident threshold, and there are a host of ways in which
patient may issue clinical complaints concerning their physicians. In
addition, we believe that compliance with some of the performance
standards would be costly and burdensome and possibly limit beneficiary
access, particularly in rural or medically underserved areas. For these
reasons, we propose not to require physician entities to comply with
the following standards:
Maintaining additional comprehensive liability insurance
for each practice location as required under Sec. 410.33(g)(6).
Maintaining a formal clinical complaint process as
required under Sec. 410.33(g)(8).
Posting IDTF standards as required under Sec.
410.33(g)(9).
Maintaining a visible sign posting business hours as
required under Sec. 410.33(g)(14)(ii).
Separately enrolling each practice location as required
under Sec. 410.33(g)(15)(i).
Accordingly, we are proposing to add Sec. 410.33(j) which states
that, ``A physician or NPP organization (as defined in Sec. 424.502)
furnishing diagnostic testing services, except diagnostic mammography
services: (1) Must enroll as an independent diagnostic testing facility
for each practice location furnishing these services; and (2) is
subject to the provisions found in Sec. 410.33, except for Sec.
410.33(g)(6), Sec. 410.33(g)(8), Sec. 410.33(g)(9), Sec.
410.33(g)(14)(ii), and Sec. 410.33(g)(15)(i). As discussed in section
II.J. of this preamble, we propose to define a ``physician or
nonphysician practitioner organization'' as any physician or NPP entity
that enrolls in the Medicare program as a sole proprietorship or
organizational entity such as a clinic or group practice.
We maintain that this enrollment requirement is necessary to ensure
that beneficiaries are receiving the quality of care that can only be
administered by appropriately licensed or credentialed nonphysician
personnel as described in Sec. 410.33(c). Moreover, we propose that
physician or NPP organizations that do not enroll as an IDTF and meet
the provisions at Sec. 410.33 may be subject to claims denial for
diagnostic testing services or a revocation of their billing
privileges.
We are soliciting comments on whether we should consider
establishing additional exceptions to the established performance
standards in Sec. 410.33(g) for physician and NPP organizations
furnishing diagnostic testing services.
While we believe that most physician and NPP organizations utilize
nonphysician personnel described in Sec. 410.33(c) to furnish
diagnostic testing services, we are also soliciting comments on whether
physician or NPPs conduct diagnostic tests without benefit of qualified
nonphysician personnel and under what circumstances the testing occurs.
While we are proposing to apply the IDTF requirement to all
diagnostic testing services furnished in physicians' offices, we are
considering whether to limit this enrollment requirement to less than
the full range of diagnostic testing services, such as to procedures
that generally involve more costly testing and equipment. We seek
comment about whether the policy should apply only to imaging services
or whether it should also include other diagnostic testing services
such as electrocardiograms or other diagnostic testing services
frequently furnished by primary care physicians. Within the scope of
imaging services, we seek comment about whether the policy should be
limited to advanced diagnostic testing procedures which could include
diagnostic magnetic resonance imaging, computed tomography, and nuclear
medicine (including positron emission tomography), and other such
diagnostic testing procedures described in section 1848(b)(4)(B) of the
Act (excluding X-ray, ultrasound, and fluoroscopy). We are also
soliciting comments on what would be appropriate criteria to limit this
provision.
Finally, since this change, if adopted, would take time to
implement for suppliers that have enrolled in the Medicare program, we
are proposing an effective date of September 30, 2009, rather than the
effective date of the final rule. For newly enrolling suppliers, the
effective date of this rule would be January 1, 2009.
2. Mobile Entity Billing Requirements
To ensure that entities furnishing mobile services are providing
quality services and are billing for the diagnostic testing services
they furnish to Medicare beneficiaries, we are proposing a new
performance standard for mobile entities at Sec. 410.33(g)(16), which
would require that entities furnishing mobile diagnostic services
enroll in Medicare and bill directly for the mobile diagnostic services
that they furnish, regardless of where the services are performed. We
believe that entities furnishing mobile diagnostic services to Medicare
beneficiaries must be enrolled in the Medicare program, comply with the
IDTF performance standards, and directly bill Medicare for the services
they render.
While we understand that a mobile entity can furnish diagnostic
testing services in various types of locations, we believe that it is
essential that mobile entities use qualified physicians or nonphysician
personnel to perform diagnostic testing procedures and that the
enrolled mobile supplier bill for the services rendered. We maintain
that it is essential to our program integrity and quality improvement
efforts that an entity furnishing mobile diagnostic testing services
comply with the performance standards for IDTFs and bill the Medicare
program directly for the services provided to Medicare beneficiaries.
Since we believe that most mobile entities are already billing for
the services they furnish, whether the service was provided in a fixed-
based location or in a mobile facility, this proposed provision, if
adopted, would be effective with the effective date of the final rule.
3. Revocation of Enrollment and Billing Privileges of IDTFs in the
Medicare Program
Historically, we have allowed IDTFs whose Medicare billing numbers
have been revoked to continue billing for services furnished prior to
revocation for up to 27 months after the effective date of the
revocation. Since we believe that permitting this extensive billing
period poses a significant risk to the Medicare program, we are
proposing to limit the claims submission timeframe

[[Page 38535]]

after revocation. In Sec. 424.535(g), we are proposing that a revoked
IDTF must submit all outstanding claims for not previously submitted
items and services furnished within 30 calendar days of the revocation
effective date. We maintain that this change is necessary to limit the
Medicare program exposure to future vulnerabilities from physician and
NPP organizations and individual practitioners that have had their
billing privileges revoked. Accordingly, this proposed change would
allow a Medicare contractor to conduct focused medical review on the
claims submitted during the claims filing period to ensure that each
claim is supported by medical documentation that the contractor can
verify. We maintain that focused medical review of these claims will
ensure that Medicare only pays for services furnished by a physician or
NPP organization or individual practitioner and that these entities and
individuals receive payment in a timely manner. In addition, we are
also proposing to amend Sec. 424.44(a)(3) to account for this
provision related to the requirements for the timely filing of claims.
The timely filing requirements in Sec. 424.44(a)(1) and (a)(2) will no
longer apply to physician and NPP organizations, physicians, NPPs and
IDTFs whose billing privileges have been revoked by CMS.

J. Physician and Nonphysician Practitioner (NPP) Enrollment Issues

[If you choose to comment on issues in this section, please include
the caption ``PHYSICIAN AND NONPHYSICIAN PRACTITIONER ENROLLMENT
ISSUES'' at the beginning of your comments.]
1. Effective Date of Medicare Billing Privileges
In accordance with Sec. 424.510, physician and NPP organizations
(that is, groups, clinics, and sole owners) and individual
practitioners including physicians and NPPs, operating as sole
proprietorships or reassigning their benefits to a physician and
nonphysician organization may submit claims as specified in Sec.
424.44 after they are enrolled in the Medicare program. This provision
permits newly enrolled physician and NPP organizations and individual
practitioners, as well as existing physicians and nonphysician
organizations and individual practitioners to submit claims for
services for services that were rendered prior to the date of filing or
the date the applicant received billing privileges to participate in
the Medicare program.
For the purposes of this proposed rule, we believe that a NPP
includes, but is not limited to, the following individuals:
Anesthesiology assistants, audiologists, certified nurse midwifes,
certified registered nurse anesthetists, clinical social workers, NPs,
occupational therapists in private practice, physical therapists in
private practice, PAs, clinical psychologists, psychologists billing
independently, and registered dieticians or nutrition professionals.
Once enrolled, physician and NPP organizations and individual
physicians and NPPs, depending on their effective date of enrollment,
may retroactively bill the Medicare program for services that were
rendered up to 27 months prior to being enrolled to participate in the
Medicare program. For example, if a supplier is enrolled in the
Medicare program in December 2008 with an approval date back to October
2006, that supplier could retrospectively bill for services furnished
to Medicare beneficiaries as early as October 1, 2006.
Currently, physician and NPP organizations and individual
practitioners, including physicians and NPPs, are not prohibited from
billing Medicare prior to their enrollment date. Therefore, it is
possible that the physician and NPP organizations and individual
practitioners who meet our program requirements on the date of
enrollment may not have met those same requirements prior to the date
of enrollment, even though that supplier could bill Medicare and
receive payments for services rendered up to 27 months prior to their
enrolling in the Medicare program. We are concerned that some physician
and NPP organizations and individual practitioners may bill Medicare
for services when they are not meeting our other program requirements,
including those related to providing beneficiary protections, such as
Advance Beneficiary Notices.
We are seeking public comment on two approaches for establishing an
effective date for Medicare billing privileges for physician and NPP
organizations and for individual practitioners.
The first approach would establish the initial enrollment date for
physician and NPP organizations and for individual practitioners,
including physician and NPPs, as the date of approval by a Medicare
contractor. This approach would prohibit physician and NPP
organizations and individual practitioners from billing for services
rendered to a Medicare beneficiary before they are approved and
enrolled by a designated Medicare contractor to participate in the
Medicare program and Medicare billing privileges are conveyed to their
National Provider Identifier (NPI). The date of approval is the date
that a designated Medicare contractor determines that the physician or
NPP organizations or individual practitioner meets all Federal and
State requirements for their supplier type.
Given this first approach, in Sec. 424.520, we may implement
regulations text that reads similar to ``the effective date of billing
privileges for physician and NPP organizations and individual
practitioners, including physicians and NPPs, is the date a Medicare
contractor conveys billing privileges to an NPI.''
We believe that this approach--
Prohibits physician and NPP organizations and individual
practitioners from receiving payments before a Medicare contractor
conveys Medicare billing privileges to an NPI (69 FR 3434);
Is consistent with our requirements in Sec. 489.13 for
those providers and certain suppliers that require a State survey prior
to being enrolled and the requirements for durable medical equipment,
prosthetics, orthotics, and supplies (DMEPOS) suppliers in Sec.
424.57(b)(2);
Is consistent with our requirements for providers
identified in Sec. 400.202 and surveyed suppliers are allowed to bill
for service only after they are approved to participate in the Medicare
program. Surveyed suppliers are suppliers who have been certified by
either CMS or a State certification agency and are in compliance with
Medicare requirements. Surveyed suppliers may include ASCs or portable
x-ray suppliers; and
Ensures that we are able to verify a supplier's
qualifications, including meeting any performance standards before
payment for services can occur.
The second approach would establish the initial enrollment date for
physician and NPP organizations and individual practitioners, including
physician and NPPs, as the later of: (1) The date of filing of a
Medicare enrollment application that was subsequently approved by a
fee-for-service (FFS) contractor; or (2) the date an enrolled supplier
first started rendering services at a new practice location. The date
of filing the enrollment application is the date that the Medicare FFS
contractor receives a signed Medicare enrollment application that the
Medicare FFS contractor is able to process to approval. This option
would allow a supplier that is already seeing non-Medicare patients to
start billing for Medicare patients beginning on the day they submit an
enrollment application that can be fully processed. In contrast to the
first option,

[[Page 38536]]

a newly enrolling physician and NPP organizations and individual
practitioners or physician and NPP organizations and individual
practitioners that are establishing or changing a practice location
would be allowed to bill the Medicare program for services furnished to
Medicare beneficiaries on or after the date of filing if a Medicare
contractor approves Medicare billing privileges and conveys billing
privileges to an NPI. It is also important to note that if a Medicare
contractor rejects or denies an enrollment application, then the
physician or NPP organization or individual practitioner is at risk of
not receiving payment for any services furnished after the date of
filing.
Given this second approach, in Sec. 424.520, we may implement
regulations text that reads similar to ``the effective date of billing
privileges for physician and NPP organizations and for individual
practitioners, physicians and NPPs, is the later of--(1) The filing
date of the Medicare enrollment application that was subsequently
approved by an FFS contractor; or (2) The date that the physician or
NPP organization or individual practitioner first furnished services at
a new practice location.''
We believe that this approach--
Prohibits physician and NPP organizations and individual
practitioners, including physician and NPPs, from receiving payments
before a Medicare contractor conveys Medicare billing privileges to an
NPI (69 FR 3434);
Is consistent with our requirements found at Sec.
410.33(i) that limit the retrospective billing for IDTFs and ensures
that Medicare billing privileges are conveyed to physician and NPP
organizations and to individual physician and NPPs in a similar manner
similar to IDTFs; and
Addresses the public's concern regarding contractor
processing timeliness while appropriately ensuring that Medicare
payments are made to physician and NPP organizations and to individual
physician and NPPs who have enrolled in a timely manner.
We maintain that it is not possible to verify that a supplier has
met all of Medicare's enrollment requirements prior to submitting an
enrollment application. Therefore, the Medicare program should not be
billed for services before the later of the two dates that a physician
or NPP organization, physician or NPP has submitted an enrollment
application that can be fully processed or when the enrolled supplier
is open for business.
To assist physician and NPP organizations and individual
practitioners in enrolling and updating their existing enrollment
record, we established Internet-based enrollment process known as
Internet-based Provider Enrollment, Chain and Ownership System (PECOS).
Internet-based PECOS is available to physician and NPP organizations
and individual practitioners in all States, except California,
Missouri, and New York, in early CY 2009. We expect that Internet-based
PECOS will be available to physician and NPP organizations and
individual practitioners in California, Missouri, and New York by
September 30, 2009.
By using Internet-based PECOS, we expect that physician and NPP
organizations and individual practitioners will be able reduce the time
necessary to enroll in the Medicare program or make a change in their
Medicare enrollment record by reducing common errors in the application
submission process. We expect that Medicare contractors will fully
process most complete Internet-based PECOS enrollment applications
within 30 to 45 calendar days compared to 60 to 90 calendar days in the
current paper-based enrollment process. Thus, if physician and NPP
organizations and individual practitioners enroll in the Medicare
program or make a change in their existing Medicare enrollment using
Internet-based PECOS and submit required supporting documentation,
including a signed certification statement, licensing and education
documentation, and, if necessary, the electronic funds transfer
authorization agreement (CMS-588) 45 days before their effective date,
a Medicare contractor should be able to process the enrollment
application without a delay in payment.
The date of filing for Internet-based PECOS will be the date the
Medicare FFS contractor receives all of the following: (1) A signed
certification statement; (2) an electronic version of the enrollment
application; and (3) a signature page that the Medicare FFS contractor
processes to approval.
In Sec. 424.502, we are also proposing to define a physician and
NPP organization to mean any physician or NPP entity that enrolls in
the Medicare program as a sole proprietorship or organizational entity
such as clinic or group practice. In addition to establishing
organizational structure as a sole proprietorship, physicians and NPPs
are able to establish various organizational relationships including
corporations, professional associations, partnerships, limited
liability corporations and subchapter S corporations. We believe that
proposed definition above would include sole proprietorships that
receive a type 1 NPI and any organizational entity that is required to
obtain a type 2 NPI.
2. Medicare Billing Privileges and Existing Tax Delinquency
The Government Accountability Office (GAO) found that over 21,000
of the physicians, health professionals, and suppliers paid under
Medicare Part B during the first 9 months of calendar year 2005 had tax
debts totaling over $1 billion. The GAO report titled, ``Medicare,
Thousands of Medicare Part B Providers Abuse the Federal Tax System
(GAO-07-587T)'' found abusive and potentially criminal activity,
including failure to remit to IRS individual income taxes or payroll
taxes or both withheld from their employees.
While we do not currently consider whether an individual physician,
NPP currently enrolled in the Medicare program has delinquent tax debts
with the Internal Revenue Service (IRS), we do consider whether a
physician or NPP was convicted of a Federal or State felony offense,
including income tax evasion, that we have determined to be detrimental
to the best interest of the Medicare program. Moreover, if a physician
or NPP was convicted of Federal or State felony offense within the 10
years preceding enrollment or revalidation of enrollment that we
determined to be detrimental to the best interest of the Medicare
program, we could deny or revoke the Medicare billing privileges of the
physician or NPP.
The Financial Management Service (FMS), a bureau of the Department
of Treasury, initiated the Federal Payment Levy Program (FPLP) portion
of the Continuous Levy Program in July 2000 to recover delinquent
Federal tax debts. The FPLP is a program whereby delinquent Federal
income tax debts are collected by levying non-tax payments, as
authorized by the Taxpayer Relief Act of 1997 (Pub. L. 105-34). The
FPLP includes vendor and Social Security benefit payments, and Medicare
payments. It is accomplished through a process of matching delinquent
debtor data with payment record data. This automated collection of debt
at the time of payment occurs after the delinquent taxpayer has been
afforded due process, in accordance with the Internal Revenue Code.
In July 2000, the IRS in conjunction with the Department of
Treasury's FMS started the FPLP which is authorized by section 6331(h)
of the Internal Revenue Code as prescribed by section 1024 of

[[Page 38537]]

the Taxpayer Relief Act of 1997. Through this program, the IRS can
collect overdue taxes through a continuous levy on certain Federal
payments disbursed by FMS; it generally allows Medicare to match a
claim to a delinquent taxpayer, offset the payment, and recover a
percentage of the amount due.
The FPLP is a collection and enforcement tool used by the IRS for
individuals that have received all requisite notification of tax
delinquency and who have either exhausted or neglected to use their
respective appeal rights; therefore, the FPLP is only applied after all
previous IRS collections efforts have failed. Accordingly, the FPLP is
an automated levy program where certain delinquent taxpayers are
systematically matched and levied on their Federal payments disbursed
by Treasury's FMS.
In 2001, we implemented the FPLP process for Medicare Part C and
vendor payments, and in FY 2009, we will implement the FPLP process for
payments made to providers and suppliers reimbursed under Part A and
Part B of the Medicare program. However, the FPLP does not allow CMS to
offset a payment when an individual reassigns his or her benefits to a
third-party, such as a group practice where an existing Federal tax
delinquency exists.
Consistent with statutory authority found under sections
1866(j)(1)(A) and 1871 of the Act, we believe that we have the
authority to establish and make changes to the enrollment process for
providers and suppliers of service. Accordingly, to ensure that the
Federal government is able to recoup delinquent Federal tax debts from
physicians and NPPs who are enrolled in the Medicare program and are
receiving payments, we are considering revoking the billing privileges
for those individuals for which a tax delinquency exists and we are
unable to directly levy future payments through the FPLP. While we are
not proposing this change in this year's PFS, we will consider
proposing this type of change in a future rulemaking effort after we
have implemented the FPLP process, monitored and evaluated the
implementation of FPLP process, and analyzed the potential impact of
this change on physician and NPPs who are subject to the FPLP but that
we are unable to directly levy future payments through the FPLP. In
addition, we expect to conduct outreach regarding our implementation in
advance of implementing the FPLP in FY 2009.
We believe that this change, if proposed and adopted, would
prohibit an individual with a tax delinquency from shielding their
future payments through reassignment of benefits to a third party.
Finally, since the tax delinquency is incurred by an individual who has
reassigned his or her benefits to a third party, we do not believe that
it is appropriate to take action against the third-party. We believe
that this is consistent with the protections already afforded to an
individual by the IRS but ensures that Medicare does not enroll or
allow continued enrollment to an individual with serious tax
delinquency.
We maintain that it is essential that a physician or NPP resolve
any existing Federal tax delinquency before entering the Medicare
program. This will ensure that the Medicare program is not making
payment to an individual who has not met his or her obligation to pay
their tax debts.
Finally, we are soliciting comments on whether we should consider
revoking a physician billing privileges or taking some other type of
administrative action when a physician or NPP has a Federal tax
delinquency that can not be levied through the FPLP process. We are
also soliciting comments on whether we should consider revoking the
billing privileges of an organizational entity or taking some other
type of administrative action against organizational entities when the
owners of an organizational entity have a Federal tax delinquency that
can not be levied through the FPLP process.
3. Denial of Enrollment in the Medicare Program (proposed Sec.
424.530(a)(6) and (a)(7))
Currently, owners, authorized officials, and delegated officials of
a physician and NPP organizations and individual practitioners,
including physicians and NPPs, can obtain additional billing privileges
by establishing a new tax identification number (TIN), reassigning
benefits to another entity, or by submitting an enrollment application
as another provider or supplier type even though the entity for which
the provider or supplier rendered services and has had its billing
privileges revoked, suspended, or has an outstanding Medicare
overpayment. Absent a reason to reject or deny a Medicare enrollment
application, the Medicare FFS contractor is required to approve the
enrollment application for a provider or supplier who meets all other
Federal and State enrollment requirements for their provider or
supplier type.
By submitting and having an enrollment application (for example, an
initial application or a change of ownership) with a new TIN, some
physician and NPP organizations and individual practitioners are able
to circumvent existing Medicare revocation, payment suspension,
overpayment recovery, and medical review processes by obtaining
additional Medicare billing privileges. By obtaining additional billing
privileges for multiple locations, these providers and suppliers are
able to discontinue the use of the NPI that has an administrative
action against it and bill and receive payment under another NPI.
Consistent with Sec. 405.371, we will impose a payment suspension
when we possesses reliable information that an overpayment or fraud, or
willful misrepresentation exist, or that payments to be made may not be
correct. While providers and suppliers do not have formal appeal rights
to a payment suspension determination, providers and suppliers can
submit a rebuttal to CMS' payment suspension determination. We believe
that it is essential that we resolve the payment suspension
determination before we grant additional billing privileges to these
providers or suppliers. In concert with Sec. 405.372(c), once a
payment suspension has been terminated, providers and suppliers may
then apply for billing privileges.
Moreover, we are obligated to recover Medicare overpayments as
expeditiously as possible. Providers and suppliers can pay the debt or
Medicare can reduce present or future Medicare payments and applying
the amount withheld to the indebtedness. When we identify an
overpayment and provide notice of the overpayment, physician and NPP
organizations and individual practitioners are given an opportunity to
appeal the determination. Under certain conditions the overpayment
collection process is suspended during the appeals process. However, if
the physician and NPP organization or individual practitioner does not
appeal the overpayment determination, the overpayment determination is
upheld on appeal, we will initiate a recovery action. However, in some
cases, physician and NPP organizations or individual practitioners will
try to circumvent the recovery process by seeking additional billing
privileges and billing under the new billing number.
Accordingly, we propose to add a new Sec. 424.530(a)(6) and (a)(7)
to deny enrollment applications for additional Medicare billing
privileges if the physician or NPP organization or individual
practitioner has an active payment suspension or has an existing
overpayment that has not been repaid. We are proposing that a Medicare
FFS

[[Page 38538]]

contractor be allowed to deny enrollment applications from those
authorized officials, delegated officials, owners, and individual
practitioners that own a supplier or provider at the time of filing
until such time as the administrative action is terminated or the
Medicare overpayment has been repaid in full. Specifically, we are
proposing to deny enrollment to any current owner (as defined in Sec.
424.502), physician, or NPP, who is participating in the Medicare
program and is under a current Medicare payment suspension.
We believe that the change to our denial policy would help protect
the Medicare program from unscrupulous or problematic physician and NPP
organizations and individual practitioners. Moreover, this change would
allow--(1) Medicare FFS contractors to improve customer service to all
providers and suppliers that are already enrolled in the Medicare
program; (2) facilitate the enrollment of all providers and suppliers
seeking to enroll in the Medicare program for the first time; and (3)
expand on existing efforts to process changes in a timely manner and
provide better customer service.
4. Reporting Requirements for Providers and Suppliers (proposed Sec.
424.516 and Sec. 424.535(a)(10))
Currently, Sec. 424.520(b) requires that providers and suppliers,
except DMEPOS and IDTF suppliers, report to CMS most changes to the
information furnished on the enrollment application and furnish
supporting documentation within 90 calendar days of the change (changes
in ownership must be reported within 30 days). As specified in Sec.
424.57(c)(2), DMEPOS suppliers, have only 30 calendar days to submit
changes of information to CMS. As specified in Sec. 410.33(g)(2),
IDTFs, must report changes in ownership, changes in location, changes
in general supervision, and adverse legal actions within 30 calendar
days. All other changes to the enrollment application must be reported
within 90 days.
While physician and NPP organizations and individual practitioners
are required to report changes within 90 days of the reportable event,
in many cases, there is little or no incentive for them to report a
change that may adversely affect their ability to continue to receive
Medicare payments. For example, physician and NPP organizations and
individual practitioners purposely may fail to report a felony
conviction or other adverse legal action, such as a revocation or
suspension of a license to a provider of health care by any State
licensing authority, or a revocation or suspension of accreditation,
because reporting this action may result in the revocation of their
Medicare billing privileges. Thus, unless CMS or our designated
contractor becomes aware of the conviction or adverse legal action
through other means, the change may never be reported by a physician
and NPP organization or individual practitioner. Alternatively, if CMS
or our designated contractor becomes aware of the conviction or adverse
legal action after the fact, we lack the regulatory authority to
collect overpayments for the period in which the physician and NPP
organizations and individual practitioners should have had their
billing privileges revoked.
Since we believe that physician and NPP organizations and
individual practitioners must furnish updates to their Medicare
enrollment information in a timely manner, we are proposing a new Sec.
424.516(d) which would establish more stringent reporting requirements
for physician NPP organizations and individual practitioners. (We are
proposing to redesignate Sec. 424.520 as Sec. 424.516 and amend the
provisions in new Sec. 424.516.) In addition to a change of ownership
(as currently specified in redesignated Sec. 424.516(d)(1)(i)), we are
proposing to add Sec. 424.516(d)(1)(ii) that requires all physician
and NPP organizations and individual practitioners to notify CMS'
designated contractor of any adverse legal action within 30 days.
Adverse legal actions include, but are not limited to, felonies,
license suspensions, and the Office of the Inspector General (OIG)
exclusion or debarment. We believe that a physician and NPP
organizations and individual practitioner's failure to comply with the
reporting requirements within the time frames described above may
result in the revocation of Medicare billing privileges and a Medicare
overpayment from the date of the reportable change. Specifically, we
believe that an adverse legal action may preclude payment, and thus,
establish an overpayment from the date of the adverse action. As such,
we believe that physician and NPP organizations and individual
practitioners should not be allowed to retain any reimbursement they
receive after the adverse legal action.
We believe that it is essential that this type of change be
reported in a timely manner (that is within 30 days). For example, if
CMS or our designated contractor determines in February 2008 that a
physician failed to notify Medicare about an adverse legal action that
occurred on June 30, 2007, that physician may be subject to an
overpayment for all Medicare payments beginning June 30, 2007 and have
its Medicare billing privileges revoked effective retroactively back to
June 30, 2007 as well.
Additionally, we are proposing to add a requirement for change in
location at Sec. 424.516(d)(1)(iii). Since a change in location may
impact the amount of payment for services rendered by placing the
physician and NPP organizations and individual practitioners into a new
CBSA. We believe that it is essential that physician and NPP
organizations and individual practitioners report changes in practice
location including those that impact the amount of payments they
receive within a timely period (that is, 30 days). However, unlike an
adverse legal action, which may preclude all payments if reported,
failure to report a change in practice location may impact the amount
of payment, not whether a physician and NPP organizations and
individual practitioners may be eligible to receive payments.
Accordingly, we believe that failing to report changes in practice
location would result in an overpayment for the difference in payment
rates retroactive to the date the change in practice location occurred
and may result in the revocation of Medicare billing privileges. For
example, if a physician and NPP organization moves its practice
location in New York, from urban Herkimer County to Hamilton County or
Lewis County, which are both rural, but fails to update its provider
enrollment information; then it would no longer be able to receive the
higher payment rate associated with Herkimer County. We believe that
reporting these types of changes is essential for making correct and
appropriate payments.
We are proposing to add Sec. 424.535(a)(9) which would specify
that failure to comply with the reporting requirements specified in
Sec. 424.516(d) would be a basis for revocation. Additionally, we are
proposing in Sec. 424.565(a), ``Failure to comply with the reporting
requirements specified in Sec. 424.516(d) would result in a Medicare
overpayment from the date of an adverse legal action or a change in
practice location.'' In this situation, an overpayment for failure to
timely report these changes would be calculated back to the date of the
adverse legal action or the date of the change in practice location.
Once an overpayment has been assessed, we will follow the overpayment
regulations established at 42 CFR Part 405 subpart C. We previously
addressed these procedures in Chapter 4 of the Medicare Financial
Management Manual (IOM Manual 100-

[[Page 38539]]

06). Lastly, collection of overpayments related to Sec.
424.516(d)(1)(iii) would not begin until after the effective date of
the final rule.
Since it is essential that physician and NPP organizations and
individual practitioners notify their designated contractor of these
types of reportable events in a timely manner and to ensure that the
provider or supplier continues to be eligible for payment, we believe
that it is essential that we establish an overpayment from the time of
the reportable event. We believe that establishing an overpayment and
revocation of billing privileges for noncompliance from the time of the
reportable event would provide the supplier with a compelling incentive
to report reportable changes in the 30-day reporting period.
In addition, if CMS or our designated contractor determines that a
physician and NPP organization or an individual practitioner has moved
and has not reported the reportable event within the 30-day reporting
period, CMS or our designated contractor would impose an overpayment,
if applicable, and revoke billing privileges for a period of not less
than one year.
5. Maintaining Ordering and Referring Documentation
We are proposing to add a new Sec. 424.516(f) that would specify,
``A provider or supplier is required to maintain ordering and referring
documentation, including the NPI, received from a physician or eligible
NPP. Physicians and NPPs are required to maintain written ordering and
referring documentation for 10 years from the date of service.'' We
believe that it is essential that providers and suppliers maintain
documentation regarding the specific service ordered or referred to a
Medicare beneficiary by a physician or NPP as defined in section
1842(b)(18)(c) of the Act (which includes but is not limited to nurse
practitioners, and physician assistants). We believe that ordering and
referring documentation maintained by a provider or supplier must match
the information on the Medicare claims form. Additionally, we are
proposing to add Sec. 424.535(a)(10) that would state that failure to
comply with the documentation requirements specified in Sec.
424.516(f) as a reason for revocation. For example, a lab submits a
claim with Dr. Smith's NPI (1234512345) in the ordering and referring
section of the claim form. The number submitted on the claim form
should match the documentation in the provider or supplier's records.
In addition, we are codifying the requirement to maintain ordering and
referring documentation as required in the Medicare Program Integrity
Manual (PIM) Publication 100-08, Chapter 5. While the PIM currently
requires that providers and suppliers maintain ordering and referring
documentation for 7 years from the date of payment, we believe that the
industry generally maintains documentation from the date of service.
Accordingly, since there may be a delay in claims payment for up to 27
months from the date of service, we believe that it would be
administratively less burdensome for providers and suppliers to
maintain ordering and referring documentation for 10 years from the
date of service, rather than requiring providers and suppliers to
maintain ordering and referring documentation associated with the date
of payment.
We maintain that a provider or supplier should retain the necessary
ordering and referring documentation received from physicians and NPPs
as defined in section 1842(b)(18)(c) of the Act to assure themselves
that coverage criterion for an item has been met. If the information in
the patient's medical record does not adequately support the medical
necessity for the item, the supplier would be liable for the dollar
amount involved unless a properly executed Advance Beneficiary Notice
of possible denial has been obtained.
6. Revocation of Enrollment and Billing Privileges in the Medicare
Program (proposed Sec. 424.535(g))
Historically, we have allowed providers and suppliers whose
Medicare billing numbers have been revoked to continue billing for
services furnished prior to revocation for up to 27 months after the
effective date of the revocation. Since we believe this extensive
billing period poses significant risk to Medicare program, we are
proposing to limit the claims submission timeframe after revocation. In
Sec. 424.535(g), we are proposing that revoked physician and NPP
organizations and individual practitioners, including physicians and
NPPs, must submit all outstanding claims not previously submitted
within 30 calendar days of the revocation effective date. We maintain
that this change is necessary to limit the Medicare program exposure to
future vulnerabilities from physician and NPP organizations and
individual practitioners that have had their billing privileges
revoked. We know that some physician and NPP organizations and
individual practitioners are able to create false documentation to
support claims payment. Accordingly, this proposed change would allow a
Medicare contractor to conduct focused medical review on the claims
submitted during the claims filing period to ensure that each claim is
supported by medical documentation that the contractor can verify. We
maintain that focused medical review of these claims will ensure that
Medicare only pays for furnished services by a physician organization
or individual practitioner and that these entities and individuals
receive payment in a timely manner. Since a physician organization or
individual practitioner generally submit claims on a nexus to the date
of service, we believe that this proposed change will not impose a
significant burden on physician organizations or individual
practitioners. In addition, we are also proposing to add Sec.
424.44(a)(3) to account for this provision related to the requirements
for the timely filing of claims.
7. Technical Changes to Regulations Text
We propose to make the following technical changes:
Existing Sec. 424.510(d)(8) would be redesignated as
Sec. 424.517. This proposed revision would separate our ability to
conduct onsite reviews from the provider and supplier enrollment
requirements.
Existing Sec. 424.520 would be revised and redesignated
as Sec. 424.516. This proposed redesignation would move the additional
provider and supplier enrollment requirements so that these
requirements immediately follow the provider and supplier enrollment
requirements.
In new Sec. 424.520, we would specify the effective dates
for Medicare billing privileges for the following entities: Surveyed,
certified, or accredited providers and suppliers; IDTFs; and DMEPOS
suppliers.
In Sec. 424.530, the phrase ``in the Medicare program''
would be added to the section heading to remain consistent with other
headings in the subpart.

K. Proposed Amendment to the Exemption for Computer-Generated Facsimile
Transmission From the National Council for Prescription Drug Programs
(NCPDP) SCRIPT Standard for Transmitting Prescription and Certain
Prescription-Related Information for Part D Eligible Individuals

[If you choose to comment on issues in this section, please include
the caption ``COMPUTER-GENERATED FAX TRANSMISSIONS'' at the beginning
of your comments.]

[[Page 38540]]

1. Legislative History
Section 101 of the MMA amended title XVIII of the Act to establish
a voluntary prescription drug benefit program. Prescription Drug Plan
(PDP) sponsors and Medicare Advantage (MA) organizations offering
Medicare Advantage-Prescription Drug Plans (MA-PDs) and other Medicare
Part D sponsors are required to establish electronic prescription drug
programs to provide for electronic transmittal of certain information
to the prescribing provider and dispensing pharmacy and dispenser. This
includes information about eligibility, benefits (including drugs
included in the applicable formulary, any tiered formulary structure
and any requirements for prior authorization), the drug being
prescribed or dispensed and other drugs listed in the medication
history, as well as the availability of lower cost, therapeutically
appropriate alternatives (if any) for the drug prescribed. Section 101
of the MMA established section 1860D-4(e)(4)(D) of the Act, which
directed the Secretary to issue uniform standards for the electronic
transmission of such data.
There is no requirement that prescribers or dispensers implement e-
prescribing. However, prescribers and dispensers who electronically
transmit prescription and certain other prescription-related
information for covered drugs prescribed for Medicare Part D eligible
individuals, directly or through an intermediary, are required to
comply with any applicable final standards that are in effect. For a
complete discussion of the statutory basis for the e-prescribing
portions of this proposed rule and the statutory requirements at
section 1860D-4(e) of the Act, please refer to the ``Background''
section of the E-Prescribing and the Prescription Drug Program proposed
rule published in the February 4, 2005 Federal Register (70 FR 6256)
2. Regulatory History
a. Foundation Standards and Exemption for Computer-Generated Facsimiles
(Faxes)
In the E-Prescribing and the Prescription Drug Program final rule
(70 FR 67568, November 7, 2005), we adopted the National Council for
Prescription Drug Programs (NCPDP) SCRIPT standard, Implementation
Guide, Version 5, Release 0 (Version 5.0), May 12, 2004, excluding the
Prescription Fill Status Notification Transaction (and its three
business cases which include the following: Prescription Fill Status
Notification Transaction-Filled; Prescription Fill Status Notification
Transaction-Not Filled; and Prescription Fill Status Notification
Transaction-Partial Fill) hereafter referred to as ``NCPDP SCRIPT
5.0,'' as the standard for communicating prescriptions and
prescription-related information between prescribers and dispensers.
Subsequently, in the June 23, 2006 Federal Register (71 FR 36020), we
published an interim final rule with comment period (IFC) that
maintained NCPDP SCRIPT 5.0 as the adopted standard, but allowed for
the voluntary use of a subsequent backward compatible version of the
standard, NCPDP SCRIPT 8.1. In the April 7, 2008 Federal Register , we
published a final rule (73 FR 18918) that finalized the June 23, 2006
IFC; effective April 1, 2009, we will retire the NCPDP SCRIPT 5.0 and
adopt NCPDP SCRIPT 8.1 as the standard. Hereafter we refer to these
standards as ``NCPDP SCRIPT.''
The November 7, 2005 final rule also established an exemption to
the requirement to utilize the NCPDP SCRIPT standard for entities that
transmit prescriptions or prescription-related information for Part D
covered drugs prescribed for Part D eligible individuals by means of
computer-generated facsimiles (faxes generated by one computer and
electronically transmitted to another computer or fax machine which
prints out or displays an image of the prescription or prescription-
related information). Providers and dispensers who use this technology
are not compliant with the NCPDP SCRIPT standard. The exemption was
intended to allow such providers and dispensers time to upgrade to
software that utilizes the NCPDP SCRIPT standard, rather than forcing
them to revert to paper prescribing.
b. Amendment of Exemption
In the CY 2008 PFS proposed rule (72 FR 38194), we proposed to
revise Sec. 423.160(a)(3)(i) to eliminate the computer-generated fax
exemption to the NCPDP SCRIPT standard for the communication of
prescription or certain prescription-related information between
prescribers and dispensers for the transactions specified in Sec.
423.160(b)(1)(i) through (xii).
Since computer-generated faxing retains some of the disadvantages
of paper prescribing (for example, the administrative cost of keying
the prescription into the pharmacy system and the related potential for
data entry errors that may impact patient safety), we believed it was
important to take steps to encourage prescribers and dispensers to move
toward use of NCPDP SCRIPT. We believed the elimination of the
computer-generated fax exemption would encourage prescribers and
dispensers using this computer-generated fax technology to, where
available, utilize true e-prescribing (electronic data interchange
using the NCPDP SCRIPT standard) capabilities.
We also believed that it might encourage those without such
capabilities to upgrade their current software products, or, where
upgrades are not available, to switch to new products that would enable
true e-prescribing. In addition, because the elimination of the
computer-generated facsimile exemption would encourage those
prescribers that are already using e-prescribing software that is
capable of true e-prescribing to utilize those capabilities, we
believed that the elimination of the computer-generated fax exemption
would increase the number of NCPDP SCRIPT transactions fairly
significantly in a relatively short time period, and that this could,
in turn, create a ``tipping point'' that could create economic
incentives for independent pharmacies to adopt NCPDP SCRIPT capable
software to begin to exchange true e-prescribing transactions with
their prescriber partners.
We proposed to eliminate the computer-generated fax exemption
effective 1 year after the effective date of the CY 2008 PFS final rule
(that is, January 1, 2009). We believed that this would provide
sufficient notice to prescribers and dispensers who would need to
implement or upgrade e-prescribing software to look for products and
upgrades that are capable of generating and receiving transactions that
utilize NCPDP SCRIPT. It would also afford current e-prescribers time
to work with their trading partners to eventually eliminate computer-
to-fax transactions. We also believed the elimination of the exemption
for computer-generated faxing would encourage e-prescribers and
dispensers to move as quickly as possible to use of the NCPDP SCRIPT
standard with what we perceived to be minimal impact.
We solicited comments on the impact of the proposed elimination of
this exemption. Several commenters concurred with our proposal to
eliminate the exemption for computer-generated faxes. The commenters
indicated that lifting the exemption for computer-generated faxes would
act as an incentive to move prescribers and dispensers toward true e-
prescribing (electronic data interchange using the NCPDP SCRIPT
standard). Less than half of the commenters disagreed with

[[Page 38541]]

our proposal to eliminate the exemptions for computer-generated faxes,
citing concerns about increased hardware/software costs, transaction
fees, certification and other activation costs. Some commenters agreed
that many prescribers who are already e-prescribing likely already
possessed the ability to generate NCPDP SCRIPT compliant transactions
using their software or could comply by obtaining a version upgrade
under their maintenance agreements. Many commenters suggested that we
continue to allow for the use of computer-generated faxes in the case
of transmission failure and network outages.
During the CY 2008 PFS proposed rule comment period, we received
several comments that indicated that the elimination of the exemption
could be problematic in certain e-prescribing transactions, namely
prescription refill requests, but only one of those commenters offered
substantiation to support this assertion. Absent receipt of substantial
industry feedback on the impact of the elimination of computer-
generated facsimiles on prescription refill requests, and not
considering these comments about prescription refill requests to
constitute widespread concern regarding the prescription refill request
function, in the CY 2008 PFS final rule with comment period (72 FR
66396), we amended the exemption to permit the use of computer-
generated facsimiles only in cases of temporary or transient network
transmission failures. Taken in the aggregate, we determined that the
1-year time period was adequate time during which providers and
dispensers would have the opportunity to convert to conducting true e-
prescribing and that costs would be mitigated due to the growing volume
of e-prescriptions and practice of e-prescribing, with a commensurate
reduction in transmission, software and other costs during that 1-year
time period. These changes were to become effective in January 2009.
3. Proposal
Following the publication of the CY 2008 PFS final rule with
comment period, we received additional information regarding how the
elimination of the exemption for computer-generated faxes would
adversely impact the electronic transmission of prescription refill
requests. These commenters relayed that the elimination of the
exemption would force dispensers who e-prescribe and use these
transactions to revert to paper prescribing. These commenters
substantiated their assertions by providing us with more specific
information regarding the economic and workflow impacts associated with
the elimination of computer-generated faxes that was not forthcoming in
the prior public comment period for the proposed rule. We also received
unsolicited comments on this issue during the comment period for the
November 16, 2007 proposed rule (72 FR 64900). In light of this new
information, we are now re-examining this issue in this proposed rule.
Dispensers have indicated that they use computer-generated
facsimiles for the majority of prescription refill requests, in
particular when communicating with prescribers that have not adopted e-
prescribing. Currently, regardless of how the initial prescription was
received by the pharmacy (that is, orally, via e-prescribing,
telephone, paper, or fax) nearly all prescription refill requests from
chain pharmacies to prescribers are sent electronically, either via an
e-prescribing application or via computer-generated facsimile. When a
prescription is received by a dispenser electronically, the
prescription refill request is sent to the prescriber via the same
technology. However, where the dispenser knows that the prescriber
lacks e-prescribing capability or has not activated it, or where the
prescriber does not respond to the request sent to his or her
prescribing device, the prescription refill request is sent or re-sent
via computer-generated facsimile. Commenters stated that the vast
majority of computer-generated facsimiles sent today from prescribers
to pharmacies are not electronic data interchange (EDI) transmissions,
but usually prescription refill requests sent from pharmacies to
prescribers who do not conduct true e-prescribing and, in many cases,
do not engage in any electronic transactions at all. One national drug
store chain estimates that it produces approximately 150,000 computer-
generated facsimile prescription refill requests every day.
The workflow and process for filling prescription would be
significantly disrupted if these computer-generated facsimile
transmissions were prohibited. Dispensers and other staff would be
forced to revert back to making phone calls or using a stand-alone
facsimile machine to contact prescribers each time a refill is
requested. Commenters indicated that not only is this counterproductive
to the advances and efficiencies made in pharmacy practice, it would
impose an undue administrative burden on dispensing pharmacies and
pharmacists.
In light of this additional information regarding the larger than
anticipated impact of the elimination of computer--generated facsimiles
for the prescription refill request transaction, we propose to further
amend the computer-generated facsimile exemption to also allow for an
exemption from the NCPDP SCRIPT standards for electronic prescription
refill request transactions that are conducted by computer-generated
facsimiles when the prescriber is incapable of receiving electronic
transmissions using the NCPDP SCRIPT standard. We propose to retain the
current exemption in instances of temporary network transmission
failures. We propose that this change will be effective January 1,
2009. We will periodically revisit the exemption for the purpose of
ultimately eliminating it for the prescription refill request
transaction as described in Sec. 423.160(b)(1)(vii), and solicit
comments regarding what constitutes an adequate time to allow the
industry to transition to the use of the NCPDP SCRIPT standard.
We are also soliciting comments on the impact of the proposed
exclusion of the prescription refill request transaction from this
exemption. Specifically, we are soliciting information on any other e-
prescribing transaction that may be similarly adversely impacted by the
elimination of computer-generated facsimiles. As the use of e-
prescribing increases, the need for computer-generated facsimiles in
Part D e-prescribing would decrease, except in cases of temporary or
transient network transmission failures. We believe that this proposal
to allow computer-generated facsimiles for the prescription refill
request transaction, and in cases of network transmission failures,
would not slow the ongoing adoption of e-prescribing using NCPDP SCRIPT
enabled transactions, and that the industry should continue to move as
quickly as possible to use of the NCPDP SCRIPT standard.

L. Comprehensive Outpatient Rehabilitation Facilities (CORF) and
Rehabilitation Agency Issues

[If you choose to comment on issues in this section, please include
the caption ``CORF AND REHABILITATION ISSUES'' at the beginning of your
comments.]
Comprehensive outpatient rehabilitation facilities (CORFs) and
rehabilitation agencies are Medicare providers that are certified to
provide certain rehabilitation services. Currently covered CORF
clinical services and rehabilitation agency services are paid through
the PFS.

[[Page 38542]]

In the CY 2008 PFS final rule with comment period (72 FR 66222 and
66399), we revised the CORF regulations at 42 CFR parts 410 and 413 to
ensure that the regulations reflected the statutory requirements
applicable to CORFs under sections 1834(k) and 1861(cc) of the Act.
Many of these changes were technical in nature. Specifically, the
regulatory changes: (1) Revised the definitions of physicians'
services, respiratory therapy services, social services and
psychological services, nursing services, drugs and biologicals, and
supplies and durable medical equipment and home environment evaluation;
(2) amended the payment provisions for CORF services; and (3) made
other clarifications and changes to the conditions for coverage for
CORF services.
In this CY 2009 PFS proposed rule, we address the comments received
in response to the CY 2008 final rule with comment (72 FR 66222), as
well as add new provisions and revise some provisions. We welcome your
comments on all of these proposed changes.
1. Personnel Qualifications
We stated in the CY 2008 PFS final rule with comment period that we
would propose updated qualifications for respiratory therapists in
future rulemaking (72 FR 66297). It has been our policy that only the
respiratory therapist (and not the respiratory therapy technician), who
possesses the educational qualifications necessary to provide the level
of respiratory therapy services required, is permitted to provide
respiratory therapy in a CORF setting.
In the CY 2008 PFS final rule with comment period, we received a
comment indicating that our regulations were outdated and did not
conform to current respiratory therapy professional standards. The
American Association for Respiratory Care (AARC) believes that the
terms ``certified respiratory therapist (CRT)'' and the ``registered
respiratory therapist (RRT)'' have replaced the terms ``respiratory
therapy technician'' and ``respiratory therapist,'' respectively. In
addition, the qualifications for CRTs and RRTs differ from those
applicable to respiratory therapy technicians and respiratory
therapists. The CRT designation is awarded after an individual
successfully passes the entry-level respiratory therapy examination. In
order to be eligible for the RRT examination, an individual must be a
graduate of an advanced level respiratory therapy educational program
and have obtained the RRT credential.
For CY 2009, we are proposing to revise Sec. 485.70(j)--setting
forth the personnel qualifications for respiratory therapists in
CORFs-- to be consistent with current qualification requirements for
RRTs, as recommended by the AARC.
We are also proposing to delete Sec. 485.70(k), which sets forth
personnel qualifications for CRTs (previously referred to as
respiratory therapy technicians) in CORFs. In the past, we have not
reimbursed CORFs for respiratory therapy services provided by
respiratory therapy technicians or CRTs, and we believe that removing
the technician definition would clarify our position. We believe that
current medical standards continue to require that the provision of
skilled respiratory therapy services to patients in the CORF setting be
furnished by RRTs. While CRTs furnish general respiratory care
procedures and may assume some clinical responsibility for specified
respiratory care modalities involving the application of therapeutic
techniques under the supervision of an RRT or a physician, the
educational qualifications that a RRT possesses allow him or her to
evaluate, treat, and manage patients of all ages with respiratory
illnesses. RRTs participate in patient education, implement respiratory
care plans, apply patient-driven protocols, follow evidence-based
clinical practice guidelines, and participate in health promotion,
disease prevention, and disease management. RRTs also may be required
to exercise considerable independent judgment.
This was implemented in the CY 2002 PFS final rule with comment
period (66 FR 55246 and 55311) and the CY 2003 PFS final rule with
comment period (67 FR 79966 and 79999) when we developed and discussed
G codes, CORF respiratory therapy services, and specifically recognized
the RRT as the appropriate level of personnel to provide these CORF
services. Finally, the CORF regulations at Sec. 485.58(d)(4) state
that as a condition of participation for CORFs, CORF personnel must
meet the qualifications described at Sec. 485.70.
For CY 2009, to maintain consistency in the conditions of
participation for both CORFs, home health agencies (HHAs), and other
outpatient service providers, we are proposing to amend the material
addressing personnel qualifications in Sec. 485.70. Specifically, we
are amending paragraphs Sec. 485.70(c) and Sec. 485.70(e) by
referencing the personnel qualifications for HHAs at Sec. 484.4. This
change would align CORF personnel requirements not only with HHA
requirements, but also with other regulations in Part 485 addressing
provision of physical therapy, speech-language pathology, and
occupational therapy services. We welcome your comments on these
proposed changes.
Also, at 485.58(a)(1)(i), we propose to amend the duties of a CORF
physician to include medical supervision of nonphysician staff. This
change conforms to changes made to the CORF conditions for coverage in
the CY 2008 PFS final rule with comment period. We believe that adding
medical supervision of nonphysician staff to the duties of CORF
physicians more accurately reflects the duties and responsibilities of
the CORF physician. We also believe that this change could increase the
quality of care provided to patients of CORFs. We welcome your comments
on this proposed change.
2. Social and Psychological Services
In the CY 2008 PFS final rule with comment period (72 FR 66297), we
clarified that all CORF services, including social and psychological
services, must directly relate to or further the rehabilitation goals
established in the physical therapy, occupational therapy, speech-
language pathology, or respiratory therapy plan of treatment. We
believe that using a full range of clinical social and psychological
CPT codes to describe CORF social and psychological services is
inappropriate because social and psychological CORF services do not
include independent clinical treatment of mental, psychoneurotic, and
personality disorders. CPT codes 96150 through 96154 and CPT code range
90801 through 90899 are inappropriate for CORF use because all of these
CPT codes represent full-scale clinical treatment for these disorders.
As we stated last year, we believe that for purposes of providing care
in a CORF, social and psychological services should represent only case
management and patient assessment components as they relate to the
rehabilitation treatment plan (72 FR 66297 through 66298).
Consequently, after notice and comment, we changed our policy and
payment for CORF social and psychological services; these services may
no longer address a CORF patient's mental health diagnoses except
insofar as they relate directly to other services provided by the CORF.
We specified in the CY 2008 final rule with comment period (72 FR
66298) that only the CPT code 96152 for health and behavior
intervention (with the patient) could be used to bill for CORF social
and psychological services. This code is part of a series of codes that
was created by CPT in 2002 to address health and behavior assessment
issues. These

[[Page 38543]]

services are offered to patients who present with established illnesses
or symptoms, who are not diagnosed with mental illness, and may benefit
from evaluations that focus on the biopsychosocial factors related to
the patient's physical health status, such as patient adherence to
medical treatment, symptom management and expression, health-promoting
behaviors, health-related risk-taking behaviors, and overall adjustment
to medical illness. We also adopted the more limited definition of CORF
social and psychological services, in our revised regulations at Sec.
410.100(h) (72 FR 66399). The regulations state that, social and
psychological services include the assessment and treatment of an
individual's mental and emotional functioning and the response to and
rate of progress as it relates to the individual's rehabilitation plan
of treatment, including physical therapy services, occupational therapy
services, speech-language pathology services and respiratory therapy
services.
We also noted that a HCPCS G-code could more accurately describe
these unique CORF services, but believed that it was inappropriate to
create such a G-code in the final rule with comment period without
first proposing to do so in proposed rulemaking.
Therefore, for CY 2009, we are proposing to create a CORF specific
G-code, GXXX5, Social work and psychological services, directly
relating to and/or furthering the patient's rehabilitation goals, each
15 minutes, face-to face; individual (services provided by a CORF-
qualified social worker or psychologist in a CORF), to accurately
describe the unique social and psychological services provided by CORF
staff and to establish appropriate payment for these services. We
propose to use salary and wage data from the Bureau of Labor and
Statistics to institute a blended social worker/psychologist clinical
labor category using a price per minute rate of $0.45 for the practice
expense component of GXXX5. We would assign a malpractice RVU of 0.01.
Because the services described by GXXX5 are solely furnished by a CORF
social worker or clinical psychologist, and not by a physician, we
would not allocate a work RVU for these services.
We also propose to revise Sec. 410.100(h) to delete the reference
to ``and treatment.'' As discussed above and in the CY 2008 PFS final
rule with comment period (72 FR 66297), we believe all CORF services,
including social and psychological services, must directly relate to or
further the rehabilitation goals established in the physical therapy,
occupational therapy, speech-language pathology, or respiratory therapy
plan of treatment. Accordingly, social and psychological CORF services
do not include clinical treatment of mental, psychoneurotic, and
personality disorders. We are concerned that the phrase ``and
treatment'' currently included in the definition of CORF social and
psychological services may be misconstrued to include social and
psychological services for the independent clinical treatment of mental
illness. Therefore, we propose to delete this language in order to
clarify that only those social and psychological services that relate
directly to a rehabilitation plan of treatment and the associated
rehabilitation goals are considered CORF social and psychological
services.
We also propose to remove Sec. 410.155(b)(1)(ii) regarding the
application of mental health limitations to CORF social and
psychological services. As stated, CORF services, including social and
psychological services, must directly relate to or further the
rehabilitation goals established in the physical therapy, occupational
therapy, speech-language pathology, or respiratory therapy plan of
treatment. In the CY 2008 PFS final rule with comment period (72 FR
66400), we stated that CORF services must be furnished under a written
plan of treatment that indicates the diagnosis and rehabilitation
goals, and prescribes the type, amount, frequency, and duration of the
skilled rehabilitation services, including physical therapy,
occupational therapy, speech-language pathology and respiratory therapy
services. Section 410.155(b) specifies that the mental health payment
limitation applies when there is a diagnosis of mental, psychoneurotic,
and personality disorders (mental disorders identified by a diagnosis
code within the range of 290 through 319) prior to beginning services.
Under our revised definition, CORF social and psychological services
must directly relate to the physical therapy or other rehabilitation
plan of treatment and its associated goals. Since these patients are
receiving CORF services because they have a need for skilled
rehabilitation services, any social and psychological services provided
in a CORF under Sec. 410.100(h) must include an assessment of the
individual's mental and emotional functioning exclusively as such
functioning relates to their rehabilitation plan of treatment. In our
view, such services provided in a CORF are not ``treatment of mental,
psychoneurotic, and personality disorders of an individual'' as set out
in section 1833(c) of the Act, so that the statutory mental health
payment limitations do not apply. We are proposing changes to Sec.
410.155(b) to reflect our view regarding the limited nature of these
services.
3. CORF Conditions of Participation
In the CY 2008 final rule with comment period (72 FR 66400), we
finalized changes to the CORF coverage and payment rules. However, all
conforming regulations in the CORF Conditions of Participation (CoPs)
were not updated at that time.
We are proposing to revise Sec. 485.58(e)(2). Section 485.58(e)
currently provides that as a CoP, a CORF facility must provide all CORF
services on its premises with the exception of-- (1) physical therapy,
occupational therapy, and speech-language pathology services furnished
away from the premises of the CORF, if Medicare payment is not
otherwise made for these services; and (2) a single home visit for the
purpose of evaluating the potential impact of the patient's home
environment on the rehabilitation goals. We are proposing to clarify
that the alternate premises for provision of physical therapy,
occupational therapy, and speech-language pathology services may be the
patient's home.
4. Extension Location
We are proposing to add a definition for an ``extension location''
of a rehabilitation agency to the definitions at Sec. 485.703. While
there are currently no provisions that allow rehabilitation agencies to
offer services in an extension location, there are currently 2,875
rehabilitation agency primary locations and 2,486 rehabilitation agency
offsite practice locations. While our State Operations manual
recognizes that these rehabilitation agency extension locations exist,
it also includes language stating that the extension locations must
meet applicable rehabilitation agency CoPs. However, it is difficult to
apply CoP requirements to a location that currently is not identified
in the CoPs. Creating a definition in the CoPs that applies to the
extension locations will allow us to survey and monitor the care
provided in these extension locations on a consistent basis.
Therefore, we propose to define an extension location as: (1) A
location or site from which a rehabilitation agency provides services
within a portion of the total geographic area served by the primary
site; (2) is part of the rehabilitation agency; and (3) is located

[[Page 38544]]

sufficiently close to share administration, supervision, and services
in a manner that renders it unnecessary for the extension location to
independently meet the conditions of participation as a rehabilitation
agency. We welcome your comments on this proposed definition.
5. Emergency Care
We are proposing to revise Sec. 485.711(c), Standard: Emergency
care, to reflect current medical practice. We propose to remove the
requirement that the rehabilitation agency provide for one or more
doctors of medicine or osteopathy to be available on call to furnish
necessary medical care in case of an emergency. We do not believe that
the patients serviced by rehabilitation agencies regularly experience
medical emergencies that necessitate the retention of an on-call
physician.
Therefore, we are proposing the revised standard to require each
rehabilitation agency to establish procedures to be followed by
personnel in an emergency to cover immediate care of the patient,
persons to be notified, and reports to be prepared. We are soliciting
comments on this proposal.
6. Technical Changes for Rehabilitation Agencies
Under section 1861(p) of the Act, rehabilitation agencies are
tasked with furnishing outpatient physical therapy and speech-language
pathology services. Unlike CORFs, which provide comprehensive
outpatient rehabilitation services, rehabilitation agencies primarily
provide physical therapy services. Some of the other services offered
by CORF, such as respiratory therapy and social services are outside
the scope of rehabilitation agency practice.
The current definition of rehabilitation agency at Sec. 485.703
(paragraph (2)(ii) of the definition) requires that rehabilitation
agencies provide social or vocational adjustment services. This
requirement is outside of the rehabilitation agency's scope of practice
and has caused confusion for these providers because we do not
reimburse rehabilitation agencies for furnishing social or vocational
services. Accordingly, in Sec. 485.703, we are proposing to delete the
requirement in paragraph (2)(ii) of the rehabilitation agency
definition requiring a rehabilitation agency to provide social or
vocational services. We are also proposing to make a conforming change
at Sec. 485.717.
At Sec. 485.711(b)(3), we are proposing to remove the reference to
Sec. 410.61(e), since Sec. 410.61(e) no longer exists in regulation.

M. Technical Corrections for Therapy-Related Issues

[If you choose to comment on issues in this section, please include
the caption ``THERAPY-RELATED ISSUES'' at the beginning of your
comments.]
We are proposing the following technical changes to the regulations
concerning therapy services:
In Sec. 409.17(a), we are proposing to delete the
reference to paragraph (a)(1)(ii) which no longer exists.
In Sec. 409.23, we are proposing to revise the title of
this section from ``Physical, occupational and speech therapy'' to
``Physical therapy, occupational therapy and speech-language pathology
services.''

N. Physician Self-Referral and Anti-Markup Issues

[If you choose to comment on issues in this section, please include
the caption ``PHYSICIAN SELF-REFERRAL AND ANTI-MARKUP ISSUES'' at the
beginning of your comments.]
1. Changes to Reassignment Rules Related to Diagnostic Tests (Anti-
Markup Provision)
a. CY 2008 PFS Final Rule With Comment Period
The CY 2008 PFS final rule with comment period (72 FR 66222)
amended the anti-markup provision in Sec. 414.50 for certain
diagnostic tests. We revised the anti-markup provision to apply to the
technical component (TC) of diagnostic tests that are ordered by the
billing physician or other supplier (or ordered by a party related by
common ownership or control to such physician or other supplier), when
the TC is outright purchased or when the TC is not performed in the
office of the billing physician or other supplier. We also imposed an
anti-markup provision on the professional component (PC) of diagnostic
tests that are ordered by the billing physician or other supplier (or
ordered by a party related by common ownership or control to such
physician or other supplier group), if the PC is outright purchased or
if the PC is not performed in the office of the billing physician or
other supplier. The anti-markup provision in Sec. 414.50 applies to
the TCs and PCs of diagnostic tests covered under section 1861(s)(3) of
the Act and paid for under 42 CFR part 414 (other than clinical
diagnostic laboratory tests paid under section 1833(a)(2)(D) of the
Act, which are subject to the special billing rules set forth in
section 1833(h)(5)(A) of the Act). If a physician or other supplier
bills for the TC or PC of a diagnostic test that was ordered by the
physician or other supplier (or ordered by a party related to such
physician or other supplier through common ownership or control) and
the diagnostic test is either purchased from an outside supplier or
performed at a site other than the office of the billing physician or
other supplier, the payment to the billing physician or other supplier
(less the applicable deductibles and coinsurance paid by the
beneficiary or on behalf of the beneficiary) for the TC or PC of the
diagnostic test may not exceed the lowest of the following amounts:
The performing supplier's net charge to the billing
physician or other supplier.
The billing physician or other supplier's actual charge,
or
The fee schedule amount for the test that would be allowed
if the performing supplier billed directly.
In revised Sec. 414.50(a)(2)(iii), we defined the ``office of the
billing physician or other supplier'' as medical office space where the
physician or other supplier regularly furnishes patient care. For a
billing physician or other supplier that is a physician organization
(as defined at Sec. 411.351 of this chapter), the ``office of the
billing physician or other supplier'' is space in which the physician
organization provides substantially the full range of patient care
services that the physician organization provides generally. (For
purposes of the anti-markup provision, the office of a billing
physician or other supplier has its common meaning--that is, it is
space in which the physician or other supplier regularly furnishes
patient care services, and does not include a ``centralized building''
as defined at Sec. 411.351).
We effectuated our changes primarily by modifying Sec. 414.50,
although we also modified Sec. 424.80 by adding paragraph (d)(3) to
alert the reader that, in a case of the reassignment of the TC and/or
PC of a diagnostic test, the reader should consult Sec. 414.50 to
investigate whether the anti-markup provision applies to the TC and/or
PC. We also amended the definition of ``entity'' at Sec. 411.351 to
exclude a physician's practice when it bills Medicare for the PC of a
diagnostic test in accordance with Sec. 414.50. (Prior to the CY 2008
PFS final rule with comment period, the definition of ``entity'' at
Sec. 411.351 excluded a physician's practice when it bills Medicare
for the TC of a diagnostic test in accordance with Sec. 414.50.)

[[Page 38545]]

b. Revisions to Payment Policies Under the Physician Fee Schedule, and
Other Part B Payment Policies for CY 2008; Delay of the Date of
Applicability of the Revised Anti-Markup Provision for Certain Services
Furnished in Certain Locations (Sec. 414.50) Final Rule (73 FR 404)
Subsequent to the publication of the CY 2008 PFS final rule with
comment period (72 FR 66222), we received informal comments from
various stakeholders that stated that the application of the rule was
unclear with respect to whether certain types of space arrangements
meet the definition of the ``office of the billing physician or other
supplier.'' Further, some of these stakeholders stated that patient
access may be significantly disrupted due to the alleged inability of
physician groups to render services in a cost-effective manner if
medical office space that satisfies the ``same building'' test in Sec.
411.355(b)(2)(i) of this chapter for purposes of the physician self-
referral rules in Part 411, Subpart J of this chapter, and other
medical office space in which patients are seen and that complies with
the physician self-referral rules, are subject to the anti-markup
provision in revised Sec. 414.50. That is, physician groups stated
that, in situations in which they are subject to the anti-markup
provision and are limited to billing Medicare the net charge imposed by
the performing supplier, they will not be able to continue to provide
diagnostic testing services to the same extent that they are currently
providing such services, because they will not be able to recoup their
overhead costs.
We were concerned that the definition of ``office of the billing
physician or other supplier'' may not have been entirely clear and that
it could have unintended consequences. Accordingly, in order for us to
study the issues further, we issued a final rule entitled ``Revisions
to Payment Policies Under the Physician Fee Schedule, and Other Part B
Payment Policies for CY 2008; Delay of the Date of Applicability of the
Revised Anti-Markup Provisions for Certain Services Furnished in
Certain Locations (Sec. 414.50)'' (the ``Delay Rule''), which delayed,
until January 1, 2009, the applicability of the revised anti-markup
provision in Sec. 414.50, except for anatomic pathology diagnostic
testing services furnished in space that: (1) Is utilized by a
physician group practice as a ``centralized building'' for purposes of
complying with the physician self-referral rules; and (2) does not
qualify as a ``same building'' under Sec. 411.355(b)(2)(i) (73 FR
404). We stated that, during this period, we planned to issue
clarifying guidance as to what constitutes the ``office of the billing
physician or other supplier'' or propose additional rulemaking, or
both. Because anatomic pathology diagnostic testing arrangements
precipitated our proposal for revision of the anti-markup provision and
remained our core concern, we did not delay the date of applicability
with respect to anatomic pathology diagnostic testing services
furnished in certain space (as described above). In addition, we did
not delay the applicability of the revised anti-markup rule for the TC
of any purchased diagnostic test. The anti-markup prohibition for the
TC of purchased diagnostic tests is longstanding and was incorporated
into the expanded and revised provisions of Sec. 414.50. Accordingly,
the regulation remained applicable to the TC of any purchased
diagnostic test.
c. Challenge to the CY 2008 PFS Final Rule With Comment Period and the
Subsequent Delay of the Date of Applicability Final Rule
On January 25, 2008, a group of plaintiffs filed suit against the
Secretary (Atlantic Urological Associates PA v. Leavitt, Civil Action
No. 08-141-(RMC) (D.D.C.), challenging the validity of the CY 2008 PFS
final rule with comment period and the subsequent Delay Rule, and
asking the Court to enjoin the application of the CY 2008 PFS final
rule with comment period as to them. The plaintiffs included the
following: (1) Three urology physician group practices that own
pathology laboratories; (2) a self-employed pathologist who performs
testing services for other physician groups; (3) Uropath, LLC, a
limited liability company that manages various pathology laboratories;
and (4) Uropath's Director of Clinical Operations. The Secretary moved
to dismiss the complaint for lack of standing and lack of jurisdiction.
The Secretary agreed to withhold implementation of the anti-markup
rule, as amended by the Delay Rule, for claims submitted between
February 1, 2008 and April 1, 2008, so that the parties could fully
brief the issues. Subsequently, a preliminary injunction was granted by
the Court until the date of its final order.
On May 5, 2008, the Court vacated the preliminary injunction order
and granted the Secretary's motion to dismiss the suit. The Court found
that the plaintiffs did not have standing to challenge the delay of the
applicability of the anti-markup provisions for some arrangements. The
Court further found that Uropath and its Director of Clinical
Operations lacked standing to challenge either the CY 2008 PFS final
rule with comment period or the subsequent Delay Rule due to the fact
that they are not Medicare providers or suppliers and, thus, had no
legally protected interest at stake. Finally, the Court found that,
even if the plaintiffs had standing, the physician groups and the self-
employed pathologist must exhaust the administrative claims process
before the matter could be heard in Federal court.
d. Specific Proposals
As finalized in the CY 2008 PFS final rule with comment period, the
anti-markup provision applies to the TCs or PCs of diagnostic tests
that are either purchased from an outside supplier or are performed
outside of the ``office of the billing physician or other supplier.''
Here, we are proposing two alternative approaches for revising the
anti-markup provision in Sec. 414.50. In addition, we are seeking
comments regarding any other possible approaches that would address our
concerns regarding overutilization motivated by the ability of a
physician or physician organization to profit from diagnostic testing
services not actually performed by or supervised by a physician who
should be considered to ``share a practice'' with the billing physician
or other supplier.
Under our first proposal, the anti-markup provision in Sec. 414.50
would apply in all cases where the PC or TC of a diagnostic testing
service is either: (i) Purchased from an outside supplier or (ii)
performed or supervised by a physician who does not share a practice
with the billing physician or physician organization (as defined at
Sec. 411.351). We would specify that a physician who is employed by or
contracts with a single physician or physician organization shares a
practice with that physician or physician organization. We believe that
when a physician provides his or her efforts for a single physician
organization (whether those efforts are full-time or part-time), he or
she has a sufficient nexus with that practice to justify not applying
the anti-markup provision as contemplated under section 1842(n)(1) of
the Act. Under this proposal, a physician who is an employee of, or
independent contractor with, more than one billing physician or
physician organization would not ``share a practice'' for purposes of
Sec. 414.50 with any of the physicians or physician organizations with
which he or she is affiliated.

[[Page 38546]]

We believe that this proposal offers a simpler, more bright-line
approach preventing potentially abusive arrangements while preserving
the viability of nonabusive arrangements involving diagnostic testing
facilities that might not be considered to be in the ``office of the
billing physician or other supplier,'' as defined under the current
regulation (for example, a centralized laboratory staffed with full-
time employees that is used by a physician practice with multiple
office locations, sometimes referred to as a ``hub and spoke''
arrangement). We are not proposing regulation text for this proposal.
We recognize that circumstances may exist under which it is
beneficial, if not necessary, for a physician to provide diagnostic
testing services to more than one physician practice. For example, a
physician in one practice may contract to provide physician services on
a locum tenens basis to another practice while a physician in that
practice is on vacation or maternity leave. We are interested in
comments regarding whether and, if so, how we could permit a physician
to provide occasional services outside of his or her physician
organization without the secondary arrangement precluding the physician
from ``sharing a practice'' with his or her physician organization for
purposes of applying the anti-markup provision. We note that we do not
consider providing services at a free clinic or moonlighting in a
hospital emergency department or as a hospitalist to be ``sharing a
practice.'' Such activity would not require the application of the
anti-markup provisions with respect to the services the physician
provides for his or her physician organization.
Alternatively, we propose to maintain much of the current
regulation text and its ``site-of-service'' approach to determine
whether a physician ``shares a practice'' with the billing physician or
other supplier. In other words, we are re-proposing to apply the anti-
markup provision to TCs and PCs of non-purchased tests that are
performed outside the ``office of the billing physician or other
supplier''. We are soliciting comments on whether this is the best
approach or whether we should employ a different approach. As discussed
in more detail below in this section, we are also proposing to amend
Sec. 414.50 to: (1) Clarify that the ``office of the billing physician
or other supplier'' includes space in which diagnostic testing is
performed that is located in the same building in which the billing
physician or other supplier regularly furnishes patient care (and to
make two other revisions to the definition); (2) clarify that, with
respect to TCs, the anti-markup provision applies if the TC is either
conducted or supervised outside of the office of the billing physician
or other supplier; (3) clarify that a TC of a diagnostic test is not
purchased from an outside supplier if the TC is supervised by a
physician located in the office of the billing physician or other
supplier; (4) clarify that, for purposes of applying the payment
limitation in Sec. 414.50(a)(1)(i) only, the ``performing supplier''
with respect to the TC is the physician who supervised the TC and, with
respect to the PC, the ``performing supplier'' is the physician who
performed the PC; (5) propose an exception for diagnostic tests ordered
by a physician in a physician organization (as defined at Sec.
411.351) that does not have any owners who have the right to receive
profit distributions; and (6) solicit comments on how to define ``net
charge'' and on whether we should delay beyond January 1, 2009 the
application of the revisions made by the CY 2008 PFS final rule with
comment period, or the proposed revisions (to the extent they are
finalized), or both.
i. Definition of the ``Office of the Billing Physician or Other
Supplier''
We received informal comments from various stakeholders who alleged
that the application of the CY 2008 PFS final rule with comment period
was unclear with respect to whether certain types of space arrangements
meet the definition of the ``office of the billing physician or other
supplier.'' In addition, some of these stakeholders stated that patient
access may be significantly disrupted due to the alleged inability of
physician groups to render services in a cost-effective manner if the
anti-markup provision applies to arrangements in which diagnostic
testing services are performed in the same building as, but in space
separate from, where patients are seen. Stakeholders pointed to
arrangements in which the office where a physician group sees patients
is located on, for example, the third floor of a medical arts building,
but the diagnostic imaging services are housed, for example, in the
basement of the building. Stakeholders also cited arrangements in which
two or more group practices in the same building may share a lab or
other diagnostic testing facility in that building.
After further review, we are proposing to clarify the definition of
``the office of the billing physician or supplier'' in Sec.
414.50(a)(2)(iv) to include space, in which diagnostic testing services
are performed, that is in the ``same building,'' (as defined at Sec.
411.351), as where the ordering physician or other ordering supplier
regularly furnishes patient care (and more specifically, for physician
organizations, in the same building as where the ordering physician
provides substantially the full range of patient care services that the
ordering physician provides generally). Note that the definition of
``same building'' at Sec. 411.351 specifically excludes a ``mobile
vehicle, van, or trailer''. Therefore, diagnostic services provided in
the parking lot of a building in which a physician group sees patients
would be subject to the anti-markup provisions.
We are soliciting comments that describe current business
arrangements (such as those that take place on a ``campus'') and that
suggest any additional or alternative criteria that would permit such
arrangements to avoid application of the anti-markup provision while
addressing our concerns for the potential for overutilization.
We have received questions as to whether, for purposes of the
definition of the ``office of the billing physician or other supplier''
a physician or other supplier may have more than one location at which
it regularly furnishes patient care. We propose to clarify in Sec.
414.50(a)(2)(iv) that it may. In addition, some stakeholders responded
to the requirement that, with respect to a billing physician or other
supplier that is a ``physician organization'', the ``office of the
billing physician or other supplier'' is space in which the physician
organization provides substantially the full range of patient care
services that the physician organization provides generally. According
to the stakeholders, a physician organization, such as a multi-
specialty physician group, may not provide substantially its full range
of services at any one location, but rather may provide substantially
the full range of services for a certain specialty in one location,
substantially the full range of services for a second specialty in a
second location, and so forth. In order to address this difficulty for
physician organizations, we are proposing to revise Sec.
414.50(a)(2)(iv) to read ``with respect to a billing physician or other
supplier that is a physician organization (as defined at Sec. 411.351
of this chapter), the ``office of the billing physician or other
supplier'' is medical office space where the ordering physician
provides substantially the full range of patient care services that the
ordering physician provides generally.
Examples of Application of Our Proposed Definition of the ``Office
of the Billing Physician or Other Supplier''.

[[Page 38547]]

We are providing the following examples in order to illustrate the
effect of our proposals. For purposes of the following examples, assume
that neither the TC nor the PC is purchased from an outside supplier.

Example 1. A physician group practice treats patients in space
located on one floor of a building, and, in that space, provides
substantially the full range of services that it provides generally.
The group practice conducts diagnostic testing on another floor of
the same building. The anti-markup would not apply because the
office of the billing physician or other supplier includes the space
on both floors.
Example 2. One or more physician group practices share space
that is used for diagnostic testing and is located in the same
building in which the group practices have their respective offices
for seeing patients (and within those offices each group practice
provides substantially the full range of patient care services that
it provides generally). Again, the anti-markup provision would not
apply because the office of the billing physician or other supplier
(with respect to each group practice) includes the space on both
floors.
Example 3. A group practice treats patients in Buildings A, B
and C. In each of its offices in Buildings A and B, the group
practice provides substantially the full range of patient care
services that it provides generally, but that is not true for space
located in Building C. The group practice provides diagnostic
testing services in Buildings B and C. If we finalize the definition
of the ``office of the billing physician or other supplier'' to
include space in which diagnostic testing is performed that is
located in the same building as where the ordering physician or
other ordering supplier regularly furnishes patient care, the anti-
markup provision would not apply to the diagnostic testing performed
in Building B but would apply to the diagnostic testing performed in
Building C.

We recognize that, unlike the first alternative proposal described
above, our second alternative proposal may adversely affect certain
``hub and spoke'' and similar diagnostic testing services arrangements
(see description above) in which a physician providing services in a
centralized diagnostic testing facility owned by and serving a multi-
site group practice has a significant nexus to the physician
organization that employs or contracts with the physician. Therefore,
we are proposing to provide an exception in Sec. 414.50(b) to the
anti-markup provision that would be applicable to diagnostic tests
ordered by a physician in a physician organization that does not have
any owners who have the right to receive profit distributions. The
exception would not apply to TCs purchased from an outside supplier, in
recognition of the statutory command in section 1842(n)(1) of the Act
and our longstanding rule. We are seeking comments as to whether the
exception is sufficient to address any potential impediments to
nonabusive ``hub and spoke'' arrangements caused by this second
alternative approach, whether the exception is too narrow or too broad,
and whether an exception to the application of the anti-markup rule
under this second alternative approach is necessary at all.
ii. Performed at a Site Other Than the Office of the Billing Physician
or Other Supplier
Section 414.50(a) provides that the anti-markup provision applies
to the TC of a diagnostic test if the TC is performed outside of the
office of the billing physician or other supplier. We propose to
clarify that, if the TC is conducted outside of the office of the
billing physician or other supplier, the anti-markup provision applies
irrespective of whether the supervision takes place in the office of
the billing physician or other supplier. We also propose to clarify
that the anti-mark-up provision applies if the supervision of the TC
takes place outside the office of the billing physician or other
supplier, even if the TC is conducted in the office of the billing
physician or other supplier. In other words, we would take the position
that ``performance'' of the TC includes both the technician's work in
conducting the test and the physician's supervision of the technician.
Therefore, if either the conducting of the TC or the supervising of the
TC takes place outside the office of the billing physician or other
supplier, the anti-markup provision would apply.
iii. Outside Supplier
In the CY 2008 PFS final rule with comment period, we defined an
outside supplier as ``someone who is not an employee of the billing
physician or other supplier and who does not furnish the test or
interpretation to the billing physician under a reassignment that meets
the requirements of Sec. 424.80'' (72 FR 66401). Subsequent to
publication of the final rule with comment period, we received
questions as to whether the TC of a diagnostic test would be purchased
from an outside supplier if the technician conducting the TC is not an
employee of the billing group but the physician supervising the
technician is an employee or contractor of the billing group. We are
proposing to provide in new Sec. 414.50(a)(2)(iii) that the TC of a
diagnostic test is not purchased from an outside supplier if the TC is
both conducted and supervised within the office of the billing
physician or other supplier, and the supervising physician is an
employee or independent contractor of the billing physician or other
supplier. We believe that the presence of the technician and the
supervising physician in the office of the billing physician or other
supplier, and the fact that the supervising physician is an employee or
independent contractor of the billing physician or other supplier may
establish a sufficient nexus between the supervising physician and the
billing physician or other supplier so as to constitute ``sharing a
practice'' within the meaning of section 1842(n)1) of the Act. We are
providing proposed regulatory text in new Sec. 414.50(a)(2)(iii) for
this proposal. We are also making two alternative proposals (each
without proposed regulatory text). We propose, in the first
alternative, that if the TC is conducted by a technician who is not an
employee of the billing supplier, the TC is considered to be purchased
from an outside supplier, regardless of where the technician conducts
the TC and notwithstanding the employment status of the supervising
physician and the fact that the test is supervised in the office of the
billing physician or other supplier. As a second alternative, we
propose that, where the TC is conducted by a non-employee of the
billing physician or other supplier and outside the office of the
billing physician or other supplier, the TC nevertheless will not be a
purchased test if the supervising physician is an employee or
independent contractor of the billing physician or other supplier and
performs the supervision in the office of the billing physician or
other supplier. We note that, if we were to adopt this second
alternative, the TC would still be subject to the anti-markup provision
under our proposal that the anti-markup provision applies if either the
conducting of the TC or the supervising of the TC takes place outside
the office of the billing physician or other supplier, unless an
exception applies (see section II.N.1.d.i. of this proposed rule).
iv. The Performing Supplier's Net Charge
Section 414.50(a)(1) provides that, where the anti-markup provision
applies, Medicare payment to the billing physician or other supplier is
limited to the lowest of three specified amounts, one of which, in
Sec. 414.50(a)(1)(i), is ``the performing supplier's net charge to the
billing physician or other supplier.'' We have received comments
concerning what the performing supplier's net charge would be in the
situation in which a physician in a group practice

[[Page 38548]]

supervises the performance of a TC but the group practice bills for the
TC directly, that is, without a reassignment from the supervising
physician. Stakeholders have questioned whether there are two
suppliers, that is, the physician supervising the TC and the group
practice billing for it, or whether there is only one supplier, that
is, the group practice, given that the supervising physician is not
effecting a reassignment.
We propose to clarify that for purposes of Sec. 414.50(a)(1)(i)
only, the ``performing supplier'' of the TC is the physician who
supervised the TC, and the ``performing supplier'' of the PC is the
physician who performed the PC. Therefore, where the anti-markup
provision applies, the billing physician or other supplier would need
to determine what it paid the physician for supervising the TC or for
performing the PC.
v. Specific Solicitation of Comments
We are interested in receiving comments concerning the calculation
of net charge for the PC when the anti-markup rules apply. In the CY
2008 PFS final rule with comment period, commenters objected that it
would be difficult to calculate the net charge of the performing
supplier. We stated that we did not believe that most suppliers would
experience significant difficulty in calculating the net charge,
despite the fact that some physicians are paid an aggregate monthly or
annual amount for their services. In addition, we stated that suppliers
could also choose to restructure their arrangements so that the anti-
markup provision does not apply (72 FR 66318). Despite these responses
in the final rule, we have received comments and questions concerning
how to calculate the net charge. We are soliciting comments as to
whether and how we should provide specific regulatory guidance for
calculating the net charge.
Commenters specifically stated that our decision to exclude the
overhead costs of the billing supplier in the net charge would have a
detrimental financial impact upon their practice and, ultimately,
patient access to care. We are also soliciting comments on whether we
should allow some overhead costs to be recovered by billing suppliers
for services to which the anti-markup provision applies, and how our
concerns about the potential for overutilization would be addressed if
we were to allow some recovery of overhead.
We note that several States have enacted direct billing laws, under
which physicians (primarily pathologists) are required to directly bill
payors for their services and are prohibited from reassigning their
right to payment to the ordering supplier. We are soliciting comments
on whether, in addition to or in lieu of, the anti-markup provision, we
should prohibit reassignment in certain situations and require the
physician supervising the TC or performing the PC to bill Medicare
directly.
Finally, we are soliciting comments on whether the revisions made
by the CY 2008 PFS final rule with comment period should go into effect
on January 1, 2009, as planned, and whether any proposals contained
herein that may be finalized should go into effect on that date, or
whether some or all of the revisions should be delayed past January 1,
2009.
2. Exception for Incentive Payment and Shared Savings Programs
(Proposed Sec. 411.357(x))
a. Background
The Medicare program and private industry stakeholders are
increasingly exploring the benefits of various types of gainsharing,
pay-for-performance (``P4P''), value-based purchasing, and similarly-
styled programs that use economic incentives to foster high quality,
cost-effective care. Many of these programs involve payments from
hospitals to physicians. These payments potentially implicate the fraud
and abuse laws, including the physician self-referral statute. Existing
exceptions to the physician self-referral statute, while useful, may
not be sufficiently flexible to encourage a variety of nonabusive and
beneficial gainsharing, P4P, and similar programs.
For this reason, as described in greater detail below, we are
proposing a new, targeted exception to the physician self-referral
statute for such programs. The design of the new exception presents a
particular challenge: Crafting an exception that offers broad
flexibility for innovative, effective programs, while at the same time
protecting the Medicare program and beneficiaries from abuses. In
reviewing various programs and industry suggestions, we have been
struck by the considerable variety and complexity of existing
arrangements, and the likelihood of continued future innovation in the
structure and method of these programs. This variety and complexity
make it difficult to craft a ``one-size-fits-all'' set of conditions
that are sufficiently ``bright line'' to facilitate compliance and
enforceability, yet sufficiently flexible to permit innovation without
undue risk of program or patient abuse.
The variety and complexity of these programs make them potential
vehicles for the unscrupulous to disguise payments for referrals or
compromise quality of care for patients in the interest of maximizing
revenues. Therefore, our approach to drafting a proposed exception is a
cautious one. Our proposal is relatively narrow, and we acknowledge at
the outset that it is unlikely to cover as many arrangements as
interested stakeholders would like. As described below, we are
considering various ways that we might expand the proposed exception,
if we can do so without a risk to the programs and their beneficiaries.
We are interested in public comments specifically addressing areas of
possible expansion, the potential abuses that could occur, and the
conditions necessary to ensure that such expansion does not pose a risk
of program or patient abuse. It is our goal to promulgate an exception
that is as broad as possible consistent with the statutory requirement
that any arrangement excepted under an exception issued using our
authority in section 1877(b)(4) of the Act pose no risk of program or
patient abuse. We note that section 1877 of the Act is not implicated
by quality or cost savings programs that do not involve remuneration to
physicians. Hospitals are free to implement quality protocols, cost
savings measures, and the like without regard to section 1877 of the
Act, provided that the arrangements do not involve financial
relationships with referring physicians.
Although ``gainsharing'' is commonly used to describe certain
programs that seek to align physician behavior with the goals of a
hospital by rewarding physicians for reaching predetermined performance
outcomes, several types of programs exist for the purpose of achieving
quality standards, generating cost savings, and reducing waste. In this
proposed rule, we refer to these programs as ``incentive payment and
shared savings programs.'' We describe below in more detail the
characteristics of programs we consider to fall within these
categories. Successful programs often result in improved quality
outcomes or cost savings (or both) for the hospital sponsoring the
program. To achieve these goals, hospitals make financial payments to
the physicians whose efforts contribute to the success of the program.
As noted above, these payments may implicate the physician self-
referral statute.
Section 1877(a)(1) of the Act states that, except as provided in
section 1877(b) of the Act, if a physician (or an immediate family
member of such physician) has a financial relationship

[[Page 38549]]

with an entity, the physician may not make a referral to the entity for
the furnishing of designated health services (DHS) for which payment
otherwise may be made under title XVIII of the Act. The provision of
monetary or nonmonetary remuneration by a hospital to a physician
through a gainsharing arrangement or other incentive payment or shared
savings program would constitute a financial relationship with an
entity for purposes of the physician self-referral statute.
Incentive payment and shared savings programs also potentially
implicate two additional specific fraud and abuse statutes. First,
sections 1128A(b)(1) and (b)(2) of the Act, commonly referred to as the
Civil Monetary Penalty (CMP) statute, prohibit a hospital from
knowingly making a payment directly or indirectly to a physician as an
inducement to reduce or limit items or services furnished to Medicare
or Medicaid beneficiaries under the physician's direct care, and a
physician from knowingly accepting such payment. Second, these
arrangements potentially implicate section 1128B(b) of the Act (the
anti-kickback statute) if one purpose of the quality improvement or
cost savings payment is to influence referrals of Federal health care
program business.
i. Incentive Payment Programs
``Pay for performance'' (P4P), also known as quality-based
purchasing, is a quality improvement and reimbursement methodology
aimed at moving towards payments that create stronger financial support
for patient focused, high value care. There are many models for
financial and non-financial incentives used in P4P and other quality-
focused programs. We refer to these types of programs, which may be
payer-based or provider-based, as ``incentive payment programs.''
Through collaborative efforts with a wide range of other public
agencies and private organizations that have a common goal of improving
quality and avoiding unnecessary health care costs, including the
National Quality Forum (NQF), The Joint Commission, the National
Committee for Quality Assurance (NCQA), the Agency for Healthcare
Research and Quality (AHRQ), and the American Medical Association
(AMA), we are developing and implementing a set of P4P initiatives to
support quality improvement in the care of Medicare beneficiaries. The
objective measures used in incentive payment programs to determine
whether providers are offering high quality care are commonly referred
to as ``quality standards.'' This term is also used in many provider-
based incentive payment programs. We use the term ``quality standards''
in this proposed rule as well.
When payer-based, P4P attempts to use reimbursement to promote
quality, efficiency in providing access to needed services, and
successful outcomes. In many payer-based models, payers make available
to hospitals financial incentives tied to achieving certain quality or
performance goals (for example, adopting health information technology,
furnishing preventive care services, achieving patient satisfaction
targets, or measurably improving patient health indicators). Hospitals
often need physician collaboration to meet performance goals. In order
to align incentives, hospitals may want to share with physicians a
portion of the P4P payments they receive from the payers. In the
absence of or in addition to a payer-based incentive payment program,
hospitals may also sponsor quality-focused programs in which objective
improvements in quality or individual patient care outcomes are
rewarded with payments to physicians responsible for the improvements.
In both circumstances, payments made by a hospital to the
physicians whose efforts promoted the achievement of targets (or
benchmarks) for one or more performance measures create a financial
relationship between the hospital and the physician that implicates the
physician self-referral statute. These payments also potentially
implicate the anti-kickback statute and the CMP statute. (We note that,
depending on the nature of the performance measure, incentive payment
programs might not implicate the CMP statute because they might not
involve any reduction or limitation in patient care services.)
Although properly structured incentive payment programs can enhance
health care quality and efficiency, improperly structured programs pose
significant risks of program or patient abuse, including adversely
affecting patient care. Moreover, such programs could be vehicles to
disguise payments for referrals, including incentives to steer
healthier patients to the hospital offering the incentive payment
program. Programs that cannot be adequately and accurately measured for
quality would also pose a high risk of program or patient abuse. We
observe that payer-based programs in which the performance measures are
set by a wholly independent, arms-length party with a clear financial
incentive to make P4P payments prudently may pose somewhat less risk
than non-payer based programs, where there is no third-party payer that
sets the performance measures and monitors compliance. We note further
that payments made directly from a payer to a physician, at the payer's
sole discretion, may not implicate the physician self-referral statute
or other fraud and abuse statutes.
ii. Shared Savings Programs
Many programs, such as ``gainsharing'' and other cost savings and
waste reduction programs, seek to align physician economic incentives
with those of hospitals by offering physicians a share of the
hospitals' variable cost savings attributable to the physicians'
efforts in controlling the costs of providing patient care. For
purposes of this proposed rulemaking, we refer to these types of
programs as ``shared savings programs.'' When a participating physician
receives a portion of the cost savings attributable to his or her
efforts in reducing waste and achieving the goals of a shared savings
program, a financial relationship is created between the hospital
sponsoring the shared savings program and the participating physician,
and the physician self-referral statute is implicated.
The Medicare Part A DRG system of hospital reimbursement, under
which a hospital receives a prospectively determined, fixed payment
that covers all hospital items and services provided to a Medicare
beneficiary during his or her inpatient stay or outpatient service,
provides a significant incentive for hospitals to control costs.
Hospitals are also motivated to reduce costs because of the growth of
managed care. However, because physicians are paid separately under
Medicare Part B (and by many managed care and other payers), they do
not share necessarily the hospital's motivation to control patient care
costs. Physicians who perform their professional services at a hospital
use the hospital's equipment, supplies and services, and prescribe
drugs, devices and other items and services which the hospital must
provide. In short, physicians are not financially at risk for the items
and services that they use and prescribe, and therefore, do not have a
financial stake in controlling the hospital's patient care costs.
As part of many shared savings programs, physicians study how
colleagues perform their procedures and then determine the best
processes to adopt, in order to increase efficiency while ensuring
quality. In other situations, outside experts are hired to analyze
hospital and regional or national data to determine appropriate

[[Page 38550]]

opportunities for cost savings that do not jeopardize patient care.
Shared savings programs are sometimes described as collaborations
between physicians and hospitals to determine the best approach to
providing quality patient care services. Shared savings programs have
been recognized by stakeholders as an effective means of controlling
costs, improving efficiency, and promoting quality in the delivery of
health care services. Government stakeholders have recognized similar
potential benefits when shared savings programs are properly structured
to ensure compliance with Federal health care program requirements.
Empirical evidence suggests that the goal of patient care quality
maintenance or improvement can be achieved through a properly-designed
shared savings program. An independent study of data from 13 separate,
1-year gainsharing programs \1\ designed and administered by the
organization responsible for the design of all of the gainsharing
programs that, to date, have received favorable advisory opinions from
OIG (see discussion below and in the FY 2009 Hospital IPPS proposed
rule (73 FR 23692 through 23693)), found that the incentives for cost
reduction in the gainsharing models studied did not result in
reductions in quality and, for certain quality measures, resulted in
improved quality of patient care. (See Jonathan D. Ketcham and Michael
F. Furukawa ``Hospital-Physician Gainsharing in Cardiology.'' Health
Affairs, Vol. 27, No. 3 (May/June 2008), 808.) Specifically, according
to the study, gainsharing slowed the growth of average in-lab cost per
coronary stent patient, reducing costs relative to non-gainsharing
hospitals; yet, in-lab complications did not increase during
gainsharing, and three complications significantly decreased. (Id. at
808.) With respect to gainsharing's positive impact on patient care
quality, the authors of the study asserted that the economic incentive
for physicians participating in gainsharing programs to collaborate in
defining and adopting best practices might improve the physicians'
incorporation of clinical evidence into patient care decisionmaking.
This is, at least in part, because the gainsharing programs studied
provided participating physicians and physician organizations with
information about other physicians' practice patterns. (Id. at 809.)
---------------------------------------------------------------------------

\1\ Although we refer herein to ``shared savings programs,'' the
study cited referred to these programs as ``gainsharing programs.''
We retain that nomenclature for purposes of discussing the study.
---------------------------------------------------------------------------

Although properly structured shared savings programs may increase
efficiency and reduce waste, thereby potentially increasing a
hospital's profitability and contributing to quality of care,
improperly designed or implemented programs pose the same risks of
program or patient abuse described above in connection with incentive
payment programs. Additional risk is posed by shared savings programs
that reward physicians based on overall cost savings (for example, the
amount by which the total costs attributable to a particular hospital
department decreased from one year to the next) without accountability
for specific cost reduction measures.
We are concerned about physicians responding to a shared savings
program by limiting their use of quality-improving but more costly
devices, tests or treatments (``stinting''), by treating only healthier
patients (``cherry picking''), by avoiding sicker patients
(``steering'') at the hospital, or by discharging patients earlier than
clinically indicated either to home or to post acute care settings
(``quicker-sicker'' discharge). We are concerned also about
arrangements which provide for payments in exchange for patient
referrals or result in unfair competition among hospitals offering
shared savings programs to foster physician loyalty and to attract more
referrals. We are concerned that, because of pressures from competition
or physicians, hospitals may increase the percentage of savings shared
with the physicians, manipulate hospital accounts to generate phantom
savings, or otherwise game the arrangement to generate income for
referring physicians in order to retain them for or attract them to the
hospital. (These same concerns may be present with incentive payment
programs.) We are incorporating safeguards into the proposed exception
that are intended to address these risks.
iii. DHHS Initiatives: Incentive Payment and Shared Savings Programs
Patient care quality improvement is a laudable goal and a priority
of the Department of Health and Human Services (the Department or
DHHS). Patient care should be safe, effective, efficient, patient-
centered, timely and equitable. Establishing partnerships is a critical
step towards achieving our goals of improving patient care quality and
avoiding unnecessary costs. Incentive payment and shared savings
programs, when properly structured, by design establish such
partnerships.
Since 1991, we have sponsored a variety of demonstration projects
and other initiatives to explore the connection between payments and
the quality of care. These initiatives include the evaluation of both
gainsharing (in various forms) and P4P programs affecting providers of
health care to beneficiaries in diverse care settings. Although we
decline to provide detailed descriptions of individual initiatives
here, gainsharing demonstrations include: (1) The Medicare
Participating Heart Bypass Center Demonstration which was conducted to
assess the feasibility and cost effectiveness of a negotiated all-
inclusive bundled payment arrangement for coronary artery bypass graft
(CABG) surgery while maintaining high quality care; (2) a 3-year
demonstration under section 1866C of the Act, which has been
established, but not yet implemented, to test gainsharing models
involving physicians, and collaborations between hospitals working with
physicians, in a single geographic area to improve the quality of
inpatient hospital care; and (3) a demonstration project under section
5007 of the DRA that would involve arrangements between a hospital and
physicians and practitioners under which the hospital provides
remuneration (to certain physicians and to certain practitioners (as
defined in 1842(b)(18)(C) of the Act)) that represents solely a share
of the savings incurred directly as a result of collaborative efforts
between the hospital and a particular physician (or practitioner) to
improve overall quality and efficiency. In addition, we recently
announced a new demonstration, the Acute Care Episode Demonstration,
for hospitals to test the use of a bundled payment for both hospital
and physician services for a select set of episodes of care (orthopedic
and cardiac) to improve the quality of care delivered through Medicare
FFS. We note that some of the demonstration programs are proceeding
under a statutory provision that waived application of section 1877 of
the Act, the anti-kickback statute, and the CMP statute.
In addition to these gainsharing demonstrations, we have developed
a number of P4P and other value-based purchasing initiatives across
patient care settings, including: The Premier Hospital Quality
Incentive Demonstration; the Medicare Care Management Performance
Demonstration; the Home Health Pay-for-Performance Demonstration; and
the Better Quality Information Pilots.

[[Continued on page 38551]]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]

[[pp. 38551-38600]] Medicare Program; Revisions to Payment Policies Under the
Physician Fee Schedule and Other Revisions to Part B for CY 2009; and
Revisions to the Amendment of the E-Prescribing Exemption for Computer
Generated Facsimile Transmissions; Proposed Rule

[[Continued from page 38550]]

[[Page 38551]]

iv. Potential Statutory and Regulatory Applications to Incentive
Payment and Shared Savings Programs
Section 1877 of the Act, also known as the physician self-referral
statute: (1) Prohibits a physician from making referrals for certain
DHS payable by Medicare to an entity with which he or she (or an
immediate family member) has a financial relationship (ownership,
investment or compensation), unless an exception applies; and (2)
prohibits the entity from filing claims with Medicare (or billing
another individual, entity or third party payer) for those referred
services. The statute establishes a number of specific exceptions and
grants the Secretary the authority to create regulatory exceptions for
financial relationships that pose no risk of program or patient abuse.
A financial relationship is created where an incentive payment or
shared savings program results in a direct or indirect payment from the
hospital to a physician. Unless the arrangement satisfies the
requirements of an applicable exception, the incentive payment or
shared savings payment would violate the physician self-referral
prohibition if the physician receiving the payment makes referrals for
DHS to the hospital making the incentive payment or shared savings
payment. In many cases, incentive payment and shared savings programs
can be structured to satisfy the requirements of existing exceptions
(for example, the exceptions for bona fide employment relationships,
personal service arrangements, fair market value compensation, or
indirect compensation arrangements). In some cases, no exception may be
necessary (for example, incentive payments paid directly from a payer
at the payer's sole discretion to a physician for the physician's
efforts in improving quality). However, in other circumstances, the
existing exceptions to the physician self-referral prohibition may not
be sufficiently flexible to protect payments to physicians under
incentive payment and shared savings programs.
As noted above, incentive payment and shared savings programs also
implicate two additional specific fraud and abuse statutes--the CMP
statute and the anti-kickback statute. An incentive payment or shared
savings program could run afoul of the anti-kickback statute if one
purpose of the payment from the hospital to the physician is to
influence referrals of Federal health care program business. In
contrast, the intent of the parties does not dictate compliance with
the physician self-referral statute. If an arrangement fails to satisfy
all of the requirements of an exception, it would violate section 1877
of the Act.
v. Solicitation of Comments in the FY 2009 Hospital Inpatient
Prospective Payment System Proposed Rule
In the FY 2009 IPPS proposed rule, we solicited comments as to
whether we should issue an exception specific to gainsharing
arrangements, which we stated ``typically refer[] to an arrangement
under which a hospital gives physicians a share of the reduction in the
hospital's costs (that is, the hospital's cost savings) attributable in
part to the physicians' efforts'' (73 FR 23692). Although we noted
general concerns with arrangements that involve the use of a
percentage-based compensation formula (as many gainsharing arrangements
involve), we solicited comments regarding a potential exception to the
physician self-referral prohibition for gainsharing arrangements in
recognition of ``the value to the Medicare program and its
beneficiaries where the alignment of hospital and physician incentives
results in improvements in quality of care'' (73 FR 23694).
Specifically, we solicited comments on the following: (1) What types of
requirements and safeguards should be included in any exception for
gainsharing arrangements; and (2) whether certain services, clinical
protocols, or other arrangements should not qualify for the exception
(73 FR 23694).
b. Public Response to Solicitation of Comments
The following discussion describes comments received in response to
the solicitation of comments on gainsharing arrangements that we have
reviewed to date. In addition, we have reviewed comments received in
connection with our proposal in the CY 2008 PFS proposed rule to revise
Sec. 411.354(d) to permit the use of percentage-based compensation
formulae (such as the type often used for making cost sharing payments)
for personally performed physician services only (72 FR 38184). In that
proposal, we specifically noted that the revisions, if finalized, could
potentially affect payment methodologies used in gainsharing programs.
Generally, commenters strongly supported the establishment of an
exception for gainsharing and other programs that compensate physicians
and physician organizations for improving patient care quality and
decreasing the cost of providing patient care when those achievements
can be tied to the physician's or physician organization's
participation in the program. Commenters urged that an exception
contain safeguards to ensure patient access to necessary items and
services, improve patient care quality, and avoid improper influencing
of physician referral patterns due to the constraints or incentives of
the program's design. One commenter suggested that the availability of
the exception be contingent upon the parties obtaining a favorable
advisory opinion from OIG prior to the implementation of the
gainsharing program. In addition, commenters requested that an
exception provide flexibility to allow an entity to design an incentive
payment or shared savings program that is specific to the entity's
goals and needs, as well as to modify the program as necessary. One
commenter also provided recommendations regarding the types of cost
savings measures (in addition to supply cost reduction measures) that
should be addressed by the exception, as well as particular services,
clinical protocols, and other arrangements that we should exclude from
the protection of an exception for incentive payment and shared savings
programs. The commenter suggested that an exception to the physician
self-referral prohibition should permit more types of arrangements (and
within additional medical specialties) than thus far have been
explicitly approved in OIG advisory opinions. Specifically, the
commenter urged that an exception for incentive payment and shared
savings programs allow a program covered by the exception to reward:
(1) Decreasing delays in patient care; (2) reconsidering ordering
patterns for all types of testing and services (in order to reduce
medically unnecessary services and reduce cost); (3) reducing
consultation of other physicians when value is not added to the
patient's care through the consultation; (4) establishing long-term
management of chronic patient conditions; and (5) using alternative
care (for example, outpatient care instead of inpatient care).
Specific recommendations for safeguards to be included in an
exception for incentive payments and shared savings programs included:
(1) Permitting the duration of the program to exceed 1 year (the term
of the arrangements approved under the OIG advisory opinions to date);
(2) requiring mechanisms to ensure that the program will not affect
patient care in an adverse manner; (3) limitations on the amount of
payments to participating physicians; (4) requiring periodic review of
the impact of the program on clinical care;

[[Page 38552]]

(5) a written agreement that clearly identifies the services or actions
for which payment may be made to the participating physicians; (6)
permitting payments only for documented and verified quality
improvement and waste or cost reduction; (7) determining compensation
to participating physicians (or a formula for such compensation) prior
to the implementation of the program or the physician's participation
in the program, and prohibiting modification to the compensation during
the term of the arrangement; (8) requiring written disclosure regarding
the program to all patients affected by the program to promote
transparency and accountability; and (9) prohibiting payment to a
physician or physician organization that is determined in any way based
on a reduction in the length of stay for hospital patients.
c. Proposal
Although we solicited comments in the FY 2009 IPPS proposed rule
regarding an exception to the physician self-referral prohibition for
gainsharing arrangements (73 FR 23692), we believe that a broader
exception that includes incentive payment programs is needed to
facilitate the full array of nonabusive, beneficial incentive payment
and shared savings programs that we consider important for promoting
the highest quality of care for our beneficiaries while achieving cost
savings for the program. Section 1877(b)(4) of the Act authorizes the
Secretary to create regulatory exceptions for financial relationships
that he determines do not pose a risk of program or patient abuse.
Therefore, using our authority under section 1877(b)(4) of the Act, we
are proposing here an exception in new Sec. 411.357(x) for payments
provided to a physician participant in an incentive payment or shared
savings program that includes certain safeguards and satisfies certain
conditions.
i. General Considerations With Respect to the Proposed Exception
As we described above in greater detail, we have concerns about
physicians responding to incentive payment and shared savings programs
by stinting, cherry picking, steering, and making quicker-sicker
discharges. The criteria included in the proposed exception are focused
on three aspects that we consider critical to a properly structured,
nonabusive incentive payment or shared savings program: transparency,
quality controls (for example, controls to prevent reductions in
resource utilization that lead to a diminution in quality), and
safeguards against payments for referrals (or influencing referrals).
We are proposing requirements with respect to the structure of the
incentive payment and shared savings program itself, limitations and
conditions regarding the payments provided to the physicians
participating in the program, and requirements for the arrangement
between the hospital and the physicians participating in the program.
We are seeking comments on each requirement in the exception, as well
as comments regarding the exception in its entirety. With respect to
the latter, we are interested in comments regarding the effect of
incentive payment and shared savings programs on marketplace
competition, specifically with regard to whether shared savings
programs that include product standardization measures disadvantage
small manufacturers of items, supplies and devices due to the selection
and preferred utilization of a limited number of items, supplies and
devices included in the shared savings program, the ordering of which
qualifies for program payments. (We note that, although we expect that
the initial selection of the preferred products would be based on
clinical efficacy, safety and medical appropriateness, we recognize
that the final selection of products in a product standardization
program is likely to be based on price when quality and utility are
comparable). We are interested in comments on how product
standardization can be achieved without limiting patient access to
items, supplies and devices considered beneficial to improved patient
care. We are also concerned about the potential for fraud and abuse if
manufacturers attempt to influence the design or implementation of
hospital incentive payment or shared savings programs.
We note that, for most of the requirements and safeguards discussed
in this proposal, we have proposed regulation text. However, we have
not provided proposed regulation text for a limited number of the
proposed requirements and safeguards described, but rather have
solicited comments regarding how best to incorporate them into the
regulatory text of the exception.
We are proposing a single set of requirements that would apply
equally to incentive payment and shared savings programs. In many
cases, programs may include both patient care quality measures and cost
savings measures, or a particular performance measure may be both a
quality measure and cost savings measure. We believe that one set of
requirements would ease administration and assist with hospitals' and
physicians' compliance efforts. Further, similar risks of program or
patient abuse exist regardless of whether a hospital pays a physician a
share of its internal cost savings, a share of external funds earned by
meeting quality goals (in a payer-sponsored program), or a share of its
general revenues to promote quality. We are interested in comments with
respect to whether separate exceptions for incentive payment programs
and shared savings programs would be preferable and, if so, how they
should be structured, and which requirements should appear in each.
The requirements of the proposed exception include a number of
program integrity safeguards, consistent with our longstanding concern,
first noted in the Phase I final rule with comment period, that a
patient's choice can be affected when physicians steer patients to less
convenient or lower quality items or services because the physicians
are sharing profits with, or receiving remuneration from, the provider
(63 FR 1659 and 1662). We are also concerned about systems that
incentivize the delivery of less expensive care at the cost of patient
care quality and systems that limit patient access to beneficial new
technology. The proposed exception prohibits payment to physicians
based in whole or in part on a reduction in the length of stay for a
particular patient or in the aggregate for the hospital operating the
program. However, we recognize that reduced length of stay may occur as
an incidental effect of quality improvement efforts.
ii. Scope of the Proposed Exception
As noted above, we used the term ``incentive payment and shared
savings program'' to encompass a wide variety of gainsharing and P4P
programs. We do not propose to limit the exception to traditional
gainsharing programs or supply cost/waste reduction programs. We are
seeking comments regarding whether this approach is too limited or
expansive, and whether different terminology would better describe the
range of nonabusive programs we intend to cover under the proposed
exception.
Our proposed exception protects only incentive payment and shared
savings programs offered by hospitals. It is our understanding that
these arrangements are the most common, and, as described above, are
the type with which we have the most experience. We are concerned that,
unlike hospitals that are reimbursed on a prospective payment basis,
other types of providers and suppliers that are reimbursed on a fee
schedule or other FFS basis might have an incentive to create quality
measures that mandate the furnishing of more

[[Page 38553]]

items and services, without regard to costs to the Medicare program or
its beneficiaries. In many cases, it might be relatively easy to
characterize a program that offers beneficiaries more items and
services as a ``quality'' incentive program, even in the absence of
actual quality improvement. However, we are soliciting comments on
whether incentive payment or shared savings programs (or similar
programs) offered by other DHS entities should be protected and under
what circumstances. In particular, we are interested in comments
regarding the structure and design of non-hospital arrangements and the
safeguards that we could include in an exception to meet the statutory
standard of no risk of program or patient abuse.
We are proposing to protect remuneration only in the form of cash
(or cash equivalent) payments made by a hospital. Nonmonetary
remuneration, such as additional staff members or new equipment,
offered to reward achievement of quality or cost savings goals would
not be protected. In addition, the proposed exception would be limited
to payments to physicians who actually participate (``participating
physicians'') in the achievement of the patient care quality measures
or cost savings measures (collectively referred to in this proposal as
the ``performance measures'') that are the subject of the particular
program. We note that the physician self-referral statute applies only
to physicians. Nothing in this proposal is intended to limit or
prohibit the participation of NPPs in incentive payment and shared
savings programs. Moreover, the participation of NPPs in an incentive
payment or shared savings program would not require the protection of
an exception to the physician self-referral prohibition unless the
practitioner's referrals are directed by, controlled by, or attributed
to a physician with whom or for whom the practitioner works.
We are proposing that protected payments could be made to
participating physicians individually or to physician organizations
composed entirely of participating physicians (referred to in this
proposal as ``qualified physician organizations'') (for example, a
group practice composed entirely of cardiac surgeons participating in a
cardiac surgery shared savings program could be a qualified physician
organization). With respect to qualified physician organizations, we
are considering whether such organizations could include physicians who
are eligible to participate in the program, even if the individual
physicians elect not to participate in the program (for example, a
group practice composed entirely of cardiac surgeons could be a
qualified physician organization in a cardiac surgery shared savings
program, even if some surgeons elect not to participate in the
program). As discussed further below, qualified physician organizations
would need to distribute incentive or shared savings payments received
from the hospital on a per capita basis to the physicians in the
physician organization who participated in the incentive payment or
shared savings program. In any case, payments made to physicians who
refer patients to the hospital but do not otherwise participate in the
program would not be protected. For example, payments to cardiac
surgeons for changing their operating room procedures would be
protected (provided that all of the other requirements of the exception
were satisfied), whereas payments to the cardiologists who referred the
patients for cardiac surgery but did not perform the surgery or
contribute to the achievement of the performance measures through their
personal efforts would not be protected.
iii. Requirements Related to the Design of an Incentive Payment or
Shared Savings Program
To be protected, the incentive payment or shared savings program
must be a documented program that seeks to achieve the improvement of
quality of hospital patient care services through changes in physician
clinical or administrative practices or actual cost savings for the
hospital resulting from the reduction of waste or changes in physician
clinical or administrative practices, without an adverse affect on or
diminution in the quality of hospital patient care services.
We are proposing to require that, in order for payments made as
part of an incentive payment or shared savings program to qualify for
the protection of the exception, the program must include patient care
quality or cost savings measures (or both) supported by objective,
independent medical evidence indicating that the measures would not
adversely affect patient care. Specifically, all performance measures
must use an objective methodology, be verifiable, be supported by
credible medical evidence, and be individually tracked. The measures
must reasonably relate to the hospital's practices and patient
population. In the interest of creating clear, bright-line rules, we
are proposing specifically that patient care quality measures be listed
in CMS' Specifications Manual for National Hospital Quality Measures.
In the alternative, rather than require programs to include the patient
care quality measures listed in CMS' Specifications Manual for National
Hospital Quality Measures, we would deem such measures to satisfy that
requirement.
With respect to cost savings measures, we are proposing to require
that cost savings measures included in the incentive payment or shared
savings program use an objective methodology, be verifiable, be
supported by credible medical evidence indicating that the measures
would not adversely affect patient care, be individually tracked, and
reasonably relate to the services provided. We are seeking comment
regarding this approach and the described alternative for patient care
quality measures in general, and we are interested specifically in
comments regarding other appropriate performance measures (or lists of
performance measures, particularly with respect to cost savings
measures to the extent such a list might exist) that might be deemed to
satisfy such a requirement if we finalize this alternative proposal, as
well as whether parties could satisfy this requirement by including
criteria deemed by the Secretary in an advisory opinion to meet the
requirement. We are including this requirement to safeguard against
programs that incorporate sham standards that are designed to reward
physicians for referrals rather than the achievement of legitimate
benchmarks for quality maintenance or improvement or cost savings. We
believe that appropriate performance measures should derive from broad,
objective, widely-recognized criteria and not merely result from the
subjective views of the parties to the arrangement. We also are
proposing a specific requirement that the program ensure that the
quality of patient care services is not impacted adversely as a result
of the program.
We are proposing that an incentive payment or shared savings
program must be reviewed prior to implementation of the program and at
least annually thereafter to ascertain the program's impact on the
quality of patient care services provided by the hospital. We believe
that such vigilance is critical to ensure that quality of hospital
patient care is not impacted adversely. Under this proposal, the
reviews must be conducted by a person or organization with relevant
clinical expertise, and they must be independent medical reviews. By
``independent medical reviews,'' we mean reviews by an individual or
organization that is not: (1) Affiliated with the hospital operating
the program under review; (2) not affiliated with any

[[Page 38554]]

participating physician or with any physician organization with which a
participating physician is affiliated; and (3) at the time of the
review, not participating in any incentive payment or shared savings
program operated by the hospital. We are seeking comments specifically
regarding the appropriate frequency for review of incentive payment and
shared savings programs to ensure that quality of hospital patient care
is not impacted adversely and to protect against program or patient
abuse. We are also seeking comments addressing the circumstances, if
any, under which the periodic review could be conducted by an
individual or organization that does not fall within the definition of
``independent medical review'' outlined above.
Any reviews would need to be objective, accurate and complete and
result in written findings. We are proposing that the initial and
periodic reviews should be contemporaneously documented, and that all
documentation related to the incentive payment or shared savings
program and the reviews thereof be made available to the Secretary upon
request. We are further proposing that incentive payment and shared
savings programs must provide for immediate and appropriate corrective
action in the event a periodic review reveals an adverse impact on
quality. Corrective actions could include termination of the program,
removal of the relevant measure from the program, removal of the
relevant measure from the calculation of physician payments, or
termination of the physician from the program. We are considering
whether corrective actions could also include modification of a
performance measure and, if so, under what conditions. However, we
would prohibit the discontinuation of a performance measure for the
purpose of increasing the payment to the participating physicians in
the next period. Also, although we do not want to encourage practice
patterns that result in reduced or poor quality patient care, we do not
believe it is appropriate to permit the discontinuation of a
performance measure because the participating physicians are unable to
earn a shared savings payment related to that measure. We are
interested in comments addressing the appropriate corrective actions
and how best to incorporate a corrective action requirement into the
regulatory text of the exception.
We are proposing to require that participation in the program be
limited to those physicians who are members of the hospital's medical
staff at the commencement of the program. We believe that this would
protect against abusive programs that serve as inducements to attract
physicians from competing hospitals. However, we are soliciting
comments on whether and, if so, how a physician who joins the medical
staff at the hospital as part of the normal cycle of workforce demands
for care delivery could be permitted to participate in an incentive
payment or shared savings program (either individually or as part of a
qualified physician organization, as described below) that began before
he or she joined the medical staff of the hospital. We are also
proposing that physicians participating in an incentive payment or
shared savings program, or in a particular performance measure or
measures within an incentive payment or shared savings program, must do
so in ``pools'' of five or more participating physicians among whom the
aggregate incentive payment available for, or cost savings that result
from, the efforts of the physicians in the ``pool'' with respect to a
particular measure would be shared on a per capita basis. A qualified
physician organization could itself constitute an eligible pool,
provided that it is comprised of at least five participating
physicians. Otherwise, participating physicians in the qualified
physician organization would need to be grouped by the hospital into
pools of at least five participating physicians.
The distribution of incentive payment and shared savings program
payments must be supported by written documentation. As an additional
safeguard, we are proposing to require that physician ``pools'' be
formed at the commencement of the program. We are interested in
comments about our proposal to require hospitals to create pools for
purposes of physician participation in incentive payment and shared
savings programs and the minimum number of physicians needed to
comprise a ``pool'' that adequately reduces the risk of program or
patient abuse. Specifically, we are interested in comments on whether
and, if so, how we should address the ``pooling'' of funds for payment
purposes in an incentive payment or shared savings program targeted at
a specific medical specialty or hospital department in which the
physicians on the medical staff in that specialty or department or in
the physician organization total fewer than five physicians.
We are proposing also that a hospital may not determine eligibility
for physician participation in a program based on the volume or value
of referrals or other business generated between the parties. We are
also considering, and soliciting comments about, conditioning
protection under the exception on the hospital offering the opportunity
to participate in the incentive payment or shared savings to all
physicians on the medical staff who belong to the department or
practice in the specialty relevant to the program (for example, the
opportunity to participate in a shared savings program for cardiac
surgery would have to be offered to all cardiac surgeons on the
hospital's medical staff).
To qualify for protection under the proposed exception, an
incentive payment or shared savings program may not limit the
discretion of physicians to make medically appropriate decisions for
their patients, including, but not limited to, decisions about tests,
treatments, procedures, services, supplies or discharge. Although
incentive payment and shared savings programs may condition program
payments on particular physician choices, to be protected under the
proposed exception, such programs could not limit other choices for
which physicians would not receive program payments. In particular, a
hospital must not limit the availability of any specific item, supply
or device, including new technology that is linked through objective
evidence to improved outcomes and is clinically appropriate for a
particular patient, and must permit individual physicians access to the
same selection of items, supplies and devices that was available to
them prior to the physician's participation in the program. We are not
requiring physician access to items, supplies and devices that were not
available prior to the commencement of the incentive payment or shared
savings program. Rather, a hospital must make available to a
participating physician at least the same selection available to the
physician prior to his or her participation in the incentive payment or
shared savings program, which already may have been restricted by
hospital policy, but without payment to physicians based on such
situations.
We recognize that some shared savings programs are designed to
channel the physician's selection of physician preference items toward
a limited number of choices; however, we believe that, to safeguard the
program and its beneficiaries against abuse, physicians participating
in a shared savings program must have access to items or supplies that
they deem medically necessary for an individual patient's care. This
would include new technology, provided that it meets the same Federal
regulatory standards (for example, approval by the Food and Drug
Administration (FDA) and

[[Page 38555]]

Medicare or Medicaid coverage decisions) as the items or supplies
included in the program. By including this requirement, we intend that
programs would ensure access to clinically appropriate new technology
while, at the same time, protect patient safety. For example, if a
program includes three alternative, FDA-approved devices for a
particular procedure, the hospital sponsoring the program could limit
access to new technology that is experimental (that is, not FDA-
approved), but could not limit access to FDA-approved alternative
devices/technology. We note also that items, supplies and devices in a
product standardization program (that is a cost savings action under a
shared savings program) should not be selected on the basis of a
participating physician's ownership or investment interest in, or
compensation arrangement with, the manufacturer or distributor of the
item, supply or device, or his or her interest in a group purchasing
organization (GPO) that arranges for the purchase of the item, supply
or device. In this regard, we would strongly recommend, and may
require, that such physicians be barred from participating in any
manner in the design or implementation of an incentive payment or
shared savings program that involves items, supplies or devices in
which the physician has a financial interest. We are proposing that a
physician (or qualified physician organization) could not receive a
payment under an incentive payment or shared savings program for the
use of an item, supply or device if he or she (or the qualified
physician organization) has an ownership or investment interest in, or
a compensation arrangement with, a manufacturer or distributor of the
item, supply or device, or GPO that arranges for the purchase of the
item, supply or device.
iv. Requirements Related to Payments Made Under an Incentive
Payment or Shared Savings Program
To reduce the risk that incentive or shared savings program
payments might be used to encourage or reward referrals to the hospital
or provide incentives to engage in other abusive practices, such as
stinting or cherry picking, we are proposing that payments made to
physicians participating in the incentive payment or shared savings
program be distributed on a per capita basis. We are interested in
public comments that may outline alternate approaches to the per capita
payment model for the distribution of incentive payments or shared
savings payments, such as paying a physician more or less according to
whether he or she contributed more or less to the achievement of the
performance measures included in the incentive payment or shared
savings program.
We believe that safeguards are necessary to ensure that incentive
payment and shared savings programs do not result in altered referral
patterns and to reduce the risk that programs will become vehicles used
to reward referring physicians. To address this, we are proposing that
remuneration paid to a participating physician or a qualified physician
organization may not include any amount that takes into account the
provision a greater volume of Federal health care patient procedures or
services than the volume provided by the participating physician or
qualified physician organization during the period of the same length
immediately preceding the commencement of the program as that covered
by the payment. We are interested in comments regarding whether and, if
so, how to account for volume changes due to market forces and
physician practice growth.
We are also proposing that the amount of the remuneration paid to
the physician or qualified physician organization be limited in
duration and amount. With respect to duration, we are proposing that
protected programs be no shorter than 1 year and no longer than 3
years. With respect to a limit on the amount of payments, we are
proposing two types of limits, which we might adopt separately or
together.
First, we are proposing a limit on payments expressed as a set
percentage of the savings available to the hospital as a result of the
changes in clinical or administrative practices of the participating
physicians. Although not incorporated into the proposed regulation
text, we are specifically considering a flat 50 percent limit on the
sharing of cost savings (regardless of the length of the program), and
are considering whether to require ``re-basing,'' depending on the
length of the program. We are interested in comments regarding whether
this ``cap'' on payments is appropriate, too high, or too low. We are
interested also in comments regarding whether and, if so, how we should
limit payments under a multi-year incentive payment or shared savings
program to an amount that would be actuarially equivalent to the amount
of the payments made under a 1-year program. We are considering also
``scaled'' limits for programs longer than 1 year. Under the scaled
limits approach, we would not require re-basing (as further described
below), but would require that payments to physicians decrease over the
course of the performance measure. For purposes of calculating the
actual payments to the physician, we are proposing that cost savings be
measured by comparing the hospital's actual acquisition costs for the
items and supplies or costs of delivering the specified services that
are subject to the incentive payment or shared savings program to the
hospital's baseline costs for the same items, supplies or services
during the 1-year period immediately preceding the commencement of the
program.
Second, we are proposing a limit on payments to address the risk
that physicians will continue to receive financial rewards for already
implemented changes in clinical or administrative practices. This
second limit would require that payments made under an incentive
payment or shared savings program must take into account any payments
that have already been made for performance measures already achieved
(``re-basing''). We are considering a re-basing approach under which,
at the end of year one, the hospital would re-base performance measures
such that available payment would be based on the difference between
the hospital's then-current level for a particular performance measure
and the goal established for that performance measure. This approach
would apply similarly to incentive payments made exclusively for
improvements in patient care quality that are unrelated to the
achievement of cost savings. We are soliciting comments specifically as
to whether requiring the re-basing of ``quality-only'' payments is a
necessary safeguard against program or patient abuse, or whether a
different approach for limiting such payments could be implemented that
would safeguard against risk to the Medicare program or its
beneficiaries. We are also soliciting comments on whether we should
require re-basing at all and, if so, under what parameters and whether
parties should be free to choose the frequency of the payment and re-
basing periods under the incentive payment or shared savings program.
In no event would a hospital be permitted to increase the incentive
payment or shared savings payment potentially available to physicians
as a result of the re-basing.
By way of illustration, assume that one objective cost saving
measure in the program is to decrease from 80 percent utilization of a
specified item during a particular surgical procedure (the hospital's
historical utilization rate for the item) to 20 percent utilization
(the national average for utilization of the item). Under an approach
that requires re-basing, if, after completion of the first

[[Page 38556]]

year of the program, the hospital's utilization of the specified item
decreased to 60 percent of surgical procedures, for year 2 of the
arrangement, the participating physicians could receive payment only
for any reduction below 60 percent utilization of the specified item,
that is, the new ``historical'' baseline utilization rate would be 60
percent and all cost savings and waste reduction for the upcoming year
would be measured against the new baseline utilization rate. If, after
completion of year one, the hospital's utilization of the specified
item increased to 90 percent, the hospital would be prohibited from re-
basing the utilization rate higher than the initial 80 percent
utilization rate determined at the commencement of the incentive
payment or shared savings program. The participating physicians would,
in the aggregate, be eligible to receive as a shared savings payment
the same percentage of cost savings throughout the term of the program.
Using the same figures, under an approach that requires scaling of
the payments over the course of the arrangement, the physicians
participating in the program would be eligible for a decreasing
percentage of cost savings over the course of the arrangement. Assume,
for example, we adopted an approach that permitted shared savings
payments of up to 50 percent for year one, up to 35 percent for year
two, and up to 20 percent for year three. If a particular cost savings
measure generated savings of $100,000 the first year, $150,000 the
second year, and $200,000 the third year (all relative to the
historical baseline utilization rate established at commencement of the
program), the participating physicians would be eligible for a total of
50 percent of $100,000 (or $50,000) the first year, a total of 35
percent of $150,000 (or $52,500) the second year, and 20 percent of
$200,000 (or $40,000) the third year. We are also considering
protecting programs in which dollar limits are expressed as fixed
dollar amounts rather than percentages.
Each of the approaches described above could be adopted to the
exclusion of or in concert with each other. We are interested in
comments regarding whether the exception should include one or more of
the payment limit alternatives, as well as comments regarding other
appropriate limitations for the amount and nature of the payments made
under an incentive payment or shared savings program. Regardless of
which approach we adopt, we are proposing to require that payments
based on cost savings be calculated on the hospital's actual
acquisition costs for the items at issue, as well as the costs involved
in providing the specified services and that they be calculated on the
basis of all patients, regardless of insurance coverage (subject to the
cap on payment for Federal health care program beneficiaries described
above). We are seeking comments regarding whether these conditions are
appropriate and whether we should permit modification under other or
different circumstances.
We do not intend to protect arrangements in which physicians
receive payments for actions taken that result in a reduction below a
predetermined target. For example, in the first hypothetical (under the
required re-basing approach), no payments could be made for reductions
below 20 percent utilization. We intend to require that the target
thresholds use objective historical and clinical measures that are
reasonably related to the practices and the patient population at the
hospital. We are mindful that some performance measures may not be
amendable to such utilization ``floors'' or ``ceilings.'' We are
considering including comparable safeguards for measures that may not
be readily amenable to percentage ``floors'' and ``ceilings'', such as
measures related to product substitution and product standardization.
For example, the fact that the substitution of one product for another
would not adversely impact quality might need to be supported by
substantial objective medical evidence. We are soliciting comments on
what kinds of quality controls are appropriate for performance measures
that are not amendable to utilization ``floors'' and ``ceilings.'' We
are considering whether and, if so, how this concern can be addressed
by requiring that the parties obtain a fully independent clinical
review by a qualified party of the program measures prior to
implementing the program. We are soliciting comments on appropriate
quality safeguards in such situations.
We recognize that parties might want to structure arrangements so
that payments are made by the hospital to a physician organization that
would not meet our proposed definition of a qualified physician
organization. This might be the case if incentive payment or shared
savings payments are made by a hospital to a multi-specialty physician
practice composed of participating and non-participating physicians
(for example, a group composed of cardiac surgeons and cardiologists,
in the case of a cardiac surgery shared savings program). We are
considering whether to extend the proposed exception to cover payments
from a hospital to such physician organizations and, if so, under what
conditions we could do so that would pose no risk of program or patient
abuse. We are concerned that payments made to such physician
organizations may become conduits to reward non-participating
physicians for referrals. On the other hand, we recognize that programs
structured so that hospitals make payments to physician organizations
rather than to individual physicians may be administratively easier for
hospitals to operate. (We note that, in some cases, payments from
hospitals to physician organizations that are not qualified physician
organizations might fit in the existing exception for indirect
compensation arrangements, depending on the circumstances.)
We are considering several options to address this issue. First, we
are considering an approach that would allow hospitals to make
incentive payment or shared savings payments to individual physicians
indirectly by passing the payment through the physician's physician
organization. Under this approach, the total amount of the payment
earned by the physician under the incentive payment or shared savings
program would need to be passed through to the physician, except
amounts required for income tax and other regular withholding. Under
this approach, the physician organization would simply operate as a
pass-through entity. The physician organization would be prohibited
from retaining any portion of the incentive payment or shared savings
payment (except, potentially, for required withholdings to be paid on
behalf of the participating physician). We are soliciting comments
about this approach and what types of payments the physician
organization could withhold (for example, whether the physician
organization should be permitted to withhold required contributions to
a qualified retirement plan).
We are concerned about the difficulty hospitals might encounter in
ensuring that the physician organization accurately and fully passes
through the full payment to the participating physician, and we are
concerned about the risk of fraud and abuse if the payment mechanism
were manipulated so that the physician organization retains a portion
of the payments for its own benefit. Such gaming of the payment
structure could result in improper remuneration from the hospital to
the physician organization for referrals (and would not fit in the
proposed or any other exception to section 1877 of the Act). We are
interested in comments about how to

[[Page 38557]]

craft safeguards for the exception to prevent this type of potential
abuse. In this regard, we are considering requiring that the physician
organization document all amounts received and distributed to
participating physicians, as well as any income tax or regular
withholding payments made on behalf of the participating physician. In
addition, we would require that the physician organization's
obligations with respect to ``pass through'' payments be included in
the written agreement between the parties and that the physician
organization be a signatory (in addition to the hospital and the
participating physician) to the agreement. We are soliciting comment on
these and any other safeguards necessary to ensure that payments are
appropriately passed through to participating physicians.
Second, we are considering whether, without posing a risk of
program or patient abuse, we could expand the definition of a
``qualified physician organization'' to which protected payments can be
made to include physician organizations comprised of some physicians
who are not participating physicians. This approach, if implemented,
would have the effect of protecting payments made directly to such
physician organizations (rather than directly to individual physicians
or ``passed through'' the physician organization), provided that all
other requirements of the exception were satisfied. We would adopt this
approach only if we could do so in a manner that would not result in
payments to physicians whose only contributions to the hospital's
incentive payment or shared savings program are potential referrals. If
we expand the definition of a qualified physician organization, we
envision a requirement that would permit only participating physicians
to share in the incentive or shared savings payments. Our concerns
described above about the difficulty hospitals would experience in
monitoring the payments and the risk of manipulation to benefit
referral source physicians or the physician organization as a whole are
heightened with this approach. If we were to adopt this approach, we
would include the proposed safeguards described above in connection
with the pass-through payments proposal. In any event, we do not intend
to protect arrangements that reward passive physicians who receive
payments but do not participate in the achievement of the patient care
quality or cost savings measure goals.
One benefit of protecting programs that are structured so that
payments are made from the hospital to a physician organization would
be to avoid potential confusion that might be caused by the physician
``stand in the shoes'' provisions in Sec. 411.354(c)(2) (under which a
physician is considered to have the same compensation arrangements with
the same parties and on the same terms as his or her physician
organization with respect to whether remuneration is permissible under
an exception). We are interested in comments on the relationship of the
proposed exception to the ``stand in the shoes'' provisions. We are
also interested in comments regarding whether the new exception, if
adopted, should be included in Sec. 411.357, or whether it would be
preferable to include it in Sec. 411.355 or elsewhere in the physician
self-referral regulatory scheme.
v. Requirements Related to the Arrangement Between a Hospital and the
Participating Physician or Qualified Physician Organization
We are proposing to include in the exception certain criteria that
are common to most of the exceptions to the physician self-referral
prohibition for compensation arrangements, namely, that the arrangement
be set out in writing, signed by the parties, have a minimum term of 1
year and a maximum term of 3 years, and specify compensation that is
set in advance, does not vary during the term of the arrangement, and
is not determined in a manner that takes into account the volume or
value of referrals or other business generated between the parties. We
are proposing to require that the written agreement between the
hospital offering the program and the physicians participating in the
program document the performance measures against which the performance
of the participating physicians will be measured. In addition, we are
proposing that each performance measure (including, for example,
specific cost savings measures) and the payments resulting from the
achievement of established targets must be delineated separately and
clearly. We believe transparency is crucial to ensure that the
incentive payment or shared savings program does not pose a risk of
program or patient abuse. However, we are interested in comments
regarding whether and, if so, how total (or ``global'') savings for a
particular department or service line can be included in the program
and sufficiently monitored, accounted for, and distributed so as not to
pose a risk of program or patient abuse and to permit transparency of
the program.
As in all exceptions issued using our authority under section
1877(b)(4) of the Act, we are proposing to include a requirement that
the arrangement does not violate the anti-kickback statute or any
Federal or State law or regulation governing billing or claims
submission. This is necessary to ensure that the arrangement does not
pose a risk of program or patient abuse, the standard for all
exceptions issued using this authority.
In order to promote transparency and foster accountability, we are
proposing to require that the arrangement between the parties require
written disclosure to patients affected by the program regarding the
nature of the program and the physician's or qualified physician
organization's participation in the program prior to admission to the
hospital, or, if pre-admission disclosure is not feasible, prior to the
procedure or other treatment to which the program is applicable.
Affected patients include those patients whose patient care at the
hospital relates to any of the measures that are part of the program.
For example, a patient being admitted to a hospital for cardiac surgery
should receive a disclosure if the hospital operates an incentive
payment or shared savings program related to cardiac surgery and his or
her physician participates in that program. We are considering whether
patients should be permitted to opt out of a measure that might
otherwise apply to their care and are seeking comments regarding
whether and how this would work in practice.
Finally, we are proposing the following additional safeguards. We
are interested in comments regarding how to incorporate these
requirements into the regulation text. First, to guard against cherry
picking or other abuse, the case severity, and the ages and payers of
the patient population treated by the participating physician under the
arrangement must be monitored using generally-accepted standards. The
monitoring could be conducted by an independent outside party or by a
committee composed of representatives of the hospital and participating
physicians. If there are significant changes from the hospital's
historical measures, the physician at issue must be terminated from
participation in the arrangement. The monitor should also assess these
characteristics in the aggregate across all participating physicians;
if there are significant changes, the program should be terminated.
Second, physicians are only eligible for payments that are related to
their own efforts, combined with the efforts of the other physicians in
their

[[Page 38558]]

pool, at meeting cost savings measures or achieving patient care
quality measures; that is, a physician is eligible to receive only a
per capita share of that portion of an available incentive payment or
shared savings payment attributable to the efforts of his or her pool.
Third, all measures should be uniformly applied to all patients
including Medicare beneficiaries (that is, the measures should not be
applied disproportionately to Medicare beneficiaries). Procedures or
treatments subject to the incentive payment or shared savings program
should not be performed disproportionally on Federal health care
program beneficiaries. We are also considering and interested in
comments regarding a requirement that the hospital offering an
incentive payment or shared savings program audit the calculation of
cost savings and payments made under the program. To this end, we are
interested in comments regarding the formality of such an audit; that
is, should we permit the hospital to complete the audit internally, or
should we require an independent financial audit of the books and
records related to the incentive payment or shared savings program.
We would also require that incentive payment and shared savings
programs must not involve the counseling or promotion of a business
arrangement or other activity that violates any Federal or State law.
In addition, we are proposing that the full range of documentation
developed and maintained in connection with compliance with the new
exception be retained and made available to the Secretary upon request.

O. Physician Quality Reporting Initiative (PQRI)

[If you choose to comment on issues in this section, please include
the caption ``PQRI'' at the beginning of your comments.]
1. Program Background and Statutory Authority
a. Division B of the Tax Relief and Health Care Act of 2006--Medicare
Improvements and Extension Act of 2006 (MIEA-TRHCA): Requirements for
the PQRI Program
Section 101(b) of the MIEA-TRHCA amended section 1848 of the Act by
adding subsection (k). Section 1848(k)(1) of the Act requires the
Secretary to implement a system for the reporting by eligible
professionals of data on quality measures as described in section
1848(k)(2) of the Act. Section 101(b) authorizes the Secretary to
specify the form and manner for data submission by program instruction
or otherwise which may include submission of such data on Part B
claims. Section 1848(k)(3)(B) of the Act specifies that for the purpose
of the quality reporting system, eligible professionals include
physicians, other practitioners as described in section 1842(b)(18)(C)
of the Act, physical and occupational therapists, and qualified speech-
language pathologists. Section 101(c) of the MIEA-TRHCA, as amended by
the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-
173) (MMSEA), authorizes ``Transitional Bonus Incentive Payments for
Quality Reporting'' in 2007 and 2008, for satisfactory reporting of
quality data, as defined by section 101(c)(2) of the MIEA-TRHCA. We
have named this quality reporting system, the ``Physician Quality
Reporting Initiative (PQRI)'' for ease of reference.
b. PQRI for 2007
For 2007, the Secretary is authorized to pay an incentive payment
equal to 1.5 percent of the estimated total allowed charges for all
covered professional services furnished during the reporting period.
The reporting period for the PQRI for 2007 is defined by MIEA-TRHCA as
the period beginning on July 1, 2007, and ending on December 31, 2007.
For 2007, PQRI data submission was limited to claims-based submission
based upon specifications and instructions posted on the CMS Web site
for 74 PQRI measures.
Preliminary PQRI participation information through November 2007
indicates that approximately 100,000 professionals, or about 16
percent, of eligible professionals who could have reported quality data
on one or more of the 74 2007 PQRI quality measures submitted PQRI
quality data at least once during the 2007 reporting period. This
number includes professionals from all 50 States, the District of
Columbia, Puerto Rico, and the Virgin Islands. In our regions with the
highest participation, reporting rates are approaching 20 percent, with
some States achieving reporting rates of around 30 percent. Nationally,
there were above average rates of participation by eligible
professionals furnishing services relevant to the following three types
of care: anesthesia services; eye care; and emergency care.
Participation rates have trended upwards during the 2007 reporting
period. Based on expanded measures, new reporting options and other
factors, we anticipate that trend will continue for 2008. Further
details of the PQRI for 2007 are provided on the PQRI section of the
CMS Web site at: http://www.cms.hhs.gov/PQRI/33_2007_General_
Info.asp#TopOfPage. Incentive payments and access to confidential
reports on measures reporting rates and measures performance rates for
2007 are scheduled to begin in mid-July 2008.
c. PQRI for 2008
Section 1848(k)(2)(B)(ii) of the Act, as added by the MIEA-TRHCA,
required the Secretary to publish a proposed set of quality measures
for 2008 by August 15, 2007 and provide for a period of public comment.
Section 1848(k)(2)(B)(i) of the Act, as added by the MIEA-TRHCA
provides that for purposes of reporting data on quality measures for
covered professional services furnished in 2008, such measures shall be
measures that have been endorsed or adopted by a consensus
organization, such as the National Quality Forum (NQF) or the AQA
Alliance (AQA), that include measures that have been submitted by a
physician specialty, and that the Secretary identifies as having used a
consensus-based process for developing such measures. In addition, the
measures shall include structural measures, such as the use of
electronic health records (EHRs) and electronic prescribing technology.
In the CY 2008 PFS proposed rule (72 FR 38196 through 38199), we
provided a detailed discussion of the MIEA-TRHCA requirements and the
PQRI. We explained our interpretation of applicable statutory and
government-wide policies relevant to defining a consensus-based measure
development process, as well as our policy for determining which
measures meet requirements for inclusion in PQRI for 2008.
To meet the MIEA-TRHCA requirement to publish proposed 2008 PQRI
measures by August 15, 2007, we published 148 proposed 2008 PQRI
quality measures in the CY 2008 PFS proposed rule (72 FR 38199 through
38202). We invited comments on the proposed measures and on our plans
to explore mechanisms for submission of electronic clinical performance
measurement information and summary measure results information
extracted from EHRs and clinical data registries.
In the CY 2008 PFS final rule with comment period (72 FR 66336
through 66359), we responded to public comments received on the PQRI
section of the CY 2008 PFS proposed rule (72 FR 38196 through 38204)
and we finalized 119 measures that we determined under the MIEA-TRHCA
and other applicable statutory requirements to be appropriate for

[[Page 38559]]

eligible professionals to use to submit such data under the 2008 PQRI.
In addition, we described our plans to test quality measures data
submission mechanisms, other than claims, based on clinical data
registries and EHRs in 2008.
The 2008 measures specifications are available on the PQRI section
of the CMS Web site at http://www.cms.hhs.gov/PQRI/15_
MeasuresCodes.asp#TopOfPage. These detailed specifications include
instructions for reporting and identify the circumstances in which each
measure is applicable.
d. Extension of and Enhancements to the PQRI Program Authorized by the
MMSEA
The MMSEA, which was enacted on December 29, 2007, authorizes us to
make incentive payments for satisfactorily reporting quality measures
data on covered professional services furnished in 2008 equal to 1.5
percent of the estimated total allowed charges for all covered
professional services furnished during the reporting period. For 2008,
the reporting period is defined to mean the entire calendar year. In
addition, while MIEA-TRHCA established a cap on incentive payments for
the 2007 PQRI, based on an average per measure payment amount, there is
no cap on incentive payments under MMSEA for the 2008 PQRI.
MMSEA also introduced enhancements that result in more
opportunities for eligible professionals to participate in the PQRI for
2008. For 2008 and 2009, section 101(c)(5)(F) of the MIEA-TRHCA, as
added by the MMSEA, requires the Secretary to establish alternative
reporting periods and alternative criteria for satisfactorily
submitting data on quality measures through medical registries and for
reporting groups of measures. For 2008, these alternative reporting
periods and reporting criteria were posted on April 16, 2008 in ``2008
PQRI: Establishment of Alternative Reporting Periods and Reporting
Criteria'' document found on the PQRI section of the CMS Web site at
http://www.cms.hhs.gov/PQRI/Downloads/2008PQRIalterrptperiods.pdf. They
supplement the single reporting period and the reporting criteria
previously set forth in the CY 2008 PFS final rule with comment period
(72 FR 66357 through 66359) which were limited to claims-based
submission of individual 2008 PQRI measures.
For 2008, each eligible professional who satisfactorily reports
under any of the options set forth in the ``2008 PQRI: Establishment of
Alternative Reporting Periods and Reporting Criteria'' document or for
the reporting period and under the reporting criteria set forth in the
CY 2008 PFS final rule with comment period will be eligible for a 1.5
percent incentive payment for services furnished during the applicable
reporting period. An eligible professional may potentially qualify as
satisfactorily reporting under more than one of the reporting criteria
and for more than one reporting period. However, this will result in
only one incentive payment for 2008, which will be equivalent to 1.5
percent of allowed charges for PFS covered professional services
furnished during the longest reporting period for which the eligible
professional satisfactorily reports.
e. PQRI for 2009
Section 1848(k)(2)(B)(ii) of the Act, as amended by the MMSEA,
requires the Secretary to publish a proposed set of quality measures
that would be appropriate for eligible professionals to use to submit
data in 2009 in the Federal Register by August 15, 2008. Such measures
shall be measures that have been endorsed or adopted by a consensus
organization, such as the NQF or the AQA, that include measures that
have been submitted by a physician specialty, and that the Secretary
identifies as having used a consensus-based process for developing such
measures. In addition, the measures shall include structural measures,
such as the use of EHRs and electronic prescribing technology.
The measures proposed for the 2009 PQRI are outlined in section
II.O.4. of this proposed rule, ``Proposed 2009 PQRI Quality Measures.''
Section 1848(k)(2)(B)(iii) of the Act, as amended by the MMSEA,
requires the Secretary to publish the final set of measures in the
Federal Register no later than November 15, 2008. The final set of 2009
PQRI quality measures will be identified in the CY 2009 PFS final rule
with comment period.
The MIEA-TRHCA does not statutorily define a specific reporting
period for 2009. However, as for 2008, the Secretary is required to
establish alternative reporting periods and alternative reporting
criteria for reporting measures groups and for registry-based reporting
for 2009. For the 2009 PQRI, we propose to define the reporting period
for PQRI to mean the entire 2009 calendar year but also propose
additional reporting options for satisfactorily reporting quality
measures data based on alternative reporting criteria and reporting
periods authorized by MMSEA for measures groups and registry-based
reporting, which are described in section II.O.2. of this proposed
rule, ``Satisfactory Reporting Criteria and Reporting Periods--
Reporting Options in the 2009 PQRI.''
Unlike 2007 and 2008, MIEA-TRHCA does not authorize an incentive
payment for PQRI for 2009. Currently, no legislation exists that
authorizes us to make incentive payments for satisfactorily reporting
data on quality measures for services furnished in 2009 or beyond.
Given that currently there is no specific authorization for an
incentive payment for the 2009 PQRI, meeting the satisfactory reporting
criteria of this proposed rule will not result in an incentive payment
for satisfactorily reporting data for covered professional services
furnished in 2009.
2. Satisfactory Reporting Criteria and Reporting Periods--Reporting
Options in the 2009 PQRI
For the 2009 PQRI, we propose to define the reporting period to
mean the entire year (January 1, 2009--December 31, 2009.) We also
propose to establish two alternative reporting periods: (1) January 1,
2009 through December 31, 2009; and (2) July 1, 2009 through December
31, 2009 for reporting measures groups and for registry-based
reporting. As proposed, this results in several reporting options
available to eligible professionals that vary by the reporting
mechanism selected. We believe that the availability of several
reporting options will increase opportunities for eligible
professionals to satisfactorily report quality data for the PQRI and
will augment the amount of information submitted about the quality of
care provided by eligible professionals to Medicare beneficiaries. The
reporting mechanisms and reporting options proposed for the 2009 PQRI
are described in the following section.
a. Claims-Based Submission of Data for Reporting Individual Measures
Under Section 101(c)(2) of the MIEA-TRHCA the criteria for
satisfactorily submitting data on quality measures require the
reporting of at least three applicable measures in at least 80 percent
of the cases in which the measure is reportable. If fewer than three
measures are applicable to the services of the professional, only data
on applicable measures are required to be submitted.
For the 2009 PQRI, we propose to retain these criteria for claims-
based reporting of individual measures for the January 1, 2009--
December 31, 2009 reporting period. As summarized in Table 7, an
eligible professional could

[[Page 38560]]

meet the criteria for satisfactorily reporting quality data by
reporting at least three applicable measures (or one to two measures if
fewer than three measures apply) for at least 80 percent of the cases
in which each measure is reportable, during January 1, 2009 through
December 31, 2009.

Table 7:--Proposed 2009 PQRI Claims-Based Reporting Options for
Individual Measures
------------------------------------------------------------------------
Reporting mechanism Reporting criteria Reporting period
------------------------------------------------------------------------
Claims-based reporting.......... At least 3 PQRI January 1, 2009-
measures, or 1-2 December 31, 2009
measures if fewer
than 3 apply to
the eligible
professional, for
80% of applicable
Medicare Part B
FFS patients of
each eligible
professional.
------------------------------------------------------------------------

b. Satisfactory Reporting of Data on Quality Measures and Reporting
Periods for Measures Groups, Through Claims-Based Reporting and
Registry-Based Reporting
Section 101(c)(5)(F) of the MIEA-TRHCA, as added by the MMSEA,
requires that for the 2008 and 2009 PQRI the Secretary establish
alternative reporting periods and alternative criteria for
satisfactorily reporting groups of measures. In establishing these
alternatives, CMS has labeled these groups of measures ``measures
groups.'' We define ``measures groups'' as a subset of PQRI measures
that have a particular clinical condition or focus in common. The
denominator definition and coding of the measures group identifies the
condition or focus that is shared across the measures within a
particular measures group.
We believe that reporting measures groups is an important step to
advance the PQRI program toward a more holistic and comprehensive
assessment of patient care. By addressing several aspects of care for a
particular clinical condition or clinical focus, measures groups
results can help assure that patients are receiving a range of care
appropriate for a given clinical condition or clinical focus. Because
of this, we believe that groups of measures may often provide more
meaningful information about the care being furnished to Medicare
beneficiaries than can individual measures in isolation. Measures
groups also allow physicians and other eligible professionals to more
broadly demonstrate their clinical performance for particular services
and thereby provide a better basis for comparison among professionals.
Measures groups can also decrease complexity of reporting by
identifying related measures applicable to the same services furnished
to the same beneficiaries by the same professional and highlighting a
common set of denominator codes across all the measures of a group that
help identify those patients.
As described in the ``2008 PQRI: Establishment of Alternative
Reporting Periods and Reporting Criteria'' document (http://
www.cms.hhs.gov/PQRI/Downloads/2008PQRIalterrptperiods.pdf ), there are
four measures groups for the 2008 PQRI: (1) Diabetes Mellitus, (2) End-
Stage Renal Disease (ESRD), (3) Chronic Kidney Disease (CKD), and (4)
Preventive Care. For the 2009 PQRI, we propose to expand the available
measures groups to a total of nine, as well as propose a variety of
reporting options for reporting on measures groups. In addition to
carrying forward three of the four 2008 measures groups, we propose to
add six new measures groups for the 2009 PQRI. The ESRD Measures Group
for the 2008 PQRI is not being proposed for 2009 because one of the
measures in the group is no longer NQF-endorsed and there are no other
ESRD measures proposed for the 2009 PQRI that could be added to this
group. We propose to retain the remaining three measures in the 2008
ESRD measures group to be available to be reported individually in the
2009 PQRI.
Similar to the 2008 measures groups, we propose that the measures
that make up five of these new measures groups could be reported either
individually or as part of a measures group. These five new measures
groups address the following:
(1) Coronary artery bypass graft (CABG) surgery;
(2) Coronary artery disease (CAD);
(3) Rheumatoid arthritis;
(4) Human immunodeficiency virus (HIV)/acquired immune deficiency
syndrome (AIDS); and
(5) Perioperative care.
We also propose one new measures group for the 2009 PQRI in which
the measures would be reportable only as a measures group, not as
individual measures. This measures group addresses quality of services
furnished to treat back pain. The measures proposed for inclusion in
each of the proposed 2009 measures groups are listed in section II.O.4.
of this proposed rule, ``Proposed 2009 PQRI Quality Measures.''
We welcome comments on these proposed new measures groups,
including suggestions for other measures groups based on individual
measures included in the proposed 2009 PQRI measure set. For the 2009
PQRI, measures groups must contain at least 4 measures. All measures in
each measures group suggested by commenters must be included in the
proposed measures cited in section II.O.4. of this proposed rule,
``Proposed 2009 PQRI Quality Measures.'' The individual measures
included in the final measures groups for the 2009 PQRI will be limited
to those which are included in the final set of measures for PQRI 2009,
as identified in the CY 2009 PFS final rule with comment period.
As in the 2008 PQRI, we are proposing for the 2009 PQRI that
measures groups be reported through claims-based or registry-based
submission for the 2009 PQRI. The form and manner of quality data
submission for 2009 measures groups will be posted on the PQRI section
of the CMS Web site at http://www.cms.hhs.gov/pqri no later than
December 31, 2008, and will detail specifications and specific
instructions for reporting measures groups via claims and registry-
based reporting. Please note that detailed measure specifications and
instructions for submitting data on those 2009 measures groups that
were also included as 2008 PQRI measures groups may be updated or
modified prior to 2009. Therefore, the 2009 PQRI measure specifications
for any given measures group may be different from specifications and
submission instructions for the same measures group used for 2008.
Additionally, the specifications for measures groups will not
necessarily contain all the specification elements of each individual
measure making up the measures group. This is based on the need for a
common set of denominator specifications for all the measures

[[Page 38561]]

making up a measures group in order to define the applicability of the
measures group. Therefore, the specifications and instructions for
measures groups will be provided separately from the specifications and
instructions for the individual 2009 PQRI measures.
For the 2009 PQRI, we are proposing three options for
satisfactorily reporting measures groups using claims-based reporting
and three options for satisfactorily reporting measures groups using
registry-based submission. The proposed options for satisfactorily
reporting on measures groups are described in Table 8. The details of
the requirements for registries are contained in section II.O.2.c.,
``Registry-Based Submission for Reporting Individual Measures.''

Table 8.--Proposed 2009 PQRI Reporting Options for Measures Groups
------------------------------------------------------------------------
Reporting mechanism Reporting criteria Reporting period
------------------------------------------------------------------------
Claims-based reporting........ One Measures Group for January 1, 2009-
30 Consecutive December 31,
Medicare Part B FFS 2009.
Patients.
Claims-based reporting........ One Measures Group for January 1, 2009-
80% of applicable December 31,
Medicare Part B FFS 2009.
patients of each
eligible professional
(with a minimum of 30
patients during the
reporting period).
Claims-based reporting........ One Measures Group for July 1, 2009-
80% of applicable December 31,
Medicare Part B FFS 2009.
patients of each
eligible professional
(with a minimum of 15
patients during the
reporting period).
Registry-based reporting...... One Measures Group for January 1, 2009-
30 Consecutive December 31,
Patients. Patients 2009.
may include, but may
not be exclusively,
non-Medicare patients.
Registry-based reporting...... One Measures Group for January 1, 2009-
80% of applicable December 31,
Medicare Part B FFS 2009.
patients of each
eligible professional
(with a minimum of 30
patients during the
reporting period).
Registry-based reporting...... One Measures Group for July 1, 2009-
80% of applicable December 31,
Medicare Part B FFS 2009.
patients of each
eligible professional
(with a minimum of 15
patients during the
reporting period).
------------------------------------------------------------------------

There are two basic criteria for satisfactory reporting of measures
groups. For claims-based reporting, the two criteria are: (1) The
reporting of quality data for 30 consecutive Medicare Part B FFS
patients for one measures group for which the measures group is
applicable during a full-year reporting period; or (2) the reporting of
quality data for at least 80 percent of Medicare Part B FFS patients
for whom the measures group is applicable (with a minimum number of
patients commensurate with the reporting period duration). For
registry-based submission, the two criteria are: (1) The reporting of
quality measures results and numerator and denominator data for 30
consecutive patients for one measures group for which the measures
group is applicable during a full-year reporting period; or (2) the
reporting of quality measures results and numerator and denominator
data for at least 80 percent of patients for whom the measures group is
applicable (with a minimum number of patients commensurate with the
reporting period duration).
The 30 consecutive patients reporting criteria apply only to the
entire year (January 1, 2009 through December 31, 2009) reporting
period, but apply to both claims-based submission and registry-based
submission mechanisms. While claims are submitted to CMS on Medicare
patients only (for claims-based reporting), consecutive patients for
registry-based submission for the January 1, 2009 through December 31,
2009 reporting period may include some, but may not be exclusively,
non-Medicare patients. We include this limited option to report quality
measures results and numerator and denominator data on quality measures
that includes non-Medicare patients for registry-based submission
because of the desirability of assessing the overall care provided by a
professional rather than just that provided to a certain subset of
patients, and the benefit of having a larger number of patients on
which to assess quality.
We propose that the alternative criteria for measures groups based
on reporting on 80 percent of patients for which one measures group be
applicable for the January 1, 2009 through December 31, 2009 reporting
period (with a minimum of 30 patients) and to the July 1, 2009 through
December 31, 2009 reporting periods (with a minimum of 15 patients) and
for either claims-based or registry-based reporting of measures groups.
We have included the reporting option for 30 consecutive patients
(for claims-based reporting, the consecutive patients must all be
Medicare FFS patients) as a means to achieve a reasonably valid sample
of patients for performance rate calculation yet place an upper limit
on the number of patients on which reporting would be required,
compared to the 80 percent of patients criteria. However, unlike 2008,
we do not propose an option for 15 consecutive patients for the 6-month
reporting period. While we do not have the results of the 2008
reporting, we are concerned that samples of fewer than 30 consecutive
patients may be insufficient to calculate comparable performance rates
across eligible professionals furnishing comparable services. We expect
additional experience with PQRI reporting to clarify optimal sample
sizes and reporting criteria for use in future reporting periods. We
invite comments on our proposed use of the consecutive patient
reporting criteria and on the use of 30 consecutive patients (for
claims-based reporting, the consecutive patients must all be Medicare
FFS patients) as the required sample under these criteria during the
full-year 2009 reporting period.
c. Registry-Based Submission for Reporting Individual Measures
Under section 1848(k)(4) of the Act, ``as part of the publication
of proposed and final quality measures for 2008 under clauses (i) and
(iii) of paragraph (2)(B), the Secretary shall address a

[[Page 38562]]

mechanism whereby an eligible professional may provide data on quality
measures through an appropriate medical registry.'' In the CY 2008 PFS
final rule with comment period, we described using different options to
test the receipt of data from registries in 2008 (72 FR 66350 through
66352). The two options being tested in 2008 are data submission
options 2 and 3 as described in the CY 2008 PFS final rule with comment
period (72 FR 66352). This testing process is ongoing, but submissions
for the testing process are expected to conclude by September 1, 2008.
Information regarding the registry submission testing process is
available on the CMS Web site at http://www/cms.hhs.gov/PQRI/20_
Reporting.asp#TopOfPage.
As we indicated previously, section 101(c)(5)(F) of the MIEA-TRHCA,
as added by MMSEA, authorizes us to establish alternative criteria for
satisfactorily reporting PQRI quality data through medical registries
for 2008 and 2009. For 2008, we have established the requirements a
registry must meet to qualify to submit data on quality measures on
behalf of eligible professionals seeking incentive payments in 2008.
The data to be submitted includes the reporting and performance rates
on PQRI measures or PQRI measures groups; and, numerators and
denominators for the reporting rates and performance rates. The
requirements that we established for 2008 include a registry self-
nomination process. The document ``2008 PQRI Registry Requirements for
Submission Under New Options'' describes the requirements for a
registry to qualify to submit under the registry-based reporting
alternatives for 2008. This document is available on the PQRI section
of the CMS Web site at http://www/cms.hhs.gov/PQRI/20_
Reporting.asp#TopOfPage. On or before August 31, 2008, we will announce
the names of self-nominated registries that are determined by CMS to
meet necessary technical and other requirements to submit quality
measures results and numerator and denominator data on quality measures
on behalf of eligible professionals seeking an incentive under the
alternative reporting periods and criteria applicable to registry-based
submission for reporting quality measures on services furnished during
2008.
For 2009, we propose that eligible professionals would be able to
report 2009 PQRI quality measures data through a qualified clinical
registry by authorizing or instructing the registry to submit quality
measures results and numerator and denominator data on quality measures
to CMS on their behalf. As for 2008, the data to be submitted for 2009
includes the reporting and performance rates on PQRI measures or PQRI
measures groups; and, numerators and denominators for the reporting
rates and performance rates. To do so, eligible professionals would
need to enter into and maintain an appropriate legal arrangement with
an eligible clinical registry. Such arrangements would provide for the
registry's receipt of patient-specific data from the eligible
professional and the registry's disclosure of quality measures results
and numerator and denominator data on behalf of the eligible
professional to CMS for the PQRI. Thus, the registry would act as a
HIPAA Business Associate and agent of the eligible professional. Such
agents are referred to as ``data submission vendors.'' Such ``data
submission vendors'' would have the requisite legal authority to
provide clinical registry data on behalf of the eligible professional
to the Quality Reporting System developed in accordance with the
statute. The registry, acting as such a data submission vendor, would
submit registry-derived measures information to the CMS designated
database within the Quality Reporting System, using a CMS-specified
record layout. The record layout will be posted on the PQRI section of
the CMS Web site at http://www.cms.hhs.gov/pqri as soon as practical,
and no later than April 1, 2009.
To maintain compliance with applicable statutes and regulations,
including but not limited to the Health Insurance Portability and
Accountability Act of 1996 (Pub. L. 104-191) (HIPAA), our program and
its data system must maintain compliance with HIPAA requirements for
requesting, processing, storing, and transmitting data. Eligible
professionals that conduct HIPAA covered transactions also must
maintain compliance with the HIPAA requirements.
For the 2009 PQRI, we propose to continue the PQRI reporting
criteria for satisfactorily reporting through registry-based submission
of 3 or more individual PQRI quality measures data that are described
in the ``2008 PQRI: Establishment of Alternative Reporting Periods and
Reporting Criteria'' document (http://www.cms.hhs.gov/PQRI/Downloads/
2008PQRIalterrptperiods.pdf). That is, we propose to accept quality
measures results and numerator and denominator data on quality measures
from registries that qualify as data submission vendors. We propose
these criteria would be available for each of the two alternative
reporting periods. Thus, the proposed reporting options for registry-
based submission of at least three individual PQRI measures are listed
in Table 9.

Table 9.--Proposed 2009 PQRI Registry-Based Submission Reporting Options
for Individual Measures
------------------------------------------------------------------------
Reporting mechanism Reporting criteria Reporting period
------------------------------------------------------------------------
Registry-based reporting...... At least 3 PQRI January 1, 2009-
measures for 80% of December 31,
applicable Medicare 2009.
Part B FFS patients
of each eligible
professional.
Registry-based reporting...... At least 3 PQRI July 1, 2009-
measures for 80% of December 31,
applicable Medicare 2009.
Part B FFS patients
of each eligible
professional.
------------------------------------------------------------------------

As discussed in section II.O.2.b. of this proposed rule,
``Satisfactory Reporting of Data on Quality Measures and Reporting
Periods for Measures Groups, Through Claims-Based Reporting and
Registry-Based Reporting,'' we also propose the three reporting options
for registry-based submission of quality measures results and numerator
and denominator data on PQRI measures groups summarized in Table 8.
To submit on behalf of eligible professionals pursuing incentive
payment for reporting clinical quality information on services
furnished during 2008 for reporting both on individual measures and
measures groups, we required registries to complete a self-nomination
process and to meet certain technical and other requirements in order
to be considered ``qualified'' to submit on behalf of eligible
professionals pursuing the 2008 PQRI incentive payment. These 2008
requirements are detailed in section (g) of the document titled: ``2008
Physician

[[Page 38563]]

Quality Reporting Initiative: Establishment of Alternative Reporting
Periods and Reporting Criteria,'' which is posted at http://
www.cms.hhs.gov/PQRI/Downloads/2008PQRIalterrptperiods.pdf, and in a
further document titled ``Registry Requirements to Qualify as an
Acceptable Registry for Submission of PQRI Data On Behalf of Eligible
Professionals Seeking Payment in 2008,'' which is posted at http://
www.cms.hhs.gov/PQRI/Downloads/2008PQRIRegistryRequirements.pdf).
For 2009, we propose to again require a self-nomination process
based on meeting specific technical and other requirements in order to
qualify to submit data on 2009 PQRI quality measures or measures groups
on behalf of eligible professionals for services furnished in 2009.
This self-nomination will be required regardless of whether or not the
registry participated in any way in PQRI in 2008. As in 2008, we will
make every effort to ensure that registries that are ``qualified'' will
be able to successfully submit quality measures results and numerator
and denominator data on PQRI quality measures or measures groups on
behalf of their professionals. By listing a registry as ``qualified,''
however, we cannot guarantee or assume responsibility for the
successful submission of data on PQRI quality measures or measures
groups. We propose that the 2009 registry technical requirements will
be substantially the same as for 2008. In general, to be considered
qualified to submit individual quality measures on behalf of
professionals wishing to report under the 2009 PQRI, a registry must:
Have been in existence as of January 1, 2009.
Be able to collect all needed data elements and calculate
results for at least three measures in the 2009 PQRI program (according
to the posted 2009 PQRI Measure Specifications).
Be able to calculate and submit measure-level reporting
rates by National Provider Identifier (NPI)/ Taxpayer Identification
Number (TIN).
Be able to calculate and submit measure-level performance
rates by NPI/TIN.
Be able to separate out and report on Medicare Fee For
Service (Part B) patients only.
Provide the Registry name.
Provide the Reporting period start date (covers dates of
services from).
Provide the Reporting period end date (covers dates of
services through).
Provide the PQRI Measure Numbers.
Provide the measure titles.
Report the number of eligible instances (reporting
denominator).
Report the number of instances of quality service
performed (numerator).
Report the number of performance exclusions.
Report the number of reported instances, performance not
met (eligible professional receives credit for reporting, not for
performance).
Be able to transmit this data in a CMS-approved XML
format.
Comply with a secure method for data submission.
Submit a ``validation strategy'' to CMS by May 31, 2009. A
validation strategy ascertains whether eligible professionals have
submitted accurately and on at least the minimum number (80 percent) of
their eligible patients, visits, procedures, or episodes for a given
measure. Acceptable validation strategies often include such provisions
as the registry being able to conduct random sampling of their
participants' data, but may also be based on other credible means
verifying the accuracy of data content and completeness of reporting or
adherence to a required sampling method.
Be able to include in its overall submission whether the
results for each NPI are validated by the registry.
Enter into and maintain with its participating
professionals an appropriate legal arrangement that provides for the
registry's receipt of patient-specific data from the eligible
professionals, as well as the registry's disclosure of quality measure
results and numerator and denominator data on behalf of eligible
professionals who wish to participate in the PQRI program.
Obtain and keep on file signed documentation that each NPI
whose data is submitted to the registry has authorized the registry to
submit quality measures results and numerator and denominator data to
CMS for the purpose of PQRI participation. This documentation must meet
the standards of applicable law, regulations, and contractual business
associate agreements.
Provide CMS access (if requested) to review the Medicare
beneficiary data on which 2009 PQRI registry-based submissions are
founded.
Provide the reporting option (reporting period and
reporting criteria) that the eligible professional has satisfied or
chosen.
Registries must provide CMS an ``attestation statement''
which states that the quality measure results and numerator and
denominator data provided to CMS are accurate and complete.
In addition to the above, registries that wish to submit 2009
quality measures information on behalf of their participating eligible
professionals seeking to participate in the 2009 PQRI based on
satisfying the criteria applicable to reporting of measures groups must
be able to:
Indicate whether each eligible professional within the
registry who wishes to submit PQRI using the measure groups will be
doing so for the 6- or 12-month period.
Include only patients who were cared for during the
twelve-month measurement period (reporting period) of January through
December 2009 or the 6-month measurement period (reporting period) of
July 2009 through December 2009.
Agree that the registry's data may be inspected by CMS
under our health oversight authority if non-Medicare patients are
included in the consecutive patient group.
Be able to report data on all of the measures in a given
measures group and on either 30 consecutive patients from January 1
through December 31, 2009 (note this consecutive patient count must
include some Medicare beneficiaries) or on 80 percent of applicable
Medicare Part B FFS patients for each eligible professional (with a
minimum of 30 patients during the January 1, 2009 through December 31,
2009 reporting period or a minimum of 15 patients during the July 1,
2009 through December 31, 2009 reporting period).
If reporting consecutive patients, provide the beginning
date of service that initiates the count of 30 consecutive patients.
Be able to report the number of Medicare Fee for Service
patients and the number of Medicare Advantage patients that are
included in the consecutive patients reported for a given measures
group.
However, for 2009, we may modify certain aspects of the registry
technical requirements listed above, which are based on the 2008
registry requirements that are described in the ``Registry Requirements
to Qualify as an Acceptable Registry for Submission of PQRI Data On
Behalf of Eligible Professionals Seeking Payment in 2008'' document
available on the CMS Web site at http://www.cms.hhs.gov/PQRI/Downloads/
2008PQRIRegistryRequirements.pdf) based on our experience during the
2008 registry testing process and any comments received on the 2009
registry technical requirements proposed above. We will post the final
2009 registry technical requirements, including the

[[Page 38564]]

exact date by which registries that wish to qualify for 2009 must
submit a self-nomination letter, on the PQRI section of the CMS Web
site at http://www.cms.hhs.gov/pqri by November 15, 2008. We anticipate
that registries that wish to self-nominate for 2009 will be required to
do so by the end of the first quarter of 2009, but not later than the
end of the second quarter of 2009.
We invite comments on the proposed options for registry-based PQRI
reporting of data on measures and measures groups for services
furnished in 2009.
d. EHR-Based Submission for Reporting Individual Measures
In addition to the testing of registry-based submission, we are
currently preparing for testing the submission of clinical quality data
extracted from EHRs for five 2008 PQRI measures. We anticipate this
testing will begin July 1, 2008 and conclude by December 31, 2008. For
the 2009 PQRI, we propose to accept PQRI data from EHRs for a limited
subset of the proposed 2009 PQRI quality measures identified in Tables
11 and 13 (section II.O.4., ``Proposed 2009 PQRI Quality Measures''),
contingent upon the successful completion of our 2008 EHR data
submission testing process and a determination that accepting data from
EHRs on quality measures for the 2009 PQRI is practical and feasible.
Provided our 2008 EHR data submission testing process is successful, we
propose to begin accepting submission of clinical quality data
extracted from EHRs on January 1, 2009 or as soon thereafter as is
technically feasible. The date on which we would begin to accept
quality data submission on services furnished in 2009 is contingent
upon when we can have the necessary information technology
infrastructure components and capacity in place and ready to accept
data on a scale sufficient for national implementation of PQRI
submission through this mechanism. (Because EHR-based data submission
need not be accomplished concurrently with the dates services are
furnished or billed, there is some latitude to begin accepting EHR-
extracted data later than January 1, 2009, without precluding accepting
data for the proposed 2009 PQRI reporting periods.)
The electronic specifications for the proposed 2009 PQRI measures
identified in Tables 11 and 13 that are under consideration for EHR-
based submission in 2009 will be posted on a public Web site when
available. We will broadly announce the availability and exact location
of these specifications through familiar CMS communications channels
including the PQRI section of the CMS Web site at http://
www.cms.hhs.gov/pqri. The posting of the electronic specifications for
any particular measure prior to publication of the final rule does not
signify that the measure will be necessarily selected for the 2009 PQRI
measure set, nor that EHR-based data submission will be accepted for
that measure even if it may otherwise be included in the 2009 PQRI.
However, by posting the specifications, we seek to allow sufficient
time for EHR vendors to adapt their products to support EHR-based
capture and submission of data for these measures prior to the start of
any 2009 PQRI reporting periods.
EHR vendors that would like to enable their customers to submit
data on PQRI that is extracted from their customers' EHRs to the CMS-
designated clinical warehouse should update or otherwise assure that
their EHR products capture and can submit the necessary data elements
identified for measure specifications and technical specifications for
EHR-based submission. We will use Certification Commission for
Healthcare Information Technology (CCHIT) criteria and Secretarially-
recognized Healthcare Information Technology Standards Panel (HITSP)
interoperability standards where possible and we encourage vendors to
do so also. These are the specifications that will be available on a
publicly accessible Web site to be identified by CMS.
Prior to the beginning of EHR-based quality measures data
submission for any 2009 PQRI reporting period, we will publish (through
familiar mechanisms such as CMS e-mail lists and the PQRI section of
the CMS Web site at http://www.cms.hhs.gov/pqri) information on the
process eligible professionals will need to use to actually submit to
the CMS-designated clinical data warehouse the 2009 PQRI quality
measures data extracted from their practices' EHRs. The process will
comply with applicable laws, regulations, and policies for privacy,
data security, and interoperability--including but not limited to HIPAA
requirements. The data submission process will also require that the
persons (eligible professionals, other practice staff, or vendors
acting on the professionals' behalf) who actually exchange data with
the clinical warehouse system obtain and use an account (user
identification and password) on a CMS-designated user authentication
and identity management system. We will not charge 2008 or 2009 PQRI
participants any processing or licensing fees to obtain or maintain the
required user account. More details on the required account and how to
obtain it will be published prior to January 1, 2009.
We cannot assume responsibility for the successful submission of
data from eligible professionals' EHRs. Any eligible professional
wishing to submit PQRI data extracted from an EHR should contact the
EHR product's vendor to determine if the product has been updated to
facilitate PQRI quality measures data submission. Such professionals
should also begin attempting submission promptly after CMS announces in
early 2009 that the clinical data warehouse is ready to accept 2009
PQRI quality measures data through the EHR mechanism in order to assure
the professional has a reasonable period of time to work with his or
her EHR and/or its vendor to correct any problems that may complicate
or preclude successful quality measures data submission through that
EHR.
To maintain compliance with applicable statutes and regulations,
including but not limited to HIPAA, our program and its data system
must comply with applicable requirements for requesting, processing,
storing, and transmitting data. Eligible professionals that conduct
HIPAA covered transactions also must maintain compliance with the HIPAA
requirements.
We encourage the use of EHRs that have been certified by the CCHIT
for data submission. CCHIT certified EHRs must meet specific standards
for functionality, privacy, security and interoperability. More
information about CCHIT certified EHRs can be found at http://
www.cchit.org. However, we do recognize that there will be some
eligible professionals who are using systems in specialties for which
there are no appropriate CCHIT certified EHR systems, or who purchased
and implemented their EHR prior to the availability of CCHIT
certification. These programs must be capable of generating a
medication list, generating a problem list and entering laboratory
results as discrete searchable data elements to be able to be used for
data submission under this reporting mechanism option.
We propose to utilize as criteria for satisfactory submission of
data for quality measures for covered professional services by EHR-
based submission for the 2009 PQRI the same criteria for successful
reporting and the same reporting period that we propose for claims-
based submission of data for individual 2009 PQRI measures. The
reporting criteria for EHR-based submission of individual PQRI measures
are summarized in Table 10.

[[Page 38565]]

Table 10.--Proposed 2009 PQRI EHR-Based Submission Reporting Options for
Individual Measures
------------------------------------------------------------------------
Reporting mechanism Reporting criteria Reporting period
------------------------------------------------------------------------
EHR-based reporting........... At least 3 PQRI January 1, 2009-
measures, or 1-2 December 31,
measures if less than 2009.
3 apply to the
eligible
professional, for 80%
of applicable
Medicare Part B FFS
patients of each
eligible professional.
------------------------------------------------------------------------

We do not propose any option to report measures groups through EHR-
based data submission on services furnished during 2009. Because EHR
submission to CMS of data on quality measures is new to PQRI, for 2009
we propose to make available only the criteria applicable to reporting
of individual PQRI measures. We invite comments on the proposed use of
EHR-based data submission for PQRI.
3. Statutory Requirements for Measures Included in the 2009 PQRI
a. Overview of Requirements for the 2009 PQRI Quality Measures
Section 1848(k)(2)(B)(ii) of the Act, as added by the MMSEA,
requires CMS to publish in the Federal Register no later than August
15, 2008, a proposed set of quality measures that would be appropriate
for eligible professionals to use to submit data in 2009. In examining
the statutory requirements of section 1848(k)(2)(B)(i) of the Act, as
amended by the MMSEA, we believe that the requirement that measures be
endorsed or adopted by a consensus organization applies to each measure
that would be included in the measure set for submitting quality data
and/or quality measures results and numerator and denominator data on
the quality measures on covered professional services furnished during
2009. Likewise, the requirement for measures to have been developed
using a consensus-based process (as identified by the Secretary)
applies to each measure. By contrast, we do not interpret the provision
requiring inclusion of measures submitted by a specialty to apply to
each measure. Rather, we believe this requirement means that in
endorsing or adopting measures, a consensus organization must include
in its consideration process at least some measures submitted by one
physician or organization representing a particular specialty.
We also believe that under sections 1848(k)(2)(B)(ii) through (iii)
of the Act, as amended by the MMSEA, the Secretary is given broad
discretion to determine which quality measures meet the statutory
requirements and are appropriate for inclusion in the final set of
measures for 2009. We do not interpret sections 1848(k)(2)(B) of the
Act to require that all measures that meet the basic requirements of
section 1848(k)(2)(B)(i) of the Act must be included in the 2009 set of
quality measures.
We discuss in the following section the statutory requirements for
consensus organizations and the use of a consensus-based process for
developing quality measures as they relate to the requirements for the
set of measures for 2009 in the context of other applicable Federal law
and policy. More information on the measure development process in
general is available on the CMS Web site at http://www.cms.hhs.gov/
QualityInitiativesGenInfo. The next section also discusses the policies
used in proposing the initial set of quality measures for eligible
professionals for use in 2009 and the policies we are proposing to
apply in publishing the final set.
b. Consensus Organizations and Consensus-Based Process for Developing
Measures
Consistent with the principle that measures used for 2009 be
endorsed or adopted by a consensus organization and developed through
the use of a consensus-based process, but without proposing that 2009
PQRI measures be limited to those meeting the definition of a voluntary
consensus standard under the National Technology Transfer and
Advancement Act of 1995 (Pub. L. 104-113) (NTTAA), we interpret
``consensus-based process for developing measures'' as used in section
1848(k) of the Act and amended by MMSEA to encompass not only the basic
development work of the formal measure developer, but also to include
the achievement of consensus among stakeholders in the health care
system. Consensus should be achieved based on at least a level of
openness, balance of interest, and consensus reflected in the
structures and processes of the NQF and AQA as of the date of enactment
of MIEA-TRHCA, MMSEA, and the date of this proposed rule. More
information on the structures and processes of the NQF and AQA can be
found on the organizations' respective Web sites at http://
www.qualityforum.org and http://www.ambulatoryqualityalliance.org.
Based on the considerations discussed in the CY 2008 PFS proposed
rule (72 FR 38196 through 38204), we are proposing to apply the
following policies in identifying measures that meet the requirements
for having used a consensus-based process for development and the
requirement for having been endorsed or adopted by a consensus
organization such as the NQF or AQA, and that are appropriate for
inclusion as 2009 measures:
(1) We continue to interpret ``a consensus-based development
process'' as meaning that in addition to the measure development, the
measure has achieved adoption or endorsement by a consensus
organization having at least the basic characteristics of the AQA as a
consensus organization as of December 2006, when the MIEA-TRHCA
incorporating reference to AQA was passed and signed into law. Those
basic characteristics include a comparable level of openness, balance
of interest, and consensus-based on voting participation. As discussed
above in this section and further clarified in points (3) and (5), we
do not interpret ``consensus-based development process'' per section
1848(k)(2)(B) of the Act to require that the consensus organization or
process meet all of the criteria of the NTTAA and Office of Management
and Budget Circular No. A-119 (OMB A-119) definition of a voluntary
consensus standards body.
(2) ``Voluntary consensus standard'' is interpreted to mean a
voluntary consensus standard that has been endorsed as such by a
consensus organization that meets the requirements of the NTTAA, as
implemented by OMB A-119, for a voluntary consensus standards body.
(3) Where there are available quality measures, and some of these
measures meet the definition of ``voluntary consensus standards'' while
others do not, those measures that meet the definition of ``voluntary
consensus standards'' are preferred to other measures not meeting the
requirements of the NTTAA.
(4) In view of the preference for voluntary consensus standards, if
a measure has been specifically

[[Page 38566]]

considered by NQF for possible endorsement, but NQF has declined to
endorse it as of August 31, 2008, we are proposing not to include it in
the final set of 2009 PQRI Quality Measures.
(5) Although the AQA, as organized in December 2006, does not meet
the requirements of the NTTAA for a voluntary consensus standards body,
it is a consensus organization per section 1848(k)(2)(B) of the Act. In
circumstances where no voluntary consensus standard (NQF-endorsed)
measure is available, a quality measure that has been adopted by the
AQA (or another consensus organization with comparable consensus-
organization characteristics) would meet the requirements under the Act
and we propose that it would be appropriate for eligible professionals
to use the measure to submit quality measures data and/or quality
measures results and numerator and denominator data on quality
measures, as appropriate.
(6) We are unaware of other consensus organizations that are
comparable to the NQF in terms of meeting the formal requirements of
the NTTAA or of organizations other than AQA that do not strictly meet
the requirements of the National Institute of Standards and Technology
Act (NISTA) as amended by the NTTAA but that feature the breadth of
stakeholder involvement in the consensus process necessary to meet the
intent of the Act. However, the Act does not limit consensus
organizations to the NQF or the AQA, nor restrict the field of
potential consensus organizations. The Act, thereby, maintains
flexibility in potential sources of measure consensus review, which is,
like having multiple sources of measure development, key to maintaining
a robust marketplace for development and review of quality measures.
(7) The basic steps for developing measures applicable to
physicians and other eligible professionals at the individual level may
be carried out by a variety of different organizations. We do not
interpret section 1848(k)(2)(B) of the Act to place special
restrictions on the type or make up of the organizations carrying out
this basic development of physician measures, such as restricting the
initial development to physician-controlled organizations. Any such
restriction would unduly limit the basic development of quality
measures and the scope and utility of measures that may be considered
for endorsement as voluntary consensus standards.
(8) The policies we are proposing are based on the preference as
articulated in NTTAA and OMB A-119 for ``voluntary consensus
standards'' to government standards, and a preference for quality
measures that have achieved broad consensus among stakeholders in the
health care system. However, the Act does not require that quality
measures meet the NTTAA or OMB A-119 definition of ``voluntary
consensus standards'' to be used for PQRI.
4. Proposed 2009 PQRI Quality Measures
The measures identified for use in PQRI in 2009 will be selected
from those we propose in this rule and will be finalized as of the date
the CY 2009 PFS final rule with comment period goes on display at the
Office of the Federal Register. No changes (that is, additions or
deletions of measures) will be made after publication of the CY 2009
PFS final rule with comment period. However, as was the case for 2008,
we may make modifications or refinements, such as revisions to measures
titles and code additions, corrections, or revisions to the detailed
specifications for the 2009 measures until the beginning of the
reporting period. Such specification modifications may be made through
the last day preceding the beginning of the reporting period. The 2009
measures specifications will be available on the PQRI section of the
CMS Web site at http://www.cms.hhs.gov/pqri when they are sufficiently
developed or finalized. We are targeting finalization and publication
of the detailed specifications for all 2009 PQRI measures on the PQRI
section of the CMS Web site by November 15, 2008, and will in no event
publish these specifications later than December 31, 2008. The detailed
specifications will include instructions for reporting and identify the
circumstances in which each measure is applicable.
For 2009, we are proposing that final PQRI quality measures will be
selected from the 175 measures listed in Tables 11 through 14, which
fall into 4 broad categories as set forth below in this section. The
four categories are the following:
(1) 2008 PQRI Measures Proposed for 2009;
(2) Additional Proposed NQF-endorsed Measures;
(3) Additional Proposed AQA-adopted Measures; and
(4) Measures Proposed for 2009 Contingent Upon NQF Endorsement or
AQA Adoption by August 31, 2008. Given that no legislation currently
exists that authorizes us to make incentive payments for satisfactorily
reporting data on quality measures on services furnished in 2009 or
beyond, we invite comments on the advisability of expanding the number
of PQRI quality measures beyond the 119 measures in the 2008 PQRI
quality measure set.
In addition, we propose to carry forward three of the four measures
groups we implemented in 2008. The measures proposed in eight of the
nine total proposed measures groups are proposed to be available for
reporting as individual measures or within measures groups and the
measures in the ninth measures group (Back Pain) are proposed to be
available for use in the 2009 PQRI solely within this proposed measures
group. The measures proposed for inclusion in each of the proposed 2009
measures groups are listed in Tables 15 through 23.
a. Considerations for Identifying Proposed 2009 PQRI Quality Measures
We have applied several considerations in selecting measures to
propose for the 2009 PQRI. We considered the following with respect to
selecting the proposed measures for the 2009 PQRI:
(1) Measures that satisfy statutory criteria for selection. For
purposes of selecting the proposed 2009 PQRI measures, we considered
those measures that met the requirements of section 1848(k)(2) of the
Act and other requirements discussed in section II.O.3.b. of this
proposed rule, ``Consensus Organizations and Consensus-Based Process
for Developing Measures.''
(2) Measures that are functional, which is to say measures that can
be technically implemented within the capacity of the CMS
infrastructure for data collection, analysis, and calculation of
reporting and performance rates. This leads to preference for measures
that reflect readiness for implementation, such as those that are
currently in the 2008 PQRI program or have been through testing. The
purpose of measure testing is to reveal the measure's strengths and
weaknesses so that the limitations can be addressed and the measure
refined and strengthened prior to implementation. For new measures,
preference is given to those which can be most efficiently implemented
for data collection and submission. For some measures that are useful,
but where data submission is not feasible through all otherwise
available PQRI reporting mechanisms, a measure may be included for
reporting solely through specific reporting mechanism(s) in which its
submission is feasible.
(3) Measures that increase the scope of applicability of measures
to services rendered to Medicare beneficiaries and expand opportunities
for eligible

[[Page 38567]]

professionals to participate in PQRI (for example, clinical topics such
as skin care, where there are no 2008 PQRI measures). We seek to
achieve broad ability to assess the quality of care furnished to
Medicare beneficiaries, and ultimately to compare performance among
professionals. We seek to increase the circumstances where eligible
professionals have at least three measures applicable to their practice
and measures that help expand the number of measures groups with at
least 4 measures in a group.
(4) Measures that support CMS and HHS priorities for improved
quality and efficiency of care for Medicare beneficiaries. These
current and long term priority topics include: Prevention; chronic
conditions; high cost and high volume conditions; elimination of health
disparities; healthcare-associated infection and other conditions;
improved care coordination; improved efficiency; improved patient and
family experience of care; improved end-of-life/palliative care;
effective management of acute and chronic episodes of care; reduced
unwarranted geographic variation in quality and efficiency; and
adoption and use of interoperable Health Information Technology (HIT).
(5) Measures that are in, or facilitate, alignment with other
Medicare, Medicaid, and SCHIP programs in furtherance of overarching
healthcare goals.
(6) Measures of various aspects of clinical quality including
outcome measures, where appropriate and feasible, process measures,
structural measures, efficiency measures and patient experience of
care.
In developing the list of proposed 2009 PQRI quality measures, we
also have reviewed and considered measure suggestions including
comments received in response to the CY 2008 PFS proposed rule and
final rule with comment period, and inquiries and suggestions received
through less formal venues, such as an invitation for measures
suggestions posted on the CMS Web site in March 2008.
We welcome comments on the implication of including or excluding
any given measure or measures proposed herein in the final 2009 PQRI
quality measure set and to our approach in selecting measures. We
recognize that some commenters may also wish to recommend additional
measures for inclusion in the 2009 PQRI measures that we have not
herein proposed. While we welcome all constructive comments and
suggestions, and may consider such recommended measures for inclusion
in future measure sets for PQRI and/or other programs to which such
measures may be relevant, we will not be able to consider such
additional measures for inclusion in the 2009 measure set.
As discussed above, section 1848(k)(2)(B)(ii) of the Act requires
that the measures proposed for use in the 2009 PQRI be published in the
Federal Register not later than August 15, 2008. We also are required
by other applicable statutes to provide opportunity for public comment
on provisions of policy or regulation that are established via notice
and comment rulemaking. Measures that were not included in this
proposed rule for inclusion in the 2009 PQRI that are recommended to
CMS via comments on this proposed rule have not been placed before the
public with opportunity for the public to comment on them within the
rulemaking process. Even when measures have been published in the
Federal Register , but in other contexts and not specifically proposed
as PQRI measures, such publication does not provide true opportunity
for public comment on those measures' potential inclusion in PQRI.
Thus, such additional measures recommended via comments on this
proposed rule cannot be included in the 2009 measure set. Section
1848(k)(2)(B)(iii) of the Act requires that the measures be finalized
via publication in the Federal Register not later than November 15,
2008. However, as discussed above, we will consider comments and
recommendations for measures, which may not be applicable to the final
set of 2009 PQRI measures, for purposes of identifying measures for
possible use in future years' PQRI or other initiatives to which those
measures may be pertinent.
b. Proposed Measures Selected From the 2008 PQRI Quality Measures Set
We are proposing to include in the 2009 PQRI quality measure set
the 2008 PQRI measures identified in Table 11 contingent on NQF
endorsement of each such included measure by August 31, 2008. All 2008
PQRI measures have been adopted by the AQA and have been considered or
are currently under consideration for endorsement by the NQF. Those
2008 PQRI measures that have been specifically considered and declined
for endorsement are not included in the list of proposed measures for
2009. The six 2008 PQRI measures not included in the proposed measures
for 2009 for this reason are: Measure 74, Radiation Therapy
Recommended for Invasive Breast Cancer Patients who have Undergone
Breast Conserving Surgery; Measure 75, Prevention of
Ventilator-Associated Pneumonia--Head Elevation; Measure 80,
Plan of Care for ESRD Patients with Anemia; Measure 103,
Review of Treatment Options in Patients with Clinically Localized
Prostate Cancer; Measure 129, Universal Influenza Vaccine
Screening and Counseling; and Measure 133 Screening for
Cognitive Impairment. Also, in some instances, those 2008 PQRI measures
intended or requested by the measure developer to be retired from PQRI
and replaced by new AQA-adopted or NQF-endorsed measures are not
included in the list of proposed measures for 2009. The two 2008 PQRI
measures not proposed for this reason are: Measure 4,
Screening for Future Fall Risk; and Measure 88, Hepatitis A
and B Vaccination in Patients with HCV.

Table 11.--2008 PQRI Measures Proposed for 2009
------------------------------------------------------------------------
Measure number and title Measure source
------------------------------------------------------------------------
1. Diabetes Mellitus: Hemoglobin A1c Poor National Committee for
Control in Diabetes Mellitus*. Quality Assurance (NCQA).
2. Diabetes Mellitus: Low Density NCQA.
Lipoprotein (LDL-C) Control in Diabetes
Mellitus*.
3. Diabetes Mellitus: High Blood Pressure NCQA.
Control in Diabetes Mellitus*.
5. Heart Failure: Angiotensin-Converting American Medical
Enzyme (ACE) Inhibitor or Angiotensin Association-Physician
Receptor Blocker (ARB) Therapy for Left Consortium for Performance
Ventricular Systolic Dysfunction (LVSD)*. Improvement (AMA-PCPI).
6. Coronary Artery Disease (CAD): Oral AMA-PCPI.
Antiplatelet Therapy Prescribed for
Patients with CAD*.
7. Coronary Artery Disease (CAD): Beta- AMA-PCPI.
Blocker Therapy for CAD Patients with
Prior Myocardial Infarction (MI)*.
8. Heart Failure: Beta-Blocker Therapy for AMA-PCPI.
Left Ventricular Systolic Dysfunction
(LVSD)*.

[[Page 38568]]

9. Major Depressive Disorder (MDD): NCQA.
Antidepressant Medication During Acute
Phase for Patients with MDD.
10. Stroke and Stroke Rehabilitation: AMA-PCPI/NCQA.
Computed Tomography (CT) or Magnetic
Resonance Imaging (MRI) Reports.
11. Stroke and Stroke Rehabilitation: AMA-PCPI/NCQA.
Carotid Imaging Reports.
12. Primary Open Angle Glaucoma (POAG): AMA-PCPI/NCQA.
Optic Nerve Evaluation.
14. Age-Related Macular Degeneration (AMD): AMA-PCPI/NCQA.
Dilated Macular Examination.
18. Diabetic Retinopathy: Documentation of AMA-PCPI/NCQA.
Presence or Absence of Macular Edema and
Level of Severity of Retinopathy.
19. Diabetic Retinopathy: Communication AMA-PCPI/NCQA.
with the Physician Managing Ongoing
Diabetes Care.
20. Perioperative Care: Timing of AMA-PCPI/NCQA.
Antibiotic Prophylaxis--Ordering Physician.
21. Perioperative Care: Selection of AMA-PCPI/NCQA.
Prophylactic Antibiotic--First OR Second
Generation Cephalosporin.
22. Perioperative Care: Discontinuation of AMA-PCPI/NCQA.
Prophylactic Antibiotics (Non-Cardiac
Procedures).
23. Perioperative Care: Venous AMA-PCPI/NCQA.
Thromboembolism (VTE) Prophylaxis (When
Indicated in ALL Patients).
24. Osteoporosis: Communication With the AMA-PCPI/NCQA.
Physician Managing Ongoing Care Post-
Fracture.
28. Aspirin at Arrival for Acute Myocardial AMA-PCPI/NCQA.
Infarction (AMI).
30. Perioperative Care: Timing of AMA-PCPI/NCQA.
Prophylactic Antibiotics--Administering
Physician.
31. Stroke and Stroke Rehabilitation: Deep AMA-PCPI/NCQA.
Vein Thrombosis Prophylaxis (DVT) for
Ischemic Stroke or Intracranial Hemorrhage.
32. Stroke and Stroke Rehabilitation: AMA-PCPI/NCQA.
Discharged on Antiplatelet Therapy.
33. Stroke and Stroke Rehabilitation: AMA-PCPI/NCQA.
Anticoagulant Therapy Prescribed for
Atrial Fibrillation at Discharge.
34. Stroke and Stroke Rehabilitation: AMA-PCPI/NCQA.
Tissue Plasminogen Activator (t-PA)
Considered.
35. Stroke and Stroke Rehabilitation: AMA-PCPI/NCQA.
Screening for Dysphagia.
36. Stroke and Stroke Rehabilitation: AMA-PCPI/NCQA.
Consideration of Rehabilitation Services.
39. Screening or Therapy for Osteoporosis AMA-PCPI/NCQA.
for Women Aged 65 Years and Older.
40. Osteoporosis: Management Following AMA-PCPI/NCQA.
Fracture.
41. Osteoporosis: Pharmacologic Therapy.... AMA-PCPI/NCQA.
43. Coronary Artery Bypass Graft (CABG): The Society of Thoracic
Use of Internal Mammary Artery (IMA) in Surgeons (STS).
Isolated CABG Surgery.
44. Coronary Artery Bypass Graft (CABG): STS.
Preoperative Beta-Blocker in Patients with
Isolated CABG Surgery.
45. Perioperative Care: Discontinuation of AMA-PCPI/NCQA.
Prophylactic Antibiotics (Cardiac
Procedures).
46. Medication Reconciliation: AMA-PCPI/NCQA.
Reconciliation After Discharge from an
Inpatient Facility.
47. Advance Care Plan...................... AMA-PCPI/NCQA.
48. Urinary Incontinence: Assessment of AMA-PCPI/NCQA.
Presence or Absence of Urinary
Incontinence in Women Aged 65 Years and
Older.
49. Urinary Incontinence: Characterization AMA-PCPI/NCQA.
of Urinary Incontinence in Women Aged 65
Years and Older.
50. Urinary Incontinence: Plan of Care for AMA-PCPI/NCQA.
Urinary Incontinence in Women Aged 65
Years and Older.
51. Chronic Obstructive Pulmonary Disease AMA-PCPI.
(COPD): Spirometry Evaluation.
52. Chronic Obstructive Pulmonary Disease AMA-PCPI.
(COPD): Bronchodilator Therapy.
53. Asthma: Pharmacologic Therapy.......... AMA-PCPI.
54. 12-Lead Electrocardiogram (ECG) AMA-PCPI/NCQA.
Performed for Non-Traumatic Chest Pain.
55. 12-Lead Electrocardiogram (ECG) AMA-PCPI/NCQA.
Performed for Syncope.
56. Community-Acquired Pneumonia (CAP): AMA-PCPI/NCQA.
Vital Signs.
57. Community-Acquired Pneumonia (CAP): AMA-PCPI/NCQA.
Assessment of Oxygen Saturation.
58. Community-Acquired Pneumonia (CAP): AMA-PCPI/NCQA.
Assessment of Mental Status.
59. Community-Acquired Pneumonia (CAP): AMA-PCPI/NCQA.
Empiric Antibiotic.
64. Asthma: Asthma Assessment.............. AMA-PCPI.
65. Treatment for Children with Upper NCQA.
Respiratory Infection (URI)--Avoidance of
Inappropriate Use.
66. Appropriate Testing for Children with NCQA.
Pharyngitis.
67. Myelodysplastic Syndrome (MDS) and AMA-PCPI/American Society
Acute Leukemias: Baseline Cytogenetic of Hematology (ASH).
Testing Performed on Bone Marrow.
68. Myelodysplastic Syndrome (MDS): AMA-PCPI/ASH.
Documentation of Iron Stores in Patients
Receiving Erythropoietin Therapy.
69. Multiple Myeloma: Treatment With AMA-PCPI/ASH.
Bisphosphonates.
70. Chronic Lymphocytic Leukemia (CLL): AMA-PCPI/ASH.
Baseline Flow Cytometry.
71. Breast Cancer: Hormonal Therapy for AMAPCPI/American Society of
Stage IC-III estrogen Receptor/ Clinical Oncology (ASCO)/
Progesterone Receptor (ER/PR) Positive National Comprehensive
Breast Cancer. Cancer Network (NCCN).
72. Colon Cancer: Chemotherapy for Stage AMA-PCPI/ASCO/NCCN.
III Colon Cancer Patients.
73. Cancer: Plan for Chemotherapy AMA-PCPI/ASCO.
Documented.
76. Prevention of Catheter-Related AMA-PCPI.
Bloodstream Infections (CRBSI)--Central
Venous Catheter Insertion Protocol.
77. Gastroesophageal Reflux Disease (GERD): AMA-PCPI/NCQA.
Assessment of GERD Symptoms in Patients
Receiving Chronic Medication for GERD.
78. End-Stage Renal Disease (ESRD): AMA-PCPI.
Vascular Access for Patients Undergoing
Hemodialysis.

[[Page 38569]]

79. End-Stage Renal Disease (ESRD): AMA-PCPI.
Influenza Vaccination in Patients with
ESRD.
81. End-Stage Renal Disease (ESRD): Plan of AMA-PCPI.
Care for Inadequate Hemodialysis in ESRD
Patients.
82. End-Stage Renal Disease (ESRD): Plan of AMA-PCPI.
Care for Inadequate Peritoneal Dialysis.
83. Hepatitis C: Testing for Chronic AMA-PCPI.
Hepatitis C--Confirmation of Hepatitis C
Viremia.
84. Hepatitis C: Ribonucleic Acid (RNA) AMA-PCPI.
Testing Before Initiating Treatment.
85. Hepatitis C: HCV Genotype Testing Prior AMA-PCPI.
to Therapy.
86. Hepatitis C: Consideration for AMA-PCPI.
Antiviral Therapy in HCV Patients.
87. Hepatitis C: HCV Ribonucleic Acid (RNA) AMA-PCPI.
Testing at Week 12 of Treatment.
89. Hepatitis C: Counseling Regarding Risk AMA-PCPI.
of Alcohol Consumption.
90. Hepatitis C: Counseling of Patients AMA-PCPI.
Regarding Use of Contraception Prior to
Starting Antiviral Therapy.
91. Acute Otitis Externa (AOE): Topical AMA-PCPI.
Therapy.
92. Acute Otitis Externa (AOE): Pain AMA-PCPI.
Assessment.
93. Acute Otitis Externa (AOE): Systemic AMA-PCPI.
Antimicrobial Therapy--Avoidance of
Inappropriate Use.
94. Otitis Media with Effusion (OME): AMA-PCPI.
Diagnostic Evaluation--Assessment of
Tympanic Membrane Mobility.
95. Otitis Media with Effusion (OME): AMA-PCPI.
Hearing Testing.
96. Otitis Media with Effusion (OME): AMA-PCPI.
Antihistamines or Decongestants--Avoidance
of Inappropriate Use.
97. Otitis Media with Effusion (OME): AMA-PCPI.
Systemic Antimicrobials--Avoidance of
Inappropriate Use.
98. Otitis Media with Effusion (OME): AMA-PCPI.
Systemic Corticosteroids--Avoidance of
Inappropriate Use.
99. Breast Cancer Resection Pathology AMA-PCPI/College of
Reporting: pT Category (Primary Tumor) and American Pathologists
pN Category (Regional Lymph Nodes) with (CAP).
Histologic Grade.
100. Colorectal Cancer Resection Pathology AMA-PCPI/CAP.
Reporting: pT Category (Primary Tumor) and
pN Category (Regional Lymph Nodes) with
Histologic Grade.
101. Prostate Cancer: Appropriate Initial AMA-PCPI.
Evaluation.
102. Prostate Cancer: Avoidance of Overuse AMA-PCPI.
of Bone Scan for Staging Low-Risk Prostate
Cancer Patients.
104. Prostate Cancer: Adjuvant Hormonal AMA-PCPI.
Therapy for High-Risk Prostate Cancer
Patients.
105. Prostate Cancer: Three-Dimensional AMA-PCPI.
(3D) Radiotherapy.
106. Major Depressive Disorder (MDD): AMA-PCPI.
Diagnostic Evaluation.
107. Major Depressive Disorder (MDD): AMA-PCPI.
Suicide Risk Assessment.
108. Rheumatoid Arthritis: Disease NCQA.
Modifying Anti-Rheumatic Drug Therapy.
109. Osteoarthritis (OA): Function and Pain AMA-PCPI.
Assessment.
110. Preventive Care and Screening: AMA-PCPI.
Influenza Immunization for Patients >= 50
Years Old.
111. Preventive Care and Screening: NCQA.
Pneumonia Vaccination for Patients 65
years and Older.
112. Preventive Care and Screening: NCQA.
Screening Mammography*.
113. Preventive Care and Screening: NCQA.
Colorectal Cancer Screening*.
114. Preventive Care and Screening: Inquiry AMA-PCPI.
Regarding Tobacco Use.
115. Preventive Care and Screening: NCQA.
Advising Smokers to Quit.
116. Inappropriate Antibiotic Treatment for NCQA.
Adults with Acute Bronchitis--Avoidance of
Inappropriate Use.
117. Diabetes Mellitus: Dilated Eye Exam in NCQA.
Diabetic Patient*.
118. Coronary Artery Disease (CAD): AMA-PCPI.
Angiotensin-Converting Enzyme (ACE)
Inhibitor or Angiotensin Receptor Blocker
(ARB) Therapy for Patients with CAD and
Diabetes and/or Left Ventricular Systolic
Dysfunction (LSVD)*.
119. Diabetes Mellitus: Urine Screening for NCQA.
Microalbumin or Medical Attention for
Nephropathy in Diabetic Patients*.
120. Chronic Kidney Disease (CKD): AMA-PCPI.
Angiotensin-Converting Enzyme (ACE)
Inhibitor or Angiotensin Receptor Blocker
(ARB) Therapy.
121. Chronic Kidney Disease (CKD): AMA-PCPI.
Laboratory Testing (Calcium, Phosphorus,
Intact Parathyroid Hormone (iPTH) and
Lipid Profile).
122. Chronic Kidney Disease (CKD): Blood AMA-PCPI.
Pressure Management.
123. Chronic Kidney Disease (CKD): Plan of AMA-PCPI.
Care: Elevated Hemoglobin for Patients
Receiving Erythropoiesis--Stimulating
Agents (ESA).
124. Health Information Technology (HIT): Quality Insights of
Adoption/Use of Electronic Medical Records Pennsylvania (QIP)/CMS.
(EMR)*.
125. Health Information Technology (HIT): QIP/CMS.
Adoption/Use of Medication e-Prescribing*.
126. Diabetes Mellitus: Diabetic Foot and American Podiatric Medical
Ankle Care, Peripheral Neuropathy: Association APMA.
Neurological Evaluation.
127. Diabetes Mellitus: Diabetic Foot and APMA.
Ankle Care, Ulcer Prevention: Evaluation
of Footwear.
128. Preventive Care and Screening: Body QIP/CMS.
Mass Index (BMI) Screening and Follow-Up.
130. Documentation and Verification of QIP/CMS.
Current Medications in the Medical Record.
131. Pain Assessment Prior to Initiation of QIP/CMS.
Patient Treatment.
132. Patient Co-Development of Treatment QIP/CMS.
Plan/Plan of Care.
134. Screening for Clinical Depression..... QIP/CMS.
------------------------------------------------------------------------
* This measure is one fifteen measures for which data may potentially be
accepted through the EHR mechanism in 2009.

[[Page 38570]]

Please note that detailed measure specifications for 2008 PQRI
measures may be updated or modified during the NQF endorsement process
or for other reasons prior to 2009. The 2009 PQRI measure
specifications for any given measure may, therefore, be different from
specifications for the same measure used for 2008. Specifications for
all 2009 measures, whether or not included in the 2008 PQRI program,
must be obtained from the specifications document for 2009 measures,
which will be available on the PQRI section of the CMS Web site on or
before December 31, 2008.
c. Additional Proposed NQF-Endorsed Measures
We propose to include in the 2009 PQRI quality measure set a number
of measures endorsed by the NQF that were not included in the 2008 PQRI
quality measures, which are identified in Table 12, provided that the
measure retains NQF endorsement as of August 31, 2008 and its detailed
specifications are completed and ready for implementation in PQRI by
October 15, 2008. Besides having NQF endorsement, the development of a
measure is considered complete for the purposes of the 2009 PQRI if by
October 15, 2008--(1) the final, detailed specifications for use in
data collection for PQRI have been completed and are ready for
implementation, and (2) all of the Category II Current Procedural
Terminology (CPT II) codes required for the measure have been
established and will be effective for CMS claims data submission on or
before January 1, 2009.
Measures designated as T in Table 12
indicate that the measure was included in the 2008 Measure Testing
Process. For 2008, we implemented a measures testing process for eleven
measures that had completed consensus adoption or endorsement but which
were not included in the final measures for use in satisfying reporting
criteria to earn an incentive under the 2008 PQRI. These 2008 test
measures have completed measures and specification development, have,
as of the publication of this proposed rule, been adopted by the AQA
and/or endorsed by the NQF, and have available CPT II codes that permit
claims-based data submission. For the 2008 Measure Testing Process,
eligible professionals may report any of these test measures by
submitting the quality data codes identified, and as directed, in the
test measure specifications on Part B claims for dates of services from
July 1, 2008 through September 30, 2008. No financial incentive is
associated with the reporting of these test measures for 2008.
We plan to analyze the number of quality data codes submitted for
each specific test measure and engage in other summary analysis for the
measures. No feedback reports regarding reporting and performance rates
will be provided to eligible professionals who report on these test
measures in 2008. Information from the analysis of the data submitted
on the 2008 measure testing process will be utilized in a preliminary
evaluation of the measures for data submission. This information can be
used to inform us of a measure's readiness for implementation in future
CMS programs.

Table 12.--Additional Proposed NQF-Endorsed Measures
------------------------------------------------------------------------
Measure title Measure source
------------------------------------------------------------------------
T142 Osteoarthritis (OA): Assessment for AMA-PCPI.
Use of Anti-Inflammatory or Analgesic Over-
the-Counter (OTC) Medications.
Use of Imaging Studies in Low Back Pain.... NCQA.
Back Pain: Initial Visit................... NCQA.
Back Pain: Physical Exam................... NCQA.
Back Pain: Advice for Normal Activities.... NCQA.
Back Pain: Advice Against Bed Rest......... NCQA.
Foot Exam.................................. NCQA.
Selection of Antibiotic Administration for STS.
Cardiac Surgery Patients.
Prolonged Intubation....................... STS.
Deep Sternal Wound Infection Rate.......... STS.
Stroke/Cerebrovascular Accident............ STS.
Post-operative Renal Insufficiency......... STS.
Surgical Re-exploration.................... STS.
Anti-platelet Medications at Discharge..... STS.
Beta Blockade at Discharge................. STS.
Anti-lipid Treatment at Discharge.......... STS.
Hemodialysis Vascular Access Decision- Society for Vascular
making by Surgeons to Maximize Placement Surgeons (SVS).
of Autogenous Arterial Venous Fistula.
------------------------------------------------------------------------

d. Additional Proposed AQA-Adopted Measures
As discussed in section II.O.3.b. of this proposed rule, Consensus
Organizations and Consensus-Based Process for Developing Measures, in
circumstances where no NQF-endorsed measure is available, a quality
measure that has been adopted by the AQA would also meet the
requirements of section 1848(k)(2)(B)(i) of the Act. As such, we
propose to include in the final 2009 PQRI quality measure set measures
adopted by AQA that have not yet been reviewed or endorsed by the NQF
and that were not included in the final set of 2008 PQRI quality
measures.
We propose to include in the 2009 PQRI quality measures each of the
AQA-adopted measures identified in Table 13, provided that, as of
August 31, 2008, the measure retains AQA adoption, has not been
reviewed and declined for endorsement by NQF, and its detailed
specifications are completed and ready for implementation in PQRI by
October 15, 2008. Besides being adopted by the AQA, a measure is
considered ready for implementation for the purposes of the 2009 PQRI
if by October 15, 2008--(1) the final, detailed specifications for use
of the measure in data collection for PQRI have been completed and are
ready for implementation, and (2) all of the CPT II codes required for
the measure have been established and will be effective for CMS claims
data submission on or before January 1, 2009. As explained above in
section II.O.4.c., ``Additional Proposed NQF-Endorsed Measures,''
measures designated as T in Table 13
indicate that the measure is one of eleven measures included in the
2008 Measure Testing Process. As also explained above in

[[Page 38571]]

section II.O.4.c., ``Additional Proposed NQF-Endorsed Measures,''
measures in the table below that are not designated as
T are not part of the 2008 PQRI measures
testing activity. Such measures may have CPT II codes identified or
specified, but those codes may or may not be recognized as active,
valid codes in the Medicare claims-processing system.

Table 13.--Additional Proposed AQA-Adopted Measures
------------------------------------------------------------------------
Measure title Measure source
------------------------------------------------------------------------
T135 Chronic Kidney Disease (CKD): AMA-PCPI.
Influenza Immunization*.
T136 Melanoma: Follow-Up Aspects of Care... AMA-PCPI/NCQA.
T137 Melanoma: Continuity of Care--Recall AMA-PCPI/NCQA.
System.
T138 Melanoma: Coordination of Care........ AMA-PCPI/NCQA.
T139 Cataracts: Comprehensive Preoperative AMA-PCPI/NCQA.
Assessment for Cataract Surgery with
Intraocular Lens (IOL) Placement.
T140 Age-Related Macular Degeneration AMA-PCPI/NCQA.
(AMD): Counseling on Antioxidant
Supplement.
T141 Primary Open-Angle Glaucoma (POAG) : AMA-PCPI/NCQA.
Reduction of Intraocular Pressure (IOP) by
15% OR Documentation of a Plan of Care.
T143 Cancer Care: Medical and Radiation-- AMA-PCPI.
Plan of Care for Pain.
T144 Radiology: Computed Tomography (CT) AMA-PCPI/NCQA.
Radiation Dose Reduction.
T145 Radiology: Exposure Time Reported for AMA-PCPI/NCQA.
Procedures Using Fluoroscopy.
Cancer Care: Pain Intensity Quantified..... AMA-PCPI.
Radiology: Inappropriate Use of ``Probably AMA-PCPI.
Benign'' Assessment Category in
Mammography Screening.
Coronary Artery Disease (CAD): Lipid AMA-PCPI.
Profile in Patients with CAD.
Chronic Kidney Disease (CKD): Referral for AMA-PCPI.
Arteriovenous (AV) Fistula.
Osteoporosis: Counseling for Vitamin D, AMA-PCPI.
Calcium Intake, and Exercise.
Falls: Plan of Care........................ AMA-PCPI.
Falls: Risk Assessment..................... AMA-PCPI.
Cancer Care: Radiation Dose Limits to AMA-PCPI.
Normal Tissues.
Hepatitis C: Hepatitis A Vaccination....... AMA-PCPI.
Hepatitis C: Hepatitis B Vaccination....... AMA-PCPI.
Cancer Care: Recording of Clinical Stage STS.
for Lung Cancer and Esophageal Cancer.
------------------------------------------------------------------------
*This measure is one fifteen measures for which data may potentially be
accepted through the EHR mechanism in 2009.

e. Additional Proposed Measures Contingent Upon NQF Endorsement or AQA
Adoption by August 31, 2008
We are proposing to include in the 2009 PQRI measure set certain
measures that are not yet NQF-endorsed or AQA-adopted, provided that
the measure will be so endorsed or adopted as of August 31, 2008, and
its detailed specifications are completed and ready for implementation
in PQRI by October 15, 2008.
The measures we propose to include in the 2009 PQRI quality measure
set are identified in Table 14. Besides being NQF-endorsed or AQA-
adopted, a measure is considered ready for implementation for the
purposes of the 2009 PQRI if by October 15, 2008--(1) the final,
detailed specifications for use of the measure in data collection for
PQRI have been completed and are ready for implementation, and (2) all
of the CPT II codes required for the measure have been established and
will be effective for CMS claims based submission on or before January
1, 2009.

Table 14.--Measures Proposed for 2009 Contingent Upon NQF Endorsement or
AQA Adoption by August 31, 2008
------------------------------------------------------------------------
Measure title Measure source
------------------------------------------------------------------------
Nuclear Medicine: Correlation with Existing AMA-PCPI.
Imaging Studies for all Patients
Undergoing Bone Scintigraphy.
Unhealthy Alcohol Use: Screening & Brief AMA-PCPI.
counseling.
Lipid Screening............................ AMA-PCPI.
Pediatric ESRD: Adequacy of Hemodialysis... AMA-PCPI.
Pediatric ESRD: Influenza Immunization..... AMA-PCPI.
Rheumatoid Arthritis: Tuberculosis AMA-PCPI.
Screening.
Rheumatoid Arthritis: Appropriate Use of AMA-PCPI.
Biologic Disease Modifying Anti-Rheumatic
Drugs (DMARDs).
Rheumatoid Arthritis: Periodic Assessment AMA-PCPI.
of Disease Activity.
Rheumatoid Arthritis: Functional Limitation AMA-PCPI.
Assessment.
Rheumatoid Arthritis: Assessment and AMA-PCPI.
Classification of Disease Prognosis.
Rheumatoid Arthritis: Glucocorticoid AMA-PCPI
Management.
Endoscopy & Polyp Surveillance: AMA-PCPI.
Surveillance Colonoscopy Interval in
Patients with History of Adenomatous
Polyps.
Chronic Wound Care: Use of Compression AMA-PCPI.
System in Patients with Venous Ulcers.
Chronic Wound Care: Offloading of Diabetic AMA-PCPI.
Foot Ulcers.
HIV/AIDS: CD4+ Cell Count or CD4+ AMA-PCPI/NCQA.
Percentage.
HIV/AIDS: Pneumocystis Jiroveci Pneumonia AMA-PCPI/NCQA.
(PCP) Prophylaxis.
HIV/AI